The Truth in Lending Act (15 U.S.C. 1601 et seq.) is the federal law that requires clear disclosures about the cost and terms of consumer credit. Regulation Z, 12 CFR part 1026, implements it. A business is a creditor when it regularly extends consumer credit that carries a finance charge or is payable by written agreement in more than four installments, not counting a down payment. Regularly means more than 25 times a year. A creditor gives written disclosures, such as the finance charge, payment schedule and total of payments, before the transaction is consummated.
What is the Truth in Lending Act?
It is a federal law about consumer credit. Regulation Z is the rule that puts it into practice. Section 1026.1(a) says Regulation Z is issued by the Bureau of Consumer Financial Protection "to implement the Federal Truth in Lending Act, which is contained in title I of the Consumer Credit Protection Act, as amended (15 U.S.C. 1601 et seq.)." Its stated purpose includes promoting "the informed use of consumer credit by requiring disclosures about its terms and cost" (1026.1(b)).
Does it apply to business customers?
No. Section 1026.3(a)(1) exempts "an extension of credit primarily for a business, commercial or agricultural purpose." Regulation Z covers consumer credit, which 1026.2(a)(12) defines as credit "offered or extended to a consumer primarily for personal, family, or household purposes." A plan sold to a person for their own training or treatment is consumer credit. A plan sold to a company usually is not.
When is a business a creditor?
Under 12 CFR 1026.2(a)(17)(i), a creditor is a person who regularly extends consumer credit "that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment)." The person must also be the one to whom the obligation is initially payable.
So there are two routes in. A plan with a finance charge can qualify. So can a 0% plan with no fees, if it is payable by written agreement in five or more installments after any down payment.
What does "regularly" mean?
Section 1026.2(a)(17)(v) sets the count. A person regularly extends consumer credit only if it extended credit more than 25 times in the preceding calendar year. The number is more than 5 times for transactions secured by a dwelling. If a person did not meet those numbers in the preceding calendar year, they are applied to the current calendar year.
| Test | Threshold | Section |
|---|---|---|
| Installments, with no finance charge | More than four, not counting a down payment | 1026.2(a)(17)(i) |
| How often | More than 25 times a year | 1026.2(a)(17)(v) |
| Secured by a home | More than 5 times a year | 1026.2(a)(17)(v) |
| Purpose | Personal, family or household | 1026.2(a)(12) |
What disclosures follow?
For closed-end credit, which covers most fixed payment plans, sections 1026.17 and 1026.18 apply. In plain terms:
- In writing, clearly and conspicuously, in a form the consumer may keep (1026.17(a)(1)).
- Before the deal is done: "before consummation of the transaction" (1026.17(b)).
- The finance charge and the annual percentage rate stand out more than any other disclosure except the creditor's identity (1026.17(a)(2)).
The content in 1026.18 includes the creditor, the amount financed, the finance charge, the annual percentage rate, the payment schedule (the number, amounts and timing of payments), the total of payments, the total sale price in a credit sale, any prepayment terms and any late payment charge.
Does it make a 0% plan illegal?
No. It changes what the agreement has to say. For schools, Regulation Z also has a separate exclusion for some interest-free plans from its private education loan rules. See Is a 0% payment plan a loan?
General information, not legal advice.
- CFPB: Regulation Z, 12 CFR 1026.1, Authority, purpose, coverage
- CFPB: Regulation Z, 12 CFR 1026.2, Definitions
- CFPB: Regulation Z, 12 CFR 1026.3, Exempt transactions
- CFPB: Regulation Z, 12 CFR 1026.17, General disclosure requirements
- CFPB: Regulation Z, 12 CFR 1026.18, Content of disclosures
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.