Regulation Z of the Truth-in-Lending regulations has been amended by the Federal Reserve to exempt most plan loans.
Document Excerpt
The June 2007 Proposal included a new Sec. 226.3(g), which would have exempted loans taken by employees against their employer-sponsored retirement plans qualified under Section 401(a) of the Internal Revenue Code and tax-sheltered annuities under Section 403(b) of the Internal Revenue Code, provided that the extension of credit is comprised of fully-vested funds from such participant’s account and is made in
compliance with the Internal Revenue Code. 26 U.S.C. 1 et seq.; 26 U.S.C. 401(a); 26 U.S.C. 403(b). The Board stated several reasons for this proposed exemption in the supplementary information to the June
2007 Proposal, including the fact that the consumer’s interest and principal payments on such a loan are reinvested in the consumer’s own account and there is no third-party creditor imposing finance charges
on the consumer. In addition, the costs of a loan taken against assets invested in a 401(k) plan, for example, are not comparable to the costs of a third-party loan product, because a consumer pays the interest on a 401(k) loan to himself or herself rather than to a third party.
Link http://edocket.access.gpo.gov/2009/pdf/E8-31185.pdf
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