Refund Orders Are Upheld on |Teaser' Loans

A federal appeals court in St. Louis has ruled that a Missouri thrift must refund $200,000 to borrowers because it understated interest rates charged on adjustable-rate loans.

Sentinel Savings and Loan Association, Kansas City, violated the Truth in Lending Act by disclosing only the artificially low "teaser" rates on 225 home loans originated between December 1985 and June 1987, said the U.S. Court of Appeals for the Eighth Circuit. The refund comes to about $888 per loan.

Sentinel failed to disclose the composite annual interest rate - the initial rate plus expected increases over the life of the loan.

The ruling affirmed cease-and-desist and restitution orders handed down by federal regulators in 1988.

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