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F e d e r a l R e s e r v e Ba n k DALLAS. TEXAS of Dallas 75222 C i r c u l a r N o . 75-172 N o v e m b e r 14, 1975 A m e r i c a n R ev o l u ti o n B i m i t c n u i a l FORM C - 1 0 S E C U R IT Y AG REEM ENT T O A L L BANKS IN T H E ELE V ENTH FE D E R A L RESERVE D IS T R IC T : In the p a s t , w e h a v e be en f u r n i s h i n g o u r F o rm C - 1 0 S e c u r i t y A g r e e m e n t to m e m b e r b a n k s f o r use u n d e r th e U n if o r m C o m m e r c ia l C o d e . On o c c a s io n , c o p ie s h a v e a ls o been m ade a v a ila b l e to n o n m e m b e r b a n k s an d o t h e r c o n c e r n e d p a r t i e s , as a m a t t e r o f in f o r m a t io n an d use as a g u id e in d e s i g n i n g a f o r m a p p l ic a b le to t h e i r p a r t i c u l a r n e e d s . T h e fo r m w a s in te n d e d to be u s e f u l in a la r g e n u m b e r o f t r a n s a c t io n s , i n c l u d i n g a l l m a n n e r o f f a r m lo a n s , i n v e n t o r y , a c c o u n ts r e c e iv a b le f i n a n c i n g , a n d loans on b u s in e s s e q u i p m e n t , c o n s u m e r g o o d s , an d a u to m o b i le s . A s y o u a r e a l l a w a r e , a f i e l d o f la w , w h ic h has been r a p i d l y e x p a n d in g in th e r e c e n t p a s t, is c o n c e r n e d w i t h c o n s u m e r p r o t e c t i o n . O ne o f th e m a n y m e a s u re s w h ic h has b e en e n a c te d . P u b lic Law 9 3 -63 7, a u t h o r i z e s th e F e d e ra l T r a d e C o m m is s io n to is s u e r u l e s p r o h i b i t i n g th e use o f c e r t a i n c o n t r a c t u a l t e r m s f r e q u e n t l y in c lu d e d in c o n s u m e r c r e d i t c o n t r a c t s and c e r t a i n p r a c tic e s o fte n e m p lo y e d b y c r e d i t o r s to a id in th e c o lle c t io n o f u n p a id d e b t s . T h e la w a ls o a u t h o r ize s th e B o a r d o f G o v e r n o r s o f th e F e d e ra l R e s e r v e S ystem to d e v e lo p s u b s t a n t i a l l y s i m i l a r r u l e s p r o h i b i t i n g s u c h t y p e s o f p r a c tic e s b y b a n k s , u n le s s th e B o a rd f in d s e i t h e r t h a t s u c h acts o r p r a c tic e s o f b a n k s a r e n o t u n f a i r o r d e c e p t i v e o r t h a t im p le m e n ta tio n o f s i m i l a r r e g u la t io n s w i t h r e s p e c t to b a n k s w o u ld s e r i o u s l y c o n f l i c t w i t h e s s e n tia l m o n e t a r y and p a y m e n t s y s te m s p o lic i e s o f th e B o a r d . A s r e f le c te d in t h is B a n k 's C i r c u l a r No. 7 5 -7 8 , d a te d J u n e 13, 1975, th e B o a r d of G o v e r n o r s of th e F e d e ra l R e s e r v e S ys tem is c u r r e n t l y d e v e l o p i n g th e s e r e g u la t io n s . It s h o u ld be n o te d t h a t th e C - 1 0 is o fte n u se d in c o n s u m e r c r e d i t t r a n s a c t io n s ; it is p o s s ib le t h a t some p r o v i s i o n s o f th e F o rm C - 1 0 , w h e n a p p l ie d to c o n s u m e r c r e d i t t r a n s a c t io n s , m ay m a t e r i a l l y c o n f l i c t w i t h th o s e r e g u la t io n s in t h e i r f in a l f o r m , o r w i t h f u t u r e c o u r t d e c is io n s in t h is e v e r - c h a n g i n g a n d d e v e l o p i n g f ie l d o f la w . A s a r e s u l t , th e F e d e ra l R e s e r v e B a n k o f D a lla s w i l l no lo n g e r f u r n i s h c o p ie s o f F orm C - 1 0 . In t h is B a n k 's C i r c u l a r No. 74 -10 8, d a te d A p r i l 25, 1974, a n n o u n c in g th e r e v i s i o n o f o u r F orm C - 9 S e c u r i t y A g r e e m e n t to F o rm C - 1 0 , P. E. C o ld w e ll , w h o w a s P r e s i d e n t o f t h is B an k at th a t t im e , no ted th a t: " A d e c is io n on th e le ga l fo r m s to be use d b y y o u r b a n k s h o u l d , of c o u r s e , be m ade in c o n s u lta tio n w i t h y o u r le gal c o u n s e l. " A g a i n , w e e a r n e s t l y u r g e y o u to c o n s u l t w i t h y o u r b a n k 's a t t o r n e y s on f u t u r e use o f th e F orm C -1 0 in its p r e s e n t fo r m o r y o u r o w n r e v i s i o n . T h i s B a n k s i n c e r e l y r e g r e t s t h is c o u r s e o f a c t io n , b u t le gal u n c e r t a i n t ie s p r o d u c e d b y th e s h a r p in c r e a s e in in v o lv e m e n t w i t h c o n s u m e r a f f a i r s a n d r e s p o n s iv e c h a n g e s in th e le gal s t r u c t u r e lead t h is B a n k to c o n c lu d e t h a t in s u c h m a tte r s c o m m e r c ia l b a n k s c a n be s t p r o t e c t t h e i r o w n in te r e s t s b y th e c o n t i n u i n g c o o p e r a t iv e in v o lv e m e n t a n d c o l l e c t i v e ju d g m e n t o f y o u r o f f ic e r s a n d p r i v a t e c o u n s e l. If y o u h a v e a n y q u e s t io n s r e g a r d i n g t h is d e c is io n , p le a s e feel f r e e to c o n ta c t o u r Legal D e p a r t m e n t a l (214) 651-6228. Sincerely yours, Ernest T . Baughman Pr es id ent This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
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