Full text of Federal Reserve Bank of New York Circulars : Credit Practices Rule

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FEDERAL RESERVE BANK
OF NEW YORK
December 23, 1985

CREDIT PRACTICES RULE
Cosigner Notice
To All State Member Banks
in the State of New York:

As indicated in our Circulars Nos. 9854, and 9959, Subpart B of Regula­
tion AA becomes effective January 1, 1986. Subpart B, among other things,
requires that a cosigner receive a notice explaining the cosigner’s obligations.
Because New York law already requires a cosigner notice, and Regulation AA
provides for neither Federal preemption nor automatic substitution of a State notice
requirement for the Federal notice requirement, State member banks should, for the
time being, provide both Federal and State notices in those consumer credit transac­
tions to which both requirements apply.
In New York, if the creditor does not comply with the notice provisions of
General Obligations Law Section 15-702, the cosigner is not obligated as a guaran­
tor.
The kinds of consumer credit transactions requiring the cosigner notice are
slightly different under the Federal and New York provisions. The permissible
manner of providing the notice is also slightly different. For example, the Federal
notice may be on the credit application; the State notice apparently may not.
Inquiries regarding this matter may be directed to Donald L. Bittker, Assistant
Counsel, Legal Department (Tel. No. 212-791-5036), or Eric K. Tarlow,
Supervising Examiner, Compliance Examinations Division, Bank Examinations
Department (Tel. No. 212-791-5919).
C h ester B . F e l d ber g ,

Senior Vice President.