Interpretation of provisions in Truth in Lending Regulation Z

Page 1

• § » » * • F E D E R A L o*wvt For immediate re tonne.

Apt!I 72, 1969 -'A '%'i The Board of Covernors o£ the Fcidcrul. Reserve System announced today the approval;of .» ix inturprntntiona of provisions • in i t s Truth in tending. R6gul'ftt4on-^.-t?hi<:)h- -gofo into of feet on July I, A copy of ench interpretation in attisohftd. •' • "

•• •>•.••....

: ::-J:'f' s Si, SMSfc ' S S 9 • s • . . m :

•-. -;

• • • : • • • • • •- • .

• . • . ' .

••••:•.• •'••;• •'•••• ••.

.•••• "

.

' • • • .

• • : ' • . • • • • • • .

":

"T - ..

• V:: '.

'J' Jfivi ;U • .

. : .

.

•• :.. v.;

. .:.

- .':•='^:i • -r v '-'rtV- y >sss;, ;a® •'Vo S : ® K • • • • • • • • •••„• ; •:

w » ¥ ' : Wf'S'v :•«-,•;' 'h Mi i W - M ;

y:-:• rnmmimmmmxi '••. -".-"--'.V-'-L-'v z*:£'

Page 2

(a) Some vendora b i l l their customers for property or services purchased under the tortus of a credit plan which requites that the f u l l amount of cach billing be paid within a stipulated period After billing, with no privilege of paying in instalments.

If the b i l l trr, not paid within that stipulated period of time, the vendor imposes a sewIce charge periodically on the unpaid balance until the Account lis paid in Cult. The question arises aa to whether Regulation % applies to uuch transactions, (b) When in the ordinary course of business a vendor's blllingo tire not paid in full within that stipulated period of it line,, and under eueh circumstances the vendor does not4 in fact, regard such accounts in default, but continues or will continue to extend credit and imposes charges periodically for delaying payment of such accounts from time to time until P A I D J the .charge, HO imposed comes within; the definitions of a ''finance charge" [§226,2(q)] applicable In each ease to the amount of the unpaid balance of the account.

Under such clrcumstanccs the credit so extended cornea within the definition of "open end credit" in §217.6.2(r), the vendor Is a creditor aa def ined in §?.?.(>,2(m), and the dincloaureM required for open end credit accounts under 5 7.2,6,') shall be made.

Page 3

§ 2?,6,6G'i InconBtBeent State requirements.

(a) Section 226.6(b) of Regulation t indicates typey of SJtate law requirements chat arc inconsistent with Regulation ?»,• arid. §226,6(c) Jn« dicatea the methods of deal.Ing with such inconsistent requirements of State law* (b) Whether State lawa nre inconslatent with Regulation Z necoasa r t l y depends on the nature • of ••the -State laws#. Sect.ton '£26>6(b) (I) pvo« vidoo that! State -law is inconsistent to the extent that It "requires a creditor, tjo make d laclosuroa d i f f e r e n t from the requireaienta of t h i s part with respect to iform, contfirtt, terminology, or tim« of delivery." This r e f e r s to disclosures of the klnda of information covered by Regu l a t i o n % i and not to obhet or c o l l a t e r a l information such an a statement t o i l i n g the customer that he 'should read the contract /carefully, or that those should ba m> blanks In the contract.

Similarly, i t does not r»s£er to hoadlti0fi that: State law way require on a contract (inch as "Retail Installment Contract,"

Similarly, a s p e c i f i c a t i o n in a State law that certain HIKO typo must he used ia not necessarily inconsistent with the requirements of Regulation Z.

M m to

Page 4

§226.702 Location of a tatomont of how the balance was djiterffilncd, (a) {taction 226.7(b)(0) raquiran the creditor <>L* mi open end c r e d i t account to dtsiclooR on the periodic statement* "th« balance on which Che iliruince chnt&a wan computed, and a statement of how thai; balancc wan determined,"

Under. §226,7(c) which roiatcm to the location of d i s c l o s u r e s . t h e r e is no apocilflic reference to the placement of tho "statement of hew that balance waa determined".when; separated from the balance to which It r e l a t e # , 'the question arises as to where, under such elrcwMtancea, this required stateaumt shall appear on the pec Iodic ntatanont. (b) If separated from the balance to which i t Mlttteu, the required statement of. how the balance waa determined may b<£ plncad on the face of the periodic stutommit, th® reverse side of the periodic statement, or on on enclosed emppletnent; however, where such atatement and balance do not appear together, the statement shall make clear the balance to which i t r e f e r s .

Page 5

•-u- I,oc.itlon of dlsclof.urcH when contract, r;ecurity aure'.'roent, und'J: evidence o£ transaction arc combined tn a flinftle document (n) Some creditors 'incorporate-the teri'is of a confcrnct, a security agreement, and evidence of n trnnoact'ton in a single document, These documents arts dentgned for processing by mechanical and electronic equipment* If all of the required dinc.looureG under §220,8 should bo placed on the face of such a document, the creditor will be unable to utilize conventional nccounting And recoru keeping equ/.pment because of the size of the rcHultinp, document.

The question arises as to whether/ required disclosures may be made on the faco and the revenue aide of uuch a document * (b) Where a creditor elects to combine disclosures with the contract, aeeuvtuy agreement, and evidence of a trannnction in a single document, the dinelosurtis required under 5226.0 shall, In'Accordance with §226,6, be made on the face of that document, on its reverse side, or on both sides, provided that the amount of the finance charge and the anmtal percentage rate shall appear on the face of the document, and, if the reverse aide la used, the printing on both a id on of the document ohall be equally clear and conspicuous, both aides shall contain the statement, "NOTICE: See other side £et important Information," and the place for the ••customer' f> signature frhall bo provided ."following the full content of •the document, 4/22/69

Page 6

§226.1001 Advortlalng of crcdlt toi'iao tii.other thah open end credit (ft) The statement of certain cited i t termn lln advertisements such 40 "no downpaynmnfc", the'Amount of any inotallmcnt payments, dollai' amount of finance charge, number of payments, etc,, us provided in 8226.10(d)(2), requires that certain; other iormn also be atatod in the Home advertisement* The question arlMG as to how «i creditor nay advert ioe crfidit fc<srtna in «• meaningful -w#y when n i l ol! hln credit salerj or loans are not made on the siiiru! basin.' (1>) The advertising oif credit terras-may •!>» nwtlo by giving one or mote examples of typical extensions of jjre'dlt and stating a l l - o f the terms applicable to <»aeh example, In any auch casei, the advertiser shall set forth one or mor«'axamplcs which are, In fact, typical of the type of c.r ad I t and terms usually and customarily made available by the creditor to present and prospective, cuatomiirs and each nhall bo clearly and conspicuously identified as twantples of typical transactions, 4/22/63

Page 7

§226,1002 Gatalogd-tablos Or schedule of eredit torma

§226,10(b). in order that a catalog may qualify aa a single advert aenant

ereditc terma, It has been the practice o£ catalog houses to inelude such

tablea in cataloga; however, auch tablos generally state amounta of purchases,

amounts of f {nance charges, and number -and anidunt of payments for bracketa up to a certain level and then contain an inatruction to include a apecified dollar amount in computing the finance charge by application of a percentage rate on any purchase in excess of that level, Tables to show the actual terms including annual percentage rates for all purchases into thourands of dollars would ba unwieldy, present a formidable appearance, and may be more confusing than helpful to the user, The question arines as to whether a creditor who publishes a catalog is required to include tables in detailed amounta from the minimum up to, tor axample, $5000, his highest priced cataloged merchandise,

by Tables or schedules of terma in catalogs gust tneluge all ancunts up to a level of the more commonly sold higher priced property or servicas which are offered for sale, but in no event greater than $1000 unless the creditor elects. to do go. If the cred{tor offera property or service for sale at prices higher than the uppermost level covered by his table, he shall atate the mathod by which the finance charge ia computed on larger amounts, -how the amount of saymentea and tha number and periada of paymente

ace determined and state for each representative amount in inevements of not

more: than $500 up te the highest priced property or service offered, the annual

percentage rate. Any catalog which contains such a table or schedule of credit terms will comply with requirements of §226.10(b) provided all- other requirements ar@ met and such catalog shall be considered adequate for the -

purpose of §226,8¢8) (1).

4/22/69

aniong other things, Lt mat dnelude a table or achedulg.of- 9 0