Congress enacted the Truth in Lending Act (TILA), [citation], in order to promote the ‘‘informed use of credit’’ by consumers. [Citation.] To that end, TILA’s disclosure provisions seek to ensure ‘‘meaningful disclosure of credit terms.’’ [Citation.] Further, Congress delegated expansive authority to the Federal Reserve Board (Board) to enact appropriate regulations to advance this purpose. [Citation.] We granted certiorari, [citation], to decide whether the Board’s Regulation Z, which specifically excludes fees imposed for exceeding a credit limit (over-limit fees) from the definition of ‘‘finance charge,’’ is an unreasonable interpretation of §1605. We conclude that it is not, and, accordingly, we reverse the judgment of the Court of Appeals for the Sixth Circuit.

   Respondent, Sharon Pfennig, holds a credit card initially issued by petitioner Household Credit Services, Inc. (Household), but in which petitioner MBNA America Bank, N. A. (MBNA), now holds an interest through the acquisition of Household’s credit card portfolio. Although the terms of respondent’s credit card agreement set respondent’s credit limit at $2,000, respondent was able to make charges exceeding that limit, subject to a $29 ‘‘over-limit fee’’ for each month in which her balance exceeded $2,000.

   TILA regulates * * * the substance and form of disclosures that creditors offering ‘‘open end consumer credit plans’’ (a term that includes credit card accounts) must make to consumers, [citation], and provides a civil remedy for consumers who suffer damages as a result of a creditor’s failure to comply with TILA’s provisions, [citation]. When a creditor and a consumer enter into an open-end consumer credit plan, the creditor is required to provide to the consumer a statement for each billing cycle for which there is an outstanding balance due. [Citation.] The statement must include the account’s outstanding balance at the end of the billing period, [citation], and ‘‘the amount of any finance charge added to the account during the period, itemized to show the amounts, if any, due to the application of percentage rates and the amount, if any, imposed as a minimum or fixed charge, [citation]. A ‘‘finance charge’’ is an amount ‘‘payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit.’’ [Citation.] The Board has interpreted this definition to exclude ‘‘charges * * * for exceeding a credit limit.’’ [Citation] (Regulation Z). Thus, although respondent’s billing statement disclosed the imposition of an overlimit fee when she exceeded her $2,000 credit limit, consistent with Regulation Z, the amount was not included as part of the ‘‘finance charge.’’

   On August 24, 1999, respondent filed a complaint in the United States District Court for the Southern District of Ohio on behalf of a purported nationwide class of all consumers who were charged or assessed over-limit fees by petitioners. Respondent alleged in her complaint that petitioners allowed her and each of the other putative class members to exceed their credit limits, thereby subjecting them to over-limit fees. Petitioners violated TILA, respondent alleged, by failing to classify the over-limit fees as ‘‘finance charges’’ and thereby ‘‘misrepresented the true cost of credit’’ to respondent and the other class members. Petitioners moved to dismiss the complaint * * * on the ground that Regulation Z specifically excludes overlimit fees from the definition of ‘‘finance charge.’’ [Citation.] The District Court agreed and granted petitioners’ motion to dismiss. 

   On appeal, respondent argued, and the Court of Appeals agreed, that Regulation Z’s explicit exclusion of over-limit fees from the definition of ‘‘finance charge’’ conflicts with the plain language of §1605(a). The Court of Appeals first noted that, as a remedial statute, TILA must be liberally interpreted in favor of consumers. [Citation.] The Court of Appeals then concluded that the over-limit fees in this case were imposed ‘‘incident to the extension of credit’’ and therefore fell squarely within §1605’s definition of ‘‘finance charge.’’ [Citation.] The Court of Appeals’ conclusion turned on the distinction between unilateral acts of default and acts of default resulting from consumers’ requests for additional credit, exceeding a predetermined credit limit, that creditors grant. Under the Court of Appeals’ reasoning, a penalty imposed due to a unilateral act of default would not constitute a ‘‘finance charge.’’ [Citation.] Respondent alleged in her complaint, however, that petitioners ‘‘allowed [her] to make charges and/or assessed [her] charges that allowed her balance to exceed her credit limit of two thousand dollars,’’ putting her actions under the category of acts of default resulting from consumers’ requests for additional credit, exceeding a predetermined credit limit, that creditors grant. The Court of Appeals held that because petitioners ‘‘made an additional extension of credit to [respondent] over and above the alleged ‘credit limit,’’’ and charged the over-limit fee as a condition of this additional extension of credit, the over-limit fee clearly and unmistakably fell under the definition of a ‘‘finance charge.’’ [Citation.] Based on its reading of respondent’s allegations, the Court of Appeals limited its holding to ‘‘those instances in which the creditor knowingly permits the credit card holder to exceed his or her credit limit and then imposes a fee incident to the extension of that credit.’’ [Citation.]

   Congress has expressly delegated to the Board the authority to prescribe regulations containing ‘‘such classifications, differentiations, or other provisions’’ as, in the judgment of the Board, ‘‘are necessary or proper to effectuate the purposes of [TILA], to prevent circumvention or evasion thereof, or to facilitate compliance therewith.’’ [Citation.] * * * Indeed, ‘‘Congress has specifically designated the [Board] and staff as the primary source for interpretation and application of truth-in-lending law.’’ * * *

   Respondent does not challenge the Board’s authority to issue binding regulations. Thus, in determining whether Regulation Z’s interpretation of TILA’s text is binding on the courts, we are faced with only two questions. We first ask whether ‘‘Congress has directly spoken to the precise question at issue.’’ [Citation.] If so, courts, as well as the agency, ‘‘must give effect to the unambiguously expressed intent of Congress.’’ [Citation.] However, whenever Congress has ‘‘explicitly left a gap for the agency to fill,’’ the agency’s regulation is ‘‘given controlling weight unless [it is] arbitrary, capricious, or manifestly contrary to the statute.’’ [Citation.]

   TILA itself does not explicitly address whether over-limit fees are included within the definition of ‘‘finance charge.’’ Congress defined ‘‘finance charge’’ as ‘‘all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit.’’ §1605(a). * * * Because petitioners would not have imposed the over-limit fee had they not ‘‘granted [respondent’s] request for additional credit, which resulted in her exceeding her credit limit,’’ the Court of Appeals held that the over-limit fee in this case fell squarely within §1605(a)’s definition of ‘‘finance charge.’’ * * *

   The Court of Appeals’ characterization of the transaction in this case, however, is not supported even by the facts as set forth in respondent’s complaint. Respondent alleged in her complaint that the over-limit fee is imposed for each month in which her balance exceeds the original credit limit. If this were true, however, the over-limit fee would be imposed not as a direct result of an extension of credit for a purchase that caused respondent to exceed her $2,000 limit, but rather as a result of the fact that her charges exceeded her $2,000 limit at the time respondent’s monthly charges were officially calculated. Because over-limit fees, regardless of a creditor’s particular billing practices, are imposed only when a consumer exceeds his credit limit, it is perfectly reasonable to characterize an over-limit fee not as a charge imposed for obtaining an extension of credit over a consumer’s credit limit, but rather as a penalty for violating the credit agreement.

***

   Moreover, an examination of TILA’s related provisions, as well as the full text of §1605 itself, casts doubt on the Court of Appeals’ interpretation of the statute. A consumer holding an open-end credit plan may incur two types of charges—finance charges and ‘‘other charges which may be imposed as part of the plan.’’ [Citation.] TILA does not make clear which charges fall into each category. But TILA’s recognition of at least two categories of charges does make clear that Congress did not contemplate that all charges made in connection with an open-end credit plan would be considered ‘‘finance charges.’’ And where TILA does explicitly address overlimit fees, it defines them as fees imposed ‘‘in connection with an extension of credit,’’ rather than ‘‘incident to the extension of credit,’’ §1605(a). * * *

   As our prior discussion indicates, the best interpretation of the term ‘‘finance charge’’ may exclude over-limit fees. But §1605(a) is, at best, ambiguous, because neither §1605(a) nor its surrounding provisions provides a clear answer. While we acknowledge that there may be some fees not explicitly addressed by §1605(a)’s definition of ‘‘finance charge’’ but which are unambiguously included in or excluded by that definition, over-limit fees are not such fees.

   Because §1605 is ambiguous, the Board’s regulation implementing §1605 ‘‘is binding in the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute.’’ [Citation.]

   Regulation Z’s exclusion of over-limit fees from the term ‘‘finance charge’’ is in no way manifestly contrary to §1605. Regulation Z defines the term ‘‘finance charge’’ as ‘‘the cost of consumer credit.’’ [Citation.] * * *

   Because over-limit fees, which are imposed only when a consumer breaches the terms of his credit agreement, can reasonably be characterized as a penalty for defaulting on the credit agreement, the Board’s decision to exclude them from the term ‘‘finance charge’’ is surely reasonable.

   In holding that Regulation Z conflicts with §1605’s definition of the term ‘‘finance charge,’’ the Court of Appeals ignored our warning that ‘‘judges ought to refrain from substituting their own interstitial lawmaking for that of the [Board].’’ [Citation.] Despite the Board’s rational decision to adopt a uniform rule excluding from the term ‘‘finance charge’’ all penalties imposed for exceeding the credit limit, the Court of Appeals adopted a case-by-case approach contingent on whether an act of default was ‘‘unilateral.’’ Putting aside the lack of textual support for this approach, the Court of Appeals’ approach would prove unworkable to creditors and, more importantly, lead to significant confusion for consumers. * * * Moreover, the distinction between ‘‘unilateral’’ acts of default and acts of default where a consumer exceeds his credit limit (but has not thereby renegotiated his credit limit and is still subject to the over-limit fee) is based on a fundamental misunderstanding of the workings of the credit card industry. As the Board explained below, a creditor’s ‘‘authorization’’ of a particular point-of-sale transaction does not represent a final determination that a particular transaction is within a consumer’s credit limit because the authorization system is not suited to identify instantaneously and accurately over-limit transactions.

   Congress has authorized the Board to make ‘‘such classifications, differentiations, or other provisions, and [to] provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper to effectuate the purposes of [TILA], to prevent circumvention or evasion thereof, or to facilitate compliance therewith.’’ [Citation.] Here, the Board has accomplished all of these objectives by setting forth a clear, easy to apply (and easy to enforce) rule that highlights the charges the Board determined to be most relevant to a consumer’s credit decisions. The judgment of the Court of Appeals is therefore reversed.