[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR444.3]

[Page 448]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 444_CREDIT PRACTICES--Table of Contents
 
Sec. 444.3  Unfair or deceptive cosigner practices.

    (a) In connection with the extension of credit to consumers in or 
affecting commerce, as commerce is defined in the Federal Trade 
Commission Act, it is:
    (1) A deceptive act or practice within the meaning of section 5 of 
that Act for a lender or retail installment seller, directly or 
indirectly, to misrepresent the nature or extent of cosigner liability 
to any person.
    (2) An unfair act or practice within the meaning of section 5 of 
that Act for a lender or retail installment seller, directly or 
indirectly, to obligate a cosigner unless the cosigner is informed prior 
to becoming obligated, which in the case of open end credit shall mean 
prior to the time that the agreement creating the cosigner's liability 
for future charges is executed, of the nature of his or her liability as 
cosigner.
    (b) Any lender or retail installment seller who complies with the 
preventive requirements in paragraph (c) of this section does not 
violate paragraph (a) of this section.
    (c) To prevent these unfair or deceptive acts or practices, a 
disclosure, consisting of a separate document that shall contain the 
following statement and no other, shall be given to the cosigner prior 
to becoming obligated, which in the case of open end credit shall mean 
prior to the time that the agreement creating the cosigner's liability 
for future charges is executed:

                           Notice to Cosigner

    You are being asked to guarantee this debt. Think carefully before 
you do. If the borrower doesn't pay the debt, you will have to. Be sure 
you can afford to pay if you have to, and that you want to accept this 
responsibility.
    You may have to pay up to the full amount of the debt if the 
borrower does not pay. You may also have to pay late fees or collection 
costs, which increase this amount.
    The creditor can collect this debt from you without first trying to 
collect from the borrower. The creditor can use the same collection 
methods against you that can be used against the borrower, such as suing 
you, garnishing your wages, etc. If this debt is ever in default, that 
fact may become a part of your credit record.
    This notice is not the contract that makes you liable for the debt.