The Truth in Lending Act - Advertising Consumer Credit - Open-End Credit vs. Closed-End Credit

Open-End Credit

In "open-end credit," the creditor:

(1) reasonably expects the consumer to make repeated transactions;

(2) may impose a finance charge from time to time on the unpaid balance; and

(3) generally makes the amount of credit available again to the consumer as the outstanding balance is paid.

Examples of open-end credit include bank and retail gasoline credit cards, department store revolving charge accounts, and cash-advance checking accounts.

Closed-End Credit

"Closed-end credit" includes all consumer credit that does not fit the definition of open-end credit. Closed-end credit consists of both sales credit and loans. In a typical closed-end credit transaction, credit is advanced for a specific time period, and the amount financed, finance charge, and schedule of payments are agreed upon by the creditor and the consumer.

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