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federal R e ser ve Ba n k DALLAS. TEXAS of D allas 75222 Circular No. 81-118 June 12, 1981 REGULATION Z - TRUTH IN LENDING Revised Regulation Z; Technical Amendments; Proposed Official Staff Interpretation for Regulation Z Commentary TO ALL MEMBER BANKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Federal Reserve Board has adopted technical amendments to Appendices H and J of the final revised Regulation Z (Truth in Lending) pub lished a t 46 FR 20848, April 7, 1981. Also, the Board is publishing for com ment a proposed official staff commentary to revised Regulation Z. The com mentary is intended to give further guidance to creditors interpreting the re quirements of Truth in Lending. The Board welcomes comments regarding the proposed commentary both on the substance of the m aterial and on the format in which it is pre sented. In order that the commentary in final form be available as early as possible, comments must be received by July 10, 1981. A fter consideration of these comments and possible revision of the text, the commentary will be published in final form in the Federal Register as an official staff interpre tation. Comments should include a reference to TIL-1 and should be mail ed to the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Comments regarding each section of the commen tary should begin on a separate page. Printed on the following pages are the Federal Register notice concerning the technical amendments, together with the language of the amend ments, which should be kept with the text of the revised Regulation Z, 12 CFR 226 [Reg. Z; Docket No. R-0288] which accompanied this Bank's Circular No. 81-80, dated April 21, 1981, and the Board's press release and the Federal Reg ister notice regarding a summary of the Proposed Official Staff Commentary. Anyone desiring copies of the entire proposed commentary should contact the Department of Communications, Financial, and Community Affairs a t Extension 6266. Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank; 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - Questions concerning the actions taken should be directed to the attorneys in the Board's Division of Consumer and Community Affairs listed in the respective Federal Register m aterial or to this Bank's Legal Department at Extension 6171. Sincerely yours, William H. Wallace First Vice President FEDERAL RESERVE SYSTEM 12 CFR P a r t 226 [Reg. Z; Docket No. R-0288] TRUTH IN LENDING Revised Regulation Z; Technical Amendments. AGENCY: Board o f Governors of th e Federal Reserve System. ACTION: Final r u l e ; t e c h n i c a l amendments. SUMMARY: The Board i s making t e c h n i c a l amendments t o Appendices Hand J o f i t s f i n a l r u l e s on Regulation Z (Truth in Lending) pu bli sh ed a t 46 FR20848, April 7, 1981. FOR FURTHER INFORMATION CONTACT: Denise M. R ec ht e r, S t a f f A tt o rn e y , Division of Consumer and Community A f f a i r s , Board of Governors of th e Federal Reserve System, Washington, D.C. 20551, (202) 452-3667. SUPPLEMENTARY INFORMATION: a r e amended as foll ows: The f i n a l r u l e s cont ai ned in FR Doc. 81-10347 1. On page 20926, th e paragraph e n t i t l e d "How t o Cancel" form H-8 i s amended by d e l e t i n g t h e "and11 t h a t fo ll ow s "You may use st at em e nt t h a t i s signed and dated by you and s t a t e s your i n t e n t i o n and t h a t precedes "or you may use t h i s n o t i c e by d a t i n g and s i g n in g o f model any w r i t t e n t o cancel " below. * 2. On page 20936, th e second s en te nc e o f paragraph (7) o f Appendix J i s amended by changing t h e word "supplement" t o "appendix * * Board o f Governors o f th e Federal Reserve System, May 22, 1981. (s ig n e d) James McAfee_______ James McAfee A s s i s t a n t Se c re ta r y o f t h e Board [SEAL] #«•••• ^ r iiSfe FEDERA^RESERV^Dres^eleas^^^C, For immediate release May 21, 1981 “" The Federal Reserve Board's staff is publishing for comment a proposed official staff commentary following up and interpreting the Board's simplified Regulation Z, which implements the Truth in Lending Simplification and Reform Act. Comment should be received by July 10, 1981. The proposed commentary applies and interprets the requirements of Truth in Lending with respect to open-end and closed-end consumer credit. The commentary will deal with the substance of some 1,500 Board and staff interpretations that have been issued, at the request of consumers and creditors, since the Act became effective over a decade ago. The commentary is expected to replace all individual interpretations and to be the sole vehicle for interpreting Regulation Z. Compliance with the simplified regulation becomes mandatory April 1, 1982, a year after its publication, but creditors may begin to comply with it immediately. The Board believes that the attempt to issue highly specific interpre tations in the past led to an accumulation of interpretations that by their number and complexity complicated rather than facilitated compliance. The proposed new commentary focuses on providing more general guidance, together with illustrative examples. The proposed commentary is described in the attached notice of the request for comment. The full proposed commentary is available from the Federal Reserve Board or Federal Reserve Banks. - 0- FEDERAL RESERVE SYSTEM 12 CFR P a r t 226 [Reg. Z; TIL-1] TRUTH IN LENDING Proposed O f f i c i a l S t a f f Commentary AGENCY: Board of Governors o f th e Federal Reserve System. ACTION: Proposed o f f i c i a l s t a f f i n t e r p r e t a t i o n . SUMMARY: In accordance with Appendix C t o 12 CFR P a r t 226, t h e B o ar d' s s t a f f i s p u b l i s h i n g f o r comment a proposed o f f i c i a l s t a f f commentary t o Regulation Z, as r e v i s e d e f f e c t i v e April 1, 1981 (46 FR 20848, April 7, 1981). The commentary a p p l i e s and i n t e r p r e t s t h e re qu irements of Truth in Lending t o open-end and closedend consumer c r e d i t , and i s intended t o s u b s t i t u t e f o r i n d i v i d u a l Board and s t a f f i n t e r p r e t a t i o n s of t h e r e g u l a t i o n . In o rd e r t o make t h e f i n a l com mentary a v a i l a b l e a t th e e a r l i e s t p o s s i b l e t i m e , commenters must submit t h e i r comments by J u l y 10, 1981. DATE: Comments must be re c ei v e d on or b ef or e J u l y 10, 1981. ADDRESS: Comments should i n c lu d e a r e f e r e n c e t o TIL-1 and should be mailed t o t h e S e c r e t a r y , Board of Governors of t h e Federal Reserve System, Washington, O.C. 20551, o r d e l i v e r e d t o Room B-2223, 20th and C o n s t i t u t i o n Avenue, N.W., Washington, D.C., between 8:45 a.m. and 5:15 p.m. To ai d in t h e i r c o n s i d e r a t i o n , comments re g a rd in g each s e c t i o n should begin on a s e p a r a t e page. Comments may be i n s p e c t e d in Room B-1122 between 8:45 a.m. and 5:15 p.m. FOR FURTHER INFORMATION: Contact t h e foll owi ng a t t o r n e y s in th e D iv is io n o f Consumer and Community A f f a i r s , Board o f Governors of th e Federal Reserve System, Washington, D.C. 20551, a t (202) 452-3667 or (202) 452-3867: Subpart A Subpart B and Appendices Gerald Hurst Beth Morgan Denise Rechter Ruth Amberg Jesse Filk in s Lynn Goldfaden Gerald Hurst Barbara Ranagan John Wood Subpart C and Appendices Beth Morgan Denise Rechter Rugenia S i l v e r Susan Werthan Claudia Yarus Steve Zeisel Subpart D and Appendices Lynn Goldfaden Susan Werthan - 2 - SUPPLEMENTARY INFORMATION: E f f e c t i v e April 1, 1981, t h e Board s u b s t a n t i a l l y r e v i s e d Regulation Z, which implements t h e Truth in Lending Act (46 FR 20848, April 7, 1981). The r e v i s i o n s r e f l e c t amendments made by th e Truth in Lending S i m p l i f i c a t i o n and Reform Act ( T i t l e VI of t h e Depository I n s t i t u t i o n s Deregu l a t i o n and Monetary Control Act of 1980, Pub. L. 96-221). C r e d i t o r s may begin complying with t h e re v is ed r e g u l a t i o n immediately. Compliance does not become mandatory, however, u n t i l April 1, 1982. Before t h a t d a t e , c r e d i t o r s may c o n t i n u e t o comply with t h e r e g u l a t i o n as i t e x i s t e d p r i o r t o th o s e amendments. Board and s t a f f i n t e r p r e t a t i o n s is su e d under t h e p r i o r r e g u l a t i o n w i l l remain e f f e c tiv e u n til th a t date. The Board's D iv is io n o f Consumer and Community A f f a i r s i s p u b l i s h i n g a d r a f t commentary on th e r e v i s e d r e g u l a t i o n . The f i n a l commentary w i l l be is su e d as an o f f i c i a l s t a f f i n t e r p r e t a t i o n , pr ovi di ng c r e d i t o r s with p r o t e c t i o n under § 130(f) o f th e Truth in Lending Act. Under t h a t s e c t i o n , c r e d i t o r s a c t i n g in conformity with an o f f i c i a l s t a f f i n t e r p r e t a t i o n have no l i a b i l i t y f o r v i o l a t i o n s a r i s i n g from th o s e a c t i o n s . The commentary w ill s i g n i f i c a n t l y a l t e r t h e s t a f f ' s approach t o p ro vi di ng i n t e r p r e t a t i o n s o f th e r e g u l a t i o n . Under t h e p r i o r r e g u l a t i o n , s t a f f o p in io n s were is su e d in re sponse t o in d i v i d u a l i n q u i r i e s re g a rd in g s p e c i f i c f a c t s i t u a t i o n s , and were normally l i m i t e d t o t h o s e f a c t s . Subsequent v a r i a t i o n s in th o s e f a c t s were s i m i l a r l y address ed in in d i v i d u a l responses t a i l o r e d t o th e v a r i a t i o n s . More than 1500 l e t t e r s i n t e r p r e t i n g and applying t h e p r i o r r e g u l a t i o n were is s u e d on t h i s b a s i s . The commentary i s expected t o re p l a c e Board and s t a f f i n t e r p r e t a t i o n s as t h e s o l e v e h i c l e f o r i n t e r p r e t i n g t h e r e g u l a t i o n . The commentary w i l l , however, be more general than t h e i n t e r p r e t a t i o n s is su e d under t h e p r i o r re g u l a t i o n . Unlike th e e a r l i e r i n t e r p r e t a t i o n s , th e commentary w il l not atte mpt t o a d d re ss and r e s o l v e every q u e s t i o n rega rding th e a p p l i c a t i o n o f th e re g u l a t i o n t o s p e c i f i c s e t s of f a c t s . Although o r i g i n a l l y designed t o ai d c r e d i t o r s in complying, t h e lon gs ta n d in g p r a c t i c e o f t r y i n g t o respond in w r i t i n g t o each and every s p e c i a l ci rcumstance has i n s t e a d c r e a t e d an enormous amount of r e g u l a t o r y m a t e r i a l . The cumulative e f f e c t o f t h e i n t e r p r e t a t i o n s has been t o c o m p li c a te , r a t h e r than f a c i l i t a t e , compliance by l a y e r i n g one s e t of d i s t i n c t i o n s on top of a n o th e r . Rather than r e s o l v i n g q u e s t i o n s , t h i s m a t e r i a l in t h e a g g re g a te has served t o g e n e r a t e f u r t h e r q u e s t i o n s . In t h e p a s t , c r e d i t o r exposure t o c i v i l l i a b i l i t y f o r t e c h n i c a l v i o l a t i o n s of t h e r e g u l a t i o n has a l s o c o n t r i b u t e d t o t h e demand f o r s t a f f i n t e r p r e t a t i o n s t h a t sought t o provide c e r t a i n t y in app lyi ng t h e r e g u l a t i o n . The r e d u c ti o n in c i v i l l i a b i l i t y r e s u l t i n g from t h e 1980 s t a t u t o r y amendments should reduce t h e perc eiv ed need f o r w r i t t e n responses t o a v a r i e t y o f s p e c i f i c questions. The commentary fo cu ses on prov idin g general guidance t o a s s i s t c r e d i t o r s in app lyi ng th e r e g u l a t i o n t o s p e c i f i c s i t u a t i o n s . That guidance may t a k e s e v e ra l forms. The commentary may l i s t examples t h a t comply with a p a r t i c u l a r r e g u l a t o r y s t a n d a r d , d i s c u s s t h e impact of a r e g u l a t o r y p r o v is io n on a p r e v a l e n t ty pe of plan or t r a n s a c t i o n , o r draw t o g e t h e r and e l a b o r a t e on a r e l a t e d group of r e g u l a t o r y requi re me nts . - 3 - The commentary does not purp or t t o be e x h a u s t i v e . I t concentrates on m a t e r i a l of general a p p l i c a t i o n whose in c l u s i o n w i l l , in th e s t a f f ' s view, be usef ul t o th e widest p o s s i b l e audience. For example, th e commentary provides se v e ra l i l l u s t r a t i o n s o f ways in which close d-e nd c r e d i t d i s c l o s u r e s may be s e g r e g a t e d in accordance with t h e requirements of § 2 2 6 . 1 7 (a ). The examples chosen a r e th o s e t h a t appear most l i k e l y to be u t i l i z e d by a number o f c r e d i t o r s , al tho ugh o t h e r methods may be e q u a l l y p e r m i s s i b l e . S i m i l a r l y , t h e commentary w i l l a d d re ss p r e v a l e n t c r e d i t t r a n s a c t i o n s , t o t h e e x t e n t t h a t the y p r e s e n t im p o rt an t q u e s t i o n s under th e r e g u l a t i o n . I t w i l l n o t , however, a tt e m p t to a d d r e s s each c r e d i t p l a n ' s unique s e t o f f a c t s . The commentary i n s t e a d i d e n t i f i e s se v e ra l ba si c f a c t o r s c h a r a c t e r i z i n g t h a t type of t r a n s a c t i o n . C r e d i t o r s must the n determine whether t h e d i s c u s s i o n a p p l i e s t o t h e i r own t r a n s a c t i o n s given t h e i r p a r t i c u l a r v a r i a t i o n s . The s t a f f e xp ect s t o update t h e commentary on an annual b a s i s , or more o f t e n as th e need a r i s e s . Each paragraph in t h e commentary, i s i d e n t i f i e d by s e c t i o n and in some c a s e s by s u b s e c t i o n . For example, th e comments f o r § 226.21 (Treatment of c r e d i t b a l a n c e s ) a re d e s i g n a t e d as comments 21-1 through 21-5, while t h e com ments f o r § 226.18 (Content o f d i s c l o s u r e s ) a r e f u r t h e r broken down and d e s i g nated ac c or d in g t o th e p a r t i c u l a r su b se c ti o n a d d re ss e d , such as comment 18( b )-1 and 1 8 ( r ) - l . The foll owin g c r o s s - r e f e r e n c e s t o r e l a t e d m a te ri a l appear a t th e end of each s e c t i o n of t h e commentary: (1) " S t a t u t e " - - th os e s e c t i o n s of th e Truth in Lending Act on which t h e r e g u l a t o r y p r o v is io n i s based; (2) "Other s e c t i o n s " - - d e f i n i t i o n s and o t h e r p ro v i s i o n s in t h e r e g u l a t i o n r e l a t i n g t o t h a t s e c t i o n ; (3) "Previous r e g u l a t i o n " - - p a r a l l e l p ro v i s i o n s in Regulation Z as i t e x i s t e d b efo re April 1, 1981; and (4) "1981 changes." This l a s t cat eg o ry i s a b r i e f d e s c r i p t i o n of t h e major changes made by th e 1981 r e v i s i o n s to Regul ation Z. The t e x t of t h e commentary does not r e f e r t o th e e a r l i e r r e g u l a t i o n . However, a comparison t o t h e p r i o r r e g u l a t i o n may in some cas es be h e lp f u l in e x p l a i n i n g t h e amended p r o v is io n and may be of i n t e r e s t t o some u s e r s , and th e proposed commentary i n c o r p o r a t e s t h i s in fo r m a ti o n , t o a l i m i t e d e x t e n t , in th e c r o s s - r e f e r e n c e s . The s t a f f p a r t i c u l a r l y s o l i c i t s comment on whether t h i s m a te r ia l should be r e t a i n e d . Comment i s welcome both on t h e substance of th e m a t e r i a l and on th e format in which i t i s p r e s e n t e d . Commenters a re encouraged t o focus on m a te ri a l of p a r t i c u l a r i n t e r e s t t o them; the y need not a d dre ss every p r o v i s i o n . The s t a f f w i l l c o n s i d e r f o r i n c l u s i o n in t h e commentary any m a te ri a l a p p r o p r i a t e f o r a s t a f f i n t e r p r e t a t i o n of t h i s scope, but commenters should not expect the commentary t o answer every q u e s t i o n o r remove every p o s s i b l e ambiguity from t h e r e g u l a t i o n . No comments t h a t have th e e f f e c t of r e v i s i n g o r e l i m i n a t i n g any re qu ire me nts of th e r e g u l a t i o n i t s e l f w ill be c o n si d e re d . To e x p e d i t e a n a l y s i s of th e comments, commenters a r e requ ested t o i d e n t i f y p o r t i o n s of th e commentary accord ing t o s e c t i o n and paragraph numbers and t o begin d i s c u s s i o n of each s e c t i o n on a s e p a r a t e page. Comments must be re c e i v e d by F r id a y , July 10, 1981. A ft e r c o n s i d e r a t i o n of t h e s e comments and p o s s i b l e r e v i s i o n o f t h e commentary, o f f i c i a l s t a f f i n t e r p r e t a t i o n TIL-1 w i l l be p u b li s h e d in f i n a l form in th e Federal R e g i s t e r .
@FedFRASER