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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 ).
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