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107 BOARD OF GOVERNORS OF" THE FEDERAL RESERVE SYSTEM WASHINGTON S-422 ADDRESS OFFICIAL CORRESPONDENCE TO THE BOARD January 8, 1942 Dear Sir: Enclosed for your information is a copy of' a letter w:..~i tten to a Federal Reserve Bank regarding the requirements of Regulation W in a case where an obligor finds that he is unable to make one of his monthly payments and desires to make it at a later date. Very truly yours, Chester Morrill, Secretary. Enclosure TO THE PREC.IDENTS OF ALL FEDE.ttAL RESERVE BANKS S-4;;2-a :108 January 7, 1942 :Ar. __ , Vice PreBidcnt} Fedaral Fleserve B&nk of ----' Dear L1r. This refers to your J.etter of November 29 regarding the effect of ReguJ.ut:\011 Yi on an. iudtalment contract original::.y clravm for 12 months, where thE:: bo.r.·rower· is une.ble to make one of tl:e monthly iJE1.yments and de~ s;Lres tu make it on thG 13th JJtonth. The question is a n.the':' troublesome c.no 1 and the dela; L1 answeri:;:1g your lett8r has been the rf.;Sult of the study ~vhich iu: s bem1 given to it by various rwmbers of the Board 1 s staff. A,3 you :::oi:1t out, it would te tmueslraole to reqnire the use of the Stater:1.ent of Ne:!e:::;sity t:::J make minor ad;juttrnents of a kind v;hich are apt to occur 1n a f&irlr large pro;Jortion of ca;:;es. To do so VJOuld encourage evasion on the pm-t of some Registrants, and would cause annoyance e.t "useless formahtios" on thE~ p~u·t of ot:1ers. S:Lailarl;, it would be un!.:esir~::bL: t.o encmu·ac;8 rtJso:;:t to the ptovL.lio:.:l L1 soction 8(a) (2) ret;arding defaulted eontrcv"!ts in -;;he ty.tJe of case to which you rofel' since ti"ut prvvis1o.a a::.flO was intended to provicl_e for exccptlonu_l casos, and not fe;r the co1;unon t_ype of case uhE:.:.::-e onJ.;,r a slight readjuBtment it> :::-equired. However, ,i.ngulat:ion W does n:)t rec:uire a ~-~eg.istrant to take any action wiEm a pa;yrn0nt is omitt.-~d or uaid only ·in part. If a HcgiGtrant wishes to revise or revn·ite the contract-' he must comply r::i.th the applicable provisions of the RegJlation, sucJ1. as secUun i3(a), section 3(d) and section 3(a)(2)(B); Hm·iever, i f a Reg:istrant jn t:1e ordinary course of husiness merely 2·efraius :::·rm; foreclo:dn,;, repossessing or bringing .:Jui t :in a c~.. se such afl you ce~cribe, he would nut be violating the Hegulatior:, unhJSS, of C·)urse, he we:ee at.:tin2: [JUL'S11-"l.nt to a sc~:eme designed tu evade t~1e Eeg-J.lat1on. ObvionslJ ~ if a Re~;istrant rnude a prac-r.;ice of' takin:; no w~tion in such Cf'.Se~;, and if tlv~ )l'C~-ctice were knmm to his obligors, thera Y·:ould be 2-t le~u:t c. presumption that he was evadinc; the RE;gulation. TLis will ,Jrobably furnish a practical Golut:i.on to -!he problt-,rn in most cases, but we vdll be very glad to receive any cm.unents or suggestio"YJ.S which you may he.ve ngarding it. Vexy (Sigrwc::) tru~y yours, Chef.ter dorrill Cheut,;r I+::Ycdll, Secretary.