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FEDERAL

RESERVE

OF NEW

BANK

YORK

/•Circular No. 2 7 8 2 " !
L March 24, 1944 J

CONSUMER

CREDIT

AMENDMENT NO. 11 TO REGULATION W OF THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM

To Registrants under Regulation W and Others
Concerned in the Second Federal Reserve District:

The Board of Governors of the Federal Reserve System issued the following statement
for the press on March 23, 1944 for immediate release.
The Board of Governors of the Federal Reserve System has adopted Amendment No. 11
to its Regulation W, relating to consumer credit. The amendment becomes effective April 3, 1944.
The changes are technical or administrative, designed to improve the practical workings of
the regulation. They will relieve both credit-grantors and their customers from some detailed
requirements that are not now of sufficient importance to warrant the extra work which they
sometimes involve.
Although the amendment makes about 15 small changes in the regulation, none of these
requires the credit-grantor to do anything he was not previously required to do. Most of them
permit one credit-grantor or another to simplify his operations under the regulation.
One of the more important changes will permit banks and other cash-lenders to obtain
from the borrower on a form of their own the information concerning the purposes of the loan
which they have heretofore had to obtain on a form prescribed by the Board, but they may
continue at their option to use the prescribed form. Other changes give merchants more latitude
in handling small balances in charge accounts — viz., balances up to $10.00 — and in handling
instalment sales of articles priced up to $10.00.
The amendment is not intended to have any material effect in the way of influencing either
the expansion or the contraction of the total volume of consumer credit outstanding.

The text of the amendment is printed on the following pages and additional copies may
be obtained npon request. In approximately two weeks copies of Regulation W , as amended,
will also be available for distribution upon request.




ALLAN SPROUL,

President.

AMENDMENT NO. 11 TO REGULATION W
ISSUED BY T H E BOARD OP GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Regulation W is hereby amended in the following respects, effective April 3, 1944:
1. By amending section 4(a) entitled " D o w n Payment" so that clause (3) will read as follows:
(3) In the case of articles the cash price of which is $10.00 or less, no down payment is required.
2. By adding to section 4 ( d ) entitled "Statement of Transaction" the following sentence:
The Statement of Transaction need not include a description of the article if it is purchased by means
of a coupon book or similar medium of instalment credit upon which a cash down payment of at least
one-third of its purchase value has been made.
3. By adding'at the end of section 5(d) entitled "Curing Defaults" the following paragraph:
In the case of any charge account obligation of any member or former member of the armed
forces of the United States incurred prior to his induction into such service, a default may be cured
by the purchaser entering into a written agreement in good faith to make payment according to such
terms as the Registrant shall deem it appropriate to require.
4. By striking out of section 5 ( / ) entitled " 'Authorization' of Small Items" the words "within
15 days from the date of sale" and inserting in lieu thereof the words "within 30 days from the
date of sale".
5. By amending section 5(g) so that it will read as follows:
(g) Small Defaults.—A charge account shall not be deemed to be " i n default" within the meaning
of sections 5 ( c ) or 12 (m) if the amount in default is less than $10.00.
6. By amending section 6(d) so that it will read as follows:
(d) Statement of the Borrower.—No Registrant shall make any instalment loan, except under
the provisions of section 10(a), unless he shall have accepted in good faith a signed Statement of the
Borrower as to the purposes of the loan. Such Statement shall state whether or not any of the proceeds of the loan are to be used to make a down payment on the purchase of a listed article or to be
used to purchase any listed article having a cash price of $15.00 or more, and, if any of the proceeds
of the loan are to be so used, such Statement shall identify such listed article and shall state the cash
price thereof and the value of any trade-in. Such statement shall state also whether or not any
of the proceeds of the loan are to be used to reduce or retire any instalment sale or instalment loan,
or any single-payment loan which is subject to this regulation, or any charge account arising in whole
or in part from the sale of a listed article, and, if any of the proceeds are to be so used, shall state
the amount of such obligation and the terms of payment. If a Registrant relies in good faith on the
facts set out by the obligor in such Statement, it shall be deemed to be correct for the purposes of
the Registrant. (The Registrant, at his option, may use either his own form or the most recent Statement of Borrower form prescribed by the Board.)
7. By amending section 7 ( c ) entitled "Renewals and Extensions" so that clause (i) of numbered
paragraph (3) will read as follows:
(i) with respect to any obligation of any member or former member of the armed forces of the
United States incurred prior to his induction into such service,
8. By amending section 1(d)

so that it will read as follows:

(d) Statement of the Borrower.—No Registrant shall make any single-payment loan, except
under the provisions of section 7 ( c ) , unless he shall have accepted in good faith a signed Statement
of the Borrower as to the purposes of the loan. Such Statement shall state whether or not any of
the proceeds of the loan are to be used to make a down payment on the purchase of a listed article




or to be used to purchase any listed article having a cash price of $15 or more, and, if any of the
proceeds of the loan are to be so used, such Statement shall identify such listed article and shall state
the cash price thereof and the value of any trade-in. If a Registrant relies in good faith on the facts
set out by the obligor in such Statement, it shall be deemed to be correct for the purposes of the
Registrant. (The Registrant, at his option, may use either his own form or the most recent Statement of Borrower form prescribed by the Board.)
9. By amending section 8 entitled "Exceptions" so that clause (1) of subsection (m) will read
as follows:
(1) the conversion of heating equipment to the use of any other fuel, the repair of heating equipment, or the replacement of heating equipment if it is worn out, damaged beyond repair, or destroyed,
10. By adding to section 8 entitled "Exceptions" the following new subsection:
(p) Loans to Indians.—Any extension of credit made in accordance with regulations of the
Secretary of the Interior for the economic development or rehabilitation of Indians.
11. By amending section 10(a) entitled "Renewals and Revisions" so that clause (1) will read
as follows:
(1) with respect to any obligation of any member or former member of the armed forces of the
United States incurred prior to his induction into such service,
12. By striking out the phrase " i n form and content prescribed by the Board," from the second
paragraph of section 10(d) entitled "Statement of Necessity to Prevent Undue Hardship".
13. By amending section 12(h) so that it will read as follows:
(h) Preservation of Records.—Every Registrant shall preserve, for the life of the obligation to
which they relate, such books of account, records, and other papers (including any statements required
by or obtained pursuant to this regulation) as are relevant to establishing whether or not an extension
of credit within the scope of this regulation was in conformity with the requirements thereof, provided, however, that the Statement of the Borrower obtained pursuant to section 6(d) or 1(d) shall
be preserved for the life of the obligation to which it relates or for one year, whichever period is
longer, and provided further that the Registrant may preserve photographic reproductions in lieu of
such books of accounts, records, or papers.
14. By amending section 12(i) so that it will read as follows:
(i) Inspections and Production of Records.—For the purpose of determining whether or not
there has been compliance with the requirements of this regulation, every person required to be licensed
under section 3 shall permit the Board or any Federal Reserve Bank, by its duly authorized representatives, to make such inspections of his business operations as the Board or Federal Reserve Bank
may deem necessary or appropriate, including inspections of books of account, contracts, letters or
other relevant papers wherever located, and, for such purpose, shall furnish such reports as the Board
or the Federal Reserve Bank may require. When ordered to do so by the Board, every such person
shall furnish, under oath or otherwise, such information relative to any transaction within the scope
of the Executive Order as the Board may deem necessary or appropriate for such purpose, including
the production of books of account, contracts, letters or other papers in the custody or control of
such person.
15. By adding to section 12 the following new subsection:
(n) Mail Orders.—An instalment sale shall not be deemed to be in violation of section 4 ( a )
if the sale is made upon the receipt of a mail order for one or more articles and the cash deposit
r^eeived with the order fails by less than $1.00 to equal the sum of the down payments required by
this regulation for all of the articles included in the order.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102