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F

ederal

R e s e r v e Ba nk
DALLAS. TEXAS

of

Dallas

75222
C i r c u l a r No. 76-32
M a r c h 3, 1976

American Revolution Bicentennial

INTERPRETATIONS OF REGULATION Z
M od ificatio n o f S e m i a n n u a l S ta t e m e n ts P u r s u a n t to S ta t e Law;
T i m in g a n d M odification o f S e m i a n n u a l S ta t e m e n ts

TO ALL BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
Q u o te d b elo w is t h e t e x t of a s t a t e m e n t i s s u e d F e b r u a r y 3, 1976,
b y t h e B o a r d o f G o v e r n o r s of t h e F e d e r a l R e s e r v e S y ste m :
T h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e S y ste m
t o d a y i s s u e d tw o i n t e r p r e t a t i o n s to t h e F a i r C r e d i t B illin g s e c ­
tio n of its R e g u l a ti o n Z.
T h e i n t e r p r e t a t i o n s r e l a t e to:
(1) T h e tim in g o f t h e s e m i a n n u a l s ta t e m e n t c r e d i t o r s m u s t
s e n d to t h e i r c u s t o m e r s e x p l a i n i n g th e p r o c e d u r e s f o r c o r r e c t ­
in g b i l l i n g e r r o r s . T h i s i n t e r p r e t a t i o n a l s o p e r m i t s a c r e d i t o r
to omit a n y p o r t i o n of t h e s e m i a n n u a l n o ti c e t h a t d o e s n o t a p p l y
to a p a r t i c u l a r c r e d i t p l a n .
(2) M o d ific atio n o f s e m i a n n u a l s t a t e m e n t s s e n t in s t a t e s
t h a t h a v e t h e i r ow n s u b s t a n t i a l l y s i m i l a r F a i r C r e d i t B illin g
A cts.
E n c lo s e d a r e c o p i e s of t h e tw o i n t e r p r e t a t i o n s o f R e g u l a ti o n Z . If
y o u h a v e a n y q u e s t i o n s , p l e a s e c o n t a c t G e o r g e H. M cE lro y of o u r R e g u l a ­
tio n s D e p a r t m e n t a l (214) 651-6169. A d d iti o n a l c o p i e s o f t h e i n t e r p r e t a t i o n s
w ill b e f u r n i s h e d u p o n r e q u e s t to t h e S e c r e t a r y ' s Office of t h i s B a n k .
S in ce rely y o u r s ,
T . W. P la n t
F i r s t V ic e P r e s i d e n t
E n c l o s u r e s (2)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

TRUTH IN LENDING
IN T E R PR E T A T IO N O F R E G U L A T IO N Z
Timing and Modification of Semiannual Statements
C reditors are required by the F air C redit Billing
A ct to disclose to their custom ers their rights and
the creditor’s responsibilities un der the A ct. T he
B oard in im plem enting the A ct provided a com ­
prehensive sem iannual statem ent fo r this purpose
and also provided fo r a n alternate shorter state­
m ent w hich would be sent w ith each periodic bill­
ing statem ent. Several questions have arisen w ith
regard to these statements. This interpretation
provides:
1. T h a t the first sem iannual statem ents (o r
shorter statem ent alternatives) m ust be m ailed or
delivered n o t later than seven m onths after Oc­
tober 28, 1975.
2. A m ethod fo r determ ining w hen to mail or
deliver such statem ents w hen a creditor switches
fro m one optional statem ent to the other.
3. T h a t the shorter statem ent alternative may
be modified to om it any portions inapplicable to
the credit plan fo r w hich it is sent and to change
references in the statem ent to read “b ank,” “com ­
pany,” o r the creditor’s nam e.
S E C T IO N 226.708 — T IM IN G A N D
M O D IF IC A T IO N O F S E M IA N N U A L
STATEM ENTS
Sections 2 2 6 .7 (d ) (1 ) through 2 2 6 .7 ( d ) ( 4 ) set
out th e m ethod by w hich th e statem ent required
by § 2 2 6 .7 (a )( 9 ) is to be provided to customers
on a sem iannual basis. Section 2 2 6 .7 (d ) (5 ) pro ­
vides fo r a shorter statem ent which, as an alterna­
tive to the provisions of § § 2 2 6 .7 (d ) (1 ) through
2 2 6 .7 ( d ) ( 4 ) , may, und er certain conditions, be
provided with each periodic statem ent.
T he question has arisen of when the first state­
m ent, either the longer statem ent required by §
2 2 6 .7 (a )( 9 ) o r the alternate shorter statem ent
un der § 2 2 6 .7 ( d ) ( 5 ) , m ust be provided under
§ 2 2 6 .7 (d ). Creditors m ust m ail o r deliver one
o r the other of these statements, pursuant to §
2 2 6 .7 (d ), not later than seven m onths after Oc­
tober 28, 1975. I n determ ining w hen to send the
first statem ent pu rsuant to § 2 2 6 .7 (d ), the initial
statem ents prescribed by § 2 2 6 .7 (a ) (9 ) w hich are
sent to custom ers with accounts in existence on
O ctober 28, 1975, p ursu an t to § 226.7 ( i) , may
not be considered a statem ent sent fo r purposes
of § 2 2 6 .7 (d ).
A second question has arisen regarding the tim ­
ing of disclosures should a creditor change p rac­
tices an d provide the statem ent un der § 2 2 6 .7 (d )
1-30-76

(5 ) instead of the longer statem ent prescribed in
§ 2 2 6 .7 (a ) ( 9 ) . T he same question has arisen with
respect to the opposite case, i.e., w hen a creditor
first m akes disclosure u nder § 2 2 6 .7 ( d ) ( 5 ) and
subsequently decides to m ake disclosure of the
statem ent prescribed by § 2 2 6 .7 (a )( 9 ) semi­
annually. I f a creditor first discloses the §
2 2 6 .7 ( a ) ( 9 ) statem ent sem iannually and sub­
sequently decides to use the § 2 2 6 .7 (d ) (5 ) alter­
native, the first statem ent w hich m ust be provided
pu rsuant to § 2 2 6 .7 ( d ) ( 5 ) m ust b e m ailed or
delivered n o t later than the tim e th a t the next
§ 2 2 6 .7 ( a ) ( 9 ) statem ent w ould have been re­
quired had no change in the creditor’s practice
occurred. If a creditor first chooses to m ake dis­
closure pursuant to § 2 2 6 .7 (d ) (5 ) and subse­
quently decides to provide the longer statem ent
prescribed in § 2 2 6 .7 ( a ) ( 9 ) semianually, the
creditor m ust mail o r deliver such longer statem ent
to those custom ers receiving periodic statements
(n o t later than the mailing o r delivery of such
periodic statem ents) pursuant to § 22 6 .7 (b ) for
the billing cycle im m ediately subsequent to the bill­
ing cycle fo r w hich the last statem ents w ere mailed
o r delivered pu rsuant to § 2 26 .7 (d ) ( 5 ) . T he tim ­
ing of mailing or delivery of § 226.7 (a ) (9) state­
ments o n a sem iannual basis subsequent thereto
is to be determ ined in accordance w ith §§
2 2 6 .7 ( d ) ( 1 ) , ( 2 ) , ( 3 ) , and ( 4 ) .
A fu rth e r question has arisen w hether a creditor
may delete portions of the statem ent prescribed
in § 2 2 6 .7 (d ) (5 ) w hich are inapplicable to its
particular credit plan as in the case of th e state­
m ent prescribed by § 2 2 6 .7 ( a ) ( 9 ) . In line with
the general policy of the T ru th in L ending A ct
and Regulation Z w hich attem pt to avoid disclo­
sures w hich m ight be confusing to consumers, any
portions o f the § 2 2 6 .7 (d ) (5 ) statem ent w hich
are inapplicable to a credit plan m ay be deleted
from the § 2 2 6 .7 (d ) (5 ) statem ent by the creditor
of th at plan.
T h e question has also arisen w hether references
to the “creditor” in the statem ent prescribed by
§ 2 2 6 .7 ( d ) ( 5 ) m ay be altered or modified as is
perm itted with regard to the statem ent prescribed
by § 2 2 6 .7 (a ) ( 9 ) . Such alteration or modification
is permissible; w herever the w ord “creditor” ap­
pears o r is referred to in the statem ent prescribed
by § 2 2 6 .7 (d ) ( 5 ) , the creditor m ay substitute a p ­
propriate references, such as “com pany,” “b ank,”
“w e,” or a specific nam e.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

TRUTH IN LENDING

IN T ER PR ETA TIO N O F REG U LA TIO N Z

Modification of Semiannual Statements Pursuant to State Law

This interpretation relates to situations in w hich
a State adopts as law provisions identical to the
F air C redit Billing A m endm ents to Regulation Z
published by the B oard on Septem ber 19, 1975,
(40 F ederal R egister 4 3 1 9 9 ). T he interpretation
provides that in such cases it is permissible for
creditors to alter o r modify the statem ents pre­
scribed in §§ 2 2 6 .7 (a )( 9 ) and 2 2 6 .7 ( d ) ( 5 ) to
provide a reference to the State’s law and th at a
State law requiring o r allowing such a modifica­
tion is not inconsistent w ith th e A ct o r Regulation
Z as contem plated in §226.6 ( b ) . T he interpretation
also sets o u t the m anner in w hich such a reference
must be made.
S E C T IO N 226.606 — M O D IF IC A T IO N O F
S E M IA N N U A L S T A T E M E N T S P U R S U A N T
T O ST A T E LA W
(a ) Sections 2 2 6 .7 (a )( 9 ) and 2 2 6 .7 (d ) (5 )
prescribe statements regarding custom ers’ rights
and creditors’ responsibilities under certain sec­
tions of the Regulation. These statem ents contain
specific references to the “Federal T ru th in L end­
ing A ct,” “F ederal F air C redit Billing A ct,” and
the “A ct.”
(b ) C ertain States have adopted, or intend to

adopt, regulations or statutes identical to the
am endm ents to Regulation Z adopted by the Board
on Septem ber 15, 1975, for the purpose of im ple­
m enting the F a ir C redit Billing A ct. T he question
has arisen w hether th e statem ents prescribed by
§§ 2 2 6 .7 (a )( 9 ) and 2 2 6 .7 ( d ) ( 5 ) m ay be m odi­
fied under these circum stances to include a refer­
ence to the State law im m ediately following the
relevant reference to the F ederal law, o r w hether
separate statements are required un der both the
State law and F ederal laws.
(c )
In the circum stances described above, it is
permissible for a creditor to modify the statements
prescribed by §§ 2 2 6 .7 ( a ) ( 9 ) and 2 2 6 .7 (d ) (5 ) in
the form of a reference to th e relevant State law
by nam e. Such a disclosure, if m ade immediately
following the relevant reference to the titled F ed ­
eral law in substantially the following m anner:
“and the [insert the nam e of th e State and the
State law involved],” is permissible u nder Regula­
tion Z and any State law requiring such a disclo­
sure is n o t inconsistent w ith the A ct o r Regulation
w ithin the m eaning of § 2 2 6 .6 (b ). It is similarly
permissible to substitute “these A cts” fo r the
w ords “the A ct” w here it appears in the statem ent
required by § 2 2 6 .7 (a ) (9 ).

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