Full text of Federal Reserve Bank of New York Circulars : 6987. Proposed Amendments to Regulation Z

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F E D E R A L R E S E R V E BANK
O F N E W YORK

[

Circular No. 6987
August 9, 1972

PROPOSED AMENDMENTS TO REGULATION Z
Credit Cards — Issuance and Liability

To A ll State M em ber Banks, and Others Concerned,
in the Second Federal Reserve District:

The following statement was issued August 7 by the Board of Governors of the Federal Reserve
System:
The Board of Governors of the Federal Reserve System today proposed an amendment to its Truth in
Lending Regulation Z to make clear that all credit cards, regardless of use, are covered by the $50 maximum
liability limit for unauthorized use, and may be issued initially only upon request of the prospective cardholder.
The proposal would state specifically that the limits on liability for unauthorized use and the ban on un­
solicited issuance of credit cards apply to all cards, whether they are to be used for personal, family, household,
agricultural, business or commercial purposes. The proposed amendment does not affect the exemption from
Truth in Lending disclosures for business credit.
Comment on the proposal should be received by the Board not later than September 15.

Printed below is the text of the proposed amendments. Comments thereon should be submitted by
September 15 and may be sent to our Regulations and Bank Analysis Department.
ALFRED HAYES,
President.

(Reg. Z)
TRUTH IN LENDING
Credit Cards — Issuance and L iab ility

1.
Pursuant to the authority contained in the Truth family, household, agricultural, business, or commercial
in Lending Act (15 U.S.C. 1601 et. seq.), the Board of
purposes, or any natural person or organization who
Governors proposes to amend Part 226 (Regulation Z)
has agreed with the card issuer to pay obligations
in the manner and for the reasons set forth below:
arising from the issuance of a credit card to another
person for such purposes.
Amend § 226.13(a)(4) and § 226.13(b) to read as
follows:

*

*

*

*

*

(b)
Issuance o f credit cards. Regardless of whether
§ 226.13— CREDIT CARDS—
a
credit
card
is to be used for personal, family, house­
ISSUANCE AND LIABILITY
hold, agricultural, business or commercial purposes, no
(a)
Supplemental definitions applicable to this credit card shall be issued to a natural person or organ­
section. * * *
ization except:
(4)
“ Cardholder” means any natural person or or­
(1) In response to a request or application therefor,
ganization to whom a credit card is issued for personal,
or




(Over)

(2)
As a renewal of, or in substitution for, an
This notice is published pursuant to section 553(b)
accepted credit card whether such card is issued by the
of Title 5, United States Code, and § 262.2(a) o f the
same or a successor card issuer.
Rules of Procedure o f the Board o f Governors o f the
2.
Considerable uncertainty has prevailed as to
Federal Reserve System (12 CFR 262.2(a)).
whether the exemption in § 226.3 o f Regulation Z for
To aid in the consideration of these matters by the
extensions o f credit for business and commercial
Board,
interested persons are invited to submit relevant
purposes applies to the unsolicited issuance of credit
data,
views,
or arguments. Any such material should be
cards and to the limits on liability for their unauthor­
submitted
in
writing to the Secretary, the Board of
ized use. The purpose o f these proposed amendments is
Governors
of
the
Federal Reserve System, Washington,
to make clear that all credit cards, regardless of use
D.C.
20551,
or
to
any Federal Reserve Bank for trans­
or cardholder status, are covered by the maximum
mittal
to
the
Board,
to be received at the Board not
liability limit and, by the same token, may not be dis­
later
than
September
15, 1972. Such material will be
tributed without an initial request from the cardholder.
made
available
for
inspection
and copying upon re­
These amendments would not affect the-application of
quest,
except
as
provided
in
§
261.6(a)
o f the Board’s
the business exemption to the disclosure, rescission, and
Rules
Regarding
Availability
of
Information.
advertising requirements of Regulation Z for which it
was originally intended.
By order of the Board of Governors, August 3, 1972.