*Section 226.14—Determination of Annual Percentage Rate *

*14(a) General rule.*

1. *Tolerance. *The tolerance of 1;8 of 1 percentage
point above or below the annual percentage rate applies to any required
disclosure of the annual percentage rate. The disclosure of the annual
percentage rate is required in §§ 226.6, 226.7, 226.9, 226.15,
226.16, and 226.26.

2. *Rounding. *The regulation does not require that the
annual percentage rate be calculated to any particular number of
decimal places; rounding is permissible within the 1/8 of 1
percent tolerance. For example, an exact annual percentage rate of
14.33333% may be stated as 14.33% or as 14.3%, or even as
141/4%; but it could not be stated as 14.2% or 14%, since
each varies by more than the permitted tolerance.

3. *Periodic rates. *No explicit tolerance exists for any
periodic rate as such; a disclosed periodic rate may vary from precise
accuracy (for example, due to rounding) only to the extent that its
annualized equivalent is within the tolerance permitted by
§ 226.14(a). Further, a periodic rate need not be calculated to any
particular number of decimal places.

4. *Finance charges. *The regulation does not prohibit
creditors from assessing finance charges on balances that include
prior, unpaid finance charges; state or other applicable law may do so,
however.

5. *Good faith reliance on faulty calculation
tools. *Footnote 31a absolves a creditor of liability for an error
in the annual percentage rate or finance charge that resulted from a
corresponding error in a calculation tool used in good faith by the
creditor. Whether or not the creditor's use of the tool was in good
faith must be determined on a case-by-case basis, but the creditor must
in any case have taken reasonable steps to verify the accuracy of the
tool, including any instructions, before using it. Generally, the
footnote is available only for errors directly attributable to the
calculation tool itself, including software programs; it is not
intended to absolve a creditor of liability for its own errors, or for
errors arising from improper use of the tool, from incorrect data
entry, or from misapplication of the law.

*14(b) Annual percentage rate §§ 226.5a and 226.5b
disclosures, for initial disclosures and for advertising purposes.
*