The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK OF NEW YORK Fiscal Agent of the United States Circular No. 9080A May 29, 1981 REGULATION Z — TRUTH IN LENDING Proposed Official Staff Commentary To A ll Depository Institutions, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued by the Board of Governors of the Federal Reserve System: The Federal Reserve Board’s staff is publishing for comment a proposed official staff commentary follow ing up and interpreting the Board’s simplified Regulation Z, which implements the Truth in Lending Simplifica tion 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 interpretations 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. Printed on the following pages is the text of the Board’s official notice regarding the commentary. The full text of the Board’s proposal will be published in the Federal Register. Single copies of the full text are being sent to depository institutions in this District; additional, single copies will be furnished upon request directed to our Circulars Division. Comments on the proposal should be submitted by July 10, 1981 and may be sent to our Consumer Affairs and Bank Regulations Department. A N TH O N Y M. SO LO M O N , President. F EDERAL RESERVE SYSTEM 12 CFR F a r t [Reg. 226 Z; T I L - 1 ] TRUTH I N LENDI NG Proposed O f f i c i a l S t a f f Commentary AGENCY: Board o f G overnors o f the Federal ACTION: Proposed o f f i c i a l staff R ese rve System. in te rp retation . SUMMARY: I n a c c o r d a n c e w i t h A p p e n d i x C t o 12 CFR P a r t 2 26 , t h e B o a r d ' s s t a f f i s p u b l i s h i n g f o r comment a p r o p o s e d o f f i c i a l s t a f f commentary t o R e g u l a t i o n Z, a s r e v i s e d e f f e c t i v e A p r i l 1, 1981 (46 FR 2 0 8 4 8 , A p r i l 7, 1 9 8 1 ) . The commentary a p p l i e s and i n t e r p r e t s t h e r e q u i r e m e n t s o f T r u t h i n L e n d i n g t o o p e n - e n d and c l o s e d e n d c o n s u m e r c r e d i t , and i s i n t e n d e d 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 B o a r d and s t a f f i n t e r p r e t a t i o n s o f t h e r e g u l a t i o n . I n o r d e r t o make t h e f i n a l com m e n t a r y a v a i l a b l e a t t h e e a r l i e s t p o s s i b l e t i m e , commenter s must s u b m i t t h e i r comments by J u l y 1 0 , 1 9 8 1 . DATE: Comments m u st be r e c e i v e d on o r b e f o r e J u l y 10, 1 98 1. A D D R ES S : Comments s h o u l d i n c l u d e a r e f e r e n c e t o T I L - 1 and s h o u l d be m a i l e d t o the S e c r e t a r y , Board o f G o v e r n o r s o f th e Federal R e s e rv e System , W a s hing to n , D.C. 2 0 5 5 1 , o r d e l i v e r e d t o Room B - 2 2 2 3 , 2 0 t h and C o n s t i t u t i o n A v e n u e , N. W. , W a s h i n g t o n , D . C . , between 8 : 4 5 a.m. and 5 : 1 5 p.m. To a i d i n t h e i r c o n s i d e r a t i o n , comments r e g a r d i n g e ac h s e c t i o n s h o u l d b e g i n on a s e p a r a t e page. Comments may be i n s p e c t e d i n Room B - 1 1 2 2 between 8 : 4 5 a.m. and 5 : 1 5 p.m. FOR FURTHER INFORMATI ON: C o n t a c t the f o l l o w i n g a t t o r n e y s in the D i v i s i o n o f C o n s u m e r and Co mm un it y A f f a i r s , B o a r d 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 , W a s h i n g t o n , D .C . 20551, at (202) 4 52-3667 or (202) 452 -38 6 7: Subpart A S u b p a r t B and Appendices Gerald H urst Beth Morgan Denise Rechter R u t h Amberg Jesse F ilk in s Lynn G o l d f a d e n Gerald Hurst B a r b a r a R anagan J o h n Wood S u b p a r t C and A p p e nd i c e s B eth M o r g a n Denise Rechter Rugenia S i l v e r S u s a n W er t h an C laud ia Yarus Steve Z e ise l S u b p a r t D and Appendices Ly nn G o l d f a d e n S u s a n We rt h an SUPPLEMENTARY INFORMATION: E f f e c t i v e A p r i l 1, 1 9 8 1 , t h e B o a r d s u b s t a n t i a l l y r e v i s e d R e g u l a t i o n Z, w h i c h i m p l e m e n t s t h e T r u t h i n L e n d i n g A c t ( 4 6 FR 2 0 8 4 8 , A p r i l 7, 1 9 8 1 ) . The r e v i s i o n s r e f l e c t amendments made by t h e T r u t h i n L e n d i n g S i m p l i f i c a t i o n and R e f or m A c t ( T i t l e VI o f t h e D e p o s i t o r y I n s t i t u t i o n s D e r e g u l a t i o n and M o n e t a r y C o n t r o l A c t o f 1 9 8 0 , Pub. L. 9 6 - 2 2 1 ) . C r e d i t o r s may b e g i n com plying with the r e v is e d r e g u l a t i o n im m ediately. C o m p l i a n c e d o e s n o t become m a n d a t o r y , h o w e v e r , u n t i l A p r i l 1, 1 98 2. B e f o r e 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 w i t h t h e r e g u l a t i o n a s i t e x i s t e d p r i o r t o t h o s e a mendments. B o a r d and s t a f f i n t e r p r e t a t i o n s i s s u e d u n d e r t h e p r i o r r e g u l a t i o n w i l l r e m a i n e f f e c t i v e u n t i l th a t date. The B o a r d ' s D i v i s i o n o f C o n s u me r 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 commentar y on t h 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 i s s u e d a s 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 , p r o v i d i n g c r e d i t o r s w i t h p r o t e c t i o n under § 1 3 0 ( f ) o f the T ruth in L e n d in g Act. U n d er 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 i n c o n f o r m i t y w i t h 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 h ave 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 t h o s e a c t i o n s . The commentary w i l l 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 a p p r o a c h t o p r o v i d i n g i n t e r p r e t a t i o n s o f the r e g u la t io n . Under the p r i o r r e g u l a t i o n , s t a f f o p i n i o n s were i s s u e d i n r e s p o n s e t o i n d i v i d u a l i n q u i r i e s r e g a r d i n 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 n o r m a l l y 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 i n t h o s e f a c t s were s i m i l a r l y a d d r e s s e d i n i n d i v i d u a l r e s p o n s e s t a i l o r e d t o th e v a r i a t i o n s . M or e t h a n 150 0 l e t t e r s i n t e r p r e t i n g and a p p l y i n g t h e p r i o r r e g u l a t i o n were i s s u e d on t h i s b a s i s . The commentary i s e x p e c t e d t o r e p l a c e B o a r d and s t a f f i n t e r p r e t a t i o n s as the s o le v e h ic le f o r i n t e r p r e t i n g the r e g u l a t i o n . The commentar y w i l l , h o w e v e r , be more g e n e r a l t h a n t h e i n t e r p r e t a t i o n s i s s u e d u n d e r t h e p r i o r r e g u lation. U n l i k e t h e e a r l i e r i n t e r p r e t a t i o n s , t h e co mme nta ry w i l l n o t a t t e m p t t o a d d r e s s and r e s o l v e e v e r y q u e s t i o n r e g a r d i n g t h e a p p l i c a t i o n o f t h e r e g u la t io n to s p e c if ic sets of fa c ts. Although o r i g i n a l l y designed to a id c r e d i t o r s in com p lying, the lo n g s t a n d in g p r a c t i c e o f t r y i n g to respond in w r i t i n g to each and e v e r y s p e c i a l c i r c u m s t a n c e h a s i n s t e a d c r e a t e d an e n o r m o u s amount o f regu la to ry m aterial. The c u m u l a t i v e 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 h a s been t o c o m p l i c a t e , r a t h e r t h a n f a c i l i t a t e , c o m p l i a n c e by l a y e r i n g one s e t o f d i s t i n c t i o n s on t o p o f a n o t h 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 te ria l in th e a g g r e g a t e has se rv e d to g e n e ra te f u r t h e r q u e s t i o n s . In the p a s t , c r e d i t o r e x p o s u r e 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 o f t h e r e g u l a t i o n h a s 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 th a t sought to p ro v id e c e r t a i n t y in a p p ly in g the r e g u l a t i o n . The r e d u c t i o n i n c i v i l l i a b i l i t y r e s u l t i n g f ro m t h e 1 9 8 0 s t a t u t o r y amendments s h o u l d r e d u c e t h e p e r c e i v e d need f o r w r i t t e n r e s p o n s e s t o a v a r i e t y o f s p e c i f i c questions. The commentary f o c u s e s on p r o v i d i n g g e n e r a l g u i d a n c e t o a s s i s t c r e d i t o r s in a p p ly in g the r e g u l a t i o n to s p e c i f i c s i t u a t i o n s . T h a t g u i d a n c e may t a k e s e v e r a l form s. The commentary may l i s t e x a m p l e s t h a t c o m p ly w i t h 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 i m p a c t o f a r e g u l a t o r y p r o v i s i o n on a p r e v a l e n t t y p e o f p l a n o r 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 g r o u p of r e g u la t o r y requirem ents. The commentar y d o e s n o t p u r p o r t t o be e x h a u s t i v e . It concentrates on m a t e r i a l o f g e n e r a l a p p l i c a t i o n whose i n c l u s i o n w i l l , i n t h e s t a f f ' s v i e w , be u s e f u l t o t h e w i d e s t p o s s i b l e a u d i e n c e . F o r e x a m p l e , t h e commentary p r o v i d e s s e v e r a l i l l u s t r a t i o n s o f w a y s i n w h i c h c l u s e d - e n d 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 a c c o rd an ce w ith the re q u ire m e n ts o f § 2 2 6 . 1 7 ( a ) . The e x a m p l e s c h o s e n a r e t h o s e t h a t a p p e a r m o s t l i k e l y t o be u t i l i z e d by a number o f c r e d i t o r s , a l t h o u g h o t h e r m e t h o d s 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 s s p r e v a le n t c r e d i t t r a n s a c t i o n s , to the extent th a t they p re se n t im p orta n t q u e s t i o n s under the r e g u l a t i o n . I t w i l l n ot, however, attempt to a d d r e s s each c r e d i t p l a n ' s u n iq u e s e t o f f a c t s . The commentar y i n s t e a d i d e n t i f i e s se v e ra l b a s ic f a c t o r s c h a r a c t e r i z i n g that type of t r a n s a c t io n . Creditors mu st t h e n d e t e r m i n e w h e t h e r 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 ir p a r t ic u la r v a ria tio n s. The s t a f f e x p e c t s t o u p d a t e t h e commentary on an a n n u a l b a s i s , o r more o f t e n a s t h e need a r i s e s . E a c h p a r a g r a p h i n 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 i n some c a s e s by s u b s e c t i o n . F o r e x a m p l e , t h e comments f o r § 2 2 6 . 2 1 ( T r e a t m e n t o f c r e d i t b a l a n c e s ) a r e d e s i g n a t e d a s comments 21- 1 t h r o u g h 2 1 - 5 , w h i l e t h e com m e n t s f o r § 2 2 6 . I a ( C o n t e n t o f d i s c l o s u r e s ) a r e f u r t h e r b r o k e n down and d e s i g n a t e d a c c o r d i n g t o t h e p a r t i c u l a r s u b s e c t i o n a d d r e s s e d , s u c h a s comment 1 8 ( b )-1 and 1 8 ( r ) - 1 . The f o l l o w i n 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 t e r i a l a p p e a r a t t h e end o f each s e c t i o n o f the commentary: (1) " S t a t u t e " - - th o s e s e c t i o n s o f the T r u t h i n L e n d i n g A c t on w h i c h t h e r e g u l a t o r y p r o v i s i o n i s b a s e d ; ( 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 r o v i s i o n s i n t h e r e g u l a t i o n r e l a t i n g t o th a t s e c t io n ; (3) " P r e v io u s r e g u l a t i o n " - - p a r a l l e l p r o v i s i o n s in R e g u la tio n Z a s i t e x i s t e d b e f o r e A p r i l 1, 1 9 8 1 ; and ( 4 ) "1981 c h a n g e s . " This la s t category i s a b r i e f d e s c r i p t i o n o f t h e m a j o r c h a n g e s made by t h e 1981 r e v i s i o n s t o R e g u l a t i o n Z. The t e x t o f t h e commentar y d o e s n o t r e f e r t o t h e e a r l i e r r e g u l a tion. H o w ev e r , a c o m p a r i s o n t o t h e p r i o r r e g u l a t i o n may i n some c a s e s be h e l p f u l i n e x p l a i n i n g t h e amended p r o v i s i o n and may be o f i n t e r e s t t o some u s e r s , and t h e p r o p o s e d co mme nta ry i n c o r p o r a t e s t h i s i n f o r m a t i 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 w h e t h e r t h i s m a t e r i a l s h o u l d be r e t a i n e d . Comment i s welcome b o t h on t h e s u b s t a n c e o f t h e m a t e r i a l and on t h e form at in which i t i s p r e s e n t e d . Commenters a r e e n c o u r a g e d t o f o c u s on m a t e r i a l o f p a r t i c u l a r i n t e r e s t t o them; t h e y need n o t a d d r e s s e v e r y 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 i n t h e commentar y any m a t e r i 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 o f t h i s s c o p e , b u t commenter s s h o u l d n o t e x p e c t t h e c o m m e n ta r y t o a n s w e r e v e r y q u e s t i o n o r remove e v e r y p o s s i b l e a m b i g u i t y f ro m the r e g u la t io n . No comments t h a t h a v e t h e e f f e c t o f r e v i s i n g o r e l i m i n a t i n g a ny r e q u i r e m e n t s o f t h e r e g u l a t i o n i t s e l f w i l l be c o n s i d e r e d . To e x p e d i t e a n a l y s i s o f t h e comments , c o m m e n t e r s a r e r e q u e s t e d t o i d e n t i f y p o r t i o n s o f t h e c o m m e n ta r y a c c o r d i n g t o s e c t i o n and p a r a g r a p h n u mb e rs and t o b e g i n d i s c u s s i o n o f e ac h s e c t i o n on a s e p a r a t e p ag e. Comments must be r e c e i v e d by F r i d a y , J u l y 10, 1 9 8 1. After considera t i o n o f 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 c o mme nt ar y , 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 T I L - 1 w i l l be p u b l i s h e d i n f i n a l f or m i n t h e F e d e r a l R e g i s t e r .
@FedFRASER