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FEDERAL RESERVE BANK OF N EW YORK C ir c u la r No. 6332 May 13, 196 9 [ Interpretations of Regulation Z To All State Member Batiks, and Others Concerned, in the Second Federal Reserve D istrict: Printed below is an excerpt from the Federal Register of May 10, containing the text of six interpretations by the Board of Governors of the Federal Reserve System of provisions in its Truth in Lending Regulation Z, which goes into effect on July 1. Additional copies of this circular will be furnished upon request. Alfred Hayes, President. Title 12-BANKSANDBANKING C hapter II— Federal Reserve System SU B C H A P T E R A — B O A R D O F G O V E R N O R S O F THE FED E R A L R E SE R V E SY ST E M [Reg. Z] PART 226— TRUTH IN LENDING M iscellaneous Interpretations 1. In order to group current and future interpretations of this part ac cording to their subject matter, the fol lowing sections are redesignated as follows: Former section 2. New section in full within that stipulated period of time, and under such circumstances the vendor does not, in fact, regard such accounts in default, but continues or will continue to extend credit and imposes charges periodically for delaying pay ment of such accounts from time to time until paid, the charge so imposed comes within the definitions of a “ finance charge” (§ 226.2(q)) applicable in each case to the amount of the unpaid balance of the account. Under such circum stances the credit so extended comes within the definition of “open end credit” in § 226.2 (r), the vendor is a creditor as defined in § 226.2(m), and the dis closures required for open end credit accounts under § 226.7 shall be made. number number (Interprets and applies 15 U.S.C. 1604 and 1605.) 226.101 226.102 226.103 226.104 226.105 226.501 226.601 226.602 226.603 226.701 § 226.604 Inconsistent State require ments. The following interpretations are added: § 226.401 Service charges on accounts not paid within a given period of time. (a) Some vendors bill their customers for property or services purchased under the terms of a credit plan which requires that the full amount of each billing be paid within a stipulated period after bill ing, with no privilege of paying in instal ments. If the bill is not paid within that stipulated period of time, the vendor imposes a service charge periodically on the unpaid balance until the account is paid in full. The question arises as to whether Regulation Z applies to such transactions. (b) When in the ordinary course of business a vendor’s billings are not paid (a) Section 226.6(b) of Regulation Z indicates types of State law requirements that are inconsistent with Regulation Z, and § 226.6(c) indicates the methods of dealing with such inconsistent require ments of State law. (b) Whether State laws are incon sistent with Regulation Z necessarily de pends on the nature of the State laws. Section 226.6(b)(1) provides tjiat State law is inconsistent to the extent that it “ requires a creditor to make disclosures different from the requirements of this part with respect to form, content, ter minology, or time of delivery.” This re fers to disclosures of the kinds of infor mation covered by Regulation Z, and not to other or collateral information such as a statement telling the customer that he should read the contract carefully, or that there should be no blanks in the contract. Similarly, it does not refer to headings that State law may require on a contract such as “Retail Installment Contract.” Similarly, a specification in a State law that certain size type must be used is not necessarily inconsistent with the requirements of Regulation Z. (Interprets and applies 15 U.S.C. 1610.) § 226.702 Location of statement of how the balance was determined. (a) Section 226.7(b)(8) requires the creditor of an open end credit account to disclose on the periodic statement, “ the balance on which the finance charge was computed, and a statement of how that balance was determined.” Under § 226.7 (c) which relates to the location of dis closures there is no specific reference to the placement of the “statement of how that balance was determined” when sep arated from the balance to which it re lates. The question arises as to where, under such circumstances, this required statement shall appear on the periodic statement. (b) If separated from the balance to which it relates, the required statement of how the balance was determined may be placed on the face of the periodic statement, the reverse side of the peri odic statement, or on an enclosed sup plement: however, where such state ment and balance do not appear to gether, the statement shall make clear the balance to which it refers. (Interprets and applies 15 U.S.C. 1636) § 226.801 Location of disclosures when contract, security agreem ent, and evidence of transaction are combined in a single document. (a) Some creditors incorporate the terms of a contract, a security agree ment and evidence of a transaction in a single document. These documents are (Over) designed fo r processing by m ech an ical and electronic equipm ent. I f all o f the re quired disclosures under § 226.8 should be placed on the fa ce o f such a d ocu m ent, the creditor w ill be unable to utilize convention al accoun tin g and rec ord keeping equipm ent because o f the size o f the resulting docum ent. T h e ques tion arises as to w hether required dis closures m ay be m ade on the fa ce and the reverse side o f such a docum ent. (b) W here a creditor elects to c o m bine disclosures w ith the contract, security agreem ent, and evidence o f a tran saction in a single docum ent, the disclosures required under § 226.8 shall, in accord a n ce w ith § 226.6, be m ade on the fa ce o f th at docum ent, on its reverse side, or on both sid es: Provided, T h a t the am ount o f the finance charge and the annual percentage rate shall appear on the fa ce o f the docum ent, and, if the reverse side is used, the printing on both sides o f the docum ent shall be equally clear and conspicuous, both sides shall con tain the statem ent, “ N o t i c e : See oth er side fo r im portan t in form a tion ,” and the place fo r the cu stom er’s signature shall be provided follow in g the fu ll con ten t o f the docum ent. stated in the same advertisem ent. T h e question arises as to how a creditor m ay advertise credit term s in a m eaningful way w hen all o f his credit sales or loans are n ot m ade on the same basis. (b ) T h e advertising o f credit terms m ay be m ade by giving one or m ore exam ples o f typical extensions o f credit and stating all o f the term s applicable to each exam ple* In any such case, the a d vertiser shall set forth one or m ore ex am ples w hich are, in fact, typical o f the type o f credit and term s usually and custom arily m ade available by the cred i tor to present and prospective custom ers and each shall be clearly and co n spicuously identified as exam ples o f typical transactions. (In terp rets and applies 15 U.S.C. 1664) § 226.1002 Catalogs-tables or schedule o f credit terms. user. T h e question arises as to w hether a creditor w ho publishes a catalog is re quired to include tables in detailed am ounts from the m inim um up to, for exam ple, $5,000, his highest priced ca ta loged m erchandise. (b) Tables or schedules o f term s in catalogs m ust include all am ounts up to a level o f the m ore com m on ly sold higher priced property or services w hich are o f fered fo r sale, but in no event greater than $1,000 unless the creditor elects to do so. I f the creditor offers property or service for sale at prices higher than the upperm ost level covered by his table, he shall state the m ethod by w hich the fi n an ce charge is com puted on larger am ounts, how the am ount o f paym ents and the num ber and periods o f paym ents are determ ined and state, for each rep resentative am ount in increm ents o f n ot m ore than $500 up to the highest priced aproperty or service offered, the annual percentage rate. Any catalog w hich c o n tains such a table or schedule o f credit term s will com ply w ith requirem ents o f (a) U nder § 226.10(b) in order th at catalog m ay qualify as a single adver tisem ent, am ong other things, it must include a table or schedule o f credit terms. It has been the practice o f catalog § 226.10(b) provided all other require houses to include such tables in catalogs; however, such tables generally state m ents are m et and such catalog shall be am ounts o f purchases, am ounts o f fi considered adequate for the purpose o f n an ce charges, and num ber and am ount § 226.8(g) (1 ). (In terp re ts an d applies 15 U.S.C. 1638) o f paym ents for brackets up to a certain (In terp rets an d applies 15 U.S.C. 1661) level and then contain an instruction to § 226.1001 Advertising of credit terms include a specified dollar am ount in c o m D ated at W ashington, D.C., the 22d in other than open end credit. puting the finance charge by ap plica day o f April 1969. (a ) T h e statem ent o f certain credit tion o f a percentage rate on any purchase term s in advertisem ents such as “ n o in excess o f that level. Tables to show By order o f the B oard o f G overnors. dow npaym en t” , the am ount o f any in the actual term s including annual per [s e a l] R o b e r t P. F o r r e s t a l , stallm ent paym ents, dollar am ount o f centage rates for all purchases into th ou Assistant S ecretary. finance charge, num ber o f paym ents, sands o f dollars would be unwieldy, p re [F .R . D oc. 69-5614; P iled, M ay 9, 1969; etc., as provided in § 226.10(d) (2 ), re sent a form idable appearance, and may 8:4 7 a.m .] quires that certain other term s also be be m ore confu sin g than helpful to the
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