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F ederal Reserve Bank o f Dallas


Circular No. 6 9 -103
April 2 5 , 1969

To All State Member Banks
in the Eleventh Federal Reserve District:
Attached for your information is a copy of a
press release of the Board of Governors of the Federal
Reserve System dated April 22 , 19&9; regarding six inter­
pretations, also attached, of Regulation Z, Truth in
Lending, which goes into effect on July 1 , 19^9 •
Yours very truly,

P. E. Coldwell
Enclosures (7)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (

F E D E R A L



For immediate release.

April 22, 1969

The Board of Governors of the Federal Reserve System
announced today the approval of six interpretations of provisions
in its Truth in Lending Regulation Z which goes into effect on
July 1.

A copy of each interpretation is attached.



Service charges on accounts not paid within a given period of time
(a) Some vendors bill their customers for property or services

purchased under the terms of a credit plan which requires that the full
amount of each billing be paid within a stipulated period after billing,
with no privilege of paying in instalments.

If the bill is not paid with­

in that stipulated period of time, the vendor imposes a service charge
periodically on the unpaid balance until the account is paid in full.


question arises as to whether Regulation Z applies to such transactions.
(b) When in the ordinary course of business a vendor's billings
are not paid in full within that stipulated period of time, and under
such circumstances the vendor does not, in fact, regard such accounts in
default, but continues or will continue to extend credit and imposes charges
periodically for delaying payment of such accounts from time to time until
paid, the charge so imposed comes within;

the definitions of a "finance

charge" [§226.2(q)] applicable in each case to the amount of the unpaid
balance of the account.

Under such circumstances the credit so extended

comes within the definition of "open end credit" in §226.2(r), the vendor
is a creditor as defined in §226.2(m), and the disclosures required for
open end credit accounts under §226.7 shall be made.


§ 226.604 Inconsistent State requirements.
(a) Section 226.6(b) of Regulation Z indicates types of State law
requirements that are inconsistent with Regulation Z, and §226.6(c) in­
dicates the methods of dealing with such inconsistent requirements of
State law.
(b) Whether State laws are inconsistent with Regulation Z necess­
arily depends on the nature of the State laws.

Section 226.6(b)(1) pro­

vides that State law is inconsistent to the extent that it "requires a
creditor to make disclosures different from the requirements of this
part with respect to form, content, terminology, or time of delivery."
This refers to disclosures of the kinds of information covered by Reg­
ulation Z, and not to other or collateral information such as a statement
telling the customer that he should read the contract carefully, or that
there should be no blanks in the contract.

Similarly, it does not refer

to headings that State law may require on a contract such as "Retail
Installment Contract."

Similarly, a specification in a State law that

certain size type must be used is not necessarily inconsistent with the
requirements of Regulation Z.



§226.702 Location of statement of how the balance was determined.
(a) Section 226.7(b)(8) requires the creditor of an open end credit
account to disclose on the periodic statement, "the balance on which the
finance charge was computed, and a statement of how that balance was deter­

Under §226.7(c) which relates to the location of disclosures.there

is no specific reference to the placement of the "statement of how that
balance was determined" when separated from the balance to which it relates.
The question arises as to where, under such circumstances, this required
statement shall appear on the periodic statement.
(b) If separated from the balance to which it relates, the required
statement of how the balance was determined may be placed on the face of the
periodic statement, the reverse side of the periodic statement, or on an
enclosed supplement; however, where such statement and balance do not appear
together, the statement shall make clear the balance to which it refers.


-4 -


Location of disclosures when contract, security agreement, and
evidence of transaction are combined in a single document
(a) Some creditors incorporate the terms of a contract, a

security agreement, and evidence of a transaction in a single document.
These documents are designed for processing by mechanical and electronic

If all of the required disclosures under §226.8 should be

placed on the face of such a document, the creditor will be unable to
utilize conventional accounting and record keeping equipment because of
the size of the resulting document.

The question arises as to whether

required disclosures may be made on the face and the reverse side of such
a document.
(b) Where a creditor elects to combine disclosures with the
contract, security agreement, and evidence of a transaction in a single
document, the disclosures required under §226.8 shall, in accordance with
§226.6, be made on the face of that document, on its reverse side, or on
both sides, provided that the amount of the finance charge and the annual
percentage rate shall appear on the face of the document, and, if the
reverse side is used, the printing on both sides of the document shall be
equally clear and conspicuous, both sides shall contain the statement,

See other side for important information," and the place for

the customer's signature shall be provided following the full content
of the document.



§226.1001 Advertising of credit terms in other than open end credit
(a) The statement of certain credit terms in advertisements
such as "no downpayment", the amount of any installment payments,
dollar amount of finance charge, number of payments, etc., as provided
in §226.10(d)(2), requires that certain other terms also be stated in the
same advertisement.

The question arises as to how a creditor may ad­

vertise credit terms in a meaningful way when all of his credit sales
or loans are not made on the same basis.
(b) The advertising of credit terms may be made by giving one
or more examples of typical extensions of credit and stating all of the
terms applicable to each example.

In any such case, the advertiser shall

set forth one or more examples which are, in fact, typical of the type
of credit and terms usually and customarily made available by the credi­
tor to present and prospective customers and each shall be clearly and
conspicuously identified as examples of typical transactions.


-6 -

§226.1002 Catalogs-tables or

schedule of credit terms

Under §226.10(b) in order that a catalog may qualify as a singl

advertisement, among other things, it must include a table or
credit terms.

schedule of

It has been the practice of catalog houses to include such

tables in catalogs; however, such tables generally state amounts of purchases,
amounts of finance charges, and number and amount of payments for brackets
up to a certain level and then contain an instruction to include a specified
dollar amount in computing the finance charge by application of a percentage
rate on any purchase in excess of that level.

Tables to show the actual

terms including annual percentage rates for all purchases into thousands of
dollars would be unwieldy, present a formidable appearance, and may be
more confusing than helpful to the user.

The question arises as to whether

a creditor who publishes a catalog is required to include tables in detailed
amounts from the minimum up to, for example, $5000, his highest priced cat­
aloged merchandise.

Tables or schedules of terms in catalogs »ust include all 3f»purvfs

up to a level of the more commonly sold higher priced property or services
which are offered for sale, but in no event greater than $1000 unless the
creditor elects to do so.

If the creditor offers property or

service for

sale at prices higher than the uppermost level covered by his

table, he

shall state the method by which the finance charge is computed on larger
amounts, how the amount of payments and the number and periods of payments
are determined and states for each representative amount in increments of not
more than $500 up to the highest priced property or service offered,the annual
percentage rate.

Any catalog which contains such a table or schedule of

credit terms will comply with requirements of §226.10(b) provided all other
requirements are met and such catalog shall be considered adequate for the
purpose of §226.8(g)(1).

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