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94 STAT. 132

PUBLIC LAW 96-221—MAR. 31, 1980
Public Law 96-221
96th Congress

An Act
Mar. 31, 1980
[H.R. 4986]

Depository
Institutions
Deregulation
and Monetary
Control Act of
1980.
12 u s e 226 note.
Monetary
Control Act of
1980.
12 u s e 226 note.

To facilitate the implementation of monetary policy, to provide for the gradual
elimination of all limitations on the rates of interest which are payable on deposits
and accounts, and to authorize interest-bearing transaction accounts, and for other
purposes.

Be it enacted by the Senate and House of Representatives of the
United States ofAmerica in Congress assembled,
SHORT TITLE

SECTION 1. This Act may be cited as the "Depository Institutions
Deregulation and Monetary Control Act of 1980".

TITLE I-MONETARY CONTROL ACT OF 1980
SHORT TITLE

SEC. 101. This title may be cited as the "Monetary Control Act of
1980".
REPORTING REQUIREMENTS

Reports of assets
and liabilities.

12 u s e 461.

12 u s e 1422.

SEC. 102. Section 11(a) of the Federal Reserve Act (12 U.S.C. 248(a))
is amended—
(1) by inserting "(1)" after "(a)"; and
(2) by adding at the end thereof the following new paragraph:
"(2) To require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such
reports of its liabilities and assets as the Board may determine to be
necessary or desirable to enable the Board to discharge its responsibility to monitor and control monetary and credit aggregates. Such
reports shall be made (A) directly to the Board in the case of member
banks and in the case of other depository institutions whose reserve
requirements under section 19 of this Act exceed zero, and (B) for all
other reports to the Board through the (i) Federal Deposit Insurance
Corporation in the case of insured State nonmember banks, savings
banks, and mutual savings banks, (ii) National Credit Union Administration Board in the case of insured credit unions, (iii) Federal
Home Loan Bank Board in the case of any institution insured by the
Federal Savings and Loan Insurance Corporation or which is a
member as defined in section 2 of the Federal Home Loan Bank Act,
and (iv) such State officer or agency as the Board may designate in
the case of any other type of bank, savings and loan association, or
credit union. The Board shall endeavor to avoid the imposition of
unnecessary burdens on reporting institutions and the duplication of
other reporting requirements. Except as otherwise required by law,
any data provided to any department, agency, or instrumentality of
the United States pursuant to other reporting requirements shall be
made available to the Board. The Board may classify depository

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 133

institutions for the purposes of this paragraph and may impose
different requirements on each such class.".
RESERVE REQUIREMENTS

SEC. 103. Section 19(b) of the Federal Reserve Act (12 U.S.C. 461(b))
is amended to read as follows:
"(b) RESERVE REQUIREMENTS.—

"(1) DEFINITIONS.—The following definitions and rules apply to
this subsection, subsection (c), section 11 A, the first paragraph of
section 13, and the second, thirteenth, and fourteenth paragraphs of section 16:
"(A) The term 'depository institution' means—
"(i) any insured bank as defined in section 3 of the
Federal Deposit Insurance Act or any bank which is
eligible to make application to become an insured bank
under section 5 of such Act;
"(ii) any mutual savings bank as defined in section 3 of
the Federal Deposit Insurance Act or any bank which is
eligible to make application to become an insured bank
under section 5 of such Act;
"(iii) any savings bank as defined in section 3 of the
Federal Deposit Insurance Act or any bank which is
eligible to make application to become an insured bank
under section 5 of such Act;
"(iv) any insured credit union as defined in section 101
of the Federal Credit Union Act or any credit union
which is eligible to make application to become an
insured credit union pursuant to section 201 of such Act;
"(v) any member as defined in section 2 of the Federal
Home Loan Bank Act;
"(vi) any insured institution as defined in section 401
of the National Housing Act or any institution which is
eligible to make application to become an insured institution under section 403 of such Act; and
"(vii) for the purpose of section 13 and the fourteenth
paragraph of section 16, any association or entity which
is wholly owned by or which consists only of institutions
referred to in clauses (i) through (vi),
"(B) The term 'bank' means any insured or noninsured
bank, as defined in section 3 of the Federal Deposit Insurance Act, other than a mutual savings bank or a savings
bank as defined in such section.
"(C) The term 'transaction account' means a deposit or
account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable
instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making
payments or transfers to third persons or others. Such term
includes demand deposits, negotiable order of withdrawal
accounts, savings deposits subject to automatic transfers,
and share draft accounts.
"(D) The term 'nonpersonal time deposits' means a transferable time deposit or account or a time deposit or account
representing funds deposited to the credit of, or in which any
beneficial interest is held by, a depositor who is not a natural
person.

Post, p. 140.
Post, p. 139.
Post, p. 140.
12 use 1813.
12 use 1815.

12 use 1752.
12 use 1781.
12 use 1422.
12 use 1724.
12 use 1726.
Post, p. 139.
Post, p. 140.

12 use 1813.

94 STAT. 134
Transaction
account,
determination
by regulation.

Regulation.

Uniform
application.

Waiver.

PUBLIC LAW 96-221—MAR. 31, 1980
"(E) In order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with
the Board of Directors of the Federal Deposit Insurance
Corporation, the Federal Home Loan Bank Board, and the
National Credit Union Administration Board, the Board of
Governors of the Federal Reserve System is authorized to
determine, by regulation or order, that an account or deposit
is a transaction account if such account or deposit may be
used to provide funds directly or indirectly for the purpose of
making payments or transfers to third persons or others.
"(2) RESERVE REQUIREMENTS.—(A) Each depository institution
shall maintain reserves against its transaction accounts as the
Board may prescribe by regulation solely for the purpose of
implementing monetary policy—
"(i) in the ratio of 3 per centum for that portion of its total
transaction accounts of $25,000,000 or less, subject to subparagraph (C); and
"(ii) in the ratio of 12 per centum, or in such other ratio as
the Board may prescribe not greater than 14 per centum and
not less than 8 per centum, for that portion of its total
transaction accounts in excess of $25,000,000, subject to
subparagraph (C).
"(B) Each depository institution shall maintain reserves
against its nonpersonal time deposits in the ratio of 3 per
centum, or in such other ratio not greater than 9 per centum and
not less than zero per centum as the Board may prescribe by
regulation solely for the purpose of implementing monetary
policy.
"(C) Beginning in 1981, not later than December 31 of each
year the Board shall issue a regulation increasing for the next
succeeding calendar year the dollar amount which is contained
in subparagraph (A) or which was last determined pursuant to
this subparagraph for the purpose of such subparagraph, by an
amount obtained by multiplying such dollar amount by 80 per
centum of the percentage increase in the total transaction
accounts of all depository institutions. The increase in such
transaction accounts shall be determined by subtracting the
amount of such accounts on June 30 of the preceding calendar
year from the amount of such accounts on June 30 of the
calendar year involved. In the case of any such 12-month period
in which there has been a decrease in the total transaction
accounts of all depository institutions, the Board shall issue such
a regulation decreasing for the next succeeding calendar year
such dollar amount by an amount obtained by multiplying such
dollar amount by 80 per centum of the percentage decrease in the
total transaction accounts of all depository institutions. The
decrease in such transaction accounts shall be determined by
subtracting the amount of such accounts on June 30 of the
calendar year involved from the amount of such accounts on
June 30 of the previous calendar year.
"(D) Any reserve requirement imposed under this subsection
shall be uniformly applied to all transaction accounts at all
depository institutions. Reserve requirements imposed under
this subsection shall be uniformly applied to nonpersonal time
deposits at all depository institutions, except that such requirements may vary by the maturity of such deposits.
"(3)

WAIVER OF RATIO LIMITS IN EXTRAORDINARY CIRCUM-

STANCES.—Upon a finding by at least 5 members of the Board

PUBLIC LAW 96-221—MAR. 31, 1980
that extraordinary circumstances require such action, the Board,
after consultation with the appropriate committees of the Congress, may impose, with respect to any liability of depository
institutions, reserve requirements outside the limitations as to
ratios and as to types of liabilities otherwise prescribed by
paragraph (2) for a period not exceeding 180 days, and for further
periods not exceeding 180 days each by affirmative action by at
least 5 members of the Board in each instance. The Board shall
promptly transmit to the Congress a report of any exercise of its
authority under this paragraph and the reasons for such exercise
of authority.
"(4) SUPPLEMENTAL RESERVES.—(A) The Board may, upon the
affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution of not
more than 4 per centum of its total transaction accounts. Such
supplemental reserve requirement may be imposed only if—
"(i) the sole purpose of such requirement is to increase the
amount of reserves maintained to a level essential for the
conduct of monetary policy;
"(ii) such requirement is not imposed for the purpose of
reducing the cost burdens resulting from the imposition of
the reserve requirements pursuant to paragraph (2);
"(iii) such requirement is not imposed for the purpose of
increasing the amount of balances needed for clearing purposes; and
"(iv) on the date on which the supplemental reserve
requirement is imposed, the total amount of reserves required pursuant to paragraph (2) is not less than the amount
of reserves that would be required if the initial ratios
specified in paragraph (2) were in effect.
"(B) The Board may require the supplemental reserve authorized under subparagraph (A) only after consultation with the
Board of Directors of the Federal Deposit Insurance Corporation,
the Federal Home Loan Bank Board, and the National Credit
Union Administration Board. The Board shall promptly transmit to the Congress a report with respect to any exercise of its
authority to require supplemental reserves under subparagraph
(A) and such report shall state the basis for the determination to
exercise such authority.
"(C) The supplemental reserve authorized under subparagraph
(A) shall be maintained by the Federal Reserve banks in an
Earnings Participation Account. Except as provided in subsection (c)(l)(A)(ii), such Earnings Participation Account shall receive earnings to be paid by the Federal Reserve banks during
each calendar quarter at a rate not more than the rate earned on
the securities portfolio of the Federal Reserve System during the
previous calendar quarter. The Board may prescribe rules and
regulations concerning the payment of earnings on Earnings
Participation Accounts by Federsd Reserve banks under this
paragraph.
"(D) If a supplemental reserve under subparagraph (A) has
been required of depository institutions for a period of one year
or more, the Board shall review and determine the need for
continued maintenance of supplemental reserves and shall
transmit annual reports to the Congress regarding the need, if
any, for continuing the supplemental reserve.
"(E) Any supplemental reserve imposed under subparagraph
(A) shall terminate at the close of the first 90-day period after

94 STAT. 135

Report to
Congress.

Report to
Congress.

Earnings
Participation
Account.

Reports to
Congress.

Termination.

94 STAT. 136

PUBLIC LAW 96-221—MAR. 31, 1980
such requirement is imposed during which the average amount
of reserves required under paragraph (2) are less than the
amount of reserves which would be required during such period
if the initial ratios specified in paragraph (2) were in effect.
"(5) RESERVES RELATED TO FOREIGN OBLIGATIONS OR ASSETS.—

12 use

601-604a.

Reserves.

Foreign branches, subsidiaries, and international banking facilities of nonmember depository institutions shall maintain reserves to the same extent required by the Board of foreign
branches, subsidiaries, and international banking facilities of
member banks. In addition to any reserves otherwise required to
be maintained pursuant to this subsection, any depository institution shall maintain reserves in such ratios as the Board may
prescribe against—
"(A) net balances owed by domestic offices of such depository institution in the United States to its directly related
foreign offices and to foreign offices of nonrelated depository
institutions;
"(B) loans to United States residents made by overseas
offices of such depository institution if such depository
institution has one or more offices in the United States; and
"(C) assets (including participations) held by foreign offices
of a depository institution in the United States which were
acquired from its domestic offices.
"(6) EXEMPTION FOR CERTAIN DEPOSITS.—The requirements imposed under paragraph (2) shall not apply to deposits payable
only outside the States of the United States and the District of
Columbia, except that nothing in this subsection limits the
authority of the Board to impose conditions and requirements on
member banks under section 25 of this Act or the authority of the
Board under section 7 of the International Banking Act of 1978
(12 U.S.C. 3105).
"(7) DISCOUNT AND BORROWING.—Any depository institution in
which transaction accounts or nonpersonal time deposits are
held shall be entitled to the same discount and borrowing
privileges as member banks. In the administration of discount
and borrowing privileges, the Board and the Federal Reserve
banks shall take into consideration the special needs of savings
and other depository institutions for access to discount and
borrowing facilities consistent with their long-term asset portfolios and the sensitivity of such institutions to trends in the
national money markets.
"(8) TRANSITIONAL ADJUSTMENTS.—

"(A) Any depository institution required to maintain reserves under this subsection which was engaged in business
on July 1,1979, but was not a member of the Federal Reserve
System on or after that date, shall maintain reserves against
its deposits during the first twelve-month period following
the effective date of this paragraph in amounts equal to oneeighth of those otherwise required by this subsection, during
the second such twelve-month period in amounts equal to
one-fourth of those otherwise required, during the third such
twelve-month period in amounts equal to three-eighths of
those otherwise required, during the fourth twelve-month
period in amounts equal to one-half of those otherwise
required, and during the fifth twelve-month period in
amounts equal to five-eighths of those otherwise required,
during the sixth twelve-month period in amounts equal to
three-fourths of those otherwise required, and during the

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 137

seventh twelve-month period in amounts equal to seveneighths of those otherwise required. This subparagraph does
not apply to any category of deposits or accounts which are
first authorized pursuant to Federal law in any State after
April 1,1980.
"(B) With respect to any bank which was a member of the
Federal Reserve System during the entire period beginning
on July 1, 1979, and ending on the effective date of the
Monetary Control Act of 1980, the amount of required Ante, p. 132.
reserves imposed pursuant to this subsection on and after
the effective date of such Act that exceeds the amount of
reserves which would have been required of such bank if the
reserve ratios in effect during the reserve computation
period immediately preceding such effective date were applied may, at the discretion of the Board and in accordance
with such rules and regulations as it may adopt, be reduced
by 75 per centum during the first year which begins after
such effective date, 50 per centum during the second year,
and 25 per centum during the third year.
"(C)(i) With respect to any bank which is a member of the
Federal Reserve System on the effective date of the Monetary Control Act of 1980, the amount of reserves which
would have been required of such bank if the reserve ratios
in effect during the reserve computation period immediately
preceding such effective date were applied that exceeds the
amount of required reserves imposed pursuant to this subsection shall, in accordance with such rules and regulations
as the Board may adopt, be reduced by 25 per centum during
the first year which begins after such effective date, 50 per
centum during the second year, and 75 per centum during
the third year.
"(ii) If a bank becomes a member bank during the fouryear period beginning on the effective date of the Monetary
Control Act of 1980, and if the amount of reserves which
would have been required of such bank, determined as if the
reserve ratios in effect during the reserve computation
period immediately preceding such effective date were applied, and as if such hank had been a member during such
period, exceeds the amount of reserves required pursuant to
this subsection, the amount of reserves required to be maintained by such bank beginning on the date on which such
bank becomes a member of the Federal Reserve System shall
be the amount of reserves which would have been required of
such bank if it had been a member on the day before such
effective date, except that the amount of such excess shall, in
accordance with such rules and regulations as the Board
may adopt, be reduced by 25 per centum during the first year
which begins after such effective date, 50 per centum during
the second year, and 75 per centum during the third year.
"(DXi) Any bank which was a member bank on July 1,
1979, and which withdraws from membership in the Federal
Reserve System during the period beginning on July 1,1979,
and ending on the day before the date of enactment of the
Depository Institutions Deregulation and Monetary Control
Act of 1980, shall maintain reserves beginning on such date of Ante, p. 132.
enactment in an amount equal to the amount of reserves it
would have been required to maintain if it had been a
member bank on such date of enactment. After such date of

94 STAT. 138

Ante, p. 132.

PUBLIC LAW 96-221—MAR. 31, 1980
enactment, any such bank shall maintain reserves in the
same amounts as member banks are required to maintain
under this subsection, pursuant to subparagraphs (B) and
(CXi).
"(ii) Any bank which withdraws from membership in the
Federal Reserve System on or after the date of enactment of
the Depository Institutions Deregulation and Monetary Control Act of 1980 shall maintain reserves in the same amount as
member banks are required to maintain under this subsection, pursuant to subparagraphs (B) and (C)(i).
"(E) This subparagraph applies to any depository institution which was engaged in business on August 1, 1978, as a
depository institution organized under the laws of a State,
which was not a member of the Federal Reserve System on
that date, and the principal office of which was outside the
continental limits of the United States on that date and has
remained outside the continental limits of the United States
ever since. Such a depository institution shall not be required to maintain reserves against its deposits pursuant to
this subsection until the first day of the sixth calendar year
which begins after the effective date of the Monetary Control
Act of 1980. Such a depository institution shall maintain
reserves against its deposits during the sixth calendar year
which begins after such effective date in an amount equal to
one-eighth of that otherwise required by paragraph (2),
during the seventh such year in an amount equal to onefourth of that otherwise required, during the eighth such
year in an amount equal to three-eighths of that otherwise
required, during the ninth such year in an amount equal to
one-half of that otherwise required, during the tenth such
year in an amount equal to five-eighths of that otherwise
required, during the eleventh such year in an amount equal
to three-fourths of that otherwise required, and during the
twelfth such year in an amount equal to seven-eighths of
that otherwise required.
"(9) EXEMPTION.—This subsection shall not apply with respect
to any financial institution which—
"(A) is organized solely to do business with other financial
institutions;
"(B) is owned primarily by the financial institutions with
which it does business; and
"(C) does not do business with the general public.
"(10) WAIVERS.—In individual cases, where a Federal supervisory authority waives a liquidity requirement, or waives the
penalty for failing to satisfy a liquidity requirement, the Board
shall waive the reserve requirement, or waive the penalty for
failing to satisfy a reserve requirement, imposed pursuant to this
subsection for the depository institution involved when requested by the Federal supervisory authority involved.".
FORM OF RESERVES

SEC. 104. (a) Section 19(c) of the Federal Reserve Act (12 U.S.C. 461)
is amended to read as follows:
"(c)(1) Reserves held by a depository institution to meet the requirements imposed pursuant to subsection (b) shall, subject to such rules
and regulations as the Board shall prescribe, be in the form of—

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 139

"(A) balances maintained for such purposes by such depository Vault cash.
institution in the Federal Reserve bank of which it is a member
or at which it maintains an account, except that (i) the Board
may, by regulation or order, permit depository institutions to
maintain all or a portion of their required reserves in the form of
vault cash, except that any portion so permitted shall be identical for all depository institutions, and (ii) vault cash may be used
to satisfy any supplemental reserve requirement imposed pursuant to subsection (b)(4), except that all such vault cash shall be
excluded from any computation of earnings pursuant to subsection (b)(4)(C); and
"(B) balances maintained by a depository institution which is
not a member bank in a depository institution which maintains
required reserve balances at a Federal Reserve bank, in a
Federal Home Loan Bank, or in the National Credit Union
Administration Central Liquidity Facility, if such depository
institution. Federal Home Loan Bank, or National Credit Union
Administration Central Liquidity Facility maintains such funds
in the form of balances in a Federal Reserve bank of which it is a
member or at which it maintains an account. Balances received
by a depository institution from a second depository institution
and used to satisfy the reserve requirement imposed on such
second depository institution by this section shall not be subject
to the reserve requirements of this section imposed on such first
depository institution, and shall not be subject to assessments or
reserves imposed on such first depository institution pursuant to
section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817),
section 404 of the National Housing Act (12 U.S.C. 1727), or
section 202 of the Federal Credit Union Act (12 U.S.C. 1782).
"(2) The balances maintained to meet the reserve requirements of Liquidity
subsection (b) by a depository institution in a Federal Reserve bank or requirements.
passed through a Federal Home Loan Bank or the National Credit
Union Administration Central Liquidity Facility or another depository institution to a Federal Reserve bank may be used to satisfy
liquidity requirements which may be imposed under other provisions
of Federal or State law.".
Ot>) The first sentence of section 5A(b)(l) of the Federal Home Loan
Bank Act (12 U.S.C. 1425a(b)) is amended—
(1) by striking out "and" before "(D)"; and
(2) by inserting before the period at the end thereof the
following: "; and (E) balances maintained in a Federal Reserve
bank or passed through a Federal Home Loan Bank or another
depository institution to a Federal Reserve bank pursuant to the
Federal Reserve Act".
12 USC 226.
MISCELLANEOUS AMENDMENTS

SEC. 105. (a) The first paragraph of section 13 of the Federal
Reserve Act (12 U.S.C. 342) is amended—
(1) by inserting "or other depository institutions" after
"member banks";
(2) by inserting "or other items" after "payable upon presentation" the first and third place it appears therein;
(3) by inserting "or other items" after "payable upon presentation within its district";
(4) by inserting "or other depository institution" after "nonmember bank or trust company" each place it appears therein;

94 STAT. 140

PUBLIC LAW 96-221—MAR. 31, 1980

(5) by striking out "sufficient to offset the items in transit held
for its account by the Federal reserve bank" and inserting in lieu
thereof "in such amount as the Board determines taking into
account items in transit, services provided by the Federal Reserve bank, and other factors as the Board may deem appropriate"; and
(6) by inserting "or other depository institution" after "prohibiting a member or nonmember bank".
(b)(1) The second paragraph of section 16 of the Federal Reserve Act
(12 U.S.C. 412) is amended—
(A) by inserting before the period at the end of the third
sentence the following: ", or assets that Federal Reserve banks
QL^^^ 353-359,
may purchase or hold under section 14 of this Act"; and
"^^^^
(B) by adding at the end thereof the following: "Collateral shall
not be required for Federal Reserve notes which are held in the
vaults of Federal Reserve banks.".
(2) Section 14(b)(1) of the Federal Reserve Act (12 U.S.C. 355), as
such section is in effect on the effective date of this title and as it will
be in effect on June 1, 1981, is amended by inserting after "reclamation districts," the following: "and obligations of, or fully guaranteed
as to principal and interest by, a foreign government or agency
thereof,".
(c) The thirteenth paragraph of section 16 of the Federal Reserve
Act (12 U.S.C. 360) is amended—
(1) by striking out "member banks" each place it appears
therein and inserting in lieu thereof "depository institutions";
(2) by striking out "member bank" each place it appears
therein and inserting in lieu thereof "depository institution";
and
(3) by inserting after "checks" each place it appears therein,
the following: "and other items, including negotiable orders of
withdrawal and share drafts".
(d) The fourteenth paragraph of section 16 of the Federal Reserve
Act (12 U.S.C. 248(o)) is amended by striking out "its member banks"
and inserting in lieu thereof "depository institutions".
(e) The first sentence of section 19(e) of the Federal Reserve Act (12
U.S.C. 463) is amended to read as follows: "No member bank shall
keep on deposit with any depository institution which is not authorized to have access to Federal Reserve advances under section 10(b) of
12 use 347b.
this Act a sum in excess of 10 per centum of its own paid-up capital
and surplus.".
(f) The last subsection of section 19 of the Federal Reserve Act (12
U.S.C. 505) is amended by striking out "(j)(l)" and inserting in lieu
thereof "(1)(1)".
ABOLITION OF PENALTY RATE

12 use 347b.

SEC. 106. Section 10(b) of the Federal Reserve Act (12 U.S.C. 374b) is
amended by striking out the second sentence of the first paragraph.
PRICING OF S E R V I C E S

SEC. 107. The Federal Reserve Act is amended by inserting after
section 11 the following new section:
"PRICING OF SERVICES

12 use 248a.
Ante, p. 132.

"gEC. 11 A. (a) Not later than the first day of the sixth month after
the date of enactment of the Monetary Control Act of 1980, the Board
shall publish for public comment a set of pricing principles in

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 141

accordance with this section and a proposed schedule of fees based
upon those principles for Federal Reserve bank services to depository
institutions, and not later than the first day of the eighteenth month
after the date of enactment of the Monetary Control Act of 1980, the ^"^«' P 132.
Board shall begin to put into effect a schedule of fees for such services
which is based on those principles.
"Ok>) The services which shall be covered by the schedule of fees
under subsection (a) are—
"(1) currency and coin services;
"(2) check clearing and collection services;
"(3) wire transfer services;
"(4) automated clearinghouse services;
"(5) settlement services;
"(6) securities safekeeping services;
"(7) Federal Reserve float; and
"(8) any new services which the Federal Reserve System offers,
including but not limited to payment services to effectuate the
electronic transfer of funds.
"(c) The schedule of fees prescribed pursuant to this section shall be
based on the following principles:
"(1) All Federal Reserve bank services covered by the fee
schedule shall be priced explicitly.
"(2) All Federal Reserve bank services covered by the fee
schedule shall be available to nonmember depository institutions
and such services shall be priced at the same fee schedule
applicable to member banks, except that nonmembers shall be
subject to any other terms, including a requirement of balances
sufficient for clearing purposes, that the Board may determine
are applicable to member banks.
"(3) Over the long run, fees shall be established on the basis of
all direct and indirect costs actually incurred in providing the
Federal Reserve services priced, including interest on items
credited prior to actual collection, overhead, and an allocation of
imputed costs which takes into account the taxes that would
have been paid and the return on capital that would have been
provided had the services been furnished by a private business
firm, except that the pricing principles shall give due regard to
competitive factors and the provision of an adequate level of such
services nationwide.
"(4) Interest on items credited prior to collection shall be
charged at the current rate applicable in the market for Federal
funds.
"(d) The Board shall require reductions in the operating budgets of
the Federal Reserve banks commensurate with any actual or
projected decline in the volume of services to be provided by such
banks. The full amount of any savings so realized shall be paid into
the United States Treasury.".
EFFECTIVE DATES

SEC. 108. This title shall take effect on the first day of the sixth 12 USC 248 note,
month which begins after the date of the enactment of this title,
except that the amendments regarding sections 19(b)(7) and
19(b)(8)(D) of the Federal Reserve Act shall take effect on the date of Ante, p. 133.
enactment of this title.

94 STAT. 142

PUBLIC LAW 96-221—MAR. 31, 1980

Depository
Institutions
Deregulation
Act of 1980.

TITLE II—DEPOSITORY INSTITUTIONS DEREGULATION

12 u s e 3501
note.

SEC. 201. This title may be cited as the "Depository Institutions
Deregulation Act of 1980".

SHORT TITLE

FINDINGS AND PURPOSE
12 u s e 3501.

SEC. 202. (a) The Congress hereby finds that—
(1) limitations on the interest rates which are payable on
deposits and accounts discourage persons from saving money,
create inequities for depositors, impede the ability of depository
institutions to compete for funds, and have not achieved their
purpose of providing an even flow of funds for home mortgage
lending; and
(2) all depositors, and particularly those with modest savings,
are entitled to receive a market rate of return on their savings as
soon as it is economically feasible for depository institutions to
pay such rate.
(b) It is the purpose of this title to provide for the orderly phase-out
and the ultimate elimination of the limitations on the maximum
rates of interest and dividends which may be paid on deposits and
accounts by depository institutions by extending the authority to
impose such limitations for 6 years, subject to specific standards
designed to ensure a phase-out of such limitations to market rates of
interest.
ESTABLISHMENT AND AUTHORITY OF COMMITTEE

Depository
Institutions
Deregulation
eommittee.
12 u s e 3502.

Members.

Delegation of
authorities,
prohibition.

SEC. 203. (a) The authorities conferred by section 19(j) of the Federal
Reserve Act (12 U.S.C. 371b), section 18(g) of the Federal Deposit
Insurance Act (12 U.S.C. 1828(g)), and section 5B(a) of the Federal
Home Loan Bank Act (12 U.S.C. 1425b(a)) or by any other provision of
Federal law, other than section 117 of the Federal Credit Union Act
(12 U.S.C. 1763), to prescribe rules governing the payment of interest
and dividends and the establishment of classes of deposits or accounts, including limitations on the maximum rates of interest and
dividends which may be paid on deposits and accounts, and the
authority conferred by the provisions of section 102 of Public Law
94-200 (12 U.S.C. 461 note) are hereby transferred to the Depository
Institutions Deregulation Committee (hereinafter in this title referred to as the "Deregulation Committee").
QD) The Deregulation Committee shall consist of the Secretary of
the Treasury, the Chairman of the Board of Governors of the Federal
Reserve System, the Chairman of the Board of Directors of the
Federal Deposit Insurance Corporation, the Chairman of the Federal
Home Loan Bank Board, and the Chairman of the National Credit
Union Administration Board, who shall be voting members, and the
Comptroller of the Currency who shall be a nonvoting member of the
Deregulation Committee. The Deregulation Committee shall hold
public meetings at least quarterly. All meetings of the Deregulation
Committee shall be conducted in conformity with the provisions of
section 552b of title 5, United States Code. The Deregulation Committee may not take any action unless such action is approved by a
majority vote of the voting members of the Deregulation Committee.
(c) The authorities conferred by this title on the Deregulation
Committee and its members may not be delegated.

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 143

DIRECTIVE TO THE COMMITTEE

SEC. 204. (a) The Deregulation Committee shall, by regulation. Regulation,
exercise the authorities transferred by section 203 to provide for the ^^ ^^^ ^^^^
orderly phase-out and the ultimate elimination of the limitations on
the maximum rates of interest and dividends which may be paid on
deposits and accounts as rapidly as economic conditions warrant. The
phase-out of such limitations may be achieved by the Deregulation
Committee by the gradual increase in such limitations applicable to
all existing categories of accounts, the complete elimination of the
limitations applicable to particular categories of accounts, the creation of new categories of accounts not subject to limitations or with
limitations set at current market rates, any combination of the above
methods, or any other method.
(b) The Deregulation Committee shall work toward providing all
depositors with a market rate of return on their savings with due
regard for the safety and soundness of depository institutions. Pursuant to the authority granted by this title, the Deregulation Committee shall increase all limitations on the maximum rates of interest
and dividends which may be paid on deposits and accounts to market
rates as soon as feasible, except that the Deregulation Committee
shall not increase such limitations above market rates during the sixyear period beginning on the date of enactment of this title.
TARGETS

SEC. 205. (a) In order to assist the Deregulation Committee in 12 use 3504.
establishing the limitations on the maximum rates of interest and
dividends which may be paid on all deposits and accounts at market
rates as soon as feasible and in order to provide maximum assurance
that interest rate controls will be phased-out during the 6-year period
following the date of enactment of this title, the Deregulation
Committee shall vote, not later than 18 months after such date of
enactment, on whether to increase the limitations on the maximum
rates applicable to passbook and similar savings accounts by at least
one-fourth of one percentage point during such 18-month period, and
shall vote, not later than the end of each of the third, fourth, fifth,
and sixth years after such date of enactment, on whether to increase
the limitations on the maximum rates applicable to all categories of
deposits and accounts by at least one-half of one percentage point.
(b) The Deregulation Committee may, consistent with the purposes
of this title, adjust the limitations on the rates applicable to all
categories of deposits and accounts to rates which are higher or lower
than the targets set forth in this section.
REPORTS

SEC. 206. Each member of the Deregulation Committee shall 12USC3505.
separately report to the Congress annually after the date of enactment of this Act regarding the economic viability of depository
institutions. Each such report shall contain—
(1) an assessment of whether the removal of any differential
between the rates payable on deposits and accounts by banks and
those payable by thrift institutions will adversely affect the
housing finance market or the viability of the thrift industry;
(2) recommendations for measures which would encourage
savings, provide for the equitable treatment of small savers, and
ensure a steady and adequate flow of funds to thrift institutions
and the housing market;

79-194

O—81—pt. 1

13 : QL3

94 STAT. 144

PUBLIC LAW 96-221—MAR. 31, 1980
(3) findings concerning disintermediation of savings deposits
from insured banks and insured thrift institutions to uninsured
money market innovators paying market rates to savers; and
(4) recommendations for such legislative and administrative
actions as the member involved considers necessary to maintain
the economic viability of depository institutions.
TERMINATIONS

Repeals.
12 use 3506.

Post, p. 161.
Post, p. 168.

SEC. 207. (a) Section 7 of Public Law 89-597 (12 U.S.C. 461 note) is
hereby repealed.
Ob) Effective upon the expiration of 6 years after the date of
enactment of this Act—
(1) section 102 of Public Law 94-200 (12 U.S.C. 461 note) is
hereby repealed;
(2) the second sentence of section 18(g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1828(g)(1)) is amended by striking out
"payment and" and by striking out ", including limitations on
the rates of interest and dividends that may be paid";
(3) the third, fifth, and eighth sentences of section 18(g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. 1828(g)(1)) are hereby
repealed;
(4) the first sentence of section 19(j) of the Federal Reserve Act
(12 U.S.C. 371b) is amended by striking out "payment and" and
by striking out ", including limitations on the rates of interest
which may be paid";
(5) the second sentence of section 19(j) of the Federal Reserve
Act (12 U.S.C. 371b) is hereby repealed;
(6) the third sentence of section 19(j) of the Federal Reserve Act
(12 U.S.C. 371b) is amended by striking out "No member bank"
and all that follows through "Provided, That, the" and inserting
in lieu thereof "The";
(7) the first sentence of section 5B(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1425b(a)) is amended by striking out "payment and" and by striking out ", including limitations on the
rates of interest or dividends on deposits, shares, or withdrawable accounts that may be paid";
(8) the second and fourth sentences of section 5B(a) of the
Federal Home Loan Bank Act (12 U.S.C. 1425b(a)) are hereby
repealed;
(9) the third sentence of section 5B(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1425b(a)) is amended by striking out
", including specifically the authority" and all that follows
through "of that authority";
(10) section 117 of the Federal Credit Union Act (12 U.S.C. 1763)
is amended by striking out ", pursuant to such regulations as
may be issued by the Board,";
(11) section 501(a)(2) of the Depository Institutions Deregulation and Monetary Control Act of 1980 is amended by striking
out "(A)" and by striking out subparagraph (B);
(12) section 527 of the Depository Institutions Deregulation
and Monetary Control Act of 1980 is amended by striking out
", except as provided in section 501(a)(2)(B)"; and
(13) Public Law 93-123 (12 U.S.C. 371b note) is hereby repealed.
ENFORCEMENT

12 use 3507.

SEC. 208. (a) Compliance with the regulations issued by the Deregulation Committee under this title shall be enforced under—

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 145

(1) section 8 of the Federal Deposit Insurance Act (12 U.S.C.
1818), in the case of—
(A) national banks, by the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other
than national banl^), by the Board of Governors of the
Federal Reserve System;
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System),
by the Board of Directors of the Federal Deposit Insurance
Corporation; and
(2) section 5(d) of the Home Owners' Loan Act of 1933 (12 U.S.C.
1464(d)), section 407 of the National Housing Act (12 U.S.C. 1730),
and section 17 of the Federal Home Loan Bank Act, by the
Federal Home Loan Bank Board (acting directly or through the
Federal Savings and Loan Insurance Corporation), in the case of
any institution subject to any of those provisions.
(b) For the purpose of the exercise by any agency referred to in
subsection (a) of its powers under any Act referred to in that
subsection, a violation of any regulation prescribed under this title
shall be deemed to be a violation of a regulation prescribed under the
Act involved. In addition to its powers under any provision of law
specifically referred to in subsection (a), each of the agencies referred
to in such subsection may exercise, for the purpose of enforcing
compliance with any regulation prescribed under this title, any other
authority conferred on it by law.

12 u s e 1437.

TRANSITIONAL PROVISIONS

SEC. 209. All rules and regulations issued pursuant to any authority 12 use 3508.
transferred by section 203 of this title shall remain in effect until
repealed, amended, or superseded by a regulation of the Deregulation
Committee.
TERMINATION OF AUTHORITY

SEC. 210. Upon the expiration of six years after the date of the 12 use 3509.
enactment of this Act, all authorities transferred to the Deregulation
Committee by this title shall cease to be effective and the Deregulation Committee shall cease to exist.
TITLE III- -CONSUMER CHECKING ACCOUNT EQUITY ACT
OF 1980

eonsumer
ehecking
Account Equity
Act of 1980.

SHORT TITLE

SEC. 301. This title may be cited as the "Consumer Checking
Account Equity Act of 1980^'.
AUTOMATIC TRANSFER ACCOUNTS

SEC. 302. (a) Section 19(i) of the Federal Reserve Act (12 U.S.C. 371a)
is amended by adding at the end thereof the following new sentence:
"Notwithstanding any other provision of this section, a member bank
may permit withdrawals to be made automatically from a savings
deposit that consists only of funds in which the entire beneficial
interest is held by one or more individuals through payment to the
bank itself or through transfer of credit to a demand deposit or other
account pursuant to written authorization from the depositor to
make such payments or transfers in connection with checks or drafts

12 u s e 226 note.

94 STAT. 146

PUBLIC LAW 96-221—MAR. 31, 1980
drawn upon the bank, pursuant to terms and conditions prescribed by
the Board.".
(b) Section 18(g) of the Federal Deposit Insurance Act (12 U.S.C.
1828(g)) is amended by inserting "(1)" after "(g)" and by adding at the
end thereof the following new paragraph:
"(2) Notwithstanding the provisions of paragraph (1), an insured
nonmember bank may permit withdrawals to be made automatically
from a savings deposit that consists only of funds in which the entire
beneficial interest is held by one or more individuals through payment to the bank itself or through transfer of credit to a demand
deposit or other account pursuant to written authorization from the
depositor to make such payments or transfers in connection with
checks or drafts drawn upon the bank, pursuant to terms and
conditions prescribed by the Board of Directors.".
NOW ACCOUNTS

SEC. 303. Section 2(a) of Public Law 93-100 (12 U.S.C. 1832(a)) is
amended to read as follows:
"(a)(1) Notwithstanding any other provision of law but subject to
paragraph (2), a depository institution is authorized to permit the
owner of a deposit or account on which interest or dividends are paid
to make withdrawals by negotiable or transferable instruments for
the purpose of making transfers to third parties.
"(2) Paragraph (1) shall apply only with respect to deposits or
accounts which consist solely of funds in which the entire beneficial
interest is held by one or more individuals or by an organization
which is operated primarily for religious, philanthropic, charitable,
educational, or other similar purposes and which is not operated for
profit.".
REMOTE SERVICE UNITS

SEC. 304. Section 5(b)(1) of the Home Owners' Loan Act of 1933 (12
U.S.C. 1464(b)(1)) is amended by adding at the end thereof the
following new sentence: "This section does not prohibit the establishment of remote service units by associations for the purpose of
crediting savings accounts, debiting such accounts, crediting payments on loans, and the disposition of related financial transactions,
as provided in regulations prescribed by the Board.".
SHARE DRAFTS

12 use 1785.

SEC. 305. (a) Section 101(5) of the Federal Credit Union Act (12
U.S.C. 1752(5)) is amended—
(1) by striking out "or share certificate" each place it appears
therein and inserting in lieu thereof ", share certificate, or share
draft account"; and
(2) by striking out "or 'share certificate'" and inserting in lieu
thereof", 'share certificate', or 'share draft'".
(b) Section 107(6) of the Federal Credit Union Act (12 U.S.C. 1757(6))
is amended by striking out "credit unions serving" and all that
follows through the end thereof and inserting in lieu thereof "credit
unions serving predominately low-income members (as defined by the
Board) payments on—
"(A) shares which may be issued at varying dividend rates;
"(B) share certificates which may be issued at varying dividend
rates and maturities; and
"(C) share draft accounts authorized under section 205(f);

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 147

subject to such terms, rates, and conditions as may be established by
the board of directors, within limitations prescribed by the Board.'.
(c) Section 117 of the Federal Credit Union Act (12 U.S.C. 1763) is
amended—
(1) in the first sentence—
(A) by striking out "and" the second place it appears
therein and inserting in lieu thereof a comma; and
(B) by inserting ", and at different rates on different types
of share draft accounts" before the period at the end thereof;
and
(2) in the second sentence, by striking out "and share certificates" and inserting in lieu thereof ", share certificates, and
sho-TG drsft d.ccoiiTit)s
(d) Section 205 of the Federal Credit Union Act (12 U.S.C. 1785) is
amended by adding at the end thereof the following new subsection:
"(f)(1) Every insured credit union is authorized to maintain, and
make loans with respect to, share draft accounts in accordance with
rules and regulations prescribed by the Board. Except as provided in
paragraph (2), an insured credit union may pay dividends on share
draft accounts and may permit the owners of such share draft
accounts to make withdrawals by negotiable or transferable instruments or other orders for the purpose of making transfers to third
parties.
"(2) Paragraph (1) shall apply only with respect to share draft
accounts in which the entire beneficial interest is held by one or more
individuals or members or by an organization which is operated
primarily for religious, philanthropic, charitable, educational, or
other similar purposes and which is not operated for profit.".
EFFECTIVE DATES

SEC. 306. The amendments made by sections 302, 304, and 305 of
this title shall take effect at the close of March 31, 1980, and the
amendments made by section 303 of this title shall take effect on
December 31,1980.

12 u s e 371a
note.

REPEAL OF EXISTING LAW

SEC. 307. At the close of March 31, 1980, the amendments made by
sections 101 through 103 of Public Law 96-161 are hereby repealed.
DEPOSIT INSURANCE

SEC. 308. (a)(1) The following provisions of the Federal Deposit
Insurance Act are amended by striking out "$40,000" each place it
appears therein and inserting in lieu thereof "$100,000":
(A) The first sentence of section 3(m) (12 U.S.C. 1813(m)).
(B) The first sentence of section 7(i) (12 U.S.C. 1817(i)).
(C) The last sentence of section 11(a)(1) (12 U.S.C. 1821(a)(1)).
(D) The fifth sentence of section ll(i) (12 U.S.C. 1821(i)).
(2) The amendments made by this subsection are not applicable to
any claim arising out of the closing of a bank prior to the effective
date of this section.
(b)(1) The following provisions of title IV of the National Housing
Act are amended by striking out "$40,000" each place it appears
therein and inserting in lieu thereof "$100,000":
(A) Section 401(b) (12 U.S.C. 1724(b)).
(B) Section 405(a) (12 U.S.C. 1728(a)).
(2) The amendments made by this subsection are not applicable to
any claim arising out of a default, as defined in section 401(d) of the

12 u s e 371a,
1464, 1752, 1757,
1828.

12 u s e 1811
note.

Exemption.
12 u s e 1813
note.
12 u s e 1724.

Exemption.
12 u s e 1724
note.

94 STAT. 148

Exemption.
12 u s e 1787
note.

Effective date.
12 u s e 1817
note.

PUBLIC LAW 96-221—MAR. 31, 1980
National Housing Act (12 U.S.C. 1724(d)), where the appointment of a
conservator, receiver, or other legal custodian as set forth in that
section became effective prior to the effective date of this section.
(c)(1) The second sentence of section 207(c) of the Federal Credit
Union Act (12 U.S.C. 1787(c)) is amended by striking out "$40,000"
and inserting in lieu thereof "$100,000".
(2) The amendment made by this subsection is not applicable to any
claim arising out of the closing of a credit union for liquidation on
account of bankruptcy or insolvency pursuant to section 207 of the
Federal Credit Union Act (12 U.S.C. 1787) prior to the effective date of
this section.
(d) Section 7(d) of the Federal Deposit Insurance Act (12 U.S.C.
1817(d)) is amended—
(1) in the first sentence—
(A) by inserting "(1)" after "(d)";
(B) by striking out "December 31, 1961" and inserting in
lieu thereof "December 31,1980"; and
(C) by striking out "33 Va per centum" and inserting in lieu
thereof "40 per centum"; and
(2) by adding at the end thereof the following new paragraph:
"(2) Notwithstanding any other provision of this subsection—
"(A) whenever the Board of Directors determines that the ratio
of the Corporation's capital account to the estimated insured
deposits is less than 1.10 per centum, the Board of Directors shall
increase the per centum of net assessment income to be transferred to the Corporation's capital account by such an amount,
but not to exceed 50 per centum, as it determines will result in
maintaining that ratio at not less than 1.10 per centum;
"(B) whenever the Board of Directors determines that the ratio
of the Corporation's capital account to the estimated insured
deposits exceeds 1.25 per centum, the Board of Directors may
reduce the per centum of net assessment income to be transferred to the Corporation's capital account by such an amount as
it determines will result in maintaining such ratio at not less
than 1.25 per centum; and
"(C) whenever the Board of Directors determines that the ratio
of the Corporation's capital account to the estimated insured
deposits exceeds 1.40 per centum, the Board of Directors shall
reduce the per centum of net assessment income to be transferred to the Corporation's capital account by such an amount as
it determines will result in maintaining that ratio at not more
than 1.40 per centum.".
(e) The amendments made by this section shall take effect on the
date of enactment of this Act,
CREDIT UNION AMENDMENTS

12 u s e 1757.

12 u s e 1795d.

SEC. 309. (a) The Federal Credit Union Act is amended—
(1) in section 107(5)(A)(i)—
(A) by inserting ", including an individual cooperative
unit," immediately following "dwelling"; and
(B) by inserting "(except that a loan on an individual
cooperative unit shall be adequately secured as defined by
the Board)" after "thirty years";
(2) by striking out section 305(b)(3) and inserting in lieu thereof
the following:

PUBLIC LAW 96-221—MAR. 31, 1980
"(3) shall share in dividend distributions at rates determined
by the Board. However, rates on the required capital stock shall
be without preference; and";
(3) by striking out ", to the extent or in such amounts as are
provided in advance in appropriation Acts" in section 307(15);
and
(4) in title III, as so redesignated by subsection Ot>)(l), by
striking out "Administrator" each place it appears and inserting
in lieu thereof "Board".
Oo) The Federal Credit Union Act is amended—
(1) by striking out the heading of subchapter III of such Act and
inserting in lieu thereof "TITLE III-CENTRAL LIQUIDITY
FACILITY";
(2) in title III, as so redesignated by paragraph (1), by striking
out "subchapter" each place it appears therein and inserting in
lieu thereof "title"; and
(3) in section 307(3), by striking out "subchapters I and II of this
chapter" and inserting in lieu thereof "titles I and II of this Act".

94 STAT. 149

12 u s e 1795f.
12 u s e
1795b-1795g.
12 u s e 1751.
12 u s e 1795.

12 u s e 1795a,
1795c, 1795f,
1795g.
12 u s e 1795f.

INTEREST RATES ON CREDIT UNION LOANS

SEC. 310. Section 107(5)(A)(vi) of the Federal Credit Union Act (12
U.S.C. 1757(5)(A)(vi)) is amended to read as follows:
"(vi) the rate of interest may not exceed 15 per centum per
annum on the unpaid balance inclusive of all finance
charges, except that the Board may establish—
"(I) after consultation with the appropriate committees of the Congress, the Department of Treasury, and
the Federal financial institution regulatory agencies, an
interest rate ceiling exceeding such 15 per centum per
annum rate, for periods not to exceed 18 months, if it
determines that money market interest rates have risen
over the preceding six-month period and that prevailing
interest rate levels threaten the safety and soundness of
individual credit unions as evidenced by adverse trends
in liquidity, capital, earnings, and growth; and
"(II) a higher interest rate ceiling for Agent members
of the Central Liquidity Facility in carrying out the
provisions of title III for such periods as the Board may 12 use 1795.
authorize;".
FEDERAL HOME LOAN BANK SETTLEMENT AND PROCESSING OF DRAFTS

SEC. 311. Section 11(e) of the Federal Home Loan Bank Act (12
U.S.C. 1431(e)) is amended—
(1) by inserting "(1)" after "(e)"; and
(2) by adding at the end thereof the following new paragraph:
"(2)(A) The Board may, subject to such rules and regulations,
including definitions of terms used in this paragraph, as the Board
shall from time to time prescribe, authorize Federal Home Loan
Banks to be drawees of, and to engage in, or be agents or intermediaries for, or otherwise participate or assist in, the collection and
settlement of (including presentment, clearing, and payment of, and
remitting for), checks, drafts, or any other negotiable or nonnegotiable items or instruments of payment drawn on or issued by members
of any Federal Home Loan Bank or by institutions which are eligible
to make application to become members pursuant to section 4, and to 12 use 1424.

94 STAT. 150

Ante, p. 140.

Rules and
regulations.

PUBLIC LAW 96-221—MAR. 31, 1980
have such incidental powers as the Board shall find necessary for the
exercise of any such authorization.
"(B) A Federal Home Loan Bank shall make charges, to be
determined and regulated by the Board consistent with the principles
set forth in section llA(c) of the Federal Reserve Act, or utilize the
services of, or act as agent for, or be a member of, a Federal Reserve
bank, clearinghouse, or any other public or private financial institution or other agency, in the exercise of any powers or functions
pursuant to this paragraph.
"(C) The Board is authorized, with respect to participation in the
collection and settlement of any items by Federal Home Loan Banks,
and with respect to the collection and settlement (including payment
by the payor institution) of items payable by Federal savings and loan
associations and Federal mutual savings banks, to prescribe rules
and regulations regarding the rights, powers, responsibilities, duties,
and liabilities, including standards relating thereto, of such Banks,
associations, or banks and other parties to any such items or their
collection and settlement. In prescribing such rules and regulations,
the Board may adopt or apply, in whole or in part, general banking
usage and practices, and, in instances or respects in which they would
otherwise not be applicable. Federal Reserve regulations and operating letters, the Uniform Commercial (Dode, and clearinghouse rules.".
CENTRAL LIQUIDITY FACILITY SETTLEMENT AND PROCESSING OF SHARE
DRAFTS

Ante, p. 140.

Rules and
regulations.

SEC. 312. Section 307 of the Federal Credit Union Act (12 U.S.C.
1795f) is amended—
(1) by inserting "(a)" after "SEC. 307."; and
(2) by adding at the end thereof the following:
"(b)(1) The Board may authorize the Central Liquidity Facility or
its Agent members, subject to such rules and regulations, including
definitions of terms used in this subsection, as the Board shall from
time to time prescribe, to be drawees of, and to engage in, or be agents
or intermediaries for, or otherwise participate or assist in, the
collection and settlement of (including presentment, clearing, and
payment of, and remitting for), checfe, share drafts, or any other
negotiable or nonnegotiable items or instruments of payment drawn
on or issued by members of the Central Liquidity Facility, any of its
Agent members, or any other credit union eligible to become a
member of the Central Liquidity Facility, and to have such incidental
powers as the Board shall find necessary for the exercise of any such
authorization.
"(2) The Central Liquidity Facility or its Agent members shall
make charges, to be determined and regulated by the Board consistent with the principles set forth in section llA(c) of the Federal
Reserve Act, or utilize the services of, or act as agent for, or be a
member of, a Federal Reserve bank, clearinghouse, or any other
public or private financial institution or other agency, in the exercise
of any powers or functions pursuant to this subsection.
"(3) The Board is authorized, with respect to participation in the
collection and settlement of any items by the Central Liquidity
Facility or by its Agent members, and with respect to the collection
and settlement (including payment by the payor institution) of items
payable by members of the Central Liquidity Facility or of any of its
Agent members, to prescribe rules and regulations regarding the
rights, powers, responsibilities, duties, and liabilities, including
standards relating thereto, of such entities and other parties to any

PUBLIC LAW 96-221—MAR. 31, 1980
such items or their collection and settlement. In prescribing such
rules and regulations, the Board may adopt or apply, in whole or in
part, general banking usage and practices, and, in instances or
respects in which they would otherwise not be applicable. Federal
Reserve regulations and operating letters, the Uniform Commercial
Code, and clearinghouse rules.".
ALASKA USA FEDERAL CREDIT UNION

SEC. 313. Any person who is a member of the Alaska USA Federal
Credit Union prior to any termination date which is contained in
section 5 of the charter of such credit union and which would
otherwise apply to such person may continue to be a member of such
credit union on and after such date until the expiration of two years
after the date of the enactment of this Act. For purposes of this
section, the term "member of the Alaska USA Federal Credit Union"
means any person who has an account at such credit union.
TITLE IV—POWERS OF THRIFT INSTITUTIONS AND
MISCELLANEOUS PROVISIONS
FEDERAL SAVINGS AND LOAN INVESTMENT AUTHORITY

SEC. 401. Section 5(c) of the Home Owners' Loan Act of 1933 (12
U.S.C. 1464(c)) is amended to read as follows:
"(c) An association may to such extent, and subject to such rules
and regulations as the Board may prescribe from time to time, invest
in, sell, or otherwise deal with the following loans, or other
investments:
"(1) Loans or investments without percentage of assets limitation: Without limitation as a percentage of assets, the following
are permitted:
"(A) ACCOUNT LOANS.—Loans on the security of its savings

accounts and loans specifically related to negotiable orderof-withdrawal accounts.
"(B) SINGLE-FAMILY AND MULTI-FAMILY MORTGAGE LOANS.—

Loans on the security of liens upon residential real property
in an amount which, when added to the amount unpaid upon
prior mortgages, liens or encumbrances, if any, upon such
real estate does not exceed the appraised value thereof,
except that the amount of any such loan hereafter made
shall not exceed 66% per centum of the appraised value if
such real estate is unimproved, 75 per centum of the appraised value if such real estate is improved by offsite
improvements such as street, water, sewers, or other utilities, 75 per centum of the appraised value if such real estate
is in the process of being improved by a building or buildings
to be constructed or in the process of construction, or 90 per
centum of the appraised value if such real estate is improved
by a building or buildings. Notwithstanding the above loanto-value ratios, the Board may permit a loan-to-value ratio in
excess of 90 per centum if such real estate is improved by a
building or buildings and that portion of the unpaid balance
of such loan which is in excess of an amount equal to 90 per
centum of such value is guaranteed or insured by a public or
private mortgage insurer or in the case of any loan for the
purpose of providing housing for persons of low income, as
described in regulations of the Board.

94 STAT. 151

94 STAT. 152

PUBLIC LAW 96-221—MAR. 31, 1980
"(C)

UNITED STATES GOVERNMENT SECURITIES.—Invest-

ments in obligations of, or fully guaranteed as to principal
and interest by, the United States.
"(D) FEDERAL HOME LOAN BANK AND FEDERAL NATIONAL
MORTGAGE ASSOCIATION SECURITIES.—Investments in
the

stock or bonds of a Federal home loan bank or in the stock of
the Federal National Mortgage Association.
"(E) FEDERAL HOME LOAN MORTGAGE CORPORATION INSTRU-

12 u s e 1454,
1455.

12 u s e 1721.

12 u s e 1701.
38 u s e 1801
note.
38 u s e 1801 et
seq.

MENTS.—Investments in mortgages, obligations, or other
securities which are or ever have been sold by the Federal
Home Loan Mortgage Corporation pursuant to section 305 or
306 of the Federal Home Loan Mortgage Corporation Act.
"(F) OTHER GOVERNMENT SECURITIES.—Investments in obligations, participations, securities, or other instruments of, or
issued by, or fully guaranteed as to principal and interest by,
the Federal National Mortgage Association, the Student
Loan Marketing Association or the Government National
Mortgage Association, or any other agency of the United
States and an association may issue and sell securities which
are guaranteed pursuant to section 306(g) of the National
Housing Act.
"(G) BANK DEPOSITS.—Investments in the time deposits,
certificates, or accounts of any bank the deposits of which
are insured by the Federal Deposit Insurance Corporation.
"(H) STATE SECURITIES.—Investments in general obligations of any State or any political subdivision thereof.
"(I) PURCHASE OF INSURED LOANS.—Purchase of loans secured by liens on improved real estate which are insured
under provisions of the National Housing Act, or insured as
provided in the Servicemen's Readjustment Act of 1944 or
chapter 37 of title 38, United States Code.
"(J)

"(K)

12 u s e 1715Z-5.

HOME

IMPROVEMENT

AND MANUFACTURED

HOME

LOANS.—Loans made for the repair, equipping, alteration, or
improvement of any residential real property, and loans
made for the purpose of manufactured home financing.
INSURED LOANS TO FINANCE THE PURCHASE OF FEE

SIMPLE.—Loans as to which the association has the benefit of
insurance under section 240 of the National Housing Act, or
of a commitment or agreement therefor.
"(L) LOANS TO FINANCIAL INSTITUTIONS, BROKERS, AND DEAL-

12 u s e 1425a.

ERS.—Loans to financial institutions with respect to which
the United States or an agency or instrumentality thereof
has any function of examination or supervision, or to any
broker or dealer registered with the Securities and Exchange Commission, secured by loans, obligations, or investments in which the association has the statutory authority
to invest directly.
"(M) LIQUIDITY INVESTMENTS.—Investments which, at the
time of making, are assets eligible for inclusion toward the
satisfaction of any liquidity requirement imposed by the
Board pursuant to section 5A of the Federal Home Loan
Bank Act, but only to the extent that the investment is
permitted to be so included under regulations of the Board or
is otherwise authorized.
"(N) INVESTMENT IN THE NATIONAL HOUSING PARTNERSHIP
CORPORATION, PARTNERSHIPS, AND JOINT VENTURES.—Invest-

ments in shares of stock issued by a corporation authorized
to be created pursuant to title IX of the Housing and Urban

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 153

Development Act of 1968, and investments in any partner- 42 USC 3931.
ship, limited partnership, or joint venture formed pursuant
to section 907(a) or 907(c) of such Act.
42 USC 3937.
"(O) HOUSING AND URBAN DEVELOPMENT GUARANTEED IN-

VESTMENTS.—Loans as to which the association has the
benefit of any guaranty under title IV of the Housing and
Urban Development Act of 1968, under part B of the Urban
Growth and New Community Development Act of 1970, or
under section 802 of the Housing and Community Development Act of 1974 as in effect on or after the date of
enactment of the Depository Institutions Deregulation and
Monetary Control Act of 1980, or of a commitment or
agreement therefor.

42 USC 3901.
42 USC 4511.
42 USC 1440,12
^^ ^^^' ^'*^^Ante, p. 132.

"(P) STATE HOUSING CORPORATION INVESTMENTS.—Invest-

ments in, commitments to invest in, loans to, or commitments to lend to any State housing corporation, provided
that such obligations or loans are secured directly, or indirectly through an agent or fiduciary, by a first lien on
improved real estate which is insured under the provisions
of the National Housing Act and that in the event of default, 12 USC 1701.
the holder of such obligations or loans would have the right
directly, or indirectly through an agent or fiduciary, to cause
to be subject to the satisfaction of such obligations or loans
the real estate described in the first lien or the insurance
proceeds under the National Housing Act.
"(Q) INVESTMENT COMPANIES.—An association may invest

in, redeem, or hold shares or certificates in any open-end
management investment company which is registered with
the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio of which is 15 USC 80a-5l.
restricted by such management company's investment
policy, changeable only if authorized by shareholder vote,
solely to any such investments as an association by law or
regulation may, without limitation as to percentage of
assets, invest in, sell, redeem, hold, or otherwise deal with.
The Board shall prescribe rules and regulations to imple- Rules and
ment the provisions of this subparagraph.
regulations.
"(2) LOANS OR INVESTMENTS LIMITED TO 20 PER CENTUM OF

ASSETS.—The following loans or investments are permitted, but
authority conferred in the following subparagraphs is limited to
not in excess of 20 per centum of the assets of the association for
each subparagraph:
"(A) COMMERCIAL REAL ESTATE LOANS.—Loans on security

of first liens upon other improved real estate.
"(B) CONSUMER LOANS AND CERTAIN SECURITIES.—An association may make secured or unsecured loans for personal,
family, or household purposes, and may invest in, sell, or
hold commercial paper and corporate debt securities, as
defined and approved by the Board.
"(3)

LOANS OR INVESTMENTS LIMITED TO 5 PER CENTUM OF

ASSETS.—The following loans or investments are permitted, but
the authority conferred in the following subparagraphs is limited
to not in excess of 5 per centum of assets of the association for
each subparagraph:
"(A) EDUCATION LOANS.—Loans made for the payment of
expenses of college, university, or vocational education.
"(B)

COMMUNITY DEVELOPMENT INVESTMENTS.—Invest-

ments in real property and obligations secured by liens on

94 STAT. 154

42 use 5301.

PUBLIC LAW 96-221—MAR. 31, 1980
real property located within a geographic area or neighborhood receiving concentrated development assistance by a
local government under title I of the Housing and Community Development Act of 1974, except that no investment
under this subparagraph in such real property may exceed
an aggregate investment of 2 per centum of the assets of the
association.
"(C) NONCONFORMING LOANS.—Loans upon the security of
or respecting real property or interests therein used for
primarily residential or farm purposes that do not comply
with the limitations of this subsection.
"(D) CONSTRUCTION LOANS WITHOUT SECURITY.—Invest-

ments not exceeding the greater of (A) the sum of its surplus,
undivided profits, and reserves or (B) 5 per centum of the
assets of the association, in loans the principal purpose of
which is to provide financing with respect to what is or is
expected to become primarily residential real estate where
(i) the association relies substantially for repayment on the
borrower's general credit standing and forecast of income
without other security, or (ii) the association relies on other
assurances for repayment, including but not limited to a
guaranty or similar obligation of a third party. Investments
under this subsection shall not be included in any percentage of assets or other percentage referred to in this
subsection.
"(4) OTHER LOANS AND INVESTMENTS.—The following additional

loans and other investments to the extent authorized below:
"(A) BUSINESS DEVELOPMENT CREDIT CORPORATIONS.—An

association whose general reserves, surplus, and undivided
profits aggregate a sum in excess of 5 per centum of its
withdrawable accounts is authorized to invest in, lend to, or
to commit itself to lend to, any business development credit
corporation incorporated in the State in which the home
office of the association is located in the same manner and to
the same extent as savings and loan associations chartered
by such State are authorized, but the aggregate amount of
such investments, loans, and commitments of any such
association shall not exceed one-half of 1 per centum of the
total outstanding loans of the association or $250,000, whichever is less.
"(B) SERVICE CORPORATIONS.—Investments in the capital

stock, obligations, or other securities of any corporation
organized under the laws of the State in which the home
office of the association is located, if the entire capital stock
of such corporation is available for purchase only by savings
and loan associations of such State and by Federal associations having their home offices in such State, but no
association may make any investment under this subparagraph if its aggregate outstanding investment under this
subparagraph would exceed 3 per centum of the assets of the
association, except that not less than one-half of the investment permitted under this subparagraph which exceeds one
per centum of assets shall be used primarily for community,
inner-city, and community development purposes.
"(C) FOREIGN ASSISTANCE, CERTAIN GUARANTEED LOANS.—

(i) Loans secured by mortgages as to which the association
has the benefit of insurance under title X of the National

PUBLIC LAW 96-221—MAR. 31, 1980
Housing Act or of a commitment or agreement for such
insurance.
"(ii) Investments in housing project loans having the
benefit of any guaranty under section 221 of the Foreign
Assistance Act of 1961 or loans having the benefit of any
guaranty under section 224 of such Act, or any commitment
or agreement with respect to such loans made pursuant to
either of such sections and in the share capital and capital
reserve of the Inter-American Savings and Loan Bank. This
authority extends to the acquisition, holding, and disposition
of loans having the benefit of any guaranty under section 221
or 222 of such Act, or of any commitment or agreement for
any such guaranty.
"(iii) Investments under clause (i) of this subparagraph
shall not be included in any percentage of assets or other
percentage referred to in this subsection. Investments under
clause (ii) of this subparagraph shall not exceed, in the case
of any association, 1 per centum of the assets of such
association.
"(D)

94 STAT. 155
12 USC I749aa.

22 USC 2181.
'^^ Stat. 432.

22 usc 2181
2182.

STATE AND LOCAL GOVERNMENT OBUGATIONS.—An

association whose general reserves, surplus, and undivided
profits aggregate a sum in excess of that amount which is
determined by the Board for the purpose of the third
sentence of section 403(b) of the National Housing Act is 12 use 1726.
authorized to invest in obligations which constitute prudent
investments, as defined by the Board, of its home State and
political subdivisions thereof (including any agency, corporation, or instrumentality) if (i) the proceeds of such obligations are to be used for rehabilitation, financing, or the
construction of residential real estate, and (ii) the aggregate
amount of all investments under this subparagraph shall not
exceed the amount of the association's general reserves,
surplus, and undivided profits.
"(6) DEFINITIONS.—As used in this subsection—
"(A) the terms 'residential real property' or 'residential
real estate' mean leaseholds, homes (including condominiums and cooperatives, except that in connection with loans
on individual cooperative units, such loans shall be adequately secured as defined by the Board), combinations of
homes and business property, other dwelling units, or combinations of dwelling units including homes and business
property involving only minor or incidental business use, or
property to be improved by construction of such structures;
"(B) the term 'loans' includes obligations and extensions or
advances of credit; and any reference to a loan or investment
includes an interest in such a loan or investment; and
"(C) the term 'State' means any State of the United States,
the District of Columbia, the Commonwealth of Puerto Rico,
the Virgin Islands, the Canal Zone, Guam, American Samoa,
and any territory or possession of the United States.".
CREDIT CARDS

SEC. 402. Section 5(b) of the Home Owners' Loan Act of 1933 (12
U.S.C. 1464(b)) is amended by adding at the end thereof the following Post, p. 159.
new paragraph:
"(4) An association is authorized, subject to such regulations as the
Board may prescribe, to issue credit cards, extend credit in connec-

94 STAT. 156

PUBLIC LAW 96-221—MAR. 31, 1980
tion therewith, and otherwise engage in or participate in credit card
operations.".
TRUST POWERS

SEC. 403. Section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C.
1464) is amended by adding at the end thereof the following new
subsection:
"(n)(l) The Board is authorized and empowered to grant by special
permit to an association applying therefor, when not in contravention of State or local law, the right to act as trustee, executor,
administrator, guardian, or in any other fiduciary capacity in which
State banks, trust companies, or other corporations which come into
competition with associations are permitted to act under the laws of
the State in which the association is located. Subject to the rules and
regulations of the Board, service corporations may invest in State or
federally-chartered corporations which are located in the State in
which the home office of the association is located and which are
engaged in trust activities.
"(2) Whenever the laws of such State authorize or permit the
exercise of any or all of the foregoing powers by State banks, trust
companies, or other corporations which compete with associations,
the granting to and the exercise of such powers by associations shall
not be deemed to be in contravention of State or local law within the
meaning of this section.
"(3) Associations exercising any or all of the powers enumerated in
this section shall segregate all assets held in any fiduciary capacity
from the general assets of the association and shall keep a separate
set of books and records showing in proper detail all transactions
engaged in under authority of this section. The State banking
authority involved may have access to reports of examination made
by the Board insofar as such reports relate to the trust department of
such association but nothing in this section shall be construed as
authorizing such State banking authority to examine the books,
records, and assets of such associations.
"(4) No association shall receive in its trust department deposits of
current funds subject to check or the deposit of checks, drafts, bills of
exchange, or other items for collection or exchange purposes. Funds
deposited or held in trust by the association awaiting investment
shall be carried in a separate account and shall not be used by the
association in the conduct of its business unless it shall first set aside
in the trust department United States bonds or other securities
approved by the Board.
"(5) In the event of the failure of such association, the owners of
the funds held in trust for investment shall have a lien on the bonds
or other securities so set apart in addition to their claim against the
estate of the association.
"(6) Whenever the laws of a State require corporations acting in a
fiduciary capacity to deposit securities with the State authorities for
the protection of private or court trusts, associations so acting shall
be required to make similar deposits and securities so deposited shall
be held for the protection of private or court trusts, as provided by
the State law. Associations in such cases shall not be required to
execute the bond usually required of individuals if State corporations
under similar circumstances are exempt from this requirement.
Associations shall have power to execute such bond when so required
by the laws of the State involved.

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 157

"(7) In any case in which the laws of a State require that a
corporation acting as trustee, executor, administrator, or in any
capacity specified in this section, shall take an oath or make an
affidavit, the president, vice president, cashier, or trust officer
of such association may take the necessary oath or execute the
necessary affidavit.
"(8) It shall be unlawful for any association to lend any officer,
director, or employee any funds held in trust under the powers
conferred by this section. Any officer, director, or employee making
such loan, or to whom such loan is made, may be fined not more than
$5,000, or imprisoned not more than five years, or may be both fined
and imprisoned, in the discretion of the court.
"(9) In passing upon applications for permission to exercise the
powers enumerated in this section, the Board may take into consideration the amount of capital and surplus of the applying association, whether or not such capital and surplus is sufficient under the
circumstances of the case, the needs of the community to be served,
and any other facts and circumstances that seem to it proper, and
may grant or refuse the application accordingly, except that no
permit shall be issued to any association having a capital and
surplus less than the capital and surplus required by State law of
State banks, trust companies, and corporations exercising such
powers.
"(10)(A) Any association desiring to surrender its right to exercise
the powers granted under this section, in order to relieve itself of the
necessity of complying with the requirements of this section, or to
have returned to it any securities which it may have deposited with
the State authorities for the protection of private or court trusts, or
for any other purpose, may file with the Board a certified copy of a
resolution of its board of directors signifying such desire.
"(B) Upon receipt of such resolution, the Board, after satisfying
itself that such association has been relieved in accordance with
State law of all duties as trustee, executor, administrator, guardian
or other fiduciary, under court, private or other appointments
previously accepted under authority of this section, may in its
discretion, issue to such association a certificate certifying that such
association is no longer authorized to exercise the powers granted by
this section.
"(C) Upon the issuance of such a certificate by the Board, such
association (i) shall no longer be subject to the provisions of this
section or the regulations of the Board made pursuant thereto, (ii)
shall be entitled to have returned to it any securities which it may
have deposited with the State authorities for the protection of
private or court trusts, and (iii) shall not exercise thereafter any of
the powers granted by this section without first applying for and
obtaining a new permit to exercise such powers pursuant to the
provisions of this section.
"(D) The Board is authorized and empowered to promulgate such Regulations,
regulations as it may deem necessary to enforce compliance with the
provisions of this subsection and the proper exercise of the trust powers
granted by this subsection.
"(11)(A) In addition to the authority conferred by other law, if, in Revocation
the opinion of the Board, an association is unlawfully or unsoundly order.
exercising, or has unlawfully or unsoundly exercised, or has failed for
a period of five consecutive years to exercise, the powers granted by
this section or otherwise fails or has failed to comply with the
requirements of this subsection, the Board may issue and serve upon

94 STAT. 158

Hearing.

Effective date.

PUBLIC LAW 96-221—MAR. 31, 1980
the association a notice of intent to revoke the authority of the
association to exercise the powers granted by this subsection. The
notice shall contain a statement of the facts constituting the alleged
unlawful or unsound exercise of powers, or failure to exercise powers,
or failure to comply, and shall fix a time and place at which a hearing
will be held to determine whether an order revoking authority to
exercise such powers should issue against the association.
"(g) Such hearing shall be conducted in accordance with the
provisions of subsection (d)(7), and subject to judicial review as
therein provided, and shall be fixed for a date not earlier than thirty
days and not later than sixty days after service of such notice unless
an earlier or later date is set by the Board at the request of any
association so served.
"(C) Unless the association so served shall appear at the hearing by
a duly authorized representative, it shall be deemed to have consented to the issuance of the revocation order. In the event of such
consent, or if upon the record made at any such hearing, the Board
shall find that any allegation specified in the notice of charges has
been established, the Board may issue and serve upon the association
an order prohibiting it from accepting any new or additional trust
accounts and revoking authority to exercise any and all powers
granted by this subsection, except that such order shall permit the
association to continue to service all previously accepted trust
accounts pending their expeditious divestiture or termination.
"(D) A revocation order shall become effective not earlier than the
expiration of thirty days after service of such order upon the
association so served (except in the case of a revocation order issued
upon consent, which shall become effective at the time specified
therein), and shall remain effective and enforceable, except to such
extent as it is stayed, modified, terminated, or set aside by action of
the Board or a reviewing court.".
CONVERSIONS

Ante, p. 132.

SEC. 404. The first sentence of section 5(i) of the Home Owners'
Loan Act of 1933 (12 U.S.C. 1464(i)) is amended by inserting ", and any
State stock savings and loan type institution may (if such institution
existed in stock form for at least the 4 years preceding the date of
enactment of the Depository Institutions Deregulation and Monetary
Control Act of 1980) convert its charter to a Federal stock charter
under this Act," after "Federal savings and loan association under
this Act".
UQUIDITY REQUIREMENTS

12 use 1724.

SEC. 405. Section 5A0t)) of the Federal Home Loan Bank Act (12
U.S.C. 1425a(b)) is amended to read as follows:
"(b)(1) Any institution which is a member or which is an insured
institution as defined in section 401(a) of the National Housing Act
shall maintain the aggregate amount of its assets of the following
types at not less than such amount as, in the opinion of the Board, is
appropriate:
"(A) cash;
"(B) to such extent as the Board may approve for the purposes
of this section, time and savings deposits in Federal Home Loan
Banks and commercial banks;
"(C) to such extent as the Board may so approve, such obligations, including such special obligations, of the United States, a
State, any territory or possession of the United States, or a

PUBLIC LAW 96-221—MAR. 31, 1980
political subdivision, agency or instrumentality of any one or
more of the foregoing, and bankers' acceptances, as the Board
may approve; and
"(D) to such extent as the Board may so approve, shares or
certificates of any open-end management investment company
which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and the portfolio
of which is restricted by such investment company's investment
policy, changeable only if authorized by shareholder vote, solely
to any of the obligations or other investments enumerated in
subparagraphs (A) through (C).
"(2) The requirement prescribed by the Board pursuant to this
subsection (hereinafter in this section referred to as the 'liquidity
requirement') may not be less than 4 per centum or more than 10 per
centum of the obligation of the institution on withdrawable accounts
and borrowings payable on demand or with unexpired maturities of
one year or less, or in the case of institutions which are insurance
companies, such other base or bases as the Board may determine to be
comparable. The Board shall prescribe rules and regulations to
implement the provisions of this subsection.".

94 STAT. 159

15 u s e 80a-51.

Liquidity
requirement.

Rules and
regulations.

STUDY OF MORTGAGE PORTFOLIOS

SEC. 406. (a)(1) The President shall convene an interagency task
force consisting of the Secretary of the Treasury, the Secretary of
Housing and Urban Development, the Federal Home Loan Bank
Board, the Board of Governors of the Federal Reserve System, the
Board of Directors of the Federal Deposit Insurance Corporation, the
Comptroller of the Currency, and the National Credit Union Administration Board. The task force shall conduct a study and make
recommendations regarding—
(A) the options available to provide balance to the assetliability management problems inherent in the thrift portfolio
structure;
(B) the options available to increase the ability of thrift
institutions to pay market rates of interest in period of rapid
inflation and high interest rates; and
(C) the options available through the Federal Home Loan Bank
system and other Federal agencies to assist thrifts in times of
economic difficulties.
(2) In carrying out such study, the task force shall solicit the views
of, and invite participation by, consumer and public interest groups,
business, labor, and State regulators of depository institutions.
(b) Not later than three months after the date of enactment of this
Act, the task force shall transmit to the President and the Congress
its findings and recommendations for such action as it deems
appropriate.
MUTUAL CAPITAL CERTIFICATES

SEC. 407. (a) Section 5(b) of the Home Owners' Loan Act of 1933 (12
U.S.C. 1464(b)) is amended by adding at the end thereof the following:
"(5)(A) In accordance with rules and regulations issued by the
Board, mutual capital certificates may be issued and sold directly to
subscribers or through underwriters, and such certificates shall
constitute part of the general reserve and net worth of the issuing
association. The Board, in its rules and regulations relating to the
issuance and sale of mutual capital certificates, shall provide that
such certificates—

79-194

O—81—pt. 1

14 : QL3

Interagency task
force.
12 u s e 1425a
note.

Report to
President and
eongress.

94 STAT. 160

Rules and
regulations.

PUBLIC LAW 96-221—MAR. 31, 1980
"(i) shall be subordinate to all savings accounts, savings certificates, and debt obligations;
"(ii) shall constitute a claim in liquidation on the general
reserves, surplus, and undivided profits of the association remaining after the payment in full of all savings accounts, savings
certificates, and debt obligations;
"(iii) shall be entitled to the pa5mient of dividends; and
"(iv) may have a fixed or variable dividend rate.
"(B) The Board shall provide in its rules and regulations for
charging losses to the mutual capital certificate, reserves, and other
net worth accounts.".
(jj) Section 403(b) of the National Housing Act (12 U.S.C. 172603)), is
amended by adding at the end thereof the following: "Mutual capital
certificates, subordinate to the rights of holders of savings accounts,
savings certificates, and the Corporation, shall be deemed to be
reserves for the purposes of this subsection in accordance with rules
and regulations prescribed by the Corporation. The Corporation shall
provide in its rules and regulations for charging losses to the mutual
capital certificate, reserves, and other net worth accounts. In the
event an insured institution fails to maintain the reserves required
by this title, no payment of dividends on such certificates shall be
made except with the approval of the Corporation.".
MUTUAL SAVINGS BANKS

SEC. 408. (a) Section 5(a) of the Home Owners' Loan Act of 1933 (12
U.S.C. 1464(a)) is amended—
(1) by inserting "(1)" after "(a)";
(2) in the fourth and fifth sentences by striking out "(1)" and
"(2)" each place they appear therein and inserting in lieu thereof
"(A)" and "(B)", respectively; and
(3) by adding at the end thereof the following new paragraph:
"(2) A Federal mutual savings bank may make commercial, corporate, and business loans except that—
"(A) not more than 5 per centum of the assets of such a bank
may be so loaned; and
"(B) such loans may only be made within the State where the
bank is located or within 75 miles of the bank's home office.".
Ot)) Section 5(a) of the Home Owners' Loan Act of 1933 (12 U.S.C.
1464(a)) is amended by adding at the end thereof the following new
paragraph:
"(3) In addition to the authority conferred by paragraph (1), Federal
mutual savings bank may accept demand deposits in connection with
a commercial, corporate, or business loan relationship.".
INSURANCE RESERVES

SEC. 409. The third sentence of section 403(b) of the National
Housing Act (12 U.S.C. 1726(b)) is amended by striking out "5 per
centum" and inserting in lieu thereof "an amount no greater than 6
per centum nor less than 3 per centum as determined by the Federal
Home Loan Bank Board".

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 161

TITLE V—STATE USURY LAWS
PART A—MORTGAGE USURY LAWS
MORTGAGES

SEC. 501. (a)(1) The provisions of the constitution or the laws of any
State expressly limiting the rate or amount of interest, discount
points, finance charges, or other charges which may be charged,
taken, received, or reserved shall not apply to any loan, mortgage,
credit sale, or advance which is—
(A) secured by a first lien on residential real property, by a first
lien on stock in a residential cooperative housing corporation
where the loan, mortgage, or advance is used to finance the
acquisition of such stock, or by a first lien on a residential
manufactured home;
(B) made after March 31,1980; and
(C) described in section 527(b) of the National Housing Act (12
U.S.C. 1735f-5(b)), except that for the purpose of this section—
(i) the limitation described in section 527(b)(1) of such Act
that the property must be designed principally for the
occupancy of from one to four families shall not apply;
(ii) the requirement contained in section 527(b)(1) of such
Act that the loan be secured by residential real property
shall not apply to a loan secured by stock in a residential
cooperative housing corporation or to a loan or credit sale
secured by a first lien on a residential manufactured home;
(iii) the term "federally related mortgage loan" in section
527(b) of such Act shall include a credit sale which is secured
by a first lien on a residential manufactured home and
which otherwise meets the definitional requirements of
section 527(b) of such Act, as those requirements are modified by this section;
(iv) the term "residential loans" in section 527(b)(2)(D) of
such Act shall also include loans or credit sales secured by a
first lien on a residential manufactured home;
(v) the requirement contained in section 527(b)(2)(D) of
such Act that a creditor make or invest in loans aggregating
more than $1,000,000 per year shall not apply to a creditor
selling residential manufactured homes financed by loans or
credit sales secured by first liens on residential manufactured homes if the creditor has an arrangement to sell such
loans or credit sales in whole or in part, or if such loans or
credit sales are sold in whole or in part to a lender, institution, or creditor described in section 527(b) of such Act or in
this section or a creditor, as defined in section 103(f) of the
Truth in Lending Act, as such section was in effect on the
day preceding the date of enactment of this title, if such
creditor makes or invests in residential real estate loans or
loans or credit sales secured by first liens on residential
manufactured homes aggregating more than $1,000,000 per
year; and
(vi) the term "lender" in section 527(b)(2)(A) of such Act
shall also be deemed to include any lender approved by the
Secretary of Housing and Urban Development for participation in any mortgage insurance program under the National
Housing Act.

12 u s e 1735f-7
note.

"Federally
related mortgage
loan."

"Residential
loans."

15 u s e 1602.

"Lender.

94 STAT. 162

"Depository
institution."

Exemption.
12 u s e 1813.
Effective date.

Exemption,
State action.

Discount points,
limitation.

PUBLIC LAW 96-221—MAR. 31, 1980
(2)(A) The provisions of the constitution or law of any State
expressly limiting the rate or amount of interest which may be
charged, taken, received, or reserved shall not apply to any deposit or
account held by, or other obligation of a depository institution. For
purposes of this paragraph, the term "depository institution"
means—
(i) any insured bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813);
(ii) any mutual savings bank as defined in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813);
(iii) any savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813);
(iv) any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752);
(v) any member as defined in section 2 of the Federal Home
Loan Bank Act (12 U.S.C. 1422); and
(vi) any insured institution as defined in section 408 of the
National Housing Act (12 U.S.C. 1730a).
(B) This paragraph shall not apply to any such deposit, account, or
obligation which is payable only at an office of an insured bank, as
defined in section 3 of the Federal Deposit Insurance Act, located in
the Commonwealth of Puerto Rico.
(b)(1) Except as provided in paragraphs (2) and (3), the provisions of
subsection (a)(1) shall apply to any loan, mortgage, credit sale, or
advance made in any State on or after April 1,1980.
(2) Except as provided in paragraph (3), the provisions of subsection
(a)(1) shall not apply to any loan, mortgage, credit sale, or advance
made in any State after the date (on or after April 1,1980, and before
April 1, 1983) on which such State adopts a law or certifies that the
voters of such State have voted in favor of any provision, constitutional or otherwise, which states explicitly and by its terms that such
State does not want the provisions of subsection (a)(1) to apply with
respect to loans, mortgages, credit sales, and advances made in such
State.
(3) In any case in which a State takes an action described in
paragraph (2), the provisions of subsection (a)(1) shall continue to
apply to—
(A) any loan, mortgage, credit sale, or advance which is made
after the date such action was taken pursuant to a commitment
therefor which was entered during the period beginning on
April 1, 1980, and ending on the date on which such State takes
such action; and
(B) any loan, mortgage, or advance which is a rollover of a loan,
mortgage, or advance, as described in regulations of the Federal
Home Loan Bank Board, which was made or committed to be
made during the period beginning on April 1,1980, and ending on
the date on which such State takes any action described in
paragraph (2).
(4) At any time after the date of enactment of this Act, any State
may adopt a provision of law placing limitations on discount points or
such other charges on any loan, mortgage, credit sale, or advance
described in subsection (a)(1).
(c) The provisions of subsection (aXD shall not apply to a loan,
mortgage, credit sale, or advance which is secured by a first lien on a
residential manufactured home unless the terms and conditions
relating to such loan, mortgage, credit sale, or advance comply with
consumer protection provisions specified in regulations prescribed by
the Federal Home Loan Bank Board. Such regulations shall—

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 163

(1) include consumer protection provisions with respect to
balloon payments, prepayment penalties, late charges, and deferral fees;
(2) require a 30-day notice prior to instituting any action
leading to repossession or foreclosure (except in the case of
abandonment or other extreme circumstances);
(3) require that upon prepayment in full, the debtor shall be
entitled to a refund of the unearned portion of the precomputed
finance charge in an amount not less than the amount which
would be calculated by the actuarial method, except that the
debtor shall not be entitled to a refund which is less than $1; and
(4) include such other provisions as the Federal Home Loan
Bank Board may prescribe after a finding that additional protections are required.
(d) The provisions of subsection (c) shall not apply to a loan,
mortgage, credit sale, or advance secured by a first lien on a
residential manufactured home until regulations required to be
issued pursuant to paragraphs (1), (2), and (3) of subsection (c) take
effect, except that the provisions of subsection (c) shall apply in the
case of such a loan, mortgage, credit sale, or advance made prior to
the date on which such regulations take effect if the loan, mortgage,
credit sale, or advance includes a precomputed finance charge and
does not provide that, upon prepayment in full, the refund of the
unearned portion of the precomputed finance charge is in an amount
not less the amount which would be calculated by the actuarial
method, except that the debtor shall not be entitled to a refund which
is less than $1. The Federal Home Loan Bank Board shall issue Regulations,
regulations pursuant to the provisions of paragraphs (1), (2), and (3) of
subsection (c) that shall take effect prospectively not less than 30 days
after publication in the Federal Register and not later than 120 days
from the date of enactment of this Act.
(e) For the purpose of this section—
Definitions.
(1) a "prepayment" occurs upon—
(A) the refinancing or consolidation of the indebtedness;
(B) the actual prepayment of the indebtedness by the
consumer whether voluntarily or following acceleration of
the payment obligation by the creditor; or
(C) the entry of a judgment for the indebtedness in favor of
the creditor;
(2) the term "actuarial method" means the method of allocating payments made on a debt between the outstanding balance of
the obligation and the precomputed finance charge pursuant to
which a payment is applied first to the accrued precomputed
finance charge and any remainder is subtracted from, or any
deficiency is added to, the outstanding balance of the obligation;
(3) the term "precomputed finance charge" means interest or a
time price differential within the meaning of sections 106(a) (1)
and (2) of the Truth in Lending Act (15 U.S.C. 1605(a) (1) and (2))
as computed by an add-on or discount method; and
(4) the term "residential manufactured home" means a mobile
home as defined in section 603(6) of the National Mobile Home
Construction and Safety Standards Act of 1974 which is used as a 42 use 5402.
residence.
(f) The Federal Home Loan Bank Board is authorized to issue rules Rules and
and regulations and to publish interpretations governing the imple- regulations.
mentation of this section.
Effective date.
(g) This section takes effect on April 1,1980.

94 STAT. 164

PUBLIC LAW 96-221—MAR. 31, 1980
PART B—BUSINESS AND AGRICULTURAL LOANS
BUSINESS AND AGRICULTURAL LOANS

12 use 86a.

ggc. 511. (a) If the applicable rate prescribed in this section exceeds
the rate a person would be permitted to charge in the absence of this
section, such person may in the case of a business or agricultural loan
in the amount of $25,000 or more, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this
section, take, receive, reserve, and charge on any such loan, interest
at a rate of not more than 5 per centum in excess of the discount rate,
including any surcharge thereon, on ninety-day commercial paper in
effect at the Federal Reserve bank in the Federal Reserve district
where the person is located.
Q)) If the rate prescribed in subsection (a) exceeds the rate such
person would be permitted to charge in the absence of this section,
and such State imposed rate is thereby preempted by the rate
described in subsection (a), the taking, receiving, reserving, or charging a greater rate than is allowed by subsection (a), when knowingly
done, shall be deemed a forfeiture of the entire interest which the
loan carries with it, or which has been agreed to be paid thereon. If
such greater rate of interest has been paid, the person who paid it
may recover, in a civil action commenced in a court of appropriate
jurisdiction not later than two years after the date of such payment,
an amount equal to twice the amount of interest paid from the person
taking, receiving, reserving, or charging such interest.
EFFECTIVE DATE OF PART B

12 use 86a note.

SEQ 512. The provisions of this part shall apply only with respect to
business or agricultural loans in amounts of $25,000 or more made in
any State during the period beginning on April 1,1980, and ending on
the earlier of—
(1) April 1,1983; or
(2) the date, on or after April 1, 1980, on which such State
adopts a law or certifies that the voters of such State have voted
in favor of any provision, constitutional or otherwise, which
states explicitly and by its terms that such State does not want
the provisions of this part to apply with respect to loans made in
such State,
except that such provisions shall apply to any loan made on or after
such earlier date pursuant to a commitment to make such loan which
was entered into on or after April 1, 1980, and prior to such earlier
date.
PART C—OTHER LOANS
INSURED BANKS

12 use I83id.

S E C 521. The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by adding at the end thereof the following new section:
"SEC. 27. (a) In order to prevent discrimination against Statechartered insured banks, including insured savings banks and insured mutual savings banks, or insured branches of foreign banks
with respect to interest rates, if the applicable rate prescribed in this
subsection exceeds the rate such State bank or insured branch of a
foreign bank would be permitted to charge in the absence of this
subsection, such State bank or such insured branch of a foreign bank
may, notwithstanding any State constitution or statute which is

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 165

hereby preempted for the purposes of this section, take, receive,
reserve, and charge on any loan or discount made, or upon any note,
bill of exchange, or other evidence of debt, interest at a rate of not
more than 1 per centum in excess of the discount rate on ninety-day
commercial paper in effect at the Federal Reserve bank in the
Federal Reserve district where such State bank or such insured
branch of a foreign bank is located or at the rate allowed by the laws
of the State, territory, or district where the bank is located, whichever may be greater.
"(b) If the rate prescribed in subsection (a) exceeds the rate such
State bank or such insured branch of a foreign bank would be
permitted to charge in the absence of this section, and such State
fixed rate is thereby preempted by the rate described in subsection
(a), the taking, receiving, reserving, or charging a greater rate of
interest than is allowed by subsection (a), when knowingly done, shall
be deemed a forfeiture of the entire interest which the note, bill, or
other evidence of debt carries with it, or which has been agreed to be
paid thereon. If such greater rate of interest has been paid, the person
who paid it may recover in a civil action commenced in a court of
appropriate jurisdiction not later than two years after the date of
such payment, an amount equal to twice the amount of the interest
paid from such State bank or such insured branch of a foreign bank
taking, receiving, reserving, or charging such interest.".
INSURED SAVINGS AND LOAN ASSOCIATIONS

SEC. 522. Title IV of the National Housing Act (12 U.S.C. 1724 et
seq.) is amended by adding at the end thereof the following new
section:
"SEC. 414. (a) If the applicable rate prescribed in this section 12 USC I730g.
exceeds the rate an insured institution would be permitted to charge
in the absence of this section, such institution may, notwithstanding
any State constitution or statute which is hereby preempted for the
purposes of this section, take, receive, reserve, and charge on any
loan or discount made, or upon any note, bill of exchange, or other
evidence of debt, interest at a rate of not more than 1 per centum in
excess of the discount rate on ninety-day commercial paper in effect
at the Federal Reserve bank in the Federal Reserve district where
such institution is located or at the rate allowed by the laws of the
State, territory, or district where such institution is located, whichever may be greater.
"(b) If the rate prescribed in subsection (a) exceeds the rate such
institution would be permitted to charge in the absence of this
section, and such State fixed rate is thereby preempted by the rate
described in subsection (a), the taking, receiving, reserving, or charging a greater rate of interest than that prescribed by subsection (a),
when knowingly done, shall be deemed a forfeiture of the entire
interest which the note, bill, or other evidence of debt carries with it,
or which has been agreed to be paid thereon. If such greater rate of
interest has been paid, the person who paid it may recover, in a civil
action commenced in a court of appropriate jurisdiction not later
than two years after the date of such payment, an amount equal to
twice the amount of the interest paid from the institution taking or
receiving such interest.".

94 STAT. 166

PUBLIC LAW 96-221—MAR. 31, 1980
INSURED CREDIT UNIONS

Ante, p. 147.

SEC. 523. Section 205 of the Federal Credit Union Act (12 U.S.C.
1785) is amended by adding at the end thereof the following new
subsection:
"(g)(1) If the applicable rate prescribed in this subsection exceeds
the rate an insured credit union would be permitted to charge in the
absence of this subsection, such credit union may, notwithstanding
any State constitution or statute which is hereby preempted for the
purposes of this subsection, take, receive, reserve, and charge on any
loan, interest at a rate of not more than 1 per centum in excess of the
discount rate on ninety-day commercial paper in effect at the Federal
Reserve bank in the Federal Reserve district where such insured
credit union is located or at the rate allowed by the laws of the State,
territory, or district where such credit union is located, whichever
may be greater.
"(2) If the rate prescribed in paragraph (1) exceeds the rate such
credit union would be permitted to charge in the absence of this
subsection, and such State fixed rate is thereby preempted by the rate
described in paragraph (1), the taking, receiving, reserving, or charging a greater rate than is allowed by paragraph (1), when knowingly
done, shall be deemed a forfeiture of the entire interest which the
loan carries with it, or which has been agreed to be paid thereon. If
such greater rate of interest has been paid, the person who paid it
may recover, in a civil action commenced in a court of appropriate
jurisdiction not later than two years after the date of such payment,
an amount equal to twice the amount of interest paid from the credit
union taking or receiving such interest.".
SMALL B U S I N E S S INVESTMENT COMPANIES

"Federal
Reserve rate.

SEC. 524. Section 308 of the Small Business Investment Act of 1958
(15 U.S.C. 687) is amended by adding at the end thereof the following
new subsection:
"(i)(l) The purpose of this subsection is to facilitate the orderly and
necessary flow of long-term loans and equity funds from small
business investment companies to small business concerns.
"(2) In the case of a business loan, the small business investment
company making such loan may charge interest on such loan at a
rate which does not exceed the lowest of the rates described in
subparagraphs (A), (B), and (C).
"(A) The rate described in this subparagraph is the maximum
rate prescribed by regulation by the Small Business Administration for loans made by any small business investment company
(determined without regard to any State rate incorporated by
such regulation).
"(B) The rate described in this subparagraph is the maximum
rate authorized by an applicable State law or constitutional
provision which is not preempted for purposes of this subsection.
"(C)(i) The rate described in this subparagraph is the higher of
the Federal Reserve rate or the maximum rate authorized by
applicable State law or constitutional provision (determined
without regard to the preemption of such State law or constitutional provision).
"(ii) For purposes of clause (i), the term 'Federal Reserve rate'
means the rate equal to the sum of 1 percentage point plus the
discount rate on ninety-day commercial paper in effect at the
Federal Reserve bank in the Federal Reserve district in which

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 167

the principal office of the small business investment company is
located.
"(iii) The rate described in this subparagraph shall not apply to
loans made in a State if there is no maximum rate authorized by
applicable State law or constitutional provision for such loans or
there is a maximum rate authorized by an applicable State law
or constitutional provision which is not preempted for purposes
of this subsection.
"(3) A State law or constitutional provision shall be preempted for
purposes of paragraph (2)(B) with respect to any loan if such loan is
made before the date, on or after April 1, 1980, on which such State
adopts a law or certifies that the voters of such State have voted in
favor of any provision, constitutional or otherwise, which states
explicitly and by its terms that such State does not want the
provisions of this subsection to apply with respect to loans made in
such State, except that such State law or constitutional or other
provision shall be preempted in the case of a loan made, on or after
the date on which such law is adopted or such certification is made,
pursuant to a commitment to make such loan which was entered into
on or after April 1, 1980, and prior to the date on which such law is
adopted or such certification is made.
"(4)(A) If the maximum rate of interest authorized under paragraph (2) on any loan made by a small business investment company
exceeds the rate which would be authorized by applicable State law if
such State law were not preempted for purposes of this subsection,
the charging of interest at any rate in excess of the rate authorized by
paragraph (2) shall be deemed a forfeiture of the greater of (i) all
interest which the loan carries with it, or (ii) all interest which has
been agreed to be paid thereon.
"(B) In the case of any loan with respect to which there is a
forfeiture of interest under subparagraph (A), the person who paid
the interest may recover from a small business investment company
making such loan an amount equal to twice the amount of the
interest paid on such loan. Such interest may be recovered in a civil
action commenced in a court of appropriate jurisdiction not later
than two years after the most recent payment of interest.".
EFFECTIVE DATE

SEC. 525. The amendments made by sections 521 through 523 of this 12 use I730g
title shall apply only with respect to loans made in any State during "°*®
the period beginning on April 1, 1980, and ending on the date, on or
after April 1,1980, on which such State adopts a law or certifies that
the voters of such State have voted in favor of any provision,
constitutional or otherwise, which states explicitly and by its terms
that such State does not want the amendments made by such sections
to apply with respect to loans made in such State, except that such
amendments shall apply to a loan made on or after the date such law
is adopted or such certification is made if such loan is made pursuant
to a commitment to make such loan which was entered into on or
after April 1,1980, and prior to the date on which such law is adopted
or such certification is made.
SEVERABIUTY

SEC. 526. If any provision of this Act or the application of such 12 use I730g
provision to any person or circumstance shall be held invalid, the ^°*^remainder of this Act and the application of such provision to any

94 STAT. 168

PUBLIC LAW 96-221—MAR. 31, 1980
person or circumstance other than that as to which it is held invalid
shall not be affected thereby.
DEFINITION

12 u s e 1730g
note.

SEC. 527. For purposes of this title, the term "State" includes the
several States, the Commonwealth of Puerto Rico, the District of
Columbia, Guam, the Trust Territories of the Pacific Islands, the
Northern Mariana Islands, and the Virgin Islands, except as provided
in section 501(a)(2)(B).
EFFECT ON OTHER LAW

12 use i735f-7
SEC. 528. In any case in which one or more provisions of, or
note.
amendments made by, this title, section 529 of the National Housing
93 Stat. 1114.
Act, or any other provision of law, including section 5197 of the
Revised Statutes (12 U.S.C. 85), apply with respect to the same loan,
mortgage, credit sale, or advance, such loan, mortgage, credit sale, or
advance may be made at the highest applicable rate.
REPEAL OF EXISTING LAW
93 Stat. 789.
12 u s e 85 note.
93 Stat. 1234.
12 u s e 85 and
note, 86a and
note, 371b-l
and note,
1425b, 1730e,
1735f-7 note,
1828, 1831a
and note; 15

SEC. 529. Effective at the close of March 31,1980, Public Law 96-104,
section 105(a)(2) of Public Law 96-161, and the amendments made by
and the provisions of title II of Public Law 96-161 are hereby
repealed, except that the provisions of such Public Law, the provisions of such section, the amendments made by such title, and the
provisions of such title shall continue to apply to any loan made, any
deposit made, or any obligation issued in any State during any period
when those provisions or amendments were in effect in such State.

Truth in
Lending
Simplification
and Reform Act.
15 u s e 1601
note.

TITLE VI-TRUTH IN LENDING SIMPLIFICATION

use 687.

SHORT TITLE

SEC. 601. This title may be cited as the "Truth in Lending Simplification and Reform Act".
DEFINITIONS

"ereditor."

SEC. 602. (a) Section 103(f) of the Truth in Lending Act (15 U.S.C.
1602(f)) is amended—
(1) by striking out the first sentence and inserting in lieu
thereof the following: "The term 'creditor' refers only to a person
who both (1) regularly extends, whether in connection with loans,
sales of property or services, or otherwise, consumer credit which
is payable by agreement in more than four installments or for
which the payment of a finance charge is or may be required; and
(2) is the person to whom the debt arising from the consumer
credit transaction is initially payable on the face of the evidence
of indebtedness or, if there is no such evidence of indebtedness,
by agreement. Notwithstanding the previous sentence, a person
who regularly arranges for the extension of consumer credit,
which is payable in more than four installments or for which the
payment of a finance charge is or may be required, from persons
who are not creditors is a creditor, and in the case of an open end
credit plan involving a credit card, the card issuer and any
person who honors the credit card and offers a discount which is
a finance charge are creditors."; and

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 169

(2) by redesignating the references to sections 127(a)(6),
127(a)(7), 127(a)(8), 127(b)(9), and 127(b)(ll) in the next succeeding
sentence as references to sections 127(a)(5), 127(a)(6), 127(a)(7),
127(b)(8), and 127(b)(10), respectively.
(b) The first sentence of section 103(g) of the Truth in Lending Act
(15 U.S.C. 1602(g)) is amended to read as follows: "The term 'credit
sale' refers to any sale in which the seller is a creditor.".
EXEMPTED TRANSACTIONS

SEC. 603. (a) Section 103(h) of the Truth in Lending Act (15 U.S.C.
1602(h)) is amended by striking out "household, or agricultural" and
inserting in lieu thereof "or household".
(b) Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended by redesignating subsections (s) and (t) as subsections (x)
and (y), respectively, and by inserting after subsection (r) the following new subsections:
"(s) The term 'agricultural purposes' includes the production,
harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates,
plants, propagates, or nurtures those agricultural products, including
but not limited to the acquisition of farmland, real property with a
farm residence, and personal property and services used primarily in
farming.
"(t) The term 'agricultural products' includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry,
bees, forest products, fish and shellfish, and any products thereof,
including processed and manufactured products, and any and all
products raised or produced on farms and any processed or manufactured products thereof.".
(c) Section 104 of the Truth in Lending Act (15 U.S.C. 1603) is
amended—
(1) by amending paragraph (1) to read as follows:
"(1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to
government or governmental agencies or instrumentalities, or to
organizations.";
(2) by amending paragraph (3) to read as follows:
"(3) Credit transactions, other than those in which a security
interest is or will be acquired in real property, or in personal
property used or expected to be used as the principal dwelling of
the consumer, in which the total amount financed exceeds
$25,000."; and
(3) by striking out paragraph (5).
OPEN END CREDIT PLAN

SEC. 604. Section 103(i) of the Truth in Lending Act (15 U.S.C.
1602(i)) is amended to read as follows:
"(i) The term 'open end credit plan* means a plan under which the
creditor reasonably contemplates repeated transactions, which prescribes the terms of such transactions, and which provides for a
finance charge which may be computed from time to time on the
outstanding unpaid balance. A credit plan which is an open end
credit plan within the meaning of the preceding sentence is an open
end credit plan even if credit information is verified from time to
time.".

"Agricultural
purposes."

"Agricultural
products."

94 STAT. 170

PUBLIC LAW 96-221—MAR. 31, 1980
MODEL FORMS

15 u s e 1604.

Publication.

Notice in
Federal
Register.
Effective date.
15 u s e 1666 et
seq., 1667 et seq.

SEC. 605. Section 105 of the Truth in Lending Act (15 U.S.C. 1605) is
amended by inserting "(a)" before "The", and by adding at the end
thereof the following:
"Qo) The Board shall publish model disclosure forms and clauses for
common transactions to facilitate compliance with the disclosure
requirements of this title and to aid the borrower or lessee in
understanding the transaction by utilizing readily understandable
language to simplify the technical nature of the disclosures. In
devising such forms, the Board shall consider the use by creditors or
lessors of data processing or similar automated equipment. Nothing
in this title may be construed to require a creditor or lessor to use any
such model form or clause prescribed by the Board under this section.
A creditor or lessor shall be deemed to be in compliance with the
disclosure provisions of this title with respect to other than numerical
disclosures if the creditor or lessor (1) uses any appropriate model
form or clause as published by the Board, or (2) uses any such model
form or clause and changes it by (A) deleting any information which
is not required by this title, or (B) rearranging the format, if in
making such deletion or rearranging the format, the creditor or
lessor does not affect the substance, clarity, or meaningful sequence
of the disclosure.
"(c) Model disclosure forms and clauses shall be adopted by the
Board after notice duly given in the Federal Register and an opportunity for public comment in accordance with section 553 of title 5,
United States Code.
"(d) Any regulation of the Board, or any amendment or interpretation thereof, requiring any disclosure which differs from the disclosures previously required by this chapter, chapter 4, or chapter 5, or
by any regulation of the Board promulgated thereunder shall have an
effective date of that October 1 which follows by at least six months
the date of promulgation, except that the Board may at its discretion
take interim action by regulation, amendment, or interpretation to
lengthen the period of time permitted for creditors or lessors to adjust
their forms to accommodate new requirements or shorten the length
of time for creditors or lessors to make such adjustments when it
makes a specific finding that such action is necessary to comply with
the findings of a court or to prevent unfair or deceptive disclosure
practices. Notwithstanding the previous sentence, any creditor or
lessor may comply with any such newly promulgated disclosure
requirements prior to the effective date of the requirements.".
COMPONENTS OF FINANCE CHARGE

SEC. 606. (a) Section 106(a) of the Truth in Lending Act (15 U.S.C.
1605(a)) is amended by striking out ", including any of the following
types of charges which are applicable" and inserting in lieu thereof
the following: ". The finance charge does not include charges of a type
payable in a comparable cash transaction. Examples of charges
which are included in the finance charge include any of the following
types of charges which are applicable".
(b) Section 106(d) of the Truth in Lending Act (15 U.S.C. 1605(d)) is
amended by striking out paragraphs (3) and (4).
ACCURACY OF ANNUAL PERCENTAGE RATE

S E C 607. (a) Section 107(c) of the Truth in Lending Act (15 U.S.C.
1606(c)) is amended to read as follows:

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 171

"(c) The disclosure of an annual percentage rate is accurate for the
purpose of this title if the rate disclosed is within a tolerance not
greater than one-eighth of 1 per centum more or less than the actual
rate or rounded to the nearest one-fourth of 1 per centum. The Board
may allow a greater tolerance to simplify compliance where irregular
payments are involved.".
(b) Section 107(e) of the Truth in Lending Act (15 U.S.C. 1606(e)) is
amended by striking out "(c) or".
(c) Section 107(f) of the Truth in Lending Act (15 U.S.C. 1606(f)) is Repeal.
hereby repealed.
RESTITUTION

SEC. 608. (a) Section 108 of the Truth in Lending Act (15 U.S.C. 1607)
is amended by adding at the end thereof the following:
"(e)(1) In carrying out its enforcement activities under this section,
each agency referred to in subsection (a) or (c), in cases where an
annual percentage rate or finance charge was inaccurately disclosed,
shall notify the creditor of such disclosure error and is authorized in
accordance with the provisions of this subsection to require the
creditor to make an adjustment to the account of the person to whom
credit was extended, to assure that such person will not be required to
pay a finance charge in excess of the finance charge actually disclosed
or the dollar equivalent of the annual percentage rate actually
disclosed, whichever is lower. For the purposes of this subsection,
except where such disclosure error resulted from a willful violation
which was intended to mislead the person to whom credit was
extended, in determining whether a disclosure error has occurred
and in calculating any adjustment, (A) each agency shall apply (i)
with respect to the annual percentage rate, a tolerance of one-quarter
of 1 percent more or less than the actual rate, determined without
regard to section 107(c) of this title, except in the case of an irregular ^nte, p. 170.
mortgage lending transaction, and (ii) with respect to the finance
charge, a corresponding numerical tolerance as generated by the
tolerance provided under this subsection for the annual percentage
rate; except that (B) with respect to transactions consummated after
two years following the effective date of section 608 of the Truth in
Lending Simplification and Reform Act, each agency shall apply (i) Supra.
for transactions that have a scheduled amortization of ten years or
less, with respect to the annual percentage rate, a tolerance not to
exceed one-quarter of 1 percent more or less than the actual rate,
determined without regard to section 107(c) of this title, but in no
event a tolerance of less than the tolerances allowed under section
107(c), (ii) for transactions that have a scheduled amortization of more
than ten years, with respect to the annual percentage rate, only such
tolerances as are allowed under section 107(c) of this title, and (iii) for
all transactions, with respect to the finance charge, a corresponding
numerical tolerance as generated by the tolerances provided under
this subsection for the annual percentage rate.
"(2) Each agency shall require such an adjustment when it determines that such disclosure error resulted from (A) a clear and
consistent pattern or practice of violations, (B) gross negligence, or (C)
a willful violation which was intended to mislead the person to whom
the credit was extended. Notwithstanding the preceding sentence,
except where such disclosure error resulted from a willful violation
which was intended to mislead the person to whom credit was
extended, an agency need not require such an adjustment if it
determines that such disclosure error—

94 STAT. 172

^"'^'P i"^!
15 use 1605.

Ante, p. 171.

PUBLIC LAW 96-221—MAR. 31, 1980
"(A) resulted from an error involving the disclosure of a fee or
charge that would otherwise be excludable in computing the
finance charge, including but not limited to violations involving
the disclosures described in sections 106(b), (c) and (d) of this title,
in which event the agency may require such remedial action as it
determines to be equitable, except that for transactions consummated after two years after the effective date of section 608 of the
Truth in Lending Simplification and Reform Act, such an adjustj^gj^^ gjjg^jj tjg ordered for violations of section 106(b);
"(B) involved a disclosed amount which was 10 per centum or
less of the amount that should have been disclosed and (i) in cases
where the error involved a disclosed finance charge, the annual
percentage rate was disclosed correctly, and (ii) in cases where
the error involved a disclosed annual percentage rate, the finance charge was disclosed correctly; in which event the agency
may require such adjustment as it determines to be equitable;
"(C) involved a total failure to disclose either the annual
percentage rate or the finance charge, in which event the agency
may require such adjustment as it determines to be equitable; or
"(D) resulted from any other unique circumstance involving
clearly technical and nonsubstantive disclosure violations that
do not adversely affect information provided to the consumer and
that have not misled or otherwise deceived the consumer.
In the case of other such disclosure errors, each agency may require
such an adjustment.
"(3) Notwithstanding paragraph (2), no adjustment shall be ordered
(A) if it would have a significantly adverse impact upon the safety or
soundness of the creditor, but in any such case, the agency may
require a partial adjustment in an amount which does not have such
an impact, except that with respect to any transaction consummated
after the effective date of section 608 of the Truth in Lending
Simplification and Reform Act, the agency shall require the full
adjustment, but permit the creditor to make the required adjustment
in partial payments over an extended period of time which the
agency considers to be reasonable, (B) if the amount of the adjustment
would be less than $1, except that if more than one year has elapsed
since the date of the violation, the agency may require that such
amount be paid into the Treasury of the United States, or (C) except
where such disclosure error resulted from a willful violation which
was intended to mislead the person to whom credit was extended, in
the case of an open-end credit plan, more than two years after the
violation, or in the case of any other extension of credit, as follows:
i
"(i) with respect to creditors that are subject to examination by
the agencies referred to in paragraphs (1) through (3) of section
108(a) of this title, except in connection with violations arising
from practices identified in the current examination and only in
connection with transactions that are consummated after the
date of the immediately preceding examination, except that
where practices giving rise to violations identified in earlier
examinations have not been corrected, adjustments for those
violations shall be required in connection with transactions
consummated after the date of the examination in which such
practices were first identified;
"(ii) with respect to creditors that are not subject to examination by such agencies, except in connection with transactions
that are consummated after May 10,1978; and

PUBLIC LAW 96-221—MAR. 31, 1980
"(iii) in no event after the later of (I) the expiration of the life of
the credit extension, or (II) two years after the agreement to
extend credit was consummated.
"(4)(A) Notwithstanding any other provision of this section, an
adjustment under this subsection may be required by an agency
referred to in subsection (a) or (c) only by an order issued in
accordance with cease and desist procedures provided by the provision of law referred to in such subsections.
"(B) In the case of an agency which is not authorized to conduct
cease and desist proceedings, such an order may be issued after an
agency hearing on the record conducted at least thirty but not more
than sixty days after notice of the alleged violation is served on the
creditor. Such a hearing shall be deemed to be a hearing which is
subject to the provisions of section 8(h) of the Federal Deposit
Insurance Act and shall be subject to judicial review as provided
therein.
"(5) Except as otherwise specifically provided in this subsection and
notwithstanding any provision of law referred to in subsection (a) or
(c), no agency referred to in subsection (a) or (c) may require a creditor
to make dollar adjustments for errors in any requirements under this
title, except with regard to the requirements of section 165.
"(6) A creditor shall not be subject to an order to make an
adjustment, if within sixty days after discovering a disclosure error,
whether pursuant to a final written examination report or through
the creditor's own procedures, the creditor notifies the person concerned of the error and adjusts the account so as to assure that such
person will not be required to pay a finance charge in excess of the
finance charge actually disclosed or the dollar equivalent of the
annual percentage rate actually disclosed, whichever is lower.
"(7) Notwithstanding the second sentence of subsection (e)(1),
subsection (eX3KCXi), and subsection (eX3XCXii), each agency referred
to in subsection (a) or (c) shall require an adjustment for an annual
percentage rate disclosure error that exceeds a tolerance of one
quarter of one percent less than the actual rate, determined without
regard to section 107(c) of this title, except in the case of an irregular
mortgage lending transaction, with respect to any transaction consummated between January 1,1977, and the effective date of section
608 of the Truth in Lending Simplification and Reform Act.".
Ot)) This section shall take effect on the date of enactment of the
Truth in Lending Simplification and Reform Act.
(c) Effective one year after the date of enactment of the Truth in
Lending Simplification and Reform Act, section 108(eXlXAXi) and
section 108(eX7) of the Truth in Lending Act are amended by striking
out ", except in the case of an irregular mortgage lending transaction".

94 STAT. 173

12 use 1818.

Post, p. 184.

^«^e, p. 170.
Ante, p. I7i.
?|^f?*j:^®^^*®
^^t^sc 1607
^^te, p. 168.
^^ use 1607.
" ' ^'

EFFECT ON OTHER LAWS

SEC. 609. Section 111(a) of the Truth in Lending Act (15 U.S.C.
1610(a)) is amended to read as follows:
"(a)(1) Chapters 1, 2, and 3 do not annul, alter, or affect the laws of 15 use 1601 et
any State relating to the disclosure of information in connection with *|^i ^^^^ ^* *^9'
credit transactions, except to the extent that those laws are inconsist^ *^^'
ent with the provisions of this title, and then only to the extent of the
inconsistency. Upon its own motion or upon the request of any
creditor, State, or other interested party which is submitted in
accordance with procedures prescribed in regulations of the Board,
the Board shall determine whether any such inconsistency exists.
If the Board determines that a State-required disclosure is incon-

94 STAT. 174

State-required
disclosure.

Post, p. 175.

PUBLIC LAW 96-221—MAR. 31, 1980
sistent, creditors located in that State may not make disclosures
using the inconsistent term or form, and shall incur no liability under
the law of that State for failure to use such term or form,
notwithstanding that such determination is subsequently amended,
rescinded, or determined by judicial or other authority to be invalid
for any reason.
"(2) Upon its own motion or upon the request of any creditor. State,
or other interested party which is submitted in accordance with
procedures prescribed in regulations of the Board, the Board shall
determine whether any disclosure required under the law of any
State is substantially the same in meaning as a disclosure required
under this title. If the Board determines that a State-required
disclosure is substantially the same in meaning as a disclosure
required by this title, then creditors located in that State may make
such disclosure in compliance with such State law in lieu of the
disclosure required by this title, except that the annual percentage
rate and finance charge shall be disclosed as required by section
122.".
ANNUAL REPORTS

SEC. 610. (a) Section 114 of the Truth in Lending Act (15 U.S.C. 1613)
is amended by striking out "Not later than January 3 of each year
after 1969," and inserting in lieu thereof "Each year".
(b) Section 18(f)(6) of the Federal Trade Commission Act (15 U.S.C.
57a(f)(6)) is amended by striking out "not later than March 15 of'.
(c) Section 707 of the Equal Credit Opportunity Act (15 U.S.C. 1691f)
is amended by striking out "Not later than February 1 of each year
after 1976" and inserting in lieu thereof "Each year".
GENERAL DISCLOSURE REQUIREMENTS

15 use 1635.
^"(^' P i|8.
15 use 1667.

SEC. 611. Sections 121 and 122 of the Truth in Lending Act (15
U.S.C. 1631 and 1632) are amended to read as follows:
*'§121. General requirement of disclosure
"(a) Subject to subsection (b), a creditor or lessor shall disclose to
the person who is obligated on a consumer lease or a consumer credit
transaction the information required under this title. In a transaction involving more than one obligor, a creditor or lessor, except in a
transaction under section 125, need not disclose to more than one of
such obligors if the obligor given disclosure is a primary obligor.
"(b) If a transaction involves one creditor as defined in section
103(f), or one lessor as defined in section 181(3), such creditor or lessor
shaXX make the disclosures. If a transaction involves more than one
creditor or lessor, only one creditor or lessor shall be required to
make the disclosures. The Board shall by regulation specify which
creditor or lessor shall make the disclosures.
"(c) The Board may provide by regulation that any portion of the
information required to be disclosed by this title may be given in the
form of estimates where the provider of such information is not in a
position to know exact information.
"(d) The Board shall determine whether tolerances for numerical
disclosures other than the annual percentage rate are necessary to
facilitate compliance with this title, and if it determines that such
tolerances are necessary to facilitate compliance, it shall by regulation permit disclosures within such tolerances. The Board shall
exercise its authority to permit tolerances for numerical disclosures
other than the annual percentage rate so that such tolerances are

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 175

narrow enough to prevent such tolerances from resulting in misleading disclosures or disclosures that circumvent the purposes of this
title.
"§ 122. Form of disclosure; additional information
"(a) Information required by this title shall be disclosed clearly and
conspicuously, in accordance with regulations of the Board. The
terms 'annual percentage rate' and 'finance charge' shall be disclosed
more conspicuously than other terms, data, or information provided
in connection with a transaction, except information relating to the
identity of the creditor. Regulations of the Board need not require
that disclosures pursuant to this title be made in the order set forth in
this title and, except as otherwise provided, may permit the use of
terminology different from that employed in this title if it conveys
substantially the same meaning.
"(b) Any creditor or lessor may supply additional information or
explanation with any disclosures required under chapters 4 and 5
and, except as provided in section 128(b)(1), under this chapter.".

"Annual
percentage rate"
and "finance
charge."

15 u s e 1666 et
seq., 1667 et seq.
Post, p. 179.

RESCISSION

SEC. 612. (a)(1) Section 125(a) of the Truth in Lending Act (15 U.S.C.
1635(a)) is amended to read as follows:
"(a) Except as otherwise provided in this section, in the case of any
consumer credit transaction (including opening or increasing the
credit limit for an open end credit plan) in which a security interest,
including any such interest arising by operation of law, is or will be
retained or acquired in any property which is used as the principal
dwelling of the person to whom credit is extended, the obligor shall
have the right to rescind the transaction until midnight of the third
business day following the consummation of the transaction or the
delivery of the information and rescission forms required under this
section together with a statement containing the material disclosures
required under this title, whichever is later, by notifying the creditor,
in accordance with regulations of the Board, of his intention to do so.
The creditor shall clearly and conspicuously disclose, in accordance
with regulations of the Board, to any obligor in a transaction subject
to this section the rights of the obligor under this section. The
creditor shall also provide, in accordance with regulations of the
Board, appropriate forms for the obligor to exercise his right to
rescind any transaction subject to this section.".
(2) Section 103 of the Truth in Lending Act (15 U.S.C. 1602), as
amended by section 603(b), is amended by adding at the end thereof ^^^^> P-169the following:
"(u) The term 'material disclosures' means the disclosure, as "Material
required by this title, of the annual percentage rate, the method of disclosures."
determining the finance charge and the balance upon which a
finance charge will be imposed, the amount of the finance charge, the
amount to be financed, the total of payments, the number and
amount of payments, and the due dates or periods of payments
scheduled to repay the indebtedness.".
(3) Section 125(b) of the Truth in Lending Act (15 U.S.C. 1635(b)) is
amended by striking out "ten days" each place it appears therein and
inserting in lieu thereof "20 days".
(4) Section 125(b) of the Truth in Lending Act (15 U.S.C. 1635(b)) is
amended by adding at the end thereof the following new sentence:
"The procedures prescribed by this subsection shall apply except
when otherwise ordered by a court.".

79-194

O—81—pt. 1

15 : QL3

94 STAT. 176

Infra.

Ante, p. 168.

15 u s e 1635.

15 u s e 1640.

"Dwelling."

"Residential
mortgage
transaction."

PUBLIC LAW 96-221—MAR. 31, 1980
(5) Section 125(0) of the Truth in Lending Act (15 U.S.C. 1635(c)) is
amended by inserting "information, forms, and" after "whom".
(6) Section 125 of the Truth in Lending Act (15 U.S.C. 1635) is
amended by striking out subsections (e) and (0 and inserting in Heu
thereof the following:
"(e)(1) This section does not apply to—
"(A) a residential mortgage transaction as defined in section
103(w);
"(B) a transaction which constitutes a refinancing or consolidation (with no new advances) of the principal balance then due
and any accrued and unpaid finance charges of an existing
extension of credit by the same creditor secured by an interest in
the same property;
"(C) a transaction in which an agency of a State is the creditor;
or
"(D) advances under a preexisting open end credit plan if a
security interest has already been retained or acquired and such
advances are in accordance with a previously established credit
limit for such plan.
"(2) The provisions of paragraph (1)(D) shall cease to be effective 3
years after the effective date of the Truth in Lending Simplification
and Reform Act.
"(f) An obligor's right of rescission shall expire three years after the
date of consummation of the transaction or upon the sale of the
property, whichever occurs first, notwithstanding the fact that the
information and forms required under this section or any other
disclosures required under this chapter have not been delivered to
the obligor, except that if (1) any agency empowered to enforce the
provisions of this title institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction, (2) such agency finds a violation of section 125,
and (3) the obligor's right to rescind is based in whole or in part on
any matter involved in such proceeding, then the obligor's right of
rescission shall expire three years after the date of consummation of
the transaction or upon the earlier sale of the property, or upon the
expiration of one year following the conclusion of the proceeding, or
any judicial review or period for judicial review thereof, whichever is
later.
"(g) In any action in which it is determined that a creditor has
violated this section, in addition to rescission the court may award
relief under section 130 for violations of this title not relating to the
right to rescind.".
(b) Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended by inserting after subsection (u) the following:
"(v) The term 'dwelling' means a residential structure or mobile
home which contains one to four family housing units, or individual
units of condominiums or cooperatives.
"(w) The term 'residential mortgage transaction' means a transaction in which a mortgage, deed of trust, purchase money security
interest arising under an installment sales contract, or equivalent
consensual security interest is created or retained against the consumer's dwelling to finance the acquisition or initial construction of
such dwelling.".
OPEN END DISCLOSURES

SEC. 613. (a) Section 127(a) of the Truth in Lending Act (15 U.S.C.
1637(a)) is amended—

PUBLIC LAW 96-221—MAR. 31, 1980
(1) by adding at the end of paragraph (1) the following new
sentence: "If no such time period is provided, the creditor shall
disclose such fact.";
(2) by striking out paragraph (5) and redesignating paragraphs
(6), (7), and (8) as paragraphs (5), (6), and (7), respectively; and
(3) by amending paragraphs (5) and (6), as redesignated by
paragraph (2), to read as follows:
"(5) Identification of other charges which may be imposed as
part of the plan, and their method of computation, in accordance
with regulations of the Board.
"(6) In cases where the credit is or will be secured, a statement
that a security interest has been or will be taken in (A) the
property purchased as part of the credit transaction, or (B)
property not purchased as part of the credit transaction identified by item or type.".
(b) Section 127(b)(2) of the Truth in Lending Act (15 U.S.C.
1637(b)(2)) is amended to read as follows:
"(2) The amount and date of each extension of credit during the
period, and a brief identification, on or accompan3dng the statement of each extension of credit in a form prescribed by the
Board sufficient to enable the obligor either to identify the
transaction or to relate it to copies of sales vouchers or similar
instruments previously furnished, except that a creditor's failure
to disclose such information in accordance with this paragraph
shall not be deemed a failure to comply with this chapter or this
title if (A) the creditor maintains procedures reasonably adapted
to procure and provide such information, and (B) the creditor
responds to and treats any inquiry for clarification or documentation as a billing error and an erroneously billed amount under
section 161. In lieu of complying with the requirements of the
previous sentence, in the case of any transaction in which the
creditor and seller are the same person, as defined by the Board,
and such person's open end credit plan has fewer than 15,000
accounts, the creditor may elect to provide only the amount and
date of each extension of credit during the period and the seller's
name and location where the transaction took place if (A) a brief
identification of the transaction has been previously furnished,
and (B) the creditor responds to and treats any inquiry for
clarification or documentation as a billing error and an erroneously billed amount under section 161.".
(c) Section 127(b) of the Truth in Lending Act (15 U.S.C. 1637) is
amended by striking out paragraph (7) and by redesignating paragraphs (8), (9), (10), and (11) as paragraphs (7), (8), (9), and (10),
respectively.
(d) Section 127(a)(7) of the Truth in Lending Act (15 U.S.C. 1637(a)),
as redesignated by subsection (a)(2), is amended by striking out "each
of two billing cycles per year, at semiannual intervals" and inserting
in lieu thereof "one billing cycle per calendar year, at intervals of not
less than six months or more than eighteen months".
(e) Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is
hereby repealed.
(f) Section 143 of the Truth in Lending Act (15 U.S.C. 1663) is
amended by striking out "or the appropriate rate determined under
section 127(a)(5)".
(g) Section 161(a) of the Truth in Lending Act (15 U.S.C. 1666(a))
is amended by redesignating the references to sections 127(b)(ll)
and 127(a)(8) as references to sections 127(b)(10) and 127(aX7),
respectively.

94 STAT. 177

15 use 1666.

15 USC 1666.

Repeal,
Post, p. 183.
^nte, p. 176.

94 STAT. 178

PUBLIC LAW 96-221—MAR. 31, 1980
OTHER THAN OPEN END DISCLOSURES

"Amount
financed."
Computation
method.

15 u s e 1605.

"Itemization of
the amount
financed."

Ante, p. 174.

SEC. 614. (a) Section 128(a) of the Truth in Lending Act (15 U.S.C.
1638(a)) is amended to read as follows:
"(a) For each consumer credit transaction other than under an
open end credit plan, the creditor shall disclose each of the following
items, to the extent applicable:
"(1) The identity of the creditor required to make disclosure.
"(2)(A) The 'amount financed', using that term, which shall be
the amount of credit of which the consumer has actual use. This
amount shall be computed as follows, but the computations need
not be disclosed and shall not be disclosed with the disclosures
conspicuously segregated in accordance with subsection (bXD:
"(i) take the principal amount of the loan or the cash price
less downpayment and trade-in;
"(ii) add any charges which are not part of the finance
charge or of the principal amount of the lo£in and which are
financed by the consumer, including the cost of any items
excluded from the finance charge pursuant to section 106;
and
"(iii) subtract any charges which are part of the finance
charge but which will be paid by the consumer before or at
the time of the consummation of the transaction, or have
been withheld from the proceeds of the credit.
"(B) In conjunction with the disclosure of the amount financed,
a creditor shall provide a statement of the consumer's right to
obtain, upon a written request, a written itemization of the
amount financed. The statement shall include spaces for a 'yes*
and 'no' indication to be initialed by the consumer to indicate
whether the consumer wants a written itemization of the
amount financed. Upon receiving an affirmative indication, the
creditor shall provide, at the time other disclosures are required
to be furnished, a written itemization of the amount financed.
For the purposes of this subparagraph, 'itemization of the
amount financed' means a disclosure of the following items, to
the extent applicable:
"(i) the amount that is or will be paid directly to the
consumer;
"(ii) the amount that is or will be credited to the consumer's account to discharge obligations owed to the creditor;
"(iii) each amount that is or will be paid to third persons by
the creditor on the consumer's behalf, together with an
identification of or reference to the third person; and
"(iv) the total amount of any charges described in the
preceding subparagraph (A)(iii).
"(3) The 'finance charge', not itemized, using that term.
"(4) The finance charge expressed as an 'annual percentage
rate', using that term. This shall not be required if the amount
financed does not exceed $75 and the finance charge does not
exceed $5, or if the amount financed exceeds $75 and the finance
charge does not exceed $7.50.
"(5) The sum of the amount financed and the finance charge,
which shall be termed the 'total of payments'.
"(6) The number, amount, and due dates or period of pajnnents
scheduled to repay the total of payments.
"(7) In a sale of property or services in which the seller is the
creditor required to disclose pursuant to section 121(b), the 'total
sale price', using that term, which shall be the total of the cash

PUBLIC LAW 96-221—MAR. 31, 1980
price of the property or services, additional charges, and the
finance charge.
"(8) Descriptive explanations of the terms 'amount financed',
'finance charge', 'annual percentage rate', 'total of payments',
and 'total sale price' as specified by the Board. The descriptive
explanation of 'total sale price' shall include reference to the
amount of the downpayment.
"(9) Where the credit is secured, a statement that a security
interest has been taken in (A) the property which is purchased as
part of the credit transaction, or (B) property not purchased as
part of the credit transaction identified by item or type.
"(10) Any dollar charge or percentage amount which may be
imposed by a creditor solely on account of a late payment, other
than a deferral or extension charge.
"(11) A statement indicating whether or not the consumer is
entitled to a rebate of any finance charge upon refinancing or
prepayment in full pursuant to acceleration or otherwise, if the
obligation involves a precomputed finance charge. A statement
indicating whether or not a penalty will be imposed in those
same circumstances if the obligation involves a finance charge
computed from time to time by application of a rate to the unpaid
principal balance.
"(12) A statement that the consumer should refer to the
appropriate contract document for any information such document provides about nonpayment, default, the right to accelerate
the maturity of the debt, and prepayment rebates and penalties.
"(13) In any residential mortgage transaction, a statement
indicating whether a subsequent purchaser or assignee of the
consumer may assume the debt obligation on its original terms
and conditions.".
(b) Section 128(b) of the Truth in Lending Act (15 U.S.C. 1638(b)) is
amended to read as follows:
"03)(1) Except as otherwise provided in this chapter, the disclosures
required under subsection (a) shall be made before the credit is
extended. Except for the disclosures required by subsection (a)(1) of
this section, all disclosures required under subsection (a) and any
disclosure provided for in subsection (h), (c), or (d) of section 106 shall
be conspicuously segregated from all other terms, data, or information provided in connection with a transaction, including any computations or itemization.
"(2) In the case of a residential mortgage transaction, as defined in
section 103(w), which is also subject to the Real Estate Settlement
Procedures Act, good faith estimates of the disclosures required
under subsection (a) shall be made in accordance with regulations of
the Board under section 121(c) before the credit is extended, or shall
be delivered or placed in the mail not later than three business days
after the creditor receives the consumer's written application, whichever is earlier. If the disclosure statement furnished within three
days of the written application contains an annual percentage rate
which is subsequently rendered inaccurate within the meaning of
section 107(c), the creditor shall furnish another statement at the
time of settlement or consummation.".
(c) Section 128(c) of the Truth in Lending Act (15 U.S.C. 1638(c)) is
amended—
(1) by inserting "(1)" after "(c)";
(2) by striking out "deferred payment price" and inserting in
lieu thereof "total sale price"; and
(3) by adding at the end thereof the following new paragraph:

94 STAT. 179

Secured credit
statement.

15 u s e 1605.

Ante, p. 176.
12 u s e 2601
note.
Ante, p. 174.

^"^^' P I'^'O

94 STAT. 180

Repeal.

PUBLIC LAW 96-221—MAR. 31, 1980
"(2) If a creditor receives a request for a loan by mail or telephone
without personal solicitation and the terms of financing, including
the annual percentage rate for representative amounts of credit, are
set forth in the creditor's printed material distributed to the public,
or in the contract of loan or other printed material delivered to the
obligor, then the disclosures required under subsection (a) may be
made at any time not later than the date the first payment is due.".
(d)(1) Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is
hereby repealed.
(2) The table of sections at the beginning of chapter 2 of the Truth
in Lending Act is amended by striking out the item relating to section
129 and inserting in lieu thereof the following:
"129. [Repealed].".

Repeal.

(e)(1) Section 126 of the Truth in Lending Act (15 U.S.C. 1636) is
hereby repealed.
(2) The table of sections at the beginning of chapter 2 of the Truth
in Lending Act is amended by striking out the item relating to section
126 and inserting in lieu thereof the following:
"126. [Repealed].".

(f)(1) The table of sections at the beginning of chapter 2 of the Truth
in Lending Act is amended by striking out the item relating to section
128 and inserting in lieu thereof the following:
"128. Consumer credit not under open end credit plans.".

(2) The section heading for section 128 of the Truth in Lending Act
(15 U.S.C. 1638) is amended by striking out "SALES" and inserting in
lieu thereof "CONSUMER CREDIT".
CIVIL LIABILITY

15 u s e 1635.

15 u s e 1607,
1611.
15 u s e 1631 et
seq., 1667 et seq.
Ante, p. 171.

15 u s e 1635.

SEC. 615. (a) Section 130 of the Truth in Lending Act (15 U.S.C. 1640)
is amended—
(1) in subsection (a)(2)(B), by striking out "in such action" and
inserting in lieu thereof "under this subparagraph in any class
action or series of class actions arising out of the same failure to
comply by the same creditor";
(2) in subsection (a)(3), by inserting "or in any action in which a
person is determined to have a right of rescission under section
125" after "liability";
(3) by amending subsections (b), (c), and (d) to read as follows:
"(b) A creditor or assignee has no liability under this section or
section 108 or section 112 for any failure to comply with any
requirement imposed under this chapter or chapter 5, if within sixty
days after discovering an error, whether pursuant to a final written
examination report or notice issued under section 108(e)(1) or through
the creditor's or assignee's own procedures, and prior to the institution of an action under this section or the receipt of written notice of
the error from the obligor, the creditor or assignee notifies the person
concerned of the error and makes whatever adjustments in the
appropriate account are necessary to assure that the person will not
be required to pay an amount in excess of the charge actually
disclosed, or the dollar equivalent of the annual percentage rate
actually disclosed, whichever is lower.
"(c) A creditor or assignee may not be held liable in any action
brought under this section or section 125 for a violation of this title if
the creditor or assignee shows by a preponderance of evidence that
the violation was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted

PUBLIC LAW 96-221—MAR. 31, 1980
to avoid any such error. Examples of a bona fide error include, but are
not limited to, clerical, calculation, computer malfunction and programing, and printing errors, except that an error of legal judgment
with respect to a person's obligations under this title is not a bona fide
error.
"(d) When there are multiple obligors in a consumer credit transaction or consumer lease, there shall be no more than one recovery of
damages under subsection (a)(2) for a violation of this title.";
(4) in subsection (e), by adding at the end thereof the following
new sentence: "This subsection does not bar a person from
asserting a violation of this title in an action to collect the debt
which was brought more than one year from the date of the
occurrence of the violation as a matter of defense by recoupment
or set-off in such action, except as otherwise provided by State
law.";
(5) in subsection (f), by inserting ", section 108(b), section 108(c),
section 108(e)," after "this section";
(6) in subsection (g), by adding at the end thereof the following
new sentence: "This subsection does not bar any remedy permitted by section 125."; and
(7) by amending subsection (h) to read as follows:
"(h) A person may not take any action to offset any amount for
which a creditor or assignee is potentially liable to such person under
subsection (a)(2) against any amount owed by such person, unless the
amount of the creditor's or assignee's liability under this title has
been determined by judgment of a court of competent jurisdiction in
an action of which such person was a party. This subsection does not
bar a consumer then in default on the obligation from asserting a
violation of this title as an original action, or as a defense or
counterclaim to an action to collect amounts owed by the consumer
brought by a person liable under this title.".
(b) Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is
amended—
(1) by inserting ", including any requirement under section
125," immediately after "this chapter"; and
(2) by adding at the end thereof the following: "In connection
with the disclosures referred to in section 127, a creditor shall
have a liability determined under paragraph (2) only for failing
to comply with the requirements of section 125, section 127(a), or
of paragraph (4), (5), (6), (7), (8), (9), or (10) of section 127(b) or for
failing to comply with disclosure requirements under State law
for any term or item which the Board has determined to be
substantially the same in meaning under section 111(a)(2) as any
of the terms or items referred to in section 127(a) or any of those
paragraphs of section 127(b). In connection with the disclosures
referred to in section 128, a creditor shall have a liability
determined under paragraph (2) only for failing to comply with
the requirements of section 125 or of paragraph (2) (insofar as it
requires a disclosure of the 'amount financed'), (3), (4), (5), (6), or
(9) of section 128(a), or for failing to comply with disclosure
requirements under State law for any term which the Board has
determined to be substantially the same in meaning under
section 111(a)(2) as any of the terms referred to in any of those
paragraphs of section 128(a). With respect to any failure to make
disclosures required under this chapter or chapter 4 or 5 of this
title, liability shall be imposed only upon the creditor required to
make disclosure, except as provided in section 131.".

94 STAT. 181

15 use 1607.
Ante, p. 171.
15 USC 1635.

15 USC 1637.
^"*^' P i'^^
Ante, p. 177.
Ante, p. 173.
15 USC 1638.

Ante, p. 178.

15 USC 1631 et
*g^-^ ^^^^ ^* *^9'
Post, p. 182.

94 STAT. 182

PUBLIC LAW 96-221—MAR. 31, 1980
LIABILITY OF ASSIGNEES

SEC. 616. (a) Section 131 of the Truth in Lending Act (15 U.S.C. 1641)
is amended to read as follows:

15 use 1607.

Ante, p. 176.

15 use 1635.
Repeal.

"§ 13L Liability of assignees
"(a) Except as otherwise specifically provided in this title, any civil
action for a violation of this title or proceeding under section 108
which may be brought against a creditor may be maintained against
any assignee of such creditor only if the violation for which such
action or proceeding is brought is apparent on the face of the
disclosure statement, except where the assignment was involuntary.
For the purpose of this section, a violation apparent on the face of the
disclosure statement includes, but is not limited to (1) a disclosure
which can be determined to be incomplete or inaccurate from the face
of the disclosure statement or other documents assigned, or (2) a
disclosure which does not use the terms required to be used by this
title.
"(b) Except as provided in section 125(c), in any action or proceeding by or against any subsequent assignee of the original creditor
without knowledge to the contrary by the assignee when he acquires
the obligation, written acknowledgement of receipt by a person to
whom a statement is required to be given pursuant to this title shall
be conclusive proof of the delivery thereof and, except as provided in
subsection (a), of compliance with this chapter. This section does not
affect the rights of the obligor in any action against the original
creditor.
"(c) Any consumer who has the right to rescind a transaction under
section 125 may rescind the transaction as against any assignee of the
obligation.".
(b) Section 115 of the Truth in Lending Act (15 U.S.C. 1614) is
hereby repealed.
(c)(1) The table of sections at the beginning of chapter 1 of the Truth
in Lending Act is amended by striking out the item relating to section
115 and inserting in lieu thereof the following:
"115. [Repealed].".

(2) The table of sections at the beginning of chapter 2 of the Truth
in Lending Act is amended by striking out the item relating to section
131 and inserting in lieu thereof the following:
"131. Liability of assignees.".
LIABILITY OF CREDIT CARDHOLDER

SEC. 617. Section 133(a) of the Truth in Lending Act (15 U.S.C.
1643(a)) is amended to read as follows:
"(a)(1) A cardholder shall be liable for the unauthorized use of a
credit card only if—
"(A) the card is an accepted credit card;
"(B) the liability is not in excess of $50;
"(C) the card issuer gives adequate notice to the cardholder of
the potential liability;
"(D) the card issuer has provided the cardholder with a
description of a means by which the card issuer may be notified
of loss or theft of the card, which description may be provided on
the face or reverse side of the statement required by section
127(b) or on a separate notice accompanying such statement;
"(E) the unauthorized use occurs before the card issuer has
been notified that an unauthorized use of the credit card has

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 183

occurred or may occur as the result of loss, theft, or otherwise;
and
"(F) the card issuer has provided a method whereby the user of
such card can be identified as the person authorized to use it.
"(2) For purposes of this section, a card issuer has been notified
when such steps as may be reasonably required in the ordinary
course of business to provide the card issuer with the pertinent
information have been taken, whether or not any particular officer,
employee, or agent of the card issuer does in fact receive such
information.".
DISSEMINATION OF ANNUAL PERCENTAGE RATES

SEC. 618. (a) Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631
et seq.) is amended by adding at the end thereof the following new
section:
"§ 136. Dissemination of annual percentage rates
15 use 1646.
"(a) The Board shall collect, publish, and disseminate to the public,
on a demonstration basis in a number of standard metropolitan
statistical areas to be determined by the Board, the annual percentage rates charged for representative types of nonsale credit by
creditors in such areas. For the purpose of this section, the Board is
authorized to require creditors in such areas to furnish information
necessary for the Board to collect, publish, and disseminate such
information.
"(b) The Board is authorized to enter into contracts or other
arrangements with appropriate persons, organizations, or State agencies to carry out its functions under subsection (a) and to furnish
financial assistance in support thereof.".
(b) The table of sections contained at the beginning of such chapter
is amended by adding at the end thereof the following new item:
"136. Dissemination of annual percentage rates.".
CREDIT ADVERTISING

SEC. 619. (a) Section 143 of the Truth in Lending Act (15 U.S.C. 1662)
is amended to read as follows:
"§ 143. Advertising of open end credit plans
15 use 1663.
"No advertisement to aid, promote, or assist directly or indirectly
the extension of consumer credit under an open end credit plan may
set forth any of the specific terms of that plan unless it also clearly
and conspicuously sets forth all of the following items:
"(1) Any minimum or fixed amount which could be imposed.
"(2) In any case in which periodic rates may be used to compute
the finance charge, the periodic rates expressed as annual
percentage rates.
"(3) Any other term that the Board may by regulation require
to be disclosed.",
(b) Section 144(d) of the Truth in Lending Act (15 U.S.C. 1664) is
amended by striking out paragraphs (1) through (4) thereof, and
inserting in lieu thereof the following:
"(1) The downpayment, if any.
"(2) The terms of repayment.
"(3) The rate of the finance charge expressed as an annual
percentage rate.".

94 STAT. 184

PUBLIC LAW 96-221—MAR. 31, 1980
CORRECTION OF BILUNG ERRORS

SEC. 620. (a) Section 161(b) of the Truth in Lending Act (15 U.S.C.
16660t))) is amended—
(1) by redesignating paragraph (6) as paragraph (7); and
(2) by inserting after paragraph (5) the following:
"(6) Failure to transmit the statement required under section
127(b) of this Act to the last address of the obligor which has been
disclosed to the creditor, unless that address was furnished less
than twenty days before the end of the billing cycle for which the
statement is required.".
Ob) Section 161(c) of the Truth in Lending Act (15 U.S.C. 1666(c)) is
amended by inserting ", which may include finance charges on
amounts in dispute," after "of statements of account".
CREDIT BALANCES

SEC. 621. (a) Section 165 of the Truth in Lending Act (15 U.S.C.
1666d) is amended to read as follows:
"§ 165. Treatment of credit balances
"Whenever a credit balance in excess of $1 is created in connection
with a consumer credit transaction through (1) transmittal of funds
to a creditor in excess of the total balance due on an account, (2)
rebates of unearned finance charges or insurance premiums, or (3)
amounts otherwise owed to or held for the benefit of an obligor, the
creditor shall—
"(A) credit the amount of the credit balance to the consumer's
account;
"(B) refund any part of the amount of the remaining credit
balance, upon request of the consumer; and
"(C) make a good faith effort to refund to the consumer by cash,
check, or money order any part of the amount of the credit
balance remaining in the account for more than six months,
except that no further action is required in any case in which the
consumer's current location is not known by the creditor and
cannot be traced through the consumer's last known address or
telephone number.".
(b) The table of sections at the beginning of chapter 4 of the Truth
in Lending Act is amended by striking out the item relating to section
165 and inserting in lieu thereof the following:
"165. Treatment of credit balances.".
GOVERNMENT EXEMPTION

SEC. 622. (a) Section 113 of the Truth in Lending Act (15 U.S.C. 1612)
is amended to read as follows:
"§113. Effect on governmental agencies
"(a) Any department or agency of the United States which administers a credit program in which it extends, insures, or guarantees
consumer credit and in which it provides instruments to a cieditor
which contain any disclosures required by this title shall, prior to the
issuance or continued use of such instruments, consult with the
Board to assure that such instruments comply with this title.
"(b) No civil or criminal penalty provided under this title for any
violation thereof may be imposed upon the United States or any

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 185

department or agency thereof, or upon any State or political subdivision thereof, or any agency of any State or political subdivision.
"(c) A creditor participating in a credit program administered,
insured, or guaranteed by any department or agency of the United
States shall not be held liable for a civil or criminal penalty under
this title in any case in which the violation results from the use of an
instrument required by any such department or agency.
"(d) A creditor participating in a credit program administered,
insured, or guaranteed by any department or agency of the United
States shall not be held liable for a civil or criminal penalty under the
laws of any State (other than laws determined under section 111 to be 15 use 1610.
inconsistent with this title) for £iny technical or procedural failure,
such as a failure to use a specific form, to make information available
at a specific place on an instrument, or to use a specific typeface, as
required by State law, which is caused by the use of an instrument
required to be used by such department or agency.".
(b) The table of sections at the beginning of chapter 1 of the Truth
in Lending Act is amended by striking out the item relating to section
113 and inserting in lieu thereof the following:
"113. Effect on governmental agencies.".
ORAL DISCLOSURES

SEC. 623. (a) Section 146 of the Truth in Lending Act (15 U.S.C.
1665a) is amended to read as follows:
"§ 146. Use of annual percentage rate in oral disclosures
"In responding orally to any inquiry about the cost of credit, a
creditor, regardless of the method used to compute finance charges,
shall state rates only in terms of the annual percentage rate, except
that in the case of an open end credit plan, the periodic rate also
may be stated and, in the case of an other than open end credit plan
where a major component of the finance charge consists of interest
computed at a simple annual rate, the simple annual rate also may
be stated. The Board may, by regulation, modify the requirements of
this section or provide an exception from this section for a transaction or class of transactions for which the creditor cannot determine
in advance the applicable annual percentage rate.".
(b) The table of sections at the beginning of chapter 3 of the Truth
in Lending Act is amended by striking out the item relating to section
146 and inserting in lieu thereof the following:
"146. Use of annual percentage rate in oral disclosures.".
CONSUMER LEASING

SEC. 624. Section 185(b) of the Truth in Lending Act (15 U.S.C.
1667d(b)) is amended by striking out "sections 115,130, and 131" and
inserting in lieu thereof "sections 130 and 131".
15 use 1640;
Ante, p. 182.

EFFECTIVE DATE

SEC. 625. (a) Except as provided in section 608(b), the amendments 15 use 1602
made by this title shall take effect upon the expiration of two years ^P^after the date of enactment of this title.
^"^^' ^ ^^^
(b) All regulations, forms, and clauses required to be prescribed
under the amendments made by this title shall be promulgated at
least one year prior to such effective date.

94 STAT. 186

PUBLIC LAW 96-221—MAR. 31, 1980
(c) Notwithstanding subsections (a) and (b), any creditor may
comply with the amendments made by this title, in accordance with
the regulations, forms, and clauses prescribed by the Board, prior to
such effective date.
TITLE VII—AMENDMENTS TO THE NATIONAL BANKING
LAWS
PART A—NATIONAL BANKING LAWS

POWER TO HOLD REAL PROPERTY OR INTERESTS IN REAL PROPERTY

SEC. 701. (a) Section 5137 of the Revised Statutes (12 U.S.C. 29) is
amended—
(1) by inserting before the period at the end of the last
paragraph thereof the following: "except as otherwise provided
in this section"; and
(2) by adding at the end thereof the following new paragraph:
"For real estate in the possession of a national banking association
upon application by the association, the Comptroller of the Currency
may approve the possession of any such real estate by such association for a period longer than five years, but not to exceed an
additional five years, if (1) the association has made a good faith
attempt to dispose of the real estate within the five-year period, or (2)
disposal within the five-year period would be detrimental to the
association. Upon notification by the association to the Comptroller
of the Currency that such conditions exist that require the expenditure of funds for the development and improvement of such real
estate, and subject to such conditions and limitations as the Comptroller of the Currency shall prescribe, the association may expend
such funds as are needed to enable such association to recover its
total investment.".
(b) Section 4(a) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(a)) is amended by adding at the end thereof the following:
"Notwithstanding any other provision of this Act, the period ending
December 31, 1980, referred to in paragraph (2) above, may be
extended by the Board of Governors to December 31, 1982, but only
for the divestiture by a bank holding company of real estate or
interests in real estate lawfully acquired for investment or development. In making its decision whether to grant such extension, the
Board shall consider whether the company has made a good faith
effort to divest such interests and whether such extension is necessary to avert substantial loss to the company.".
DIVIDENDS ON PREFERRED STOCK

SEC. 702. The first sentence of subsection (a) of section 302 of the
Act entitled "An Act to provide relief in the existing national
emergency in banking, and for other purposes", approved March 9,
1933 (12 U.S.C. 51b), is amended by striking out "at a rate not
exceeding 6 per centum per annum".
CONSIDERATION OF PREFERRED STOCK IN DETERMINING IMPAIRMENT OF
CAPITAL

SEC. 703. The third sentence of section 345 of the Banking Act of
1935 (12 U.S.C. 51b-l) is amended by striking out "at a rate not
exceeding six per centum per annum".

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 187

REVOCATION OF TRUST POWERS

SEC. 704. The first section of the Act of September 28,1962 (76 Stat.
668; 12 U.S.C. 92a), is amended by adding at the end thereof the
following new subsection:
"(k)(l) In addition to the authority conferred by other law, if, in the Notice of intent.
opinion of the Comptroller of the Currency, a national banking
association is unlawfully or unsoundly exercising, or has unlawfully
or unsoundly exercised, or has failed for a period of five consecutive
years to exercise, the powers granted by this section or otherwise fails
or has failed to comply with the requirements of this section, the
Comptroller may issue and serve upon the association a notice of
intent to revoke the authority of the association to exercise the
powers granted by this section. The notice shall contain a statement Hearing,
of the facts constituting the alleged unlawful or unsound exercise of
powers, or failure to exercise powers, or failure to comply, and shall
fix a time and place at which a hearing will be held to determine
whether an order revoking authority to exercise such powers should
issue against the association.
"(2) Such hearing shall be conducted in accordance with the Judicial review.
provisions of subsection (h) of section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818(h)), and subject to judicial review as
provided in such section, and shall be fixed for a date not earlier than
thirty days nor later than sixty days after service of such notice
unless an earlier or later date is set by the Comptroller at the request
of any association so served.
"(3) Unless the association so served shall appear at the hearing
by a duly authorized representative, it shall be deemed to have
consented to the issuance of the revocation order. In the event of such
consent, or if upon the record made at any such hearing, the
Comptroller shall find that any allegation specified in the notice of
charges has been established, the Comptroller may issue and serve
upon the association an order prohibiting it from accepting any new
or additional trust accounts and revoking authority to exercise any
and all powers granted by this section, except that such order shall
permit the association to continue to service all previously accepted
trust accounts pending their expeditious divestiture or termination.
"(4) A revocation order shall become effective not earlier than the Revocation
effective
expiration of thirty days after service of such order upon the orders,
date.
association so served (except in the case of a revocation order issued
upon consent, which shall become effective at the time specified
therein), and shall remain effective and enforceable, except to such
extent as it is stayed, modified, terminated, or set aside by action of
the Comptroller or a reviewing court.".
EMERGENCY UMITATIONS AND RESTRICTIONS ON BUSINESS OF MEMBER
BANKS

SEC. 705. Section 4 of the Act of March 9,1933 (48 Stat. 2; 12 U.S.C.
95), is amended—
(1) by inserting "(a)" after "SEC 4."; and
(2) by adding at the end thereof the following:
"(bXD In the event of natural calamity, riot, insurrection, war, or
other emergency conditions occurring in any State whether caused
by acts of nature or of man, the Comptroller of the Currency may
designate by proclamation any day a legal holiday for the national
banking associations located in that State. In the event that the
emergency conditions affect only part of a State, the Comptroller of

Legal holidays,
designation.

94 STAT. 188

"State."

PUBLIC LAW 96-221—MAR. 31, 1980
the Currency may designate the part so affected and may proclaim a
legal holiday for the national banking associations located in that
affected part. In the event that a State or a State official authorized
by law designates any day as a legal holiday for either emergency or
ceremonial reasons for all banks chartered by that State to do
business within that State, that same day shall be a legal holiday for
all national banking associations chartered to do business within that
State unless the Comptroller of the Currency shall by written order
permit all national banking associations located in that State to
remain open.
"(2) For the purpose of this subsection, the term 'State' means any
of the several States, the District of Columbia, the Commonwealth of
Puerto Rico, the Northern Mariana Islands, Guam, the Virgin
Islands, American Samoa, the Trust Territory of the Pacific Islands,
or any other territory or possession of the United States.".
PROCEDURE FOR CONVERSION, MERGER, OR CONSOLIDATION

SEC. 706. The second sentence of subsection (b) of section 2 of the
Act of August 17,1950 (64 Stat. 456; 12 U.S.C. 214a(b)), is amended by
striking out "unanimous" and inserting in lieu thereof "majority".
DELEGATION OF AUTHORITY

12 use 4a.

SEC. 707. (a) Chapter 9 of title VII of the Revised Statutes (12 U.S.C.
1 et seq.) is amended by inserting after section 327 the following new
section:
"SEC. 327 A. The Comptroller of the Currency may delegate to any
duly authorized employee, representative, or agent any power vested
in the office by law.".
(b) The table of contents contained at the beginning of chapter 9 of
title VII of the Revised Statutes is amended by inserting after the
item relating to section 327 the following new item:
"327A. Delegation of authority.".
AUTHORITY TO PRESCRIBE REGULATIONS

12 use 93a.

12 use 36.

SEC. 708. Chapter 4 of title LXII of the Revised Statutes (12 U.S.C.
21 et seq.) is amended by inserting immediately following section 5239
a new section 5239A to read as follows:
"SEC. 5239A. Except to the extent that authority to issue such rules
and regulations has been expressly and exclusively granted to
another regulatory agency, the Comptroller of the Currency is
authorized to prescribe rules and regulations to carry out the responsibilities of the office, except that the authority conferred by this
section does not apply to section 5155 of the Revised Statutes or to
securities activities of National Banks under the Act commonly
known as the 'Glass-Steagall Act'.".
EXAMINATION OF NATIONAL BANKING ASSOCIATIONS

Foreign
operations.

SEC. 709. (a) Section 5240 of the Revised Statutes (12 U.S.C. 481) is
amended by striking out the first two sentences and inserting in lieu
thereof the following: "The Comptroller of the Currency, with the
approval of the Secretary of the Treasury, shall appoint examiners
who shall examine every national bank as often as the Comptroller of
the Currency shall deem necessary.".
(b) Section 5240 of the Revised Statutes (12 U.S.C. 481) is amended
^^ adding at the end thereof the following new sentence: "The

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 189

Comptroller of the Currency, upon the request of the Board of
Governors of the Federal Reserve System, is authorized to assign
examiners appointed under this section to examine foreign operations of State banks which are members of the Federal Reserve
System.".
OWNERSHIP INTEREST OF DIRECTORS OF NATIONAL BANKS

SEC. 710. The second sentence of section 5146 of the Revised
Statutes (12 U.S.C. 72) is amended by striking out the second sentence
and inserting in lieu thereof the following: "Every director must own
in his or her own right either shares of the capital stock of the
association of which he or she is a director the aggregate par value of
which is not less than $1,000, or an equivalent interest, as determined
by the Comptroller of the Currency, in any company which has
control over such association within the meaning of section 2 of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841). If the capital of
the bank does not exceed $25,000, every director must own in his or
her own right either shares of such capital stock the aggregate par
value of which is not less than $500, or an equivalent interest, as
determined by the Comptroller of the Currency, in any company
which has control over such association within the meaning of section
2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).".
PURCHASE OF STOCK IN BANKERS' BANKS

SEC. 711. The paragraph numbered "Seventh" of section 5136 of the
Revised Statutes (12 U.S.C. 24(7)) is amended by inserting before the
period at the end thereof the following: ": Provided further, That,
notwithstanding any other provision of this paragraph, the association may purchase for its own account shares of stock of a bank
insured by the Federal Deposit Insurance Corporation if the stock of
such bank is owned exclusively by other banks (except to the extent
State law requires directors qualifying shares) and if such bank is
engaged exclusively in providing banking services for other banks
and their officers, directors, or employees, but in no event shall the
total amount of such stock held by the association exceed at any time
10 per centum of its capital stock and paid in and unimpaired surplus,
and in no event shall the purchase of such stock result in the
association's acquiring more than 5 per centum of any class of voting
securities of such bank".
I N T E R S T A T E TRUST OPERATIONS

SEC. 712. (a) Section 5169 of the Revised Statutes (12 U.S.C. 27) is
amended by adding at the end thereof the following: "Notwithstanding the provisions of the preceding sentence, a national banking
association the operations of which are limited as provided in the
preceding sentence shall be deemed an additional bank within the
contemplation of section 3 of the Bank Holding Company Act of
1956.".
12 use 1842.
(b) Section 3(d) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(d)) is amended by inserting "(1)" after "(d)" and by adding at the
end thereof the following:
"(2)(A) Except as provided in subparagraph (B), the restrictions
contained in paragraph (1) regarding the acquisition of shares or
assets of, or interests in, an additional bank shall apply to the
acquisition of shares or assets of, or interests in, a trust company.

94 STAT. 190

"Trust
company.'

Termination
date.

PUBLIC LAW 96-221—MAR. 31, 1980
"(B) Subparagraph (A) shall not apply with respect to the acquisition of shares or assets of, or interests in, a trust company if such
acquisition was approved by the Board on or before March 5, 1980,
and if such trust company opened for business and was operating on
or before March 5,1980.
"(C) For the purpose of this paragraph, the term 'trust company'
means any company whose powers are limited to the powers specified
in subsection (a) of the first section of the Act entitled 'An Act to place
authority over the trust powers of national banks in the Comptroller
of the Currency', approved September 28, 1962 (12 U.S.C. 92a), for a
national bank located in the same State in which such trust company
is located.".
(c) The amendments made by this section are hereby repealed on
October 1,1981.
LOANS FOR THE FORMATION OF A ONE-BANK HOLDING COMPANY

SEC. 713. Section 3(c) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(c)) is amended by adding at the end thereof the following:
"Notwithstanding any other provision of law, the Board shall not
follow any practice or policy in the consideration of any application
for the formation of a one-bank holding company if following such
practice or policy would result in the rejection of such application
solely because the transaction to form such one-bank holding company involves a bank stock loan which is for a period of not more than
twenty-five years. The previous sentence shall not be construed to
prohibit the Board from rejecting any application solely because the
other financial arrangements are considered unsatisfactory. The
Board shall consider transactions involving bank stock loans for the
formation of a one-bank holding company having a maturity of
twelve years or more on a case by case basis and no such transaction
shall be approved if the Board believes the safety or soundness of the
bank may be jeopardized.".
PART B—TERMINATION OF NATIONAL BANK CLOSED RECEIVERSHIP
FUND
PURPOSE

12 use 191 note.

SEC. 721. The purpose of this part is to terminate the closed
receivership fund by—
(1) providing final notice of availability of liquidating dividends
to creditors of national banks closed on or before January 22,
1934;
(2) barring rights of creditors to collect liquidating dividends
from the Comptroller of the Currency after a reasonable period
of time following such final notice; and
(3) refunding to the Comptroller the principal amount of such
fund and any income earned thereon.
DEFINITIONS

12 use 191 note.

SEC. 722. For purposes of this part—
(1) the term "closed receivership fund" means the aggregation
of undisbursed liquidating dividends from national banks closed
on or before January 22, 1934, held by the Comptroller in his
capacity as successor to receivers of those banks;

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 191

(2) the term "Comptroller" means the Comptroller of the
Currency;
(3) the term "claimant" means a depositor or other creditor
who asserts a claim against a closed national bank for a liquidating dividend; and
(4) the term "liquidating dividend" means an amount of money
in the closed receivership fund determined by a receiver of a
closed national bank or by the Comptroller to be owed by that
bank to a depositor or other creditor.
TERMINATION OF CLOSED RECEIVERSHIP FUND

SEC. 723. (a) The Comptroller shall publish notice once a week for
four weeks in the Federal Register that all rights of depositors and
other creditors of closed national banks to collect liquidating dividends from the closed receivership fund shall be barred after twelve
months following the last date of publication of such notice.
(b) The Comptroller shall pay the principal amount of a liquidating
dividend, exclusive of any income earned thereon, to a claimant
presenting a valid claim, if the claimant applies to collect within
twelve months following the last date notice is published.
(c) If a creditor shall fail to apply to collect a liquidating dividend
within twelve months after the last date notice is published, all rights
of the claimant against the closed receivership fund with respect to
the liquidating dividend shall be barred.
(d) The principal amount of any liquidating dividends (1) for which
claims have not been asserted within twelve months following the
last date notice is published or (2) for which the Comptroller has
determined a valid claim has not been submitted shall, together with
any income earned on liquidating dividends and other moneys, if any,
remaining in the closed receivership fund, be covered into the general
funds of the Comptroller.

Notice,
publication in
Federal
Register.
12 u s e 191 note.

SHORT TITLE

Financial
Regulation
Simplification
Act of 1980.

SEC. 801. This title may be cited as the 'Financial Regulation
Simplification Act of 1980".

12 u s e 3501
note.

TITLE VIII—REGULATORY SIMPLIFICATION

FINDINGS

SEC. 802. The Congress hereby finds that many regulations issued
by the Board of Governors of the Federal Reserve System, the Board
of Directors of the Federal Deposit Insurance Corporation, the
Comptroller of the Currency, the Federal Home Loan Bank Board,
and the National Credit Union Administration Board (hereinafter in
this title referred to as the "Federal financial regulatory agencies")
often impose costly, duplicative, and unnecessary burdens on both
financial institutions and consumers. Regulations should be simple
and clearly written. Regulations should achieve legislative goals
effectively and efficiently. Regulations should not impose unnecessary costs and paperwork burdens on the economy, on financial
institutions, or on consumers.

12 u s e 3521.

"Federal
financial
regulatory
agencies."

POLICY

SEC. 803. Any regulation issued by the Federal financial regulatory
agencies shall, to the maximum extent practicable, insure that—

79-194

O—81—pt. 1

16 : QL3

12 u s e 3522.

94 STAT. 192

PUBLIC LAW 96-221—MAR. 31, 1980
(1) the need for and purpose of such regulation is established
clearly;
(2) meaningful alternatives to the promulgation of such regulation are considered before such regulation is issued;
(3) compliance costs, paperwork, and other burdens on the
financial institutions, consumers, and public are minimized;
(4) conflicts, duplication, and inconsistencies between the regulations issued by the Federal financial regulatory agencies are to
be avoided to the extent possible taking into account differences
in statutory responsibilities, the classes of financial institutions'
regulation and methods of implementation of statutory or policy
objectives;
(5) timely participation and comment by other Federal agencies, appropriate State and local agencies, financial institutions,
and consumers are available; and
(6) any regulation issued shall be as simple and clearly written
as possible and understandable by those who are subject to such
regulation.
REVIEW OF EXISTING REGULATIONS

12 use 3523.

SEC. 804. The Federal financial regulatory agencies shall establish
a program which assures periodic review of existing regulations to
determine whether those regulations achieve the policies stated in
section 803. Those regulations which are not in keeping with such
policies shall be revised accordingly.
REPORTING

Report to
congressional
12^1180 3524.

SEC. 805. Not later than six months after the date of enactment of
^his title and in subsequent annual reports, each Federal financial
regulatory agency shall submit a report of its progress in implementing this title to the Committee on Banking, Finance and Urban
Affairs of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate.
TERMINATION DATE

12 use 3521
^°^-

SEC. 806. This title is hereby repealed five years after the date of
enactment of this title.
TITLE IX—FOREIGN CONTROL OF UNITED STATES
FINANCIAL INSTITUTIONS
DEFINITIONS

12 use 3101
"°**'

SEC. 901. For purposes of this title—
(1) the term "domestic financial institution" means any bank,
mutual savings bank, or savings and loan association organized
under the laws of any State or of the United States;
(2) the term "foreign person" means any foreign organization
or any individual resident in a foreign country or any organization or individual owned or controlled by such an organization or
individual; and
(3) the term "takeover" means any acquisition of the stock or
assets of any domestic financial institution if, after such acquisition, the amount of stock or assets held is 5 per centum or more of
the institution's stock or assets.

PUBLIC LAW 96-221—MAR. 31, 1980

94 STAT. 193

MORATORIUM

SEC. 902. The Board of Governors of the Federal Reserve System, 12 use 3101
the Comptroller of the Currency, the Board of Directors of the ^°^Federal Deposit Insurance Corporation, and the Federal Home Loan
Bank Board may not approve any application relating to the
takeover of any domestic financial institution by a foreign person
until July 1,19o0, unless—
(1) such takeover is necessary to prevent the bankruptcy or
insolvency of the domestic financial institution involved;
(2) the application was initially submitted for filing on or
before March 5,1980;
(3) the domestic financial institution has deposits of less than
$100,000,000;
(4) the application relates to a takeover of shares or assets
pursuant to a foreign person's intrafirm reorganization of its
interests in a domestic financial institution, including specifically any application to establish a bank holding company
pursuant to such reorganization;
(5) the application relates to a takeover of the assets or shares
of a domestic financial institution if such assets or shares are
owned or controlled by a foreign person; or
(6) the application relates to the takeover of a domestic
financial institution which is a subsidiary of a bank holding
company under an order to divest by December 31,1980.
Approved March 31, 1980.

LEGISLATIVE HISTORY:
HOUSE REPORT No. 96-842 (Comm. of Conference).
SENATE REPORTS: No. 96-368 (Comm. on Banking, Housing, and Urban Affairs)
and No. 96-640 (Comm. of Conference).
CONGRESSIONAL RECORD:
Vol. 125 (1979): Sept. 10, 11, considered and passed House.
Oct. 23, 29, 31, Nov. 1, considered and passed Senate, amended.
Nov. 7, House concurred in Senate amendment with amendments.
Vol. 126 (1980): Mar. 27, House agreed to conference report.
Mar. 27, 28, Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS:
Vol. 16, No. 14 (1980): Mar. 31, Presidential statement.