12 C.F.R. PART 535—PROHIBITED CONSUMER CREDIT PRACTICES
Title 12 - Banks and Banking
Authority: Sec. 18, as added by sec. 202, 88 Stat. 2193, as amended (15 U.S.C. 57a).
Source: 54 FR 49479, Nov. 30, 1989, unless otherwise noted.
(a) Act. For the purposes of this part, “Act” means the Federal Trade Commission Act, 15 U.S.C. 41 et seq. (b) Consumer. The term “consumer” means a natural person who seeks or acquires goods, services, or money for personal, family, or household purposes, and who applies for or is extended “consumer credit” as defined in §561.12 of this chapter. (c) Cosigner. The term “cosigner” means a natural person who assumes liability for the obligation of a consumer without receiving goods, services, or money in return for the obligation, or in the case of an open-end credit obligation, without receiving the contractual right to obtain extensions of credit under the account. The term shall include any person whose signature is requested as a condition to granting credit to a consumer, or as a condition for forbearance on collection of a consumer's obligation that is in default. The term shall not include a spouse or other person whose signature is required on a credit obligation to perfect a security interest pursuant to state law. A person is a cosigner within the meaning of this definition whether or not he or she is designated as such on a credit obligation. (d) Creditor. The term “creditor” means a savings association. (e) Debt. The term “debt” means money that is due or alleged to be due from one to another. (f) Earnings. The term “earnings” means compensation paid or payable to an individual or for his or her account for personal services rendered or to be rendered by him or her, whether denominated as wages, salary, commission, bonus, or otherwise, including periodic payments pursuant to a pension, retirement, or disability program. (g) Household goods. The term “household goods” means clothing, furniture, appliances, linens, china, crockery, kitchenware, and personal effects of the consumer and his or her dependents, provided that the following are not included within the scope of the term “household goods”: (1) Works of art; (2) Electronic entertainment equipment (except one television and one radio); (3) Antiques, i.e., any item over one hundred years of age, including such items that have been repaired or renovated without changing their original form or character, and (4) Jewelry (other than wedding rings). (h) Savings association. For purposes of this part, the term “savings association” includes any savings association, and any service corporation that is wholly owned by one or more savings association, that engages in the business of providing credit to consumers. (i) Obligation. The term “obligation” means an agreement between a consumer and a creditor. (j) Person. The term “person” means an individual, corporation, or other business organization. (a) In connection with the extension of credit to consumers after January 1, 1986, it is an unfair act or practice within the meaning of section 5 of the Act for a savings association directly or indirectly to enter into a consumer credit obligation that constitutes or contains, or to enforce in a consumer credit obligation purchased by a savings association, any of the following provisions: (1) A cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit or process thereon; (2) An executory waiver or a limitation of exemption from attachment, execution, or other process on real or personal property held, owned by, or due to the consumer, unless the waiver applies solely to property subject to a security interest executed in connection with the obligation; (3) An assignment of wages or other earnings, unless: (i) The assignment by its terms is revocable at the will of the debtor, (ii) The assignment is a payroll deduction plan or preauthorized payment plan, commencing at the time of the transaction, in which the consumer authorizes a series of wage deductions as a method of making each payment, or (iii) The assignment applies only to wages or other earnings already earned at the time of the assignment. (4) A nonpossessory security interest in household goods other than a purchase-money security interest. (a) General. In connection with the extension of credit to consumers after January 1, 1986, it is: (1) A deceptive act or practice within the meaning of section 5 of the Act for a savings association, 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 the Act for a savings association, directly or indirectly, to obligate a cosigner unless the cosigner is informed, prior to becoming obligated, of the nature of his or her liability as cosigner. (b) Disclosure requirement. (1) A clear and conspicuous document that shall contain the following statement or one which is substantially equivalent, shall be given to the consigner prior to becoming obligated (which, in the case of open-end credit, shall mean prior to the time that the cosigner becomes obligated for any fees or transaction on the account):
Notice of 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. (2) Compliance with the disclosure requirement under paragraph (b)(1) of this section shall constitute compliance with the consumer information requirement of paragraph (a)(2) of this section. (3) If the notice is a separate document, nothing other than the following times may appear with the notice: (i) The name and address of the savings association; (ii) An identification of the debt to be cosigned (e.g., a loan identification number); (iii) The date; and (iv) The statement, “This notice is not the contract that makes you liable for the debt.” (a) In connection with collecting a debt arising out of an extension of credit to a consumer after January 1, 1986, it is an unfair act or practice within the meaning of section 5 of the Act for a savings association, directly or indirectly, to levy or collect any delinquency charge on a payment, which payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, when the only delinquency is attributable to late fee(s) or delinquency charge(s) assessed on earlier installment(s). (b) For the purposes of this part, “collecting a debt” means any activity, other than the use of judicial process, that is intended to bring about or does bring about repayment of all or part of a consumer debt. (a) Upon application to the Office by an appropriate state agency, the Office shall determine if: (1) There is a state requirement or prohibition in effect that applies to any transaction to which a provision of this rule applies; and (2) The state requirement or prohibition affords a level of protection to consumers that is substantially equivalent to, or greater than, the protection afforded by this rule. (b) If the Office makes a determination as specified under paragraph (a) of this section, then that provision of this section will not be in effect in that state to the extent specified by the Office in its determination, for as long as the state administers and enforces the state requirement or prohibition effectively, as determined by the Office. (c) The Director of Consumer Affairs in consultation with the Chief Counsel shall have delegated authority to make such determinations as are required under this part 535.
Title 12: Banks and Banking
PART 535—PROHIBITED CONSUMER CREDIT PRACTICES
Section Contents
§ 535.1 Definitions.
§ 535.2 Unfair credit practices.
§ 535.3 Unfair or deceptive cosigner practices.
§ 535.4 Late charges.
§ 535.5 State exemptions.
§ 535.1 Definitions.
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§ 535.2 Unfair credit practices.
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§ 535.3 Unfair or deceptive cosigner practices.
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§ 535.4 Late charges.
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§ 535.5 State exemptions.
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