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99 BOARD OF GOVERNORS OF" THE FEDERAL RESERVE SYSTEM S-418 WASHINGTON ADDRESS OF"F"ICIAL CORRESPONDENCE TO THE BOARD J 8..>.'1Uar'.f 3 , 191;2 Dear Sir: Enclosed is a copy of a tel•'3gram regarding section 8(c) of Regulation iv. A copy of this telegra1a has already been tele- graphed to yot-'.1' :3ank unde2· d3.te of December · ~20, 1941. '.Tery trul7 yours, L. P. Bethea, Assistant Secretary. Enclosure ·ro THE P.R.BSIDF..t\11'8 OF ALL FEDEi:\.AL RESERVE B.AllKS -· 100 S-418-a December 20, 1941 (Addressed to a Federal Reserve Ba..'1k} Y o1lr wire December 5. A borrower w~:10 hae contracted to pay 18 mol~thly ins";jalments of ~$25 each and wbo b~womes four months past due in the middle of the contract :nay borrow $100 from another lender on an lb-month basis in view of t.he fact that section 8(c) refers onl.v to "r·etire" a..'"ld n.ot to "reduce". Hmvevur, the original lender could not lend him ~~100 v;it.h ·,;f!ich to pay t}:le past-duE;; L1stalments since t~a.t wo~d be in effect a lengthening of the maturity of the original loa.."l ;"fithout a statement of necessity. If the four payments were at the end of an 18-month contract the loan bJr the new lender wuuld be to "reti:reH and therefore co'..~ld not be made without a statement of necessity. If the past due payments were ir1 the Illiddle of the 18-month contract, the nev; lender could not take over the entire contract without a statement of necessity. The ne-;-1 loan could not be made under section 8(b) i::oce;.use ti1e past due instalments and the instalments :1ot yet due .~u~e not two separate obligations. The new loan could ;:lOt be maJ.e vdt::1 t:1e entire outstanding ·1:-Jah.nce divided into equal faonthly instalments over the remainder of the original 18 months' maturity beaause that would haYe the effect cf revising the contr;.:~ct so as to make the last instalments substa..."ltiall;r great8r thm the earlier instalments. (Signed) Chester Morrill
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