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F E D E R A L R E S E R V E BA N K O F N EW YORK [ Circular No. 8 8 0 5 * 1 April 21,1980 J CONSUMER CREDIT RESTRAINT Technical Amendments to Subpart A T o A l l M e m b e r B a n k s, an d O th e r s C o n cern ed , in th e S e c o n d F e d e r a l R e s e r v e D i s t r i c t : The Board of Governors of the Federal Reserve System has issued two technical amendments to Subpart A of i s regulation on “Credit Restraint.” Subpart A of the regulation deals with con t sumer credit. Following i the text of the Board’ announcement: s s The Federal Reserve Board today announced two technical amendments to its consumer credit restraint program. They deal with changes in the terms of certain consumer credit accounts and with the relationship of the program to maximum finance charge rates permitted by State and Federal laws and Department of Energy rules. The amendments are extensions of revisions in the consumer credit restraint regulations announced April 2 establishing uniform national rules for creditors to follow if they impose or increase finance or other charges or make certain other changes in the terms of consumer credit accounts. The further revisions announced today, effective April 14: 1. Clarify that the requirements for changes in the terms of consumer credit accounts apply not only to open-end accounts (where the consumer may pay the balance due in installments), but also to open accounts (such as 30-day accounts where the consumer may incur new debt from time to time but is expected to pay the full amount due upon being billed). 2. Clarify that (a) the provisions for changes in the terms of consumer credit accounts do not affect the maximum finance charge permitted under State laws, or the maximum rates permitted under the Depository Institutions Deregulation and Monetary Control Act of 1980, but that (b) Federal finance charge limitations for other covered creditors, such as regulations governing oil company credit programs, are superseded to the extent they are inconsistent with the Board’s rules. Enclosed i the text of the amendments. Legal questions regarding the Consumer Credit s Restraint Program may be directed to Donald L. Bittker, Assistant Counsel, Legal Department (Tel. No. 212-791-5036) ; other questions m ay be directed to the Consumer Credit Reports Unit (Tel. Nos. 212-791-7721 through 7725). A nthony M. S olomon, President. Board of Governors of the Federal Reserve System CREDIT RESTRAINT A M E N D M E N T S TO SUBPA R T A — C O N S U M E R CREDIT (effective April 14 , 1980) AGENCY: Board o f G overnors o f Che F e d e ra l R eserv e S ystem . ACTION: F in a l R u le. SUMMARY: On A p ril 2 , 1980, th e Board amended i t s consum er c r e d i t r e s t r a i n t r e g u l a t i o n (45 F e d e ra l R e g is te r 24444, A p ril 10, 1980) to p e rm it co v ered c r e d i t o r s to change c e r t a i n term s r e l a t i n g to c e r t a i n c r e d i t a c c o u n ts i f two c o n d itio n s were m et. F i r s t , th e c r e d i t o r would have to m a il o r d e l i v e r a w r i t t e n n o tic e o f th e pro p o sed change to each a f f e c t e d a cc o u n t h o ld e r a t l e a s t 30 days b e f o r e th e e f f e c t i v e d a te o f th e ch an g e. S econd, th e c r e d i t o r would have to a llo w th e acc o u n t h o ld e r to re p a y th e b a la n c e o u ts ta n d in g on th e e f f e c t i v e d a te a c c o rd in g to th e e x i s t i n g term s u n le s s th e consum er made a c r e d i t p u rc h a se o r o b ta in e d a c r e d i t advance on o r a f t e r t h a t d a te ; in which c a s e , th e new term s would ap p ly to th e o u ts ta n d in g b a la n c e p lu s new c re d it. The Board is now making two te c h n i c a l amendments to i t s A p ril 2 amendment. The f i r s t makes c l e a r t h a t th e change in term s re q u ire m e n ts a p p ly n o t o n ly to o p en -en d c r e d i t a c c o u n ts where th e consum er may pay th e b a la n c e due in in s t a l l m e n t s s u b je c t to a fin a n c e c h a rg e , b u t a ls o to open a c c o u n ts (su c h as s o - c a l l e d 3 0 -d ay a c c o u n ts r e f e r r e d to a t 45 FR 17928) w here th e consum er may make c r e d i t p u rc h a s e s o r o b ta in c r e d i t ad v an ces from tim e to tim e , y e t is ex p e c te d to pay in f u l l upon b ein g b i l l e d . The i n t e n t o f th e A p ril 2 amendment was to c o v er b o th ty p e s o f a c c o u n t. The second te c h n ic a l amendment c l a r i f i e s t h a t th e change in terras p r o v is io n does n o t a f f e c t th e maximum fin a n c e c h a rg e r a t e p e r m itte d by S ta te law o r , fo r d e p o s ito r y i n s t i t u t i o n s , th e maximum r a t e allo w ed by T i t l e V o f th e D e p o s ito ry I n s t i t u t i o n s D e r e g u la tio n and M onetary C o n tro l Act o f 1980 ( P u b lic Law 9 6 -2 2 1 ). I t makes c l e a r , how ever, t h a t F e d e ra l fin a n c e ch arg e l i m i t a t i o n s fo r o th e r co v ered c r e d i t o r s , such as th e D epartm ent o f E n e rg y 's For this Regulation to be complete, retain : 1) Regulation pamphlet entitled “Credit Restraint,” adopted effective March 14, 1980. 2) Subpart D, effective March 28, 1980. 3) Amendment to Subpart B, effective March 28, 1980. 4) Amendment to Subpart A ( C h a n g e in T e r m s o f O p e n - E n d C r e d it A c c o n n t s ) , effective April 2, 1980. 5) Amendments to Subpart A ( A l t e r n a t i v e B a s e ) , effective April 2, 1980. 6) This slip sheet. [ E nc . C ir . N o . 8805] ( over) r e g u l a t i o n s g o v e rn in g o i l company c re d i t p ro g ram s, a re s u p e rs e d e d by § 2 2 9 .6 (a ) o f th e c r e d i t r e s t r a i n t re g u l a t i o n to th e e x te n t t h a t t h a t p ro v i s i o n a u th o r iz e s an a c t io n o th e rw is e p r o h ib i te d by F e d e ra l law . T hat was th e i n t e n t o f th e A p r il 2 amendment as in d ic a te d in th e F e d e ra l R e g is te r s u p p le m e n ta ry in f o r m a tio n (45 FR 24444 ) . EFFECTIVE DATE: A p r il 14, 1980. FOR FURTHER INFORMATION CONTACT: Nath a n i e l E. B u tle r , A s s o c ia te D ir e c t o r , o r David A. M yers, A tto r n e y , D iv is io n o f Consumer and Community A f f a i r s , Board o f G o v ern o rs o f th e F e d e ra l Rese rv e S ystem , W ash in g to n , D.C. 20551 (2 0 2 -4 5 2 -3 0 0 0 ). SUPPLEMENTARY INFORMATION: S in ce th e two amendments t h a t a re b e in g made to th e consum er c r e d i t r e s t r a i n t r e g u l a t i on a re m e re ly i n t e r p r e t a t i v e in n a tu r e and do n o t change th e s u b s ta n c e o f th e r e g u l a t i o n , th e 3oard f in d s th a t p u b l i c a t i o n o f th e ch an g es f o r p u b lic comment o r a d e la y in t h e i r e f f e c t i v e n e s s is n e i t h e r n e c e s s a r y n o r r e q u ir e d u n d er 5 U .S .C . § 5 5 3 (b ). T h e r e f o re , p u rs u a n t to i t s a u t h o r i t y u n d er th e Cr e d i t C o n tro l Act (12 U .S .C . §§ 19011 9 0 9 ), as im plem ented by E x e c u tiv e Ord e r 12201, th e Board h e re b y amends 12 CFR P a r t 229, S u b p a rt A, §§ 2 2 9 .6 (a ) and ( b ) ( 1 ) , e f f e c t i v e A p ril 1 4 5 1980, as f o llo w s : * ★ * (a ) N o tw ith s ta n d in g th e term s o f any c r e d i t agreem ent o r th e p r o v is io n o f any o th e r law , a c o v ere d c r e d i t o r , w ith r e s p e c t to i t s op en end o r o th e r open c r e d i t a c c o u n ts , may (1 ) impose o r in c r e a s e any fin a n c e o r o th e r c h a r g e , (2 ) change th e m ethod o f com puting th e b a la n c e upon which c h a rg e s a re im posed, o r (3 ) in c r e a s e th e r e q u ir e d minimum p e r io d ic paym ent, i f th e fo llo w in g two c o n d itio n s a re m e t. * * * (b ) (1 ) T h is s e c t i o n does n o t a u th o r iz e a c o v ere d c r e d i t o r to im pose a r a t e o f i n t e r e s t o r f in a n c e c h a rg e in e x c e s s o f th e maximum p e r m itte d by S ta t e law , n o r does i t a u th o r iz e a d e p o s it o r y i n s t i t u t i o n (a s d e f in e d in s e c ti o n 19(b) o f th e F e d e ra l R eserv e Act as amended by th e M onetary C o n tro l Act o f 1980) to impose a r a t e o f i n t e r e s t or fin a n c e c h a rg e in e x c e ss o f th e maximum p e r m itte d by F e d e ra l law . ★ ★ ★
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