Unfair or Deceptive Acts or Practices (Regulation AA)
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SUMMARY:
EFFECTIVE DATE: Comments must be received on or before
ADDRESSES: You may submit comments, identified by Docket No. R-1490 and RIN 7100 AE-19, by any of the following methods:
* Agency Web site: http://www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
* Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
* Email: [email protected]. Include the docket number in the subject line of the message.
* FAX: (202) 452-3819 or (202) 452-3102.
* Mail: Robert deV. Frierson, Secretary,
All public comments are available from the Board's Web site at http://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted, unless modified for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper form in Room MP-500 of the
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION: The FTC Act directs the
FOOTNOTE 1 15 U.S.C. 45 and 57a(a)(1). END FOOTNOTE
FOOTNOTE 2 16 CFR 444.1-.5. END FOOTNOTE
Prior to Dodd-Frank Act amendments to the FTC Act in 2010, section 18(f)(1) of the Act required the Board to promulgate rules applicable to banks that were "substantially similar" to these FTC rules, with some exceptions. /3/ In addition, section 18(f)(1) of the Act provided the Board the authority to prescribe additional rules for banks addressing unfair or deceptive acts or practices--regardless of whether the FTC had promulgated rules about such acts or practices. The Act also required the Board to take appropriate action on complaints about unfair or deceptive acts or practices by banks. /4/
FOOTNOTE 3 Section 18(f)(1) of the Act was previously codified at 15 U.S.C. 57a(f)(1). The Board was not required to impose substantially similar rules if it found that: (1) Such acts or practices of banks were not unfair or deceptive, or (2) implementation of similar regulations with respect to banks would seriously conflict with essential monetary and payments systems policies of the Board. END FOOTNOTE
FOOTNOTE 4 The same authority that was conferred to the Board by section 18(f)(1) of the Act also applied to the Federal Home Loan Bank Board (FHLBB) (predecessor to the
Pursuant to its rule writing authority in section 18(f)(1) of the FTC Act, the Board issued Regulation AA, /5/ including the Board's credit practices rule, which was adopted in 1985. /6/ The Board's credit practices rule was substantially similar to the FTC's Credit Practices Rule; in adopting the rule, the Board relied on the extensive findings that had been made by the FTC that the prohibited practices were unfair or deceptive.
FOOTNOTE 5 12 CFR Part 227. END FOOTNOTE
FOOTNOTE 6 12 CFR Part 227, subpart B. END FOOTNOTE
The Board's credit practices rule in Regulation AA prohibits banks from using certain remedies to enforce consumer credit obligations and from including these remedies in their consumer credit contracts. Specifically, the rule prohibits the following contract provisions and remedies:
(1) Confession of judgment clauses that require consumers to agree in advance to waive their right to a hearing;
(2) Waivers of state statutory exemptions that protect debtors' homes and personal necessities from attachment to satisfy a debt, unless they were pledged as collateral for the loan;
(3) Clauses that assign consumers' future wages to the creditor in the event of default; and
(4) Provisions granting the creditor a security interest in household goods not in the creditor's possession, unless the goods were purchased with the credit.
The rule also prohibits banks from:
(1) Obligating a co-signer on the debt unless the co-signer previously received a clear and conspicuous written notice explaining the nature of the co-signer's obligations and liabilities under the contract; and
(2) Imposing a late fee when a consumer makes a full loan payment on time or within the grace period, solely because the consumer did not pay a previous late fee imposed on an earlier installment (the "pyramiding" of late fees).
In addition, Regulation AA contains a provision that informs consumers how to file a complaint regarding a state member bank and explains the Board's procedure for responding to such complaints. /7/ The provision lists an address to which consumers may send their complaint, and explains that consumers will receive, within 15 business days, either a substantive response or an acknowledgment setting a reasonable time for a substantive response.
FOOTNOTE 7 12 CFR 227.2. END FOOTNOTE
Finally, Regulation AA contains information regarding state exemptions from the rule. /8/ The Board also published, separately from the regulation, Staff Guidelines to clarify how Regulation AA applied in particular circumstances. /9/
FOOTNOTE 8 12 CFR 227.16. END FOOTNOTE
FOOTNOTE 9 http://www.federalreserve.gov/regulations/cg/crdtpracrul.htm. END FOOTNOTE
The Dodd-Frank Act /10/ repealed section 18(f)(1) of the FTC Act. /11/ Accordingly, the Board is proposing to repeal its Regulation AA.
FOOTNOTE 10 Pub. L. No. 111-203, 124
FOOTNOTE 11 See section 1092(2) of the Dodd-Frank Act. The repeal of section 18(f)(1) of the FTC Act also repealed the authorities of the former FHLBB and the NCUA. See supra note 4. Section 1092(2) of the Dodd-Frank Act did not repeal FTC Act rule writing authority for the FTC, so the FTC Credit Practices Rule remains in effect. See supra note 2. END FOOTNOTE
II. Discussion
Unlike other consumer protection laws and regulations, Regulation AA did not transfer from the Board to the
FOOTNOTE 12 See Dodd-Frank Act sections 1061(a)(1), (b)(1) (transferring authority of "Federal consumer financial laws" to the Bureau) and section 1002(14) (defining "Federal consumer financial laws"). END FOOTNOTE
FOOTNOTE 13 Section 1031 of the Dodd-Frank Act. END FOOTNOTE
Notwithstanding the repeal of rule writing authority under the FTC Act, the Board continues to have supervisory and enforcement authority regarding unfair or deceptive acts or practices under section 5 of the FTC Act and sections 1031 and 1036 of the Dodd-Frank Act. /14/ Concurrent with this proposed repeal of Regulation AA, the Board, Bureau,
--This is a summary of a
Notice of proposed rulemaking; request for public comment.
CFR Part: "12 CFR Part 227"
RIN Number: "RIN 7100 AE-19"
Citation: "79 FR 51115"
Document Number: "Docket No. R-1490"
Federal Register Page Number: "51115"
"Proposed Rules"
Copyright: | (c) 2014 Federal Information & News Dispatch, Inc. |
Wordcount: | 1435 |
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