The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F ederal Reser ve Ba n k o f Dallas DALLAS. TEXAS 75222 C ir c u la r No. 77-84 A u g u s t 10, 1977 REGULATION Z—TRUTH-IN-LENDING D iscounts for Paym ents b y C a s h , C h e c k , o r Sim ilar Means TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e Board of G o v e r n o r s of th e Fe d e ra l R e s e r v e System h a s am en d ed its T r u t h in Lending Regulation Z to c la rify p r o v is io n s th a t p e rm it d is c o u n ts for c a s h c u s to m e r s . T h e am end m en ts a r e effective im m ediately. T h e y c a r r y out p r o v i sion s of Public Law 94-222 s p ec ify in g th a t m e rc h a n ts may give d is c o u n ts to c u sto m e r s who pay in c a s h (or by c h e c k o r sim ilar means) r a t h e r than by u sin g a c r e d i t c a r d . Such d is c o u n t s n e e d not be d is c lo se d as a finance c h a r g e to those u s in g c r e d i t c a r d s . D iscounts may not ex ce e d 5 p e r c e n t of th e c r e d i t card price. T h e a m en d m en ts a d o p te d b y th e Board w e re s u b s ta n tia lly th e same a s am en d m en ts p ro p o s e d fo r p u b lic comment in D ecem ber. T h e am end m en ts allow m e rc h a n ts to u s e e ith e r a d is c o u n t o r a "tw ota g " p r ic in g system to in d icate d is c o u n t s for c a s h . Examples of p r i c i n g s y s tems th a t may be u s e d w ithout being d is c lo se d a s a fin a n c e c h a r g e include: 1. A d is c o u n t p r i c i n g system: th e m e rc h a n t p o s ts o r ta g s goods with a sin g le p r i c e — th e p r i c e c h a r g e d if a c r e d i t c a r d is u s e d — a n d offers a 5 p e r c e n t (or less) d is c o u n t off th is p r i c e to c a s h c u s to m e r s . 2. A " tw o -ta g" system: th e m e rc h a n t p o s ts o r tags goods w ith both a c r e d i t c a r d a n d a c a s h p r i c e . Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-8 00 -492 -440 3 (intrastate) and 1 -8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus the extention referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) -2- 3. A n o th e r "tw o-tag" system: the m e rc h a n t n e ith e r ta g s n o r p o s ts p r i c e s , but offers to a c c e p t from c u s to m e r s p a y in g b y c a s h a p r i c e 5 p e r c e n t (or less) lower than the p r i c e c h a r g e d to c u sto m ers u s in g c r e d i t c a r d s . T h e am end m en ts a d o p te d also inc lu d e a p ro v is io n th a t th e amount of a n y d i s c o u n t for c a s h is not, in the c a s e of c r e d i t c a r d u s e r s , a c h a r g e for c r e d i t u n d e r a n y State law, su c h a s a u s u r y o r c r e d i t d i s c l o s u r e law. Enclosed is a co p y of th e a m end m en ts for in s e rtio n in y o u r R eg u la tions b i n d e r , if you ha ve a n y q u e s tio n s r e g a r d i n g R egulation Z, p le a se c o n tact R ic h a rd West of o u r Examination D ep artm en t, C o n su m e r Affairs Section, a t Ext. 6171 o r 6181. Additional copies of a m en d m en ts to R egulation Z will be fu r n is h e d upon r e q u e s t to th e S e c r e t a r y 's Office of t h is B ank. S in c e re ly y o u r s , Robert H. Boykin F i r s t Vice P r e s id e n t Enclosure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM TRUTH IN LENDING A M E N D M E N T S T O R E G U L A T IO N Z f E ffectiv e July 20, 1977, R e g u la tio n Z is amended as follows: SECTION 226.2 — DEFINITIONS AND RULES OF CONSTRUCTION * * # * * 1. Section 226.2 is amended by adding new paragraphs (tt), (uu), and (vv) as follows: (tt) “R e g u la r p r ice ” means (1) the tag or posted price charged for the property or service if a single price is tagged or posted; or (2) the price charged for the property or service when payment is made by use of an open end credit card account if either (a) no price is tagged or posted, or (b) two prices are tagged or posted, one of which is charged when payment is made by use of an open end credit card account and the other when payment is made by use of cash, check, or similar means. For purposes of this definition, payment by check, draft, or other negotiable instrument which may result in the debiting of a cardholder’s open end ac count shall not be considered payment made by use of that account. (uu) “ D is c o u n t,” as used in §§226.4(i) and 226.13(1), means a reduction made from the “regular price,” as defined in §226.2(tt). (vv) “S u rch arge,” as used in §226.4(i), means any amount added at the point of sale to the “regular price,” as defined in §226.(tt), as a condition or consequence of payment being made by use of an open end credit card account. For purposes of this definition, payment by check, draft, or other negotiable instrument which may result in the debiting of a card holder’s open end account shall not be con sidered payment made by use of that account. SECTION 226.4— DETERM INATION OF FIN A N CE CHARGE * * * * * 2. Section 226.4 is amended as follows: (a) paragraph(i)(l) is amended by adding foot note “5a” after the word “used” (i.e., .. whether or not a credit card is physically used,5® . . .”), the text of which footnote shall be as follows: “For purposes of this section, payment by check, draft, or other negotiable instrument which may result in the debiting of a card holder’s open end account shall not be con sidered payment made by use of that account.” (b) paragraph (i)(l)(i) is amended by deleting the words “tag, posted, or advertised” and sub stituting therefor the word “regular.” (c) paragraph (i)(l)(iii) is amended by: (1) changing the phrase, “the availability of a dis count for payments in cash must be clearly and conspicuously disclosed” to read as follows: “the availability of such a discount must be clearly and conspicuously disclosed;” and (2) by adding at the end of the paragraph© (1)(iii) a new sentence as follows: ***If a price other than the “regular price,” as defined in §226.2(tt), is disclosed is an adver- t For this Regulation to be complete as amended effective July 20, 1977, retain the following: 1) Printed pamphlet as amended effective March 23, 1977; 2) Amendments effective April 11, 1977, Section 226.6(a) and October 10, 1977, Section 226.8(b); and 3) This slip sheet. tisement, telephone contact, or other corre spondence promoting goods or services for which such a discount is offered, then the advertise ment, telephone contact, or other correspondence shall also indicate that such price is not available to credit card purchasers. (d) paragraph (i)(2) is amended by deleting the words “for cash.” (e) paragraph (i)(4) is deleted and new para graph (i)(4) as follows is added in lieu thereof: (i) usury; or (ii) disclosure of information in connection with credit extensions; or (iii) the types, amounts, or rates of charges, or the element or elements of charges permis sible in connection with the extension or use of credit. SECTION 226.5 — DETERM INATION OF ANN U A L PERCENTAGE RATE * * * * * * * * (4) No creditor in any sales transaction may impose a surcharge. This paragraph shall cease to be effective on February 27, 1979. 3. Section 226.5(a)(3)(ii) is amended by de leting the footnote designation “5a” and inserting, in lieu thereof, the designation “5b.” * * * * * (f) new paragraph (i)(5) is added as follows: * ( * * * * ^ (5) Notwithstanding any other provisions of this Part, any discount which, pursuant to para graph (1), is not a finance charge for purposes of this Part shall not be considered a finance charge or other charge for credit under the laws of any State relating to: SECTION 226.13 — CREDIT CARD TRANSACTIONS — SPECIAL REQUIREMENTS * # * * * 4. Section 226.13(1 )(l)(i) is amended by delet ing the word “cash” which appears immediately before the word “discounts.” * * * * *
@FedFRASER