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I
FE D E R AL R E SE R V E BAN K
O F N E W YO R K
f Circular No. 3 3 6 5 *1
L August 26, 1948 J
REGULATION W
CONSUMER INSTALMENT CREDIT CONTROL
To all Persons in the Second F ed eral Reserve District
Concerned with Regulation W :
There is set forth below the text of a statem ent issued by the Board of Governors of the
F ed eral R eserve System , regarding the issuance by the Board of its Regulation W , entitled
“ Consumer Instalm ent C red it” , which will become effective on Septem ber 20, 1948; and
announcing that the Board of Governors is considering the advisability of certain amendments
to the regulation.
BOARD OF GOVERNORS
OF THE
FED ERA L RESERVE SYSTEM
Statement for the Press
For release in morning papers of Friday, August 20,1948
August 19, 1948
The Board of Governors of the Federal Reserve System today issued Regulation W on “ Consumer
Instalment Credit” under Public Law 905 which the President signed on August 16, 1948. The regu
lation, which becomes effective September 20, 1948, is being published in the Federal Register, and
copies will be distributed by the Federal Reserve Banks as promptly as possible.
The regulation is in much the same form as that which terminated on November 1, 1947. It covers
instalment sales of and loans for 12 kinds of consumers’ durable goods, providing the cost is more than
$50. I t also covers instalment loans for most other consumer purposes. Instalment credits up to $5,000
are subject to the regulation.
The goods for which down payments are prescribed are as follows:
Article
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Down Payment
Automobiles
Cooking stoves
Dishwashers
Ironers
Refrigerators
Washing machines
Combination units incorporating any item in 2-6
Air conditioners, room unit
Radio and television sets, phonographs
Sewing machines
Suction cleaners
Furniture and soft-surface floor coverings
33 y3%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
20%
Maturities on all instalment credits subject to the regulation, whether to finance the purchase of
these articles or not, must come within the following requirements:
Credit
1. Not exceeding $1,000
2. Above $1,000,
except that monthly payment
on amounts over $1,000 must
not be less than $70.00
Maximum maturity
15 months
18 months
Since November 1, 1947, when the old regulation ended, terms offered by merchants and lenders
extending credit have been relaxed considerably. The requirements of the new regulation are somewhat
less restrictive than those of last November hut considerably tighter than terms now generally in effect.
The down payment requirements on appliances are lowered from one-third to one-fifth. Also, to take
care of late-model automobiles and certain other items where the expenditure must necessarily be large,
the maximum maturity for credits above $1,000 is set at more than 15 months, running up to 18 months.
At the same time, the scope of the regulation is broadened to include all credits up to $5,000 whereas
$2,000 had been the limit under the previous regulation.
Instalment credit for home improvements was eliminated from Regulation W after the close of the
war, and it is at present not covered in the regulation. Because of the current inflationary situation,
however, the Board is considering the advisability of an amendment to bring such credit under the regu
lation. Before deciding whether to do this, the Board wishes to give all who are interested an oppor
tunity to express their views. Accordingly, the Board will publish in the Federal Register an invita
tion to interested persons to submit comments on the question whether such an amendment would be
desirable.
The Board is also giving consideration to an amendment which would have the effect of making
unenforceable any contract which does not conform to the provisions of the regulation on down pay
ments or maturities. A similar procedure for receiving comment will be followed.
Regulation W will be administered in the field by the 12 Federal Reserve Banks and their 24
branches located conveniently throughout the country. Inquiries should be addressed to the nearest
Federal Reserve Bank or branch.
A copy of the new Regulation W is enclosed, so th at you may acquaint yourself with its
provisions, and determine whether or not your business is such that you will be subject to the
regulation.
Special attention is called at this time to the provision for registration set forth in sec
tion 2(b) of the regulation. Any person whose principal place of business is within the Second
F ed eral R eserve D istrict, and who is engaged in any business making him subject to the regula
tion, should file a registration statem ent with us not later than sixty days a fte r Septem ber 20,
1948. This should be done whether or not the person had filed a registration statem ent under
Regulation W as in effect prior to November 1, 1947. The new registration form s, which will
be somewhat different from those form erly used, will be distributed by us shortly.
The proposals for the amendment of the new Regulation W , referred to in the above state
ment of the B oard of Governors, have been published in the Fed eral R eg ister, and are set forth
on page 3 of this circular.
Any inquiries concerning Regulation W should be addressed to us.
Additional copies of this circular and of the regulation will be furnished on request.
A lla n
S p r o t jl ,
P resid en t.
2
(E xtract from page 4877 o f the F ed era l R egister, August 21,1948)
F E D E R A L R E S E R V E SY STEM
[12 CFR, P art 222]
[Regulation W ]
C o n s u m e r I n s t a l m e n t C r e d it
NOTICE OF PROPOSED CHANGES
The Board of Governors of the Fed eral R eserve System has adopted, and has had pub
lished in the F e d e r a l R e g i s t e r , P a rt 222 (relating to Consumer Instalm ent Credit) to become
effective Septem ber 20, 1948. T h at part is also called Regulation W . The Board has under
consideration, with a view to possible future adoption, certain proposed amendments to the
part. These proposed amendments may be described in general term s as follow s:
1. M odernization and r ep a ir credits. Amendments which would bring under this part
so-called modernization and repair credits, that is, credit for repairs, alterations or improve
ments upon real property in connection with existing structures. Such amendments would
involve several changes in the provisions of this part. One such change might be the elimina
tion of the exemption of these credits which is now contained in clause (2) of § 222.7 (g) of this
part. Another necessary change might be to add to § 222.9 of this p art a provision subjecting
such credits to such down payment (and maximum loan value) requirem ents, maximum m aturi
ties, or both, as the Board might prescribe.
2. E n fo rceab ility o f contracts. Amendments to this p art which would have the effect of
making unenforceable contracts (and related liens) which violate this part, or which violate
certain provisions thereof, such as those relating to down payments and maximum m aturities.
Such amendments would involve the deletion or amendment of § 222.8 (c) of this part, and might
also involve changes in other provisions of this part, including § 222.8 (e) relating to noncompliance due to facts outside the R e g istra n t’s knowledge.
This notice is published pursuant to section 4 of the Adm inistrative Procedure A ct and
section 2 of the rules of procedure of the B o ard of Governors of the F ed eral Reserve System
(12 C F R 1946 Supp. 262.2). The proposed changes are authorized by section 5 (b) of the Act
of October 6, 1917, as amended (40 S ta t. 415; 12 U. S. C. 95a), Executive Order No. 8843, dated
August 9, 1941, and Public Law 905, approved August 16, 1948.
In terested persons may submit data, views or arguments with respect to these m atters;
and any such m aterial should be submitted in w riting. Although subm ittals or requests may be
sent directly to the Board, it is preferable that they be sent to the F ed eral R eserve Bank of the
district in which the interested person resides or m aintains his business, which will forw ard
them to the Board. To be considered, all m aterial must be received not later than Septem ber
20, 1948.
Approved this 17th day of August 1948.
B oard o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e S y s t e m ,
[ sea l]
S . R . Ca rpen ter,
S ecretary .
[F . R . Doc. 48-7580; Filed , Aug. 20, 1948; 8:45 a. m.]
3
BOARD OF GOVERNORS
of the
FED ERA L R ESER V E SYSTEM
CONSUMER INSTALMENT CREDIT
REGULATION W
Effective September 2 0 , 1948
INQUIRIES REGARDING THIS REGULATION
Any inquiry relating to this regulation should be addressed
to the Federal Reserve Bank or Federal
Reserve branch bank of the district
in which the inquiry arises.
REGULATION W
C O N S U M E R IN S T A L M E N T C R E D I T
CONTENTS
Page
S e c . 1. S cope
R e g u l a t io n ..........................................................
3
R eg is tr a t io n ..................................................
3
S e c . 3. I n stalm en t S a l e s : G e n e r a l R u l e s ...................................................................
4
and
A pplicatio n
of
S e c . 2. G e n e r a l R e q u ir em en t s
(a)
(b)
(a)
(b)
(c)
and
General requirements
Registration
Down payment and maturity
Amounts and intervals of instalments
Statement of transaction
S e c . 4. I nstalm en t L oan s : G e n e r a l R u l e s .................................................................
(a)
(b)
(c)
(d)
(e)
S e c . 5. R e n e w a l s , R ev isio n s ,
(а)
(б)
(c)
and
A dd itio ns ..............................................................
(e)
(/)
(g)
(h)
(i)
10
Business or agricultural loans
Credit to dealers and certain salesmen
Credit to governmental agencies, religious institutions, etc.
Credits under government rehabilitation and readjustment
programs
Loans to pay fire and casualty insurance premiums
Credit for purchasing securities
Real estate and home improvement loans
Loans to meet medical expenses, etc.
Disaster credits
S e c . 8. M isc ella n eo u s P rovisions ; D e f in it io n s .......................................................
(a)
(b)
(c)
(d)
(e)
(J)
(g)
(h)
7
Special payment schedules for seasonal incomes
Calculating maximum maturity of contract
Record of instalment sale
Extension of credit for mixed purposes
“Lay-away” plans
Mail orders
Delivery in anticipation of instalment sale
Sets and groups of articles
Evasive side agreements
Side loan to make down payment
Purchase of article in lieu of trade-in
Misuse of coupon plans
S e c . 7. E x e m p t C r e d it s ...............................................................................................................
(a)
(b)
(c)
(d)
6
General requirements
Statement of changed conditions
Bona fide collection effort; Servicemen’s pre-induction debt
S e c . 6. C er t a in T ech n ical P r o visio n s ............................................................................
(a)
(b)
(c)
(d)
(e)
(/)
(g)
(ih)
(i)
(j)
(k)
(I)
4
Instalment loans to purchase listed articles
Unclassified instalment loans
Amounts and intervals of instalments; Record
Statement of the borrower
Loans to make down payments prohibited
11
Preservation of records; Inspections
Suspension of license
Enforceability of contracts
Clerical errors
Non-compliance due to facts outside Registrant’s knowledge
Transactions outside United States
Right of Registrant to impose stricter requirements
Definitions
S u p p l e m e n t . - . .....................................................................................................................................
15
REGULATION W
Effective September 2 0 , 1 9 4 8 *
CONSUMER INSTALMENT CREDIT
SE C TIO N 1. SCO PE AND A PPLIC A TIO N OF R EG U LA TIO N
This regulation is issued by the Board of Governors of the Federal
Reserve System (hereinafter called the “Board”) under authority of
section 5(6) of the Act of October 6, 1917, as amended, Executive
Order No. 8843, dated August 9, 1941 (hereinafter called the “Executive
Order”), and Public Law 905, approved August 16, 1948.
The regulation applies, in general, to any person who is engaged in
the business of making extensions of instalment credit in amounts of
$5,000 or less, or discounting or purchasing obligations arising out of
such extensions of credit. It applies whether the person is a bank, loan
company, or finance company, or a person who is so engaged in connec
tion with any other business, such as by making such extensions of
credit as a dealer, retailer, or other person in connection with the sell
ing of consumers’ durable goods.
s e c tio n
2. g e n e r a l r e q u ir e m e n ts a n d r e g is t r a t io n
(a)
General Requirements.—Each person engaged in the business
of making instalment sales1 or instalment loans,2 or engaged in the
business of lending on the security of or discounting or purchasing
obligations arising out of such extensions of credit, is referred to in
this regulation as a “Registrant” ; and no Registrant shall make or
receive any payment which constitutes or arises directly or indirectly
out of any such extension of credit made by him or out of any such
obligation lent on or discounted or purchased by him, except on the
following conditions:
(1)
He must have a license, and each Registrant is hereby
granted such a license, but such license of a Registrant may be
* This regulation shall apply to extensions of credit made, renewed, revised or consolidated on
or after the effective date.
1 It is to be noted that “instalment sale” is defined to include only instalment credit arising out
of the sale of an article listed in the Supplement, hereinafter called a “listed article.”
2 Both "instalment sale” and “instalment loan” are defined to exclude credits in a principal amount
exceeding $5,000.
3
4
REGULATION W
suspended in the manner and on the grounds stated in section
8(6) ; and
(2)
The extension of credit made, renewed, revised or con
solidated by him, or giving rise to the obligation discounted or
purchased by him or acquired by him a's collateral, must comply
with the applicable requirements of this regulation.
(6)
Registration.—Within 60 days after the effective date of this
regulation, or 60 days after he becomes subject to section 2 (a ), which
ever is later, each Registrant shall file, with the Federal Reserve
Bank or'any branch thereof in the district in which the main office
of the Registrant is located, a registration statement on a form obtain
able from any Federal Reserve Bank or branch. Such statem ent shall
be filed regardless o f w hether or not the Registrant had filed such a
statem ent under Regulation W as in effect prior to N ovem ber 1, 1917.
SE C TIO N
3 . IN S T A L M E N T S A L E S :
G E N ER A L R U L E S
Except as otherwise permitted by this regulation, each instalment
sale shall comply with the following requirements:
(а) Down Payment and Maturity.—There shall be a down pay
ment not less than that specified for the listed article in the Supple
ment, such down payment to be calculated as therein specified; and
the maturity shall not exceed that specified for the listed article in
the Supplement.
(б) Amounts and Intervals of Instalments.— Except as permitted
by section 6(a) for seasonal incomes, the time balance shall be payable
in instalments whicn shall be (1) substantially equal in amount or
so arranged that no” instalment is substantially greater than any pre
ceding instalment, (2) payable at approximately equal intervals not
exceeding one month, and (3) not less than $5.00 per month or $1.25
per week on the aggregate instalment indebtedness of one debtor to
the same creditor.
(c)
Statement of Transaction.—The instalment sale shall be
evidenced by a written instrument or record which shall set forth the
information specified in section 6 (c).
s e c t io n
4. in s t a l m e n t
lo a n s:
gen eral
ru les
Except as otherwise permitted by this regulation, each instalment
loan shall comply with the following requirements:
REGULATION W
5
(а) Instalment Loans to Purchase Listed Articles.—If the Regis
trant knows o£ has reason to know that the proceeds of an instalment
loan are to be used to purchase any listed article:
(1) The principal amount lent (excluding any interest or
finance charges and the cost of any insurance) shall not exceed
the maximum loan value specified for the article in the Supple
ment, such loan value to be calculated as therein specified; and
(2) The maturity shall not exceed the maximum maturity speci
fied for the listed article in the Supplement.
(б) Unclassified Instalment Loans.—In the case of an instalment
loan which is not subject to section 4 (a ), the maximum maturity shall
not exceed the maximum maturity specified therefor in the Supple
ment.
(c) Amounts and Intervals of Instalments; Record.—Whether
subject to section 4(a) or section 4 (5 ), the instalment loan, except as
permitted by section 6(a) for seasonal incomes, shall be payable in
instalments which shall be (1) substantially equal in amount or so
arranged that no instalment is substantially greater in amount than
any preceding instalment, (2) payable at approximately equal intervals
not exceeding one month, and (3) not less than $5.00 per month or
$1.25 per week on the aggregate instalment indebtedness of one debtor
to the same creditor. It shall be evidenced by a written instrument
or record which shall set forth the terms of payment.
(d) Statement of the. Borrower.—No Registrant shall make any
instalment loan subject to section 4(a) or 4(6) unless he shall have
accepted in good faith a signed Statem ent of the Borrower as to the
purposes of the loan. Such Statement shall state whether or not any of
the proceeds of the loan are to be used to make a down payment on the
purchase of a listed article or to be used to purchase any listed article,
and if any of the proceeds of the loan are to be used for the latter
purpose such Statement shall identify such listed article and shall
state the cash price thereof and the value of any trade-in. I f a Regis
trant relies in good faith on the facts set out by the obligor in such
Statement, it shall be deemed to be correct for the purposes of the
Registrant.
(e) Loans to Make Down Payments Prohibited.—A Registrant
shall not make any instalment loan if he knows or has reason to know
that any part of the proceeds thereof is to be used tó make a down pay
ment on the purchase price of any listed article.
6
REG U LA TIO N W
SE C TIO N
5. R E N E W A L S , R E V IS IO N S AND A D DITION S
(а) General Requirements.—In the case of an instalment sale or
instalment loan which results from a renewal or revision of any such
credit already outstanding, or which results from the combination of
any such outstanding credit with an additional extension of instalment
credit, the renewed, revised or consolidated obligation shall (regard
less of when the outstanding credit originated) comply with all the
requirements of this regulation as if it were a new extension of credit
except that:
(1) The requirements as to Statement of Borrower and down
payment or maximum loan value, if any, shall not apply to the
outstanding credit already held by the Registrant; and
(2) The renewed, revised or consolidated obligation may, in
so far as the maturity and instalment requirements are concerned,
be treated as if it were a new credit with the maximum maturity
calculated from the date of the renewal, revision or consolidation.
The payments on such renewed, revised, or consolidated obligation
shall not be less than $5.00 per month or $1.25 per week on the
aggregate instalment indebtedness of one debtor to the same
creditor.
(б) Statement of Changed Conditions.—Notwithstanding any
other provision of this regulation, if a Registrant accepts in good faith
a Statement oj Changed Conditions as provided in the following para
graph, an extension of instalment credit that refinances any outstand
ing obligation (whether or not such obligation is held by the Registrant
or is itself payable in instalments) may have a maturity not exceeding
that specified in the Supplement for refinancing pursuant to such
Statements, but such maturity shall be applicable only to the credit
refinanced. The payments on the credit refinanced need not be as
large as $5.00 per month or $1.25 per week.
The requirements of a Statem ent o f Changed Conditions will be
complied with only if the Registrant accepts in good faith a written
statement signed by the obligor that the contemplated refinancing is
necessary in order to avoid undue hardship upon the obligor or his
dependents resulting from contingencies that were unforeseen by him
at the time of obtaining the original extension of credit or which were
beyond his control, which statement also sets forth briefly the principal
facts and circumstances (1) with respect to the original extension of
credit and (2) with respect to such contingencies, and specifically
states in addition that the contemplated refinancing is not pursuant
7
REGULATION W
to a preconceived plan or an intention to evade or circumvent the
requirements of this regulation.
(c)
Bona Fide Collection Effort; Servicemen’s Pre-induction
Debt.—Nothing in this regulation shall be construed to prevent any
Registrant from making any renewal or revision, or taking any action
that he shall deem necessary in good faith (1) for the Registrant’s
own protection in connection with any obligation which is in default
and is the subject of bona fide collection effort by the Registrant, or
(2) with respect to any obligation of any member or former member
of the armed forces of the United States incurred prior to his induction
into such service.
SE C TIO N
6. CERTA IN
T E C H N IC A L
PR O V ISIO N S
(a) Special Payment Schedules for Seasonal Incomes.—If the
income received by an obligor from the main sources of his income
customarily fluctuates materially from month to month or from sea
son to season, the payment schedule may be adapted, within the
applicable maximum maturity, to such customary flow of income,
provided the obligation complies with one or the other of the following
requirements: (1) at least half of the credit is to be repaid within the
first half of the applicable maximum maturity; or (2) payments are
reduced or omitted in not more than 4 months of any calendar year
but are otherwise in equal monthly amounts. In all such cases, a
statement of the facts relied upon shall be preserved in the Registrant’s
files for the life of the obligation.
(b) Calculating Maximum Maturity of Contract.—In calculating
the maximum maturity of an instalment sale or instalment loan, a
Registrant may, at his option, use any date not more than 15 days
subsequent to the actual date of the sale or loan.
(c) Record of Instalment Sale.—The instrument or record evi
dencing an instalment sale pursuant to section 3(c) shall set forth (in
any order) the following information:
(1) A brief description identifying the article purchased;
(2) The cash price of the article;
(3) The amount of the purchaser’s down payment (i) in cash
and (ii) in goods accepted in trade, together with a brief descrip
tion identifying such goods and stating the monetary value
assigned thereto in good faith;
(4) The amount of any insurance premium for which credit
is extended and of any finance charges or interest by way of dis
8
REGULATION W
count included in the principal amount of the obligation, or the
sum of these amounts;
(5) The time balance owed by the purchaser, which is the sum
of items (2) and (4) minus item (3 ); and
(6) The terms of payment.
The instrument or record need not include a description of the article
if it is purchased by means of a coupon book or similar medium of
instalment credit upon which there has been made a cash down pay
ment at least as great as the highest down payment required by this
regulation on any article sold by the Registrant. The instrument
or record need not include the information called for by items (2)
and (4) if the Registrant is one who quotes to the public a time price
for the article which includes the finance charge if any, provided he
sets forth such time price in such instrument or record, and provided
he obtains a cash down payment which is at least as large as would
be required if the percentage specified for the article in the Supple
ment were applicable to the time price.
(d) Extension of Credit for Mixed Purposes.—In case an ex
tension of credit is partly subject to one section of this regulation and
partly subject to another section, the amount and terms of such exten
sion of credit shall be such as would result if the credit were divided
into two or more parts and each part were treated as if it stood alone.
In case an extension of credit is partly subject to this regulation and
partly not subject to the regulation, the amount and terms of such
extension of credit shall be such as would result if the credit were
divided and the part subject to the regulation were treated according
to the applicable provisions of the regulation; the part not subject to
the regulation may be treated as if the regulation did not exist.
(e) “ Lay-away” Plans.—With respect to any extension of credit
involving a bona fide “lay-away” plan, or other similar plan by which
a purchaser makes one or more payments on an article before receiv
ing delivery thereof, the Registrant may, for the purposes of this regu
lation, treat the extension of credit as not having been made until the
date of the delivery of the article to the purchaser.
(/) Mail Orders.—An instalment sale shall not be deemed to be
in violation of the down payment requirement of section 3(a) if the
sale is made Upon the receipt of a mail order for one or more articles
and the cash deposit received with the order fails by less than $1.00
to equal the sum of the down payments required by this regulation
for all of the articles included in the order.
REGULATION W
9
(g) Delivery in Anticipation of Instalment Sale.—In case a listed
article is delivered in anticipation of an instalment sale of that article
or a similar article (such as a delivery “on approval”, “on trial”, or
as a “demonstrator”), the Registrant shall require, at or before the
time of such delivery, a deposit equal to the down payment that would
be required on such an instalment sale.
(h ) Sets and Groups of Articles.—In determining whether an
article is a “listed article”, the word “article” shall be deemed to in
clude any set, group or assembly commonly considered, sold or used
as a single unit, if the component parts thereof are sold or delivered
at substantially the same time.
(i) Evasive Side Agreements.—No extension of credit complies
with the requirements of this regulation if at the time it is made
there is any agreement, arrangement, or understanding (1) by which
the obligation is to be renewed or revised on terms which would permit
final payment to be deferred beyond the date permitted by this
regulation for such credit at its inception, or (2) by which the obligor
is to be enabled to make repayment on conditions inconsistent in
any other respect with those required by this regulation, or (3) by
which there is to be any evasion or circumvention, or any concealment
of any evasion or circumvention, of any requirement of this regulation.
(j) Side Loan to Make Down Payment.—A Registrant shall not
make an extension of instalment credit to finance the purchase of any
listed article if he knows or has reason to know that there is, or that
there is to be, any other extension of credit of any kind in connection
with the purchase of the listed article which would bring the total
amount of credit extended in connection with such purchase beyond the
amount of instalment credit permitted by this regulation; but, if the
Registrant accepts in good faith a written statement signed by the
obligor that no such other extension exists or is to be made, such state
ment shall be deemed to be correct for the purposes of the Registrant.
(k ) Purchase of Article in Lieu of Trade-in.—Anything which
the seller of a listed article buys, or arranges to have bought, from
the purchaser at or about the time of the purchase of the listed article
shall be regarded as a trade-in for the purposes of this regulation.
(I) Misuse of Coupon Plans.—No coupon, ticket or similar medium
of credit, whether paid for in instalments or otherwise, shall be ac
cepted by any Registrant in payment, in whole or in part, for any
listed article if such acceptance, in effect, would permit the article to
be sold on terms not complying with the requirements of this regulation.
10
REGULATION W
SE C T IO N
7. E X E M P T
C R ED ITS
This regulation shall not apply to any of the following:
(a) Business or Agricultural Loans.—-Any loan for business pur
poses to a business enterprise or for agricultural purposes to a person
engaged in agriculture, provided the loan is not for the purpose of
purchasing a listed article.
(b ) Credit to Dealers and Certain Salesmen.—Any extension of
credit to a wholesaler or retailer to finance the purchase of any article
for resale, or any extension of credit which is made to a bona fide
salesman of automobiles in order to finance the purchase of a new
automobile to be used by him principally as a demonstrator.
(c) Credit to Governmental Agencies, Religious Institutions,
etc.—Any extension of credit to the Federal Government, any State
government, any political subdivision, or any department, agency or
establishment thereof, or to any church, hospital, clinic, sanitarium,
school, college, or other religious, education, charitable, or eleemosy
nary institution.
{d) Credits Under Government Rehabilitation and Readjust
ment Programs.—Any extension of credit (1) made by the Land
Bank Commissioner on behalf of the Federal Farm Mortgage Corpora
tion or by any Federal land bank and found, pursuant to regulations
issued by the Commissioner, to be necessary to maintain or increase
production of essential agricultural commodities, (2) made or insured
by the Farmers’ Home Administration, (3) made in accordance with
the regulations of the Secretary of the Interior for the economic de
velopment or rehabilitation of Indians, (4) made under section 4(a) (4)
of the Reconstruction Finance Corporation Act, as amended, because
of floods or other catastrophes, or (5) made, guaranteed or insured
in whole or in part by the Administrator of Veterans’ Affairs pursuant
to the provisions of Title I I I of the Servicemen’s Readjustment Act
of 1944, or by any State agency pursuant to similar State legislation.
(e) Loans to Pay Fire and Casualty Insurance Premiums.—Any
loan to finance a premium in excess of one year on a fire or casualty
insurance policy, if the loan is fully secured by the unearned portion
of such premium.
(/) Credit for Purchasing Securities.—Any extension of credit
which is subject to the Board’s regulations under the Securities Ex
change Act of 1934 or which is otherwise for the purpose of purchasing
or carrying stocks, bonds, or other investment securities.
REGULATION W
11
(g) Real Estate and Home Improvement Loans.—Any extension
of credit which is for the purpose of financing or refinancing (1) the
construction or purchase of an entire residential building or other
entire structure or (2) repairs, alterations, or improvements upon
urban, suburban or rural real property in connection with existing
structures, except to the extent that such repairs, alterations, or im
provements incorporate any listed article.
(h) Loans to Meet Medical Expenses, etc.—Any loan as to which
the Registrant accepts in good faith a written statement signed by
the borrower certifying that the proceeds are to be used for bona fide
educational, medical, hospital, dental, or funeral expenses, or to pay
debts incurred for such expenses, and that such proceeds (unless they
are to be used exclusively for educational expenses) are to be paid
over in amounts specified in such statement to persons whose names,
addresses, and occupations are stated therein.
(i) Disaster Credits.—Any extension of credit to finance the repair
or replacement of property damaged or lost as a result of a flood or
other similar disaster which the Federal Reserve Bank of the district
in which the disaster occurred finds has created an emergency affect
ing a substantial number of the inhabitants of the stricken area, pro
vided such extension is made prior to the end of the sixth calendar
month following the month in which the disaster occurred and a state
ment describing the damage or loss is preserved in the Registrant’s
files.
SE C TIO N
8 . M ISC E L L A N E O U S P R O V IS IO N S ; D E F IN IT IO N S
(a)
Preservation of Records; Inspections.—Every Registrant
shall preserve, for the life of the obligation to which they relate, such
books of account, records, and other papers (including any statements
required by or obtained pursuant to this regulation) as are relevant
to establishing whether or not an extension of credit within the scope
of this regulation was in conformity with the requirements thereof,
provided, however, that the Registrant may preserve photographic
reproductions in lieu of such books of account, records or papers.
For the purpose of determining whether or not there has been com
pliance with the requirements of this regulation, every Registrant shall
permit the Board or any Federal Reserve Bank by its duly authorized
representatives, to make such inspections of his business operations
as the Board or Federal Reserve Bank may deem necessary or appro
priate, including inspections of books of account, contracts, letters or
other relevant papers wherever located, and, for such purpose, shall
12
REGULATION W
furnish such reports as the Board or the Federal Reserve Bank may
require. When ordered to do so by the Board, every Registrant
shall furnish, under oath or otherwise, such information relative to
any transaction within the scope of the authority cited in section 1
as the Board may deem necessary or appropriate for such purpose,
including the production of books of account, contracts, letters or
other papers in the custody or control of such person.
(b) Suspension of License.3—The license of any Registrant may,
after reasonable notice and opportunity for hearing, be suspended by
the Board, in its entirety or as to particular activities or particular
offices or for specified periods, because of any willful or negligent
failure to comply with any provision of this regulation or any re
quirement of the Board pursuant thereto.
A license which is suspended for a specified period will again be
come effective upon the expiration of such period. A license which is
suspended indefinitely may be restored by the Board, in its discretion,
if the Board is satisfied that its restoration would not lead to further
violations of this regulation and would not be otherwise incompatible
with the public interest.
(c) Enforceability of Contracts.—Except asjn ay subsequently be
otherwise provided, all provisions of this regulation are designated,
pursuant to section 2(d) of the Executive Order, as being “for admin
istrative purposes” within the meaning of said section 2 (d ), which
provides that noncompliance with provisions of the regulation so
designated shall not affect the right to enforce contracts.
(d) Clerical Errors.—Any failure to comply with this regulation
resulting from a mistake in determining, calculating, or recording any
price, down payment, or extension of credit, or other similar matter,
shall not be construed to be a violation of this regulation if the Regis
trant establishes that such failure to comply was the result of excusable
error and was not occasioned by a regular course of dealing.
(e) Non-Compliance Due to Facts Outside Registrant’s Knowl
edge .—The prohibitions of this regulation shall not apply to a Regis
trant with respect to any failure to comply with this regulation in
connection with (1) an extension of credit made by him if, at the timé
3 In addition, the authority cited in section 1 authorizes the Board to institute court proceedings
to restrain violations and to compel compliance with the regulation or any order of the Board
made in pursuance thereof. Furthermore, any Registrant who willfully violates or knowingly par
ticipates in a violation of this regulation is subject to the penalties prescribed in section 5(b) of
the Act of October 6, 1917, as amended, which reads in part as follows: “Whoever willfully violates
any of the provisions of this subdivision or of any license, order, rule, or regulation issued there
under, shall, upon conviction, be fined not more than 110,000, or, if a natural person, may be im
prisoned for not more than ten years, or b o th ; and any officer, director, or agent of any corporation
who knowingly participates in such violation may be punished by a like fine, imprisonment, or both.”
REGULATION W
13
he made it, he did not know or have reason to know any fact by reason
of which such extension failed to comply; (2) an obligation purchased,
discounted or acquired as collateral by him if, when he purchased or
discounted the obligation or acquired it as collateral, the obligation
did not show on its face any failure to comply and he did not know
any fact by reason of which the extension of credit giving rise to the
obligation failed to comply; or (3) an obligation renewed, revised, or
consolidated by him if, at the time when he renewed, revised or con
solidated it, he did not know or have reason to know any fact by
reason of which such renewal, revision or consolidation failed to com
ply. With respect to any loan on the security of an obligation which
arises out of an extension of credit subject to this regulation, the
prohibitions of this regulation shall be deemed to apply only to pay
ments arising out of the obligation rather than to payments arising
out of the loan.
(/) Transactions Outside United States.—Nothing in this regula
tion shall apply with respect to any extension of credit made in Alaska,
the Panama Canal Zone, or any territory or possession outside the
continental United States.
{g) Right of Registrant to Impose Stricter Requirements.—Any
Registrant has the right to refuse to extend credit, or to extend less
credit than the amount permitted by this regulation, or to require that
repayment be made within a shorter period than the maximum per
mitted by this regulation.
(h) Definitions.—For the purposes of this regulation, unless the
context otherwise requires:
(1) “Person” means an individual, partnership, association, or
corporation.
(2) “Registrant” has the meaning given it in section 2(a).
(3) “Extension of Credit” has the meaning given it in the
Executive Order.4
(4) “Instalm ent Credit” means an extension of credit which
the obligor undertakes to repay in two or more scheduled pay
ments or as to which the obligor undertakes to make two or more
« The pertinent part of the Executive Order reads as follows: “Extension of credit” means any
loan or mortgage; any instalment purchase contract, any conditional sales contract, or any sale or
contract of sale under which part or all of the price is payable subsequent to the making of such sale
or contract; any rental-purchase contract, or any contract for the bailment or leasing of property
under which the bailee or lessee either has the option of becoming the owner thereof or obligates
himself to pay as compensation a sum substantially equivalent to or in excess of the value thereof;
any contract creating any lien or similar claim or property to be discharged by the payment of money;
any purchase, discount, or other acquisition of, or any extension of credit upon the security of, any
obligation or claim arising out of any of the foregoing; and any transaction or series of transactions
having a similar purpose or effect.
REGULATION W
scheduled payments or deposits usable to liquidate the credit, or
which has a similar purpose or effect.
(5) “Instalment Sale” means an instalment credit in a prin
cipal amount of $5,000 or less which is made as principal, agent
or broker, by any seller of any consumers’ durable good listed in
the Supplement to this regulation (herein called a “listed article”)
and which arises out of a sale of such listed article. For this
purpose, “sale” includes a lease, bailment, or other transaction
which is similar in purpose or effect to a sale.
(6) “Instalment Loan” means an instalment credit, other than
an instalment sale, in the form of a loan which is in a principal
amount of $5,000 or less; but the definition does not include any
loan upon the security of any obligation which arises out of any
instalment sale or instalment loan.
(7) “Cash Price” means the bona fide cash purchase price of
an article, including the bona fide cash purchase price of any
accessories, any bona fide delivery, installation and service charges
(other than interest, finance or insurance charges), and any ap
plicable sales taxes.
(8) “Principal Amount” in the case of an instalment sale
means the total amount to be paid under the obligation minus
the finance charge, and in the case of an instalment loan means
the amount lent exclusive of interest (whether or not such in
terest is deducted in advance).
REGULATION W
15
SU PPLEM EN T TO REGULATION W
Effective September 20, 1948
P art 1. Listed Articles, Down Payments, Loan Values.—For
the purpose of Regulation W, the following articles, whether new or
used, are “listed articles”, and the following required down payments
and maximum loan values are prescribed (such down payments and
loan values to be calculated as specified in Parts 4 and 5 of this
Supplement); but no article having a cash price o f less than $50.00
shall be considered a listed article:
Group A—33 1/ 3 per cent minimum down payment, 66% per cent
maximum loan value:
I. Automobiles (passenger cars designed for the purpose of trans
porting less than 10 passengers, including taxicabs).
Group B —20 per cent minimum down payment, 80 per cent m axi
mum loan value:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
II.
Cooking stoves and ranges, designed for household use.
Dishwashers, mechanical, designed for household use.
Ironers designed for household use.
Refrigerators, mechanical, of less than 12 cubic feet rated stor
age capacity (including food freezers).
Washing machines designed for household use.
Combination units incorporating any listed article in the fore
going classifications of this Group B.
Air conditioners, room unit.
Radio or television receiving sets, phonographs, or combinations.
Sewing machines designed for household use.
Suction cleaners designed for household use.
Furniture, household, (including ice refrigerators, bed springs,
mattresses and lam ps); and floor coverings, soft surface.
P art 2. Maturities.—The maximum maturity for all listed articles
and for unclassified instalment loans is 15 months in case the exten
sion of credit is in a principal amount of $1,000 or less and 18 months
in case the extension of credit is in a principal amount of more than
$1,000, except that when such principal amount is more than $1,000
the instalment payments shall not be less than $70 per month.
P art 3. Refinancing Pursuant to Statement of Changed Condi
tions.—The maximum maturity of any refinancing pursuant to a
Statement of Changed Conditions as specified in section 5(6) shall be
20 months.
16
REGULATION W
Part 4. Calculation of Down Payments for Automobiles.—The
maximum loan value of any automobile shall be the specified per
centage of the cash price or of the “appraisal guide value”, whichever
is lower, and the required down payment shall be the difference be
tween the cash price and the maximum loan value as so calculated.
Such required down payment in the case of an automobile may be
obtained in the form of cash, trade-in, or both.
“Appraisal guide value” means the estimated average retail value
as stated in the current edition of any regularly published automo
bile appraisal guide that the Board designates for this purpose for
use in the territory in which such automobile is sold, plus any applica
ble sales taxes. Information as to the guide or guides designated for
any given territory may be obtained from any Federal Reserve Bank
or branch.
Part 5. Calculation of Down Payments for Articles in Group B .—
If any article is traded in by the purchaser on an article listed in
Group B, the required down payment and the maximum loan value
shall be the specified percentage of the net price of the article after
deducting from the cash price the amount allowed for the trade-in;
and such down payment shall be obtained in cash in addition to
the trade-in.
L IST OF FED ERA L R E SER V E BANKS AND BRANCHES
Federal Reserve Bank of
Address
BOSTON
30 Pearl Street, Boston 6, Massachusetts
NEW YORK
Buffalo Branch
33 Liberty Street, New York 7, New York
270-276 Main Street, Buffalo 5, New York
PHILADELPHIA
925 Chestnut Street, Philadelphia 1, Pennsylvania
CLEVELAND
East 6th Street and Superior Avenue, Cleveland 1,
Ohio
4th and Race Streets, Cincinnati 1, Ohio
717 Grant Street, Pittsburgh 19, Pennsylvania
Cincinnati Branch
Pittsburgh Branch
CHICAGO
Detroit Branch
9th and Franklin Streets, Richmond 13, Virginia
Calvert and Lexington Streets, Baltimore 3, Maryland
South Tryon and 2nd Streets, Charlotte 1, North
Carolina
104 Marietta Street, Atlanta 3, Georgia
18th Street and 5th Avenue, North, Birmingham 2,
Alabama
Church and Hogan Streets, Jacksonville 1, Florida
228 3rd Avenue, North, Nashville 3, Tennessee
Carondelet and Common Streets, New Orleans 11,
Louisiana
230 South LaSalle Street, Chicago 90, Illinois
160 Fort Street, West, Detroit 31, Michigan
ST. LOUIS
Little Rock Branch
Louisville Branch
Memphis Branch
411
121
5th
3rd
MINNEAPOLIS
Helena Branch
73 South 5th Street, Minneapolis 2, Minnesota
Park Avenue and Lawrence Street, Helena, Montana
KANSAS CITY
10th Street and Grand Avenue, Kansas City 18, Mis
souri
17th and Arapahoe, Denver Ì7, Colorado
226 West 3rd Street, Oklahoma City 1, Oklahoma
1701-5 Dodge Street, Omaha 2, Nebraska
RICHMOND
Baltimore Branch
Charlotte Branch
ATLANTA
Birmingham Branch
Jacksonville Branch
Nashville Branch
New Orleans Branch
Denver Branch
Oklahoma City Branch
Omaha Branch
Locust Street, St. Louis 2, Missouri
West 3rd Street, Little Rock, Arkansas
and Market Streets, Louisville 1, Kentucky
and Jefferson Streets, Memphis 1, Tennessee
DALLAS
El Paso Branch
Houston Branch
San Antonio Branch
Wood and Akard Streets, Dallas 13, Texas
351 Myrtle Avenue, El Paso, Texas
1301 Texas Avenue, Houston 1, Texas
Navarro and Villita Streets, San Antonio 6, Texas
SAN FRANCISCO
Sacramento and Sansome Streets, San Francisco 20,
California
409 West Olympic Boulevard, Los Angeles 54, Cali
fornia
6th and Oak Streets, Portland 8, Oregon
70 East South Temple Street, Salt Lake City 9, Utah
2nd Avenue and Spring Street, Seattle 14, Washington
Los Angeles Branch
Portland Branch
Salt Lake City Branch
Seattle Branch
FEDERAL RESERVE SYSTEM
BOUNDARIES OF FE D ER A L RESERVE DISTRICTS
AND THEIR BRANCH TER R ITO R IES
MINNEAPOLIS
Detroit
CLEVELAND
CHICAGO I
®*»«r
.Cincinnai
KANSAS CITYj
L o u itv i" «/
¿CHWONCT
ST. LOUIS
N atttvill*
Oklahom a City
Chariot'*
M t m p h i» '
L it t l e Rock
B irm in gh o i
ATLANTA
DALLAS
ja e k * o n * 1" *
H o u sto n
N e w O r le a n «
■*====---BOUNDARIES OF F E D ER A L RESERVE DISTRICTS
Sai» A n ton io.
--------- ---BOUNDARIES OF FED ER A L RESERVE BRANCH TER R ITO R IES
•
BOARD OF GOVERNORS OF T H E F E D E R A L R ESER VE S Y S TEM
•
F E D E R A L R ES ER VE BANK C ITIE S
•
FED ERA L RESERVE BRANCH CITIES
OCTO BER
/.
/B4B
BOARD O F GOVERNORS O F TH E FEDERAL R E S E R V E 3 YS T E t/
Outline of the P rincip al Provisions
of
Regulation W
of the
Board of Governors of the Federal Reserve System
Pertaining to
Consumer Instalm ent Credit
Effective September 20, 1948
This outline does not replace or affect in any respect the pro
visions of Regulation W. It is intended to serve merely as a quick refer
ence guide to the principal provisions of the regulation and was prepared
solely for the use of Bank Examiners and other enforcement agents.
N o te.
Fe d er a l Re se r ve Ba n k
of
new
York
OUTLINE OF TH E PR IN C IPA L PRO VISIO N S OF REGULATION W O F TH E BOARD OF GOVERNORS OF TH E
F E D E R A L R E S E R V E SY ST E M PERTA IN IN G TO CONSUMER IN STALM ENT CRED IT
T r a n s a c t io n s S u b j e c t
The regulation is applicable to all instalment sale contracts, or notes, and instalment loans, of $5,000. or less, principal amount arising in connection with
the sale of “ listed articles” . It is also applicable to all other instalment loans in the aforesaid principal amount unless specifically exempted by the regulation.
Instalment sale contracts pertaining to non “ listed articles” are not subject to the regulation.
Bona fide single payment obligations whether or not to finance the sale of “ listed articles” are not subject to the regulation, provided there is no prior oral
or written agreement or understanding requiring the obligor to make partial payments in reduction of any such obligation or providing for the renewal on terms
inconsistent with the regulation.
R E Q U IR E M E N T S F O R IN ST A LM EN T S A L E CONTRACTS (O R N O T E S ) AND IN STA LM EN T LOANS.
G roup B
G roup A
80% of cash price
6 6 % % of the lower of the cash price or designated appraisal guide value
net of trade in value, if any.
if used cars of 1938 through 1948 models.
6 6 % % of cash price for new cars, used 1 9 4 9 ,1 9 3 7 and prior models.
M a x im u m L o an V a l u e
U n c l a s s if ie d G r o u p
Not applicable.
D own P a ym en t
Difference between maximum loan value and cash price, payable in cash,
trade in, or both.
20% of cash price
net of trade in value, if any.
Not applicable.
M a x im u m M a t u r it y
15 months, except payments shall be not less than $5.00 per month, or
$1.25 per week.
Same as Group A.
Same as Group A and B.
18 months, except payments shall be not less than $70.00 per month.
Same as Group A.
Same as Group A and B .
$1,000 or less
Principal Amount
M a x im u m M a t u r it y
over $1,000 through $5,000
Principal Amount
G roup
G ro u p
GROUPS O F C R E D IT S U B JE C T TO T H E R EG U LA TIO N .
A— Automobiles (passenger cars designed to transport less than 10 passengers,
(6 ) Combination units incorporating any foregoing listed article in Group B .
including taxicabs and station wagons).
(7) A ir conditioners, room unit.
B — (1 ) Cooking stoves and ranges, designed for household use.
(8 ) Radio or television receiving sets, phonograph or combination.
(2 ) Dishwashers, mechanical, designed for household use.
(9) Sewing machines designed for household use.
(3 ) Ironers designed for household use.
(1 0 ) Suction cleaners designed for household use.
(1 1 ) Household furniture, including ice refrigerators, bed springs, mattresses,
(4 ) Refrigerators, mechanical, of less than 12 cubic feet rated storage
lamps and soft surface floor coverings.
capacity (including food freezers).
(5 ) Washing machines designed for household use.
U n c l a s s i f i e d G r o u p — Instalment
S t a t e m e n t s R e q u ir e d —
R e n e w a l s , R e v is io n s a n d
M ix e d C r e d it s -
loans fo r purposes not exempted by the regulation, and not arising out of the sale of one or more of the above listed articles.
In connection with transactions subject to the regulation there shall be:
On In sta lm en t S a les— a Statement of Transaction in accordance with section 6 (c ) of the regulation.
On In stalm en t L o a n s— a Statement of the Borrower in accordance with section 4 (d ) of the regulation.
C o n s o l i d a t i o n s - -of outstanding instalment obligations are to be treated as though they were new extensions of credit and the maturity calculated from the
date of such renewal, revision or consolidation in accordance with the maximum maturity requirements set forth in the above table; the
requirements pertaining to maximum loan values and Statement of the Borrower and Statement of Transaction shall apply only with respect
to any new extension of credit included in such renewal, revision or consolidation. W ith a Statem en t o f C han ged C on dition s accepted in
good faith the maximum maturity of a renewed or refinanced credit may be 20 months from the date of the renewal or refinancing,
partly subject to one section and partly subject to another, or p artly subject and partly not subject, are to be treated as though they
were two separate and distinct extensions of credit.
R e s p o n s i b i l i t y o f B a n k or F in a n c e C o m p a n y in C o n n e c t io n w it h
P u r c h a s e o r D is c o u n t o f I n s t a l m e n t P a p e r S u b j e c t to t h e R e g u l a t io n .
(1 ) P ap er shall not show on its face failure to comply with regulation.
(2 ) Bank or Finance Company shall not know of any condition or circumstance by which the paper fails to comply even though it may
not be revealed on face of paper.
(3 ) Bank or Finance Company shall not make or receive payments on paper which does not comply with the regulation.
E x e m p t C r e d it s —
See section 7 of the regulation fo r exceptions relating to the following:
( a ) Business or Agricultural Loans ( not to purchase listed articles).
(b) Credit to Dealers and certain Salesmen.
(c ) Credits to Governmental Agencies, Religious Institutions, etc.
(d ) Credits under Government Rehabilitation and Readjustment
Program s (including insured or guaranteed loans to veterans).
(e ) Loans to pay F ire and Casualty Insurance Premiums.
( f ) Credit for Purchasing Securities.
(g ) Real Estate and Home Improvement Loans, (exclusive of
purchase of listed articles in connection with improvement
loans).
(h ) Loans to meet Medical Expenses, etc.
(i) Disaster Credits.
F e d e ra l R eserve Bank
o f
N
e w
Y
o r k
N e w Yo r k 45,N.Y.
Dear Sir:
As you no doubt know, Regulation W of the Board of Gdvernors
of the Federal Reserve System pertaining to "Consumer Instalment Credit",
pursuant to Public Law 90£, became effective September 20, 19U8, and is
administered in the field by the twelve Federal Reserve Banks and their
twenty-four branches located throughout the country.
The Regulation is in much the same form as the former Regula
tion W which terminated on November 1, 19li7. Generally speaking, the
Regulation is applicable to extensions of instalment credit in the
principal amount of $£,000 or less, arising out of the sale of twelve
kinds of consumers’ durable goods, providing the cost of each item of
merchandise is more than $£0.00, and also instalment loans in the princi
pal amount of $£*000 or less arranged to finance the purchase of such
goods., or for any other purpose, unless specifically exempted by the
Regulation,
Every person who, on September 20, 19^8, was engaged in a busi
ness subject to the Regulation, is required to file with the Federal
Reserve Bank or branch in which territory he is located, a registration
statement not later than November 19, 19U8. Further, every person who
on the effective date of the Regulation was not engaged in a business
which was subject to the Regulation, but who thereafter engages in such
a business, is required to file a registration statement within sixty
days after he has become subject to the Regulation* Such statement must
be filed whether or not the person had filed a registration statement
under the former Regulation W which was in effect prior to November 1*
19U7.
The Regulation provides that certain penalties may be imposed
against any person, after hearing and conviction, because of his willful
or negligent failure to comply with any provisions of the Regulation#
Such penalties may be in the form of a suspension, in whole or in part,
by the Board of Governors, of the license to transact business involving
2
F E D E R A L R E S E R V E B A N K O F N E W Y O R K -------------------
the extension of credit subject to the Regulation, or may even take
the form of a fine of not more than $10,000 or, if a natural person,
imprisonment of not more than ten years, or both. The matter of
registration is a specific requirement of the Regulation and failure
to register is a violation of the Regulation,
We are anxious that all persons who are required to register
under Regulation W know that they are required to do so* We would
appreciate very much your calling to the attention of your readers the
need for registration by November 19, 19U8, of those persons who are
engaged in businesses subject to the Regulation, and also to the require
ment that any person who is not so engaged at this time will be required
to register within sixty days from the date he does become engaged in
such business. Your cooperation with us in this connection will be of
assistance in our administrative and enforcement work under the
Regulation,
There is enclosed herewith a copy of Regulation W, together with
Circulars numbered 3365 and 3380 of this bank, which may be helpful to
you in preparing any item which you may feel you can publish with respect
to this matter*
Very truly yours,
A* Phelan,
Vice President.
@FedFRASER