[Federal Register: June 13, 2003 (Volume 68, Number 114)]
[Rules and Regulations]
[Page 35283-35285]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jn03-5]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 37
[Docket No. 03-11]
RIN 1557-AB75
Debt Cancellation Contracts and Debt Suspension Agreements;
Change in Compliance Date and Request for Comment
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of delay in compliance date; request for comment.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) has
determined to delay the date when compliance is required with certain
provisions of the final rule governing debt cancellation contracts
(DCCs) and debt suspension agreements (DSAs) in order to allow the OCC
to consider issues that have recently been brought to our attention
concerning the application of the DCC/DSA rule in the context of
closed-end consumer loan transactions where DCCs and DSAs are offered
through unaffiliated, non-exclusive agents. The delay of the compliance
date applies only to the extent and to the types of transactions
described in this document. In all other circumstances, national banks
are required to comply with the DCC/DSA rule as of June 16, 2003, which
is the date on which the rule takes effect. The OCC also is inviting
comment on issues raised by national banks related to the sale of DCCs
and DSAs in connection with closed-end consumer loans offered through
such non-exclusive agency relationships.
DATES: Compliance date: The compliance date for certain provisions in
12 CFR part 37 published at 67 FR 58962 (September 19, 2002) is delayed
indefinitely. See SUPPLEMENTARY INFORMATION for details. OCC will
publish a document in the Federal Register announcing the compliance
date.
Comment date: Comments must be received by July 14, 2003.
[[Page 35284]]
ADDRESSES: Comments should be directed to Office of the Comptroller of
the Currency, Public Information Room, 250 E Street, SW., Mail Stop 1-
5, Washington, DC 20219, Attention: Docket No. 03-11; Fax number (202)
874-4448 or Internet address: regs.comments@occ.treas.gov. Due to
delays in paper mail delivery in the Washington area, commenters are
encouraged to send comments by fax or e-mail when possible. Comments
may be inspected and photocopied at the OCC's Public Reference Room,
250 E Street, SW., Washington, DC. You may make an appointment to
inspect the comments by calling (202) 874-5043.
FOR FURTHER INFORMATION CONTACT: Jean Campbell, Attorney, Legislative
and Regulatory Activities Division, (202) 874-5090; or Pamela Mount,
Compliance Specialist, Compliance Division, (202) 874-4428, Office of
the Comptroller of the Currency, 250 E Street, SW., Washington, DC
20219.
SUPPLEMENTARY INFORMATION:
Background
On September 19, 2002, the OCC published the final rule governing
DCCs and DSAs.\1\ The final rule establishes consumer protection
standards and safety and soundness requirements that apply with respect
to DCCs and DSAs entered into by national banks in connection with
extensions of credit they make to customers. The rule prohibits
national banks from engaging in certain practices, such as tying and
misleading marketing or advertising. It also requires, among other
things, that national banks provide standardized disclosures about the
DCC and DSA products they offer; that they obtain a customer's
acknowledgment of receipt of those disclosures; and that they obtain
the customer's affirmative election to purchase the product. In
addition, the rule requires a national bank that offers a customer the
option to pay the fee for a DCC or DSA in a single payment also to
offer that customer a bona fide option to pay the fee on a periodic
basis (``periodic payment option''). The final rule takes effect on
June 16, 2003.
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\1\ 67 FR 58962. The rule is codified at 12 CFR part 37.
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The OCC recently has received information that the periodic payment
option requirement may present unique issues, of which the OCC was
previously unaware, in connection with DCCs and DSAs offered by
national banks through unaffiliated, non-exclusive agents, with respect
to certain types of consumer purchase transactions, most notably car
loans made available through automobile dealers.
Accordingly, we have determined that it is appropriate to delay the
mandatory compliance date for the periodic payment option in the case
of transactions where unaffiliated, non-exclusive agents of a national
bank offer that bank's DCC or DSA in connection with closed-end
consumer credit, until the OCC has an opportunity to further evaluate
the feasibility of approaches to providing appropriate customer
protections in connection with that type of transaction. Because the
availability of the periodic payment option also triggers certain
disclosures, we also are delaying the time for compliance with certain
other provisions in the DCC/DSA final rule that are linked to the
requirement to offer a periodic payment option, including the
requirement to provide the long form disclosures.
Banks offering DCCs and DSAs through non-affiliated, non-exclusive
agents thus remain subject to the following requirements:
[sbull] The bank may not extend credit or alter the terms or
conditions of an extension of credit conditioned upon the customer's
purchase of a DCC or DSA.
[sbull] The bank may not engage in any practice or use any
advertisement that could mislead or otherwise cause a reasonable person
to reach an erroneous belief with respect to information that must be
disclosed under this part.
[sbull] The bank may not offer DCCs or DSAs that contain terms
giving the bank the right unilaterally to modify the contract unless
the modification is favorable to the customer and is made without
additional charge to the customer; or the customer is notified of any
proposed change and is provided a reasonable opportunity to cancel the
contract without penalty before the change goes into effect.
[sbull] If a DCC or DSA is terminated, the bank must refund to the
customer any unearned fees paid for the contract unless the contract
provides otherwise.
[sbull] The bank shall calculate the amount of a refund using a
method at least as favorable to the customer as the actuarial method.
[sbull] If the bank offers the customer the option to finance the
fee for a DCC or DSA, the bank must disclose to the customer whether
and, if so, the time period during which, the customer may cancel the
agreement and receive a refund.
[sbull] A national bank must provide to the customer at the time of
the initial solicitation of the DCC or DSA, the short form disclosures
described in Appendix A to part 37, as modified to reflect delay of the
compliance date for providing the periodic payment option and related
changes. The form of the short form disclosures must be readily
understandable and meaningful. The short form disclosures also must be
included in advertisements and other promotional material for DCCs and
DSAs, unless they are of a general nature.
[sbull] Before entering into a contract, the bank must obtain a
customer's written affirmative election to purchase the DCC or DSA. The
written election must be conspicuous, simple, direct, readily
understandable, and designed to call attention to its significance.
[sbull] A national bank must manage the risks associated with DCCs
and DSAs in accordance with safe and sound banking principles.
Description of Provisions Affected
As a result of today's actions, compliance with the following
provisions will not be required, until further notice, when a national
bank, in connection with closed-end consumer credit \2\ extended by
that bank, offers a DCC or DSA through an unaffiliated, non-exclusive
agent:
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\2\ As used in this notice, the term ``closed-end consumer
credit'' and ``closed-end consumer loan'' refer to consumer credit
other than open-end credit, as defined in the final DCC/DSA rule.
These terms do not include loans secured by 1-4 residential real
property. See 12 CFR 37.2(a).
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[sbull] The requirement to offer a periodic payment option set
forth in 12 CFR 37.5.
[sbull] The requirement set forth in 12 CFR 37.4(a) that a bank
that offers a customer a DCC or DSA without a refund provision also
must offer that customer a bona fide option to purchase a comparable
DCC or DSA that provides for a refund.
[sbull] The long-form disclosure requirement set forth in 12 CFR
37.6.
[sbull] The second disclosure set forth in Appendix A to part 37
(Short Form Disclosures), entitled ``Lump sum payment of fee,''
informing the customer that he or she has the option to pay the fee in
a single lump sum or in periodic payments.
[sbull] The third disclosure set forth in Appendix A to part 37
(Short Form Disclosures), entitled ``Lump sum payment of fee with no
refund,'' informing the customer that he or she has the option to
purchase a DCC or DSA with a refund provision.
[sbull] The fifth disclosure set forth in Appendix A to part 37
(Short Form Disclosures), entitled ``Additional disclosures,''
indicating that the customer will receive additional
[[Page 35285]]
information before being required to pay for the DCC or DSA.\3\
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\3\ The sixth disclosure set forth in Appendix A to part 37,
provides banks the option of directing customers either to the long
form disclosures or the contract for a full explanation of the
terms. Clearly, since the long form is not required for the time
being, the bank will refer customers to the contract.
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[sbull] The requirement to obtain a customer's written
acknowledgment of receipt of disclosures set forth at 12 CFR 37.7(a).
The OCC expects that national banks that do not provide long forms
disclosures will conspicuously inform customers that they will receive
a copy of the contract before they are required to pay for the product.
Request for Comment
As we have indicated, the purpose of this delay in the time for
compliance is to permit the OCC to consider how best to address
compliance issues that arise under the circumstances described in this
notice. To aid our review of these issues, we invite comment on the
following specific questions, as well as on any other aspect of this
notice that commenters wish to address:
1. Please comment on any compliance issues or problems posed by
providing the periodic payment option and the associated short and long
form disclosures for DCCs or DSAs sold by unaffiliated, non-exclusive
agents in connection with closed-end loans.
2. Please explain the types of loan products, e.g., car loans,
where this issue arises.
3. What alternative approaches are available to provide appropriate
consumer protections?
4. In the case of closed-end loans, should the requirement in the
long form disclosures to disclose the total fee for a DCC paid on a
monthly or periodic basis be modified? Is there an alternative,
effective way to disclose that information that could be added to the
rule?
Dated: June 10, 2003.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 03-14972 Filed 6-12-03; 8:45 am]
BILLING CODE 4810-33-P