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Multistate Manualfor Variable/Simple Interest Consumer

Notes

BANKERS SYSTEMS, INC.

� 1996 Bankers Systems, Inc., St. Cloud, MN Form PM-CL 8/22/96

INTRODUCTIONFORMS AND PURPOSE: This manual is intended to assist lenders who have purchased the followingcopyrighted CUPA/Bankers Systems, Inc. variable/simple interest forms:

* * *CL - [state abbreviation]

Closed End Note, Disclosure, and Security Agreement

* * *

USAGE: The forms listed above should only be used for the purpose for which they were intended.

Please note that these forms have been designed for use in closed end direct loans by credit unions tomembers that are subject to federal Truth in Lending (Regulation Z) and state-enacted laws andregulations.

The form listed above in bold type is intended for loans which are either unsecured or secured by mostforms of personal property. THESE FORMS SHOULD BE CAREFULLY REVIEWED BY YOUR OWNATTORNEY BEFORE BEING USED FOR LOANS SECURED BY REAL ESTATE.

CAUTION: THESE FORMS ARE NOT DESIGNED FOR AND SHOULD NOT BE USED IN THEFOLLOWING WAYS:

� open end credit

� multiple advance lending

� commercial or agricultural lending (i.e., non-consumer)

� loans which require credit insurance (i.e., life, accident)

� loans where mortgage insurance (PMI) is charged, collected, etc.

� assumable loans

� transactions subject to retail installment sales laws

� loans for the purchase of property (real or personal) where you are also the seller of the property(e.g., a loan for someone to buy property that you repossessed).

FORMAT: The entire front side of the form is reproduced on page five of this manual. Each separateitem of the form which receives separate discussion in the manual is numbered.

The explanatory text begins with a simple statement of what would commonly be filled in on the linebeing discussed. In many cases, this simple explanation is followed by a more detailed explanation,with cross-references to other portions of the form that need to be considered with the item underdiscussion.

1� 1996 Bankers Systems, Inc., St. Cloud, MN Form PM-CL 8/22/96

GLOSSARY: Throughout the text of this Introduction, the Disclaimer of Warranties, the Limitation ofLiability, and the Manual itself, we use certain abbreviations and terms:

The Term: Means:

We CUPA/Bankers Systems, Inc. or CUPA/BSI

You The Lender

Reg. 226.18(a) Section 18(a) of the Federal Reserve Board's Regulation Z (Truth in Lending) which is found at 12 Code of Federal Regulations 226.18(a).

Commentary The Official Staff Commentary on Regulation Z (Truth in Lending).The Commentary is arranged and numbered in sequence to theRegulation sections to which the comment relates. In this manual,we normally use the Regulation number preceded or followed bythe word "Commentary." This means you should read theCommentary to the Regulatory section cited. We do not use thenumbering sequence found in the Commentary, whichoccasionally varies (by the addition of more numbers) from thecitations to the Regulation.

UCC Article 9 § 204 The Uniform Commercial Code Article 9, Section 204

CFR Code of Federal Regulations

12 U.S.C. 901 Title 12 United States Code Section 901

FTC Federal Trade Commission

(A-1) The line on our form which is labeled (for purposes of this manual) Number (A-1).

APR Annual Percentage Rate

Finance Charge Any charge that is a cost of credit that is not otherwise excludedby Regulation Z. It does not include any charge that would bepayable in a comparable cash transaction.

Additional Finance Charge Any charge that is a finance charge other than simple interestapplied to declining balance. Examples include origination fees,documentation fees, loan fees, etc.

Prepaid Finance Charge Any finance charge paid separately in cash or by check before orat the consummation of a loan, or withheld from the proceeds ofthe loan at anytime.

Variable Rate An interest rate that can change during the term of the loan. Thisincludes a "fixed rate" loan with a balloon payment where youhave agreed (either orally or in writing) to refinance the balloonwhen it comes due. Regulation Z requires specific disclosures forvariable rate loans.


The Term: Means:

Market Rate In a variable rate loan, the rate charged at any given time isusually calculated by adding an amount (usually known as a"margin" or "spread") to an index value. The total of the margin orspread plus the index value is the "market rate."

Discounted Rate In a variable rate transaction, if the initial rate that you charge isless than the "market rate," then you are charging a "discountedrate." Regulation Z requires you to take into account the fact thatthe rate will increase even if higher than the initial rate that youcharge.

Premium Rate In a variable rate transaction, if the initial rate that you charge ismore than the "market rate," then you are charging a "premiumrate." Regulation Z requires you to take into account the fact thatthe rate will decrease even if the index rate does not change.Thus, the annual percentage rate will be lower than the initial ratethat you charge.

Residential Mortgage Transaction This term is used in this manual as it is defined in Regulation Z.This means a loan where a lien is taken against the member'sprincipal dwelling to finance the acquisition or initial constructionof that dwelling.

FORM SPECIFIC: This manual is written solely for use with our variable/simple interest forms. Theexistence of varying state laws means that some of the terms discussed may not be applicable in yourstate. The explanatory text will usually point this out where it applies. Moreover, there may beprovisions in the note developed for your state which are not discussed in this manual. Feel free to callus at our toll free number (1-800-313-2872) if you need information about specific sections. This manualis not intended to be used with any form other than a variable/simple interest note.

PRIVATE ATTORNEYS: In developing this manual, the forms to which it pertains, and all of our othertechnical forms, we necessarily have to interpret many statutes, cases and regulations.

We strongly encourage you to seek the advice of your own attorney concerning the utility and legalityof this manual, the forms to which it pertains, and all of our other technical forms. One of the reasonswe have included legal citations in this manual is to assist you and your counsel in your review of ourform and this manual. If you or your counsel's interpretations are contrary to ours, you should, ofcourse, follow your own interpretations in using and completing the form.

COMMENTS: We encourage you to comment on and criticize this manual, the forms to which itpertains, and all of our other forms. We make every effort to keep up with statutes, case law andlending practices, but the lending industry is constantly evolving and our effort is often assisted by ourcustomers. We especially appreciate copies of any statutes or cases which you might feel are pertinent.Please submit your comments in writing either to your Sales Representative or to:

Compliance Services DepartmentCUPA/Bankers Systems, Inc.

P.O. Box 1457St. Cloud, MN 56302-1457


WARRANTIES AND LIMITATIONS

LIMITED WARRANTIES: If you signed a Product Warranty Agreement with CUPA, the formsrepresented in this manual are governed by that Agreement.

If you have not signed a Product Warranty Agreement with CUPA, the only express warranties we giveto you are:

1) that the form size, paper weights, ink colors, paper colors, type sizes, type styles, and screenswill conform to the sample (within the tolerances acceptable to the forms printing trade); and

2) that the number of parts and any "imprinted" names or logos will be as ordered by you.

No employee of CUPA/Bankers Systems, Inc. is authorized to vary or extend the express warrantystated here. The references to forms contained in the remainder of this section are to forms not coveredby a signed Product Warranty Agreement.

WE DO NOT IN ANY WAY EXPRESSLY GUARANTY THE UTILITY OR LEGALITY OF ANYFORM OR THIS MANUAL; YOU MUST MAKE YOUR OWN INDEPENDENT JUDGMENT ONTHESE ISSUES.

NO IMPLIED OR OTHER EXPRESS WARRANTIES: This manual, the form featured in the manual,and all other forms or manuals of any kind produced or distributed by us, are delivered to you AS ISand WITH ALL FAULTS. We do not impliedly warrant the legality or utility of our forms, manuals orsoftware.

IN PARTICULAR, AND NOT BY WAY OF LIMITATION OF ANY OF THE FOREGOING, WEDISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESSFOR ANY PARTICULAR USE.

LIMITATION OF REMEDIES: In the event any forms fail to conform to the Limited Warranties set outabove, our sole and exclusive obligation to you the purchaser is to replace the forms at our ownexpense. In the alternative, we reserve the right in our sole discretion to refund your purchase priceupon return of the merchandise in lieu of replacing the forms purchased.

TIME LIMIT: Claims by you for breach of warranty for any form or manual must be made within oneyear of the date of delivery of the forms or manuals to you.

LIMITATION OF LIABILITY: We are not liable to you for any incidental and/or consequentialdamages arising or resulting from the use of this manual, any forms featured in it, or any of our otherforms or manuals. In no event shall any such liability exceed any amounts paid by you for theparticular forms or manuals with which the liability arises.

APPLICABLE LAW: All agreements between us shall be governed and construed under the laws of theState of Minnesota.

COPYRIGHT 1994: No part of this manual or any of our copyrighted forms may be reproduced, byany person, by any means, or for any reason, without our express written consent. We vigorouslyenforce our copyright and you should be aware that there are criminal penalties as well as civil penaltiesfor violation of this rule.

CUPA/BANKERS SYSTEMS, INC.6815 Saukview DriveP.O. Box 1457St. Cloud, MN 56302-1457



LENDER’S NAME AND ADDRESS“You” means the Lender, its successors and assigns.

BORROWER’S NAME AND ADDRESS“I” includes each Borrower above, jointly and severally.

Date ———————————————Maturity Date ————————————Loan Amount $ ———————————Renewal Of ————————————Mem./Loan # ————————————

I promise to pay you the principal amount of $ —————————————— , plus interest, accruing on the unpaid balance at the rate of —————————— % per year

from today’s date until ————————————————————————— . Interest accrues on a —————————————— basis. I agree to pay this note

according to the payment schedule and late charge provisions shown in the TRUTH IN LENDING DISCLOSURES. I also agree to pay any additional amounts according to the terms

and conditions of this note. The purpose of this loan is —————————————————————— .□ ADDITIONAL FINANCE CHARGE - I agree to pay an additional, nonrefundable finance charge of $ ———————————————— that will be □ paid in cash.

□ paid pro rata over the loan term. □ withheld from the proceeds. (If this charge is withheld from the proceeds, the amount is included in the principal sum.)

□ VARIABLE RATE - The rate above may then change so as always to be ————————————————————————————— the following index rate:

—————————————————————————————————————————————————————————————————————

—————————————————————————————————————————————————————————————————————

———————————— . The interest rate may not change more than ——————————— % each ———————————————————————— .

The annual interest rate in effect on this note will not at any time be more than ——————————— % or less than ——————————— %. I agree my variable

rate loan is subject to the additional provisions shown in the TRUTH IN LENDING DISCLOSURES.

You have certain rights that may affect my property as explained on page 2. In addition to these rights, this loan is secured by the following:

(a) □ For value received, I assign and give to you a security interest in □ all my Account(s) or □ ——————————————————————————— Account(s).

The amount of my Required Balance is $ —————————————————— .(b) □ This loan is further secured by —————————————————————————————————— , dated —————————————————— .(c) □ I give you an additional security interest in the Property described below:

ANNUAL PERCENTAGE RATEThe cost of my credit

as a yearly rate.

%

FINANCE CHARGEThe dollar amount the

credit will cost me.

$

AMOUNT FINANCEDThe amount of credit

provided to me or on my behalf.

$

TOTAL OF PAYMENTSThe amount I will have paid when

I have made all scheduled payments.

$

I have the right to receive at thistime an itemization of the

Amount Financed.YES - I want an itemization.NO - I do not wantan itemization.

“e” means an estimate.

$ ————— Filing Fees$ Nonfiling Insurance

No. of Payments Amt. of Payments

$

$

$

$

My Payments are Due as Shown Below

□ This note has a demand feature. □ This note is payable on demand and all disclosures are based on an assumed maturity of one year.

□ Variable Rate □ My loan contains a variable rate feature. Disclosures about the variable rate feature have been provided to me earlier.

□ The annual percentage rate may increase during the term of this transaction if ———————————————————————————

—————————————————————————————————————————————————————————————————————

————————————————————————————————————————————————————————————————————— .

Any increase will take the form of ——————————————————————————————————————————————————————— .

If the rate increases by ———————————— % in ———————————— , the ———————————————————————————————will increase to ————————————————— . The rate may not increase more often than once —————————————— , and may not increase more

than ———————————— % each ——————————————————————————— . The rate will not go above ———————————— %.

Security - I am giving a security interest in: □ (brief description of other property)

□ the goods or property being purchased.

□ collateral securing other loans with you may also secure this loan.

□ my Accounts and other rights to the payment of money from you.

□ Late Charge - I will be charged a late charge on the portion of any payment not made within ———————— days after it is due equal to —————————————

————————————————————————————————————————————————————————————————————— .□ Required Deposit - The annual percentage rate does not take into account my required deposit.

Prepayment - If I pay off this note early, I will not have to pay a penalty.

□ If I pay off this note early, I will not be entitled to a refund of part of the Additional Finance Charge.

□ Assumption - Someone buying the property securing this obligation cannot assume the remainder of the obligation on the original terms.I can see my contract documents for any additional information about nonpayment, default, any required repayment before the scheduled date, and prepayment refunds and penalties.

VARIABLE/SIMPLE INTEREST NOTE, DISCLOSURE, AND SECURITY AGREEMENT CONSUMER LOAN - NOT FOR OPEN-END CREDIT© 1981, 1994 CUPA/Bankers Systems, Inc., St. Cloud, MN (1-800-313-2872) Form CL-TN 2/22/95 A (page 1 of 2)

CREDIT INSURANCE - Credit life insurance and credit disabilityinsurance are not required to obtain credit, and will not be providedunless I sign and agree to pay the additional costs.

Type Premium Term

□ Credit Life

□ Joint Credit Life

□ Credit Disability

□ ——————————————————————————————————□ I do want the insurance checked above.

□ I do not want the insurance described above.X DOB

X DOB

PROPERTY INSURANCE - I may obtain property insurance from anyone I want

that is acceptable to you. If I get the insurance from or through you I will pay

$ ———————————— for ——————————————— of coverage.

}

(Optional)

Signed —————————————————————————— For Lender

Title ———————————————————————————————

AMOUNT GIVEN TO ME DIRECTLY $ —————————————AMOUNT PAID ON MY (LOAN) ACCOUNT $ —————————————

——————————————————— $ —————————————AMOUNTS PAID TO OTHERS ON MY BEHALF:

to Insurance Companies $ —————————————to Public Officials $ —————————————

——————————————————— $ —————————————

——————————————————— $ —————————————

——————————————————— $ —————————————(less) PREPAID FINANCE CHARGE(S) $ —————————————

Amount Financed $ —————————————(Add all items financed and subtract prepaid finance charges.)

SIGNATURES - I AGREE TO THE TERMS SET OUT ON PAGE 1 AND PAGE 2 OF THIS AGREEMENT. I HAVE RECEIVED A COPY OF THIS DOCUMENT ON TODAY’S DATE.

Check one

{(Check one)

PROMISE TO PAY AND PAYMENT TERMS

SECURITY

TRUTH IN LENDING DISCLOSURES

ITEMIZATION OF AMOUNT FINANCED

✎✗

✎✗

CUSTOMER NAMEADDRESS

A-1 A-2 A-3

A-4

A-5

A-6

A-7

A-8

A-9 A-10

A-11 A-12

A-13

A-14

A-19

A-17 A-18

A-15A-16

A-20

A-21

A-22

A-24

A-23

A-25

B-1B-2 B-3 B-4

B-5

B-6

B-7

B-8

C-1 C-2 C-3 C-4 C-5

C-6

C-7C-8

C-9

C-11C-13

C-10

C-12

C-14C-15

C-16

C-17

C-19 C-20

C-18

C-21C-24

C-22

C-23

C-25

C-26

C-28

D-1

D-4

D-2 D-3

D-5

D-7

D-6

D-8

D-9 D-10

F-1

E-1

E-2

E-3

E-4

E-5

E-6

E-7

E-8

F-2

C-27

PART A - PROMISSORY NOTE

(A-1) Fill in the name of the lender who is making the disclosures and the address where paymentsare to be made.

MISCELLANEOUS - The identity of the creditor making the disclosures must be disclosed.Reg. 226.18(a). The identity of the creditor may be made separately from other requiredTruth-in-Lending disclosures. Reg. 226.17(a)(1) (footnote 38). The lender's identity is theonly required Truth-in-Lending disclosure that may be more conspicuous than the wordsANNUAL PERCENTAGE RATE and FINANCE CHARGE. Reg. 226.17(a)(2).

(A-2) Fill in the name and address of the borrower. This should be the same address you intend touse for any notice of default or notice of sale of the collateral.

OTHER PARTIES - See (G-1) below for space to type in the name of a person who grants thesecurity interest but does not agree to pay the note.

(A-3) Fill in the date that you are making the disclosures.

NORMALLY - In almost all cases, the date you make the disclosures will be the same as thedate your member signs the note and the date the loan proceeds are disbursed.

RESCISSION - If the loan is subject to your borrower's right to rescind - Reg. 226.23(c) - thenyou will not disburse the loan proceeds until after the right to rescind has expired. Mostlenders take the position that interest will not begin to accrue until the loan proceeds aredisbursed to the borrower; if you concur, we suggest that interest be calculated, and, ifnecessary, the first installment due date be adjusted, on the assumption that the loan isactually disbursed on the fourth or fifth day after you make the disclosures (where the rightof rescission applies). You should still fill in the date that your member receives thedisclosures on this line because by signing below, your member acknowledges receipt of acopy on "today's date."

(A-4) Fill in the date of the last scheduled payment (or "On Demand" if this is a demand loan).

(A-5) This designation is for your internal reference. You may fill in what will best serve yourpurposes. The term "Loan Amount" is not defined in the note itself. Presumably, it will beeither the Amount Financed or the Total of Payments.

(A-6) Fill in the loan number of the previous loan if this note is a renewal. This helps to provide agood audit trail.

(A-7) Fill in your member number and/or loan number.

(A-8) Space has been left for you to include other information, such as a social security number.

(A-9) Fill in (in numbers) the principal amount of the debt against which interest will accrue.

PRINCIPAL VS. AMOUNT FINANCED - It is possible for the principal amount of the loanthat you would fill in on line (A-9) to be different from the Amount Financed that you willfill in on lines (C-3) and (E-8). This would be true, for example, if the borrower pays aprepaid finance charge.


(A-10) Fill in the initial simple annual interest rate that will be applied toward the principal sum of thisloan. This may or may not be the same as the Annual Percentage Rate disclosed on line (C-1).

OTHER CHARGES - The Annual Percentage Rate disclosed on line (C-1) will be larger if youcharge additional finance charges.

COMPUTATION - The Annual Percentage Rate may also vary from the simple interest ratedepending on the method of computation you use and the treatment of odd-days interest.

DISCOUNTED AND PREMIUM RATE - In a variable rate transaction, the AnnualPercentage Rate will also be different than the beginning rate on the note if you charge a"discount" or "premium" initial interest rate (See (C-1) below).

(A-11) If the note is FIXED RATE, fill in the words "Paid in Full."

If VARIABLE RATE is checked at (A-19), type in the date of the first interest rate change date.

(A-12) Fill in the method or basis you are using to accrue interest on this note.

EXAMPLE: If you assume that each month has 30 days and that a year has 360 days, line(A-12) would state that “Interest accrues on a 30/360 basis.”

EXAMPLE: If you assume that a year has 365 days and you calculate interest according tothe actual number of days a principal balance is outstanding, line (A-12) would state that“Interest accrues on an actual/365 basis.”

If you fail to complete line (A-12), the “Accrual Method” paragraph on page 2 of the formprovides that you may use any reasonable method for calculating interest.

(A-13) Fill in a simple statement of the (Borrower’s) purpose for making the loan.

You must keep a record of the “purpose” of any loan over $10,000.00 under the FinancialRecordkeeping and Reporting of Currency in Foreign Transactions Regulations, 31 C.F.R.§ 103.33 and § 103.38.

The “purpose of loan” statement may be useful in proving your right to a grace period inperfecting a purchase money loan under U.C.C. § 9-301.

(A-14) Check the box and complete this section if you are charging an additional finance charge.(A-15) Where permitted by law, we have provided that this fee is nonrefundable. Some states do not

permit additional finance charges but since both federally chartered and state chartered creditunions use this document, we have included the provision on the form. (Federal credit unionshave specific authority for additional finance charges at 12 CFR § 701.21.) If your credit unionis state chartered, you should consult your own counsel about what types of loans and whatdollar limitations might apply for additional finance charges. The amount of the charge mustbe included in the amount shown in the finance charge disclosed (See (C-2)). This will have theeffect of increasing the Annual Percentage Rate (C-1).

One of the three boxes following this blank should be checked to indicate how it is beingcollected. (A-16, A-17 or A-18).


NOTE: Additional finance charges that are "paid in cash" or "withheld from proceeds" are also"prepaid finance charges" as that term is defined by the regulation. Reg. 226.2(a)(23) andCommentary. The fact that an additional finance charge is also a prepaid finance charge makesits effect on the Annual Percentage Rate (C-1) even greater.

(A-16) This option should be checked if the fee is paid in cash or by check before or at the closing ofthe loan. A charge collected in this manner is a prepaid finance charge for purposes of theitemization of amount financed.

(A-17) This option should be checked if the fee is to be collected pro rata over the term of the loan.For example, in a 20 installment loan transaction with a $20.00 loan fee, $1.00 will be collectedwith each installment. If a loan were prepaid, you may find that you have collected only partof this fee and the balance would have to be collected in the payoff amount.

(A-18) Check this box if the amount of the loan fee will be taken out of the loan proceeds. If a financecharge is collected in this manner, it is a prepaid finance charge and the amount of the principal(A-9) and the "Amount Financed" (C-3) will be different. Checking this box means that interestwill be charged on the additional fee.

(A-19) (VARIABLE RATE ONLY) Check this box if you want to contract for a variable rate of simple(A-20) interest. On line (A-20) type in the "margin" (or "spread") which is the relationship between the

"index rate" and the actual rate of interest to be charged on this note. See (A-21) below fordiscussion of discretionary rate changes.

EXAMPLE: Assume the base rate you use is the 90 day discount rate of the Federal ReserveBank of Chicago. Assume also that your borrower is to pay 2% more than this index rate.Then this line (A-20) should be filled in as follows: "2% greater than."

EXAMPLE: Assume your borrower is to pay a rate that is equal to the "index rate." Thenthis line (A-20) should be completed as follows: "equal to."

EXAMPLE: Assume your borrower is to pay a rate that is 1% less than your index rate.Then this line (A-20) should read as follows: "1% less than."

If you check box (A-19) you must also complete (A-21) through (A-25) below.

(A-21) (VARIABLE RATE ONLY) Fill in a description of the "index rate" you will be using to establishthe actual interest rate of the note. You will also fill in the description of this rate on line (C-15)below. There are any number of indexes which may be used as your index rate. These wouldinclude, but are not limited to, the average annual yield on the auction of 6 month U.S.Treasury Bills or the Federal Reserve Discount Rate in your district (be sure to specify a specificFederal Reserve district, since it may vary).

If you choose to vary the rate solely upon your own discretion, you need to state on the blankline that any increase is within your discretion. In that event, line (A-20) above should not becompleted. Reg. 226.18(f) and Commentary.

CAUTION: In some circumstances, a lender may not be permitted to vary an interest ratewithin its own discretion, or with an index which is changed at its discretion or control. Ifyou are contemplating (or already) making loans with this type of index rate, you shouldconsult with your attorneys regarding this issue.

(A-22) (VARIABLE RATE ONLY) Use these blanks to contract for a periodic rate cap. The forms that(A-23) CUPA/Bankers Systems provides generally do not contain provisions for interest rate "carryover,"

so if the full amount of an index change is not reflected in a particular time period the "unused"


portion of an index change cannot be "carried over" into the next "change" period. Use line (A-22) togive the percentage limit and line (A-23) to disclose the pertinent time period. Periodic rate caps arenot required by federal law.

EXAMPLE: The interest rate may not change more than 2% each month.

(A-24) (VARIABLE RATE ONLY) If you have a ceiling on the interest rate (a rate above which theinterest rate cannot go), describe the ceiling on the blank line.

Line (A-24) must be completed if this loan is variable rate and is being secured by a dwelling.Reg. 226.30.

The ceiling or lifetime cap must be stated as either a specified amount or in some other mannerthat allows the consumer to easily ascertain at the time of entering into the obligation themaximum interest rate that will apply. Commentary - Reg. 226.30(8)

EXAMPLE: "The annual interest rate in effect on this note will not at any time be more than15%."

(A-25) (VARIABLE RATE ONLY) If there will be a floor on the interest rate (a rate below which theinterest rate cannot go), describe the floor on the blank line. A floor is not required by federallaw.

EXAMPLE: "The annual interest rate in effect on this note will not at any time be ... or lessthan 12%."

PART B - SECURITY AGREEMENT(B-1) Check this box if you wish to take a security interest in any or all of your member’s share

and/or deposit accounts. (This does not affect your right of setoff under common law.) If youmark this box, you must complete (B-2) through (B-5).

(B-2) Select this box if you wish to take a security interest in all of the member’s accounts.

(B-3) Select this box if you wish to take a security interest in one or more, but not all of the member’s (B-4) accounts. Name the accounts in which you wish to have a security interest.

(B-5) We suggest you use this area to describe the amount of funds you will require the member tokeep in the accounts in which you have taken a security interest. If the credit union takes asecurity interest in a member’s account(s) and requires a specific balance be maintained in theaccount, the credit union MAY be established as a creditor in bankruptcy proceedings. Thebalance in the account(s) must be monitored to demonstrate the credit union’s interest.

(B-6) If you have secured this loan with a separate security agreement, mortgage, assignment of timeor savings account, etc., check the box and fill in the type of interest taken (e.g. assignment,mortgage, security agreement) and the date of such interest. We encourage you to include pre-existing security interests which secure this loan as well as contemporaneous but separatesecurity interests.

NOTE: Be sure that the separate agreement is in fact sufficient to secure this loan.Completing (B-6) does not by itself tie this form to pre-existing security agreements(including mortgages and deeds of trust). Such security agreements must include “futureadvance” language to create this relationship.


(B-7) By checking this box, and describing the collateral below, (B-8), you take a security interest inthe property described.

(B-8) Describe by item or type the collateral in which you are taking a security interest to secure thisnote.

GENERALLY - This security agreement is designed for personal property, and withconsiderable limitations, certain items which may become attached to or a part of realestate. This security agreement is principally designed for items which are covered byArticle 9 of the Uniform Commercial Code.

CAUTION: As mentioned previously, this form is designed only for use in consumertransactions and for collateral typically involved in those transactions, such as consumergoods. THIS FORM IS NOT INTENDED, DESIGNED, OR RECOMMENDED FORANY OTHER USE.

We strongly recommend that you consult your own legal counsel concerning theappropriate ways to describe collateral here and on any financing statement or other filingdocument.

PLEDGES - If the collateral in which you are taking a security interest is pledged collateral(collateral which is delivered to your possession such as corporate stocks, collectibles, etc.)indicate following your description of the collateral, in parenthesis, that the collateral ispledged.

NOTE: If you are taking securities as collateral and their aggregate value is greater than$10,000, you may need to check with the Securities Information Center to ascertain whetherthe securities certificate has been reported missing, lost, counterfeit or stolen as required bySecurities and Exchange Commission Rule 17f-1.

Also, if you are extending credit in excess of $100,000 that is secured, in whole or in part, byany margin stock, you may need to complete form G-3.

There are, in addition, some circumstances where form G-3 may need to be completed forloans of under $100,000. Reg. G, 12 C.F.R. 207.

AFTER-ACQUIRED PROPERTY - IMPORTANT - If you intend that your security interestattach not only to property which the borrower already owns, but to property of the sametype which the borrower might acquire later, be sure to add in this space appropriatelanguage to that effect. Remember, under U.C.C. § 9-204, the application of an after-acquired property security interest to consumer goods is very limited in scope.

FILING - Generally, a copy of this security agreement may be filed as a financing statement.However, since most filing offices require a higher fee for filing a non-standard financingstatement (which a copy of this form would be), we recommend that you use a separatefinancing statement or statements instead of filing a copy of this form. See U.C.C. § 9-402,9-203, 9-103, 9-313. If you are filing a copy of this agreement as a financing statement andyour collateral is timber to be cut, minerals (including oil and gas), certain accounts orfixtures, you should:


(a) state that it covers this type of collateral;(b) include a legal description of the real estate concerned; (c) include the name of the record owner of the real estate concerned; and(d) include a statement that will be filed in the real estate records.

PART C - TRUTH IN LENDING DISCLOSURES

(C-1) Fill in the ANNUAL PERCENTAGE RATE you calculate for this loan. Regulation 226.17(c)permits certain disclosures to be made using the designation "estimate." See discussion at line(C-7). You should not use that designation for these disclosures, simply because you havecontracted for a variable rate of simple interest. Reg. 226.17(c) and Commentary. Thedisclosure of the potential changes is adequately described in the variable rate portion of thefederal box disclosure and, therefore, there is no need to mark the annual percentage rate andother items as an estimate.

TOLERANCE - The tolerance for regular transactions is .125% (1/8%) either way. Forexample, if the disclosed APR is 15.20% and the actual APR is 15.324%, the disclosure iswithin acceptable limits. Reg. 226.22(a)(2). The tolerance for "irregular" transactions is .25%(1/4%) either way. An irregular transaction is defined in Reg. 226.22(a)(3)(footnote 46).

CONSPICUOUS - See Reg. 226.17(a)(2) for requirement that words ANNUALPERCENTAGE RATE and FINANCE CHARGE be more conspicuous than other disclosures.See the Commentary to this section for guidelines on compliance with this rule.

See Reg. 226.22(c) for optional rule on one APR calculation when all transactions within aclass can be disclosed with same APR.

See Appendix J to Truth in Lending Regulation for actuarial or U.S. Rule methods of calculation.

See Reg. 226.22(b) for exemption allowed for appropriate use of Federal Reserve's APR tables.

DISCOUNTED AND PREMIUM RATE LOANS - If the initial interest rate is not tied to theindex used to determine later rates, the disclosures must assume that the rate changes onthe first change date to the "market rate." The "market rate" is the rate that would be ineffect if the margin (or spread) (see (A-20)) is combined with the current index (or indexrate). The disclosures must also take into account interest caps. See (C-19), (C-20) below.The APR disclosed on a discounted or premium rate variable rate loan must reflect acomposite annual percentage rate based on the initial rate for as long as it applies and thenthe "market" rate (or rates) for the remaining of the term. The multiple rates must also bereflected in the calculation of:

• the finance charge (C-2);• the total of payments (C-4); and,• the payment schedule (C-10).

Reg. 226.18(f) and Commentary.

See 15 U.S.C. 130 for liability exposure for inaccurate or unmade APR disclosures.


(C-2) Fill in the total finance charge.

Generally, this disclosure should be based on the initial rate of interest being charged on thisloan, without taking into consideration possible variations throughout the life of the loan. Thiswould be the rate upon consummation of the loan. See (C-7) for a discussion of the use ofestimates and additional descriptive phrases in association with this disclosure.

OTHER CHARGES - Remember to include prepaid finance charges and additional financecharges, if any.

TOLERANCE - The tolerance is $5.00 on transactions with an Amount Financed of $1,000.00or less, and $10.00 on transactions with an Amount Financed of more than $1,000.00. Reg.226.18(d)(footnote 41).

CAUTION: THIS FORM IS NOT DESIGNED FOR, AND SHOULD NOT BE USED ON,LOANS THAT REQUIRE CREDIT INSURANCE. PREMIUMS FOR REQUIREDCREDIT INSURANCE ARE A FINANCE CHARGE. See PART D below, and Reg. 226.4(d)for conditions which must be met to exclude credit insurance costs from the finance charge.

SECURITY INTEREST CHARGES - You must disclose the cost of perfecting a securityinterest in order to exclude the cost from the finance charge. See (C-8) below.

DISCOUNTED OR PREMIUM RATE LOANS - See (C-1) above.

(C-3) Fill in the Amount Financed.

There is no tolerance permitted for this disclosure.

See (E-1) through (E-8) below concerning the Itemization of Amount Financed, especially(E-7) for treatment of prepaid finance charges.

See the discussion under line (A-9) above regarding the potential for the Amount Financedto be different from the principal amount of the note.

(C-4) Fill in the Total of Payments.

See lines (C-1) and (C-2) for the basis of this disclosure, as well as the use of estimates anddescriptive phrases.

TOLERANCE - There is no mention of a tolerance for this disclosure. The "Total ofPayments" is defined as the sum of the payment amounts disclosed pursuant to Reg.226.18(g) in the spaces labeled (C-10) on this form.

The "amounts" of the payments you will disclose on line (C-10) will include the financecharge attributable to the payment as well as the portion attributable to the repayment ofthe Amount Financed.

IN ADDITION, the amount of each payment that you disclose on line (C-10) may (but neednot) also include any additional amount due with the payment which is neither part of theAmount Financed or the finance charge. For example, if you also collect an amount to beescrowed for future property insurance premiums or real estate taxes, you may add theamount attributable to the escrow to the amount of each payment on line (C-10). However,we discourage you from adding the escrow portions to the amount of the payment you willdisclose on line (C-10) because of the potential for confusion and error; if you do not add


such escrow payments to the normal loan payment, the Total of Payments should be equalto the sum of the Amount Financed and the finance charge.

DISCOUNTED OR PREMIUM RATE LOANS - See (C-1) above.

(C-5) You may ignore these if you voluntarily supply an itemization of the Amount Financed.(C-6) Otherwise, you should have your borrower initial the appropriate space. (C-5 if the borrower

wants the Itemization and C-6 if the borrower does not want the Itemization.) Of course, you mustprovide the Itemization if your borrower initials line (C-5). Reg. 226.18(c) and Commentary.

(C-7) If any information necessary for an accurate disclosure is unknown, you must make thedisclosure based on the best information available and label such a disclosure as an estimate("e"). It is unlikely, on this form at least, that you would ever estimate any disclosure. (SeeReg. 226.17(c)(2) and Commentary for the standard on what can legitimately be estimated.)Also, see the discussion at line (C-1), regarding the use of estimates for a variable rate loan.

(C-8) On this line, fill in the total taxes and fees prescribed by law that you actually will pay to publicofficials for determining the existence of, or for perfecting, releasing or satisfying a securityinterest. Reg. 226.4(e)(1).

ITEMIZATION - The regulation uses the word "itemized." Reg. 226.4(e)(1). TheCommentary to this section permits you to aggregate the cost of these items on one line.

DISTINGUISH - Remember to distinguish this line (C-8) from line (E-5) below. You will fillin line (E-5) with the aggregate amount paid to public officials only if you finance thesecharges (or a part of them). You should fill in line (C-8) every time you collect these feesfrom your borrower, whether paid in cash or financed.

NOTARY FEES - See Commentary - Reg. 226.4(e) for the rule on notarial fees. Notary fees,except in a transaction secured by real estate or a "residential mortgage" must meet the testsin this Commentary to be excluded from the finance charge. Notary fees in a "residentialmortgage transaction" or a transaction secured by real estate, do not have to be listed on thisline (C-8). Reg. 226.4(c)(7).

(C-9) If you charge your member a premium for "non-filing" insurance, a portion of the premiummay be excluded from the finance charge if you list the excludable portion of this premium onthis line.

SINGLE INTEREST INSURANCE - Normally, "non-filing insurance" is sold as part of alender's "single interest" insurance policy. (Single interest insurance is not provided for inthis document.) The insurance company should allocate the total premium for singleinterest insurance to the various components of the policy. The cost of some components(depending upon the type of policy) may have to be included in the finance charge.Commentary - Reg. 226.4(d)(10).

AMOUNT EXCLUDABLE - The amount of the premium for non-filing insurance that maybe excluded from the finance charge is limited to the aggregate fees necessary to perfect thesecurity interest. The amount of the premium in excess of the actual fees must be treated as afinance charge. Commentary - Reg. 226.4(e)(2).

SELF INSURANCE - To exclude any portion of a premium for non-filing insurance, thelender must actually purchase the insurance. If the lender merely charges the customer afee but does not purchase a policy, the entire fee is to be treated as a finance charge.Commentary - Reg. 226.4(e)(4).


(C-10) These columns and spaces are to be used for disclosing the number, amounts, and due dates ofpayments. Reg. 226.18(g).

Example (1)

Example (2)

Example (3)

For demand obligations with no alternate maturity date, you must disclose (in thissection (C-10)) only the frequency or due dates of scheduled interest payments duringthe first year. "Interest payable quarterly" is the example used in the Commentary toReg. 226.18(g)(1).

For a more complete disclosure, using methods consistent with other types of loanswe might suggest the following (for a $3,000.00 loan with monthly interest paymentsof $75.25). Reg. 226.18(g)(1) and Commentary:

Also remember to check box (C-12) below.


Number of Amount of When PaymentsPayments Payments Are Due

36 247.50 monthlybeginningJuly 15, 1992


35 202.40 monthlybeginningJuly 15, 1992

1 4,200.00 June 15, 1995


11 75.25 monthlybeginningOctober 1, 1992

1 3,075.25 September 1, 1993

Example (4)

For demand notes which include an alternate maturity date, disclose the number,amounts and due dates of all scheduled payments based on the alternate maturitydate. Also remember to check box (C-11) below.

You are permitted, but not required, to include in the amount of each payment disclosed hereany additional sums required to be paid with each payment of principal and interest, butwhich are neither part of the Amount Financed or the finance charge. Commentary - Reg.226.18(g). Such additional sums might be a real estate tax escrow or a property insuranceescrow. If you add such amounts to the payment amounts disclosed here, of course, the "Totalof Payments" that you disclose on line (C-4) will also reflect these escrow payments.

DISCOUNTED OR PREMIUM RATE LOANS - See example in Commentary 226.17(c).

IN ADDITION - The comments made under Annual Percentage Rate (C-1) and financecharge (C-2) regarding the use of estimates and disclosures based on the terms at theconsummation of the loan also apply to the payment schedule (C-10).

(C-11) Check this box if the principal amount of your loan is payable on demand with an alternatematurity date.

(C-12) Check this box if the principal amount of your loan is payable solely on demand. Remember,all disclosures will be based on an assumed maturity of one year. Reg. 226.18(I).

(C-13) (VARIABLE RATE ONLY) Check this box if you have contracted above for a variable interestrate by completing (A-19) through (A-25) or if your loan is otherwise considered to be avariable rate transaction for purposes of Regulation Z. Commentary 226.18(f)(1).

(C-14) (VARIABLE RATE ONLY) Check this box if this loan has a term of more than one year and isbeing secured by your member’s principal dwelling. This disclosure must be given instead ofthe federal box variable rate disclosures in (C-15) through (C-20). Reg. 226.18(f)(2).

The "early" variable rate disclosures referred to in (C-14) consist of the Consumer Handbook onAdjustable Rate Mortgages and a "loan program" disclosure statement. Reg. 226.19(b).

(C-15) (VARIABLE RATE ONLY) Check the box and complete lines (C-15) through (C-20) if this loanhas a term of less than one year or is not secured by your member's principal dwelling.

On line (C-15), fill in a description of the circumstances under which the annual percentage ratemay increase on this loan. Obviously, the annual percentage rate will increase if the index ratewhich you have described on line (A-21) increases, subject to any limitations described on lines(A-22) through (A-25). Reg. 226.18(f)(1)(i).

EXAMPLE: If line (A-21) is completed with the 90 day discount rate of the Federal ReserveBank of Chicago, this line (C-15) would be completed as follows: "the 90 day discount rateof the Federal Reserve Bank of Chicago increases."

(C-16) (VARIABLE RATE ONLY) This line should be completed with the method by which you aregoing to collect the additional money due in the event of an increase. If there is a possibilitythat this additional amount may be collected in more than one way, each of those should bedescribed on this line (C-16). Regulation 226.18(f)(1)(iii) and Commentary.


(C-17) (VARIABLE RATE ONLY) For each variable rate transaction (unless it is a demand obligationwith no alternate maturity date), it is necessary to disclose an example of the payment termsthat would result from an increase in the annual percentage rate. This may be accomplished bygiving either a standard example that represents the general type of credit you offer or bygiving a specific example that directly reflects the terms and conditions of this loan. Regulation226.18(f)(1)(iv) and Commentary.

Line (C-17) provides a specific example which directly relates to the terms of this loan. Due tothe broad use of this form with respect to making different types of loans, and rapidlychanging market conditions, we believe this is the more appropriate disclosure.

CAUTION: (C-17) IS NOT DESIGNED TO BE USED FOR A "STANDARD" EXAMPLE. Ifyou use a "standard" example you should provide it separately and complete line (C-17) asfollows: "Hypothetical example provided separately."

The first space should contain the amount of the increase in the interest rate. The second spaceshould contain the time period at which the rate change will take place, such as in one "day,""month" or "year." The third space should be completed with a description of the method bywhich the additional funds due will be collected. The fourth space is either the amount of theincrease, the total amount of the new payment, or the number of payments.

EXAMPLE: Assume your loan of $10,000.00 was made at 11%, payable in 36 equal,consecutive, monthly payments of $327.39; the rate can be changed yearly and anyadditional funds due will be collected by an increase in each payment. This line (C-17)would read: If the rate increases by one % in one year, the amount of each payment willincrease to $330.66.

EXAMPLE: Assume the same conditions as the example above, except that the additionalamount due will be collected at maturity. This line (C-17) would read: If the rate increasesby one % in one year, the amount due at maturity will increase to $405.88.

(C-18) (VARIABLE RATE ONLY) Fill in the frequency (e.g., “month” or “year”) in which the rate mayincrease.

(C-19) (VARIABLE RATE ONLY) This line provides space to disclose any periodic limitation on theincreases. Reg. 226.18(f)(1)(ii).

EXAMPLE: Assume that the interest rate can change once a year and may only increase 2% ateach yearly change, even though the index rate may have increased more than 2%, line (C-19)should read: and may not increase more than 2% each year.

CAUTION: The Commentary to Regulation 226.18(f)(1)(ii) indicates that theselimitations and those described in (C-20) below do not include legal limits in the natureof usury or rate ceilings under state or federal statutes or regulations. You should fill inonly those limitations you have contractually agreed to. If none, leave this line blank orfill in "N/A."

(C-20) (VARIABLE RATE ONLY) Fill in the ceiling or lifetime interest rate cap that is on line (A-24).Remember both lines (A-24) and (C-20) must be completed if this loan is variable rate and isbeing secured by a dwelling. Reg. 226.30.

NOTE: This requirement is not limited to loans secured by the borrower's "principaldwelling" - it applies to variable rate consumer loans secured by any dwelling.Unfortunately, the word "dwelling" is not defined in Reg. Z, but may include RV's,houseboats, etc.


(C-21) Check this box if this loan is being secured by the goods or property being purchased with theproceeds of the loan.

FURTHER DESCRIPTION - You are not required (here) to further describe purchase moneycollateral if you do not want to. However, you may do so if you choose in the spaceprovided immediately following this line (C-21), without checking the box (C-24). If youhave mixed security, see (C-24) below. Reg. 226.18(m) and Commentary.

DISTINGUISH - Of course, you must distinguish between the description necessary forTruth in Lending and the description you should use in your security agreement ormortgage. While you only need to check this box to describe purchase money collateral forTruth in Lending purposes, you must describe the collateral with greater specificity in thesecurity agreement.

(C-22) Check this box if collateral securing preexisting credit also secures this loan.

If you have a preexisting security agreement which secures future debts (including the debtfor which you are making the disclosures on this form) you may check this box and youneed not list the collateral from that preexisting security agreement. Commentary - Reg.226.18(m)(5). You may do so, however, if you wish.

CAUTION: If you have a previous mortgage on property which constitutes the principalresidence of any of the borrowers under this loan, and if that mortgage (or securityinterest if a mobile home) also secures this note, you need to give a notice of right ofrescission for this transaction.

(C-23) Check this box if you have taken a security interest in your member’s account(s) or if, understate or federal law, you consider the right of setoff to be a “security interest.” Each lender mustdecide for itself whether this box should be checked.

Federal credit unions may rely on the statutory lien provision at 12 USCA § 1757(11) andalways select this box. State chartered credit unions subject to credit union acts that include astatutory lien provision may also want to always select this box. State law is not, however,always clear on the subject. The Commentary - Reg. 226.2(a)(25) provides the followingsubjective standard:

"If the creditor is unsure whether a particular interest is a security interest underapplicable law (for example, if statutes and case law are either silent or inconclusiveon the issue), the creditor may at its option consider such interests as security interestsfor Truth in Lending purposes."

DISTINGUISH - You must distinguish this disclosure from an assignment of a specific timeor savings deposit as collateral for a loan. Where you take a specific assignment of aspecific account, this assignment should be disclosed under (C-24) below.

(C-24) Check this box and describe in the space that follows any "nonpurchase money" collateralsecuring this loan by "item or type."

See Reg. 226.2(a)(25) for the definition of a security interest.

See Reg. 226.18(m) for the requirement of disclosure of the security.

CROSS-COLLATERAL - See (C-22) above for the abbreviated disclosure which may be usedwhere this loan is secured by collateral which also secures preexisting credit.


If you check box (C-21) (purchase money collateral) and you also want to describe thecollateral, we suggest you do so on the line immediately following line (C-21), withoutchecking the box (C-24).

MIXED SECURITY - If you check box (C-21), and you also take a security interest in non-purchase money collateral, the latter must be described in the space provided in (C-24).

(C-25) If you wish to contract for a late fee, check the box at the beginning of line (C-25). A late fee forsingle-pay loans or loans payable on demand with no periodic payments should not bedisclosed here. Reg. 226.18(l) and Commentary. You will need to contract for such a fee in aseparate document.

NOTE: Not all states allow for a late fee. Federal credit unions, however, have the authorityto preempt any state law limitations on late fees. 12 C.F.R. § 701.21.

(C-26) This form includes the disclosure required by Regulation Z for required deposits. Generally,this disclosure is not needed even if you require a deposit because of the extensive exceptionsto the rule. The required deposit disclosure is not needed if:

1) you pay interest or dividends of at least 5% per year on the deposit;2) the deposit is an escrow account for taxes, insurance or repairs; or3) the deposit is payments under a Morris plan.

See Reg. 226.18(r), f.n.45.

If you require a deposit and if the deposit does not meet any of the above exceptions, thenselect the box.

(C-27) If you are permitted by law to and have contracted for an additional finance charge at (A-14)and provided for "pro rata" collection of the fee at (A-17) then you must disclose at (C-27) whatwill happen to that fee if the loan is paid off early. You are permitted (but not required) to alsomake the disclosure if you collect the additional finance charge in cash (A-16) or by taking itout of the proceeds of the loan (A-18). Reg. 226.18(k) and Commentary.

CAUTION: If the finance charge that you disclosed at (C-2) above is composed entirely of asimple interest rate applied to the unpaid principal balance from time to time, the disclosureat (C-27) should not be given.

(C-28) If you are doing a "residential mortgage transaction" (see Glossary), the assumption disclosureis required. Commentary - Reg. 226.18(q). This disclosure is also allowed, but not required, fortransactions other than "residential mortgage transactions." Commentary - Reg. 226.17(a)(1)(5).

PART D - INSURANCE DISCLOSURE

(D-1) This disclosure must be made, and must in fact be true, if you wish to sell credit life or disabilityinsurance and you want to exclude the cost of such insurance from the finance charge. Youmust also complete lines (D-2), (D-3), and have your member elect the coverage at (D-6) andsign on line (D-7) to keep the costs of such insurance out of the finance charge. Of course, ifyour member wants both Credit Life and Disability coverage, he or she should initial bothplaces.

(D-2) Fill in the premium for the credit life, disability or joint credit life policy which your borrowermay purchase from or through you.


UNIT COST METHOD - See Commentary - Reg. 226.4(d)(4) for the limited circumstanceswhen a unit cost disclosure is permissible.

(D-3) Fill in the term of the insurance for which you have disclosed the premium. If the term of theinsurance is less than the term of the loan, the term must be disclosed. Reg. 226.4(d)(1)(ii). Ifthe term of the insurance is the same as the term of the loan, fill in "of loan," or the actual termof the loan.

(D-4) If the borrower wants any of the types of insurance described here, you should have borrowercheck the appropriate boxes here.

(D-5) A blank line has been provided here for you to disclose any other sort of credit insurance (such ascredit unemployment insurance) that you offer. The types of credit insurance you may offer aregoverned by state law.

(D-6) This is space where the borrower(s) elects the insurance checked above or rejects credit insurancecoverage altogether. Have the borrower select the appropriate box. If you have more than oneborrower and both either do, or do not, want insurance, select the appropriate box and have bothborrowers initial on that line. If you have more than one borrower and one wants insurance andthe other does not, both boxes should be checked and the appropriate initial marked on theappropriate line.

(D-7) This blank line is for the signature(s) of the debtor(s). The signature or initials of the debtor arenecessary to exclude the cost of credit insurance premiums from the finance charge. Oneborrower may sign the request for insurance for a co-borrower. Reg. 226.4(d)(l)(iii). While asignature of a borrower is not required by Regulation Z where credit insurance is not beingpurchased, presence of a signature coupled with the election at (D-6) helps resolve anyambiguity over whether credit insurance was requested by a debtor.

(D-8) A spot has been provided for the date of birth of debtors requesting credit insurance. There aresome cases where it is permissible for different premium rates to be charged for credit lifeinsurance depending on the age of the insured.

(D-9) To exclude the cost of any required property insurance, fill in the premium for any requiredproperty insurance your borrower may purchase from or through you.

Of course, you must give your borrower the option to purchase the insurance from anyone elsewho offers equivalent coverages; however, the option to purchase the insurance from orthrough someone other than the lender does not mean that the insurance has to be readilyavailable elsewhere. Commentary - Reg. 226.4(d)(8).

(D-10) Fill in the term of the property insurance for the premium disclosed on line (D-9). The termmust be disclosed if the term of the insurance is less than the term of the note. Reg.226.4(d)(2)(ii).

PART E - ITEMIZATION OF AMOUNT FINANCED

(E-1) Fill in the amount of the loan proceeds paid to the borrower directly or, if applicable, theamount deposited to his or her asset account. Commentary - Reg. 226.18(c)(1)(i).


(E-2) Fill in the amount of this loan (if any) that has been applied toward the payment of a previousloan for you.

If you actually pay a portion of the loan proceeds to a third-party creditor, that third-partycreditor should be specifically listed on line (E-6). Reg. 226.18(c)(iii).

If more than one loan is paid off with you, you may aggregate these loan pay-offs on this line.

(E-3) If you are permitted by law to collect a prepaid finance charge, fill in the amount of anyprepaid finance charge you are financing for the borrower by increasing the face amount ofthe note. Describe the charge on the blank line to the left.

Example -

To Lender $20.00

If the borrower is paying more than one type of charge to you, for example, an origination feeand an administrative fee which are both being financed, you should aggregate these chargesand fill in the total amount on line (E-3).

The charges being paid by the borrower may constitute finance charges for purposes ofRegulation Z. See Reg. 226.4. Any finance charge that is withheld from the proceeds of theloan is a prepaid finance charge and should also be listed on line (E-7) below. Reg. 226.2(a)(23)and 226.18(c).

If you do not collect such a charge or the borrower pays the charge by cash or check at orbefore consummation of the loan, do not list anything on this line (E-3).

(E-4) Fill in the total amount of insurance premiums (including credit life, credit disability andproperty insurance) you are financing for the borrower.

CREDIT LIFE AND DISABILITY - Include in this total any credit insurance premiums youhave financed. Note: All required disclosures, (see lines (D-1) through (D-8) above), mustbe given.

PROPERTY - Include in this total any property insurance premium you have financed. Dothis when the borrower purchases the property insurance from or through you, or whenyou make out a draft for the loan proceeds to an insurer selected by the borrower. Allrequired disclosures (see lines (D-9) and (D-10)) must be given.

(E-5) Fill in the aggregate fees paid to public officials as part of this transaction to the extent suchfees are financed.

This amount is not necessarily the same as (C-8) above. For example, if this is a loansecured by real estate, certain fees are automatically excludable from the finance chargewithout being disclosed under line (C-8) above. See Reg. 226.4(c)(7). However, if youfinance the cost of such fees, they should be included on this line (E-5). Another example iswhere you collect in cash from your borrower the fees necessary to perfect a securityinterest. You should list the fees on line (C-8), but you will not list them here because theyare not financed.

(E-6) List on the lines (E-6) any other third parties paid by the lender with the proceeds of the loan.These should be identified by name. Reg. 226.18(c)(iii).


For example, if the loan is for an automobile and the lender pays the car dealer directly, thename of the dealership and the amount paid should be filled in here.

(E-7) Fill in the amount of any and all prepaid finance charges, whether financed or not.

(E-8) Calculate the Amount Financed, by aggregating lines (E-1) through (E-6), and (if applicable)subtracting (E-7). Remember, if there are any prepaid finance charges, your Amount Financed(E-8) and Principal Loan Amount (A-9) will differ.

PART F - SIGNATURES

(F-1) This line is provided for your signature.

(F-2) Borrowers should sign here.

CAUTION: If you require more than one signature, be sure you are in compliance withFederal Regulation B (12 C.F.R. § 202) and state law. (This is true in any consumer ornonconsumer loan transaction.)

PART G - PAGE 2 OF FORM

NOTICE: SIGNATURES OR MARKINGS ON PAGE 2 OF THE FORM WILL NOT TRANSFERTHROUGH TO THE OTHER COPIES. SIGNATURES SHOULD BE MADE ON THEORIGINAL DOCUMENT. COPIES MAY THEN BE CONFORMED TO THE ORIGINAL.

(G-1) Type in on line (G-1) the name of any person who is granting a security interest in the collateral,(G-2) but who does not promise to pay the loan, and have such person sign on line (G-2).

(G-3) Where necessary, add the FTC notice to this space. (Remember to add the notice to the copyyou give the borrower, as well as the original.)

DISCUSSION - The regulation governing this FTC notice is found at 16 C.F.R. § 433. Thenotice is required if this is a "purchase money loan," which is defined in the regulation as:

(a) PURCHASE MONEY LOAN. A cash advance which is received by a consumer inreturn for a "Finance Charge" within the meaning of the Truth in Lending Act andRegulation Z which is applied in whole or in substantial part, to a purchase of goodsor services from a seller who (1) refers consumers to the creditor or (2) is affiliatedwith the creditor by common control, contract, or business arrangement.

CAUTION: The FTC's definition of "purchase money loan" is much narrower than generalusage in the lending industry. The FTC notice is not intended to apply simply because loanproceeds are being used to purchase property. Instead, the FTC notice is only requiredwhere there is some relationship between you and the seller of the goods or services beingpurchased.


If you do not have an established relationship with the seller, either through referrals oraffiliation, do not add the FTC notice in this space. The FTC notice is intended to limitthe "Holder in Due Course" rule. Under this rule, the consumer must continue to makepayments even if the seller fails to keep its promises. Adding the FTC notice to a loancontract with respect to which it is not required may mean that the consumer will nothave to make loan payments to you if the seller fails to keep its promises to theconsumer. This, in turn, may compel you to monitor the seller's performance.

© COPYRIGHT 1996 CUPA®, A Division of BANKERS SYSTEMS, INC., ST. CLOUD, MNREPRODUCTION IS STRICTLY PROHIBITED


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