12 C.F.R. PART 706—CREDIT PRACTICES
Title 12 - Banks and Banking
Authority: 15 U.S.C. 57a(f).
Source: 52 FR 46586, Dec. 9, 1987, unless otherwise noted.
(a) Person. An individual, corporation, or other business organization. (b) Consumer. A natural person member who seeks or acquires goods, services, or money for personal, family, or household use. (c) Obligation. An agreement between a consumer and a Federal credit union. (d) Debt. Money that is due or alleged to be due from one to another. (e) Earnings. 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. (f) Household goods. Clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) 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) Items acquired as antiques; and (4) Jewelry (except wedding rings). (g) Antique. Any item over one hundred years of age, including such items that have been repaired or renovated without changing their original form or character. (h) Cosigner. A natural person who renders himself or herself liable for the obligation of another person without receiving goods, services, or money in return for the credit obligation, or, in the case of an open-end credit obligation, without receiving the contractual right to obtain extensions of credit under the obligation. The term includes 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 does not include a spouse 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. (a) In connection with the extension of credit to consumers, it is an unfair act or practice for a Federal credit union, directly or indirectly, to take or receive from a consumer an obligation that: (1) Constitutes or contains 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) Constitutes or contains 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) Constitutes or contains an assignment of wages or other earnings unless: (i) The assignment by its terms is revocable at the will of the debtor, or (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) Constitutes or contains a nonpossessory security interest in household goods other than a purchase money security interest. (a) Prohibited practices. In connection with the extension of credit to consumers, it is: (1) A deceptive act or practice for a Federal credit union, directly or indirectly, to mispresent the nature or extent of cosigner liability to any person. (2) An unfair act or practice for a Federal credit union, directly or indirectly, to obligate a cosigner unless the cosigner is informed prior to becoming obligated, which in the case of open-end credit means 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) Disclosure requirement. (1) To comply with the cosigner information requirement of paragraph (a)(2) of this section, a clear and conspicuous disclosure statement shall be given in writing to the cosigner prior to becoming obligated. The disclosure statement will contain only the following statement, or one which is substantially equivalent, and shall either be a separate document or included in the documents evidencing the consumer credit obligation.
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. (2) If the notice to cosigner is a separate document, nothing other than the following items may appear with the notice. Items (i) through (v) may not be part of the narrative portion of the notice to cosigner. (i) The name and address of the Federal credit union; (ii) An identification of the debt to be consigned (e.g., a loan identification number); (iii) The amount of the loan; (iv) The date of the loan; (v) A signature line for a cosigner to acknowledge receipt of the notice; and (vi) To the extent permitted by state law, a cosigner notice required by state law may be included in the paragraph (b)(1) notice. (3) To the extent the notice to cosigner specified in paragraph (b)(1) of this section refers to an action against a cosigner that is not permitted by state law, the notice to cosigner may be modified. (a) In connection with collecting a debt arising out of an extension of credit to a consumer, it is an unfair act or practice for a Federal credit union, 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 purposes of this section, “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) If, upon application to the NCUA by an appropriate state agency, the NCUA determines that: (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; then that provision of this rule will not be in effect in the state to the extent specified by the NCUA in its determination, for as long as the state administers and enforces the state requirement or prohibition effectively. (b) States that received an exemption from the Federal Trade Commission's Credit Practices Rule prior to September 17, 1987, are not required to reapply to NCUA for an exemption under paragraph (a) of this section provided that the state forwards a copy of its exemption determination to the appropriate Regional Office. NCUA will honor the exemption for as long as the state administers and enforces the state requirement or prohibition effectively. Any state seeking a greater exemption than that granted to it by the Federal Trade Commission must apply to NCUA for the exemption.
Title 12: Banks and Banking
PART 706—CREDIT PRACTICES
Section Contents
§ 706.1 Definitions.
§ 706.2 Unfair credit practices.
§ 706.3 Unfair or deceptive cosigner practices.
§ 706.4 Late charges.
§ 706.5 State exemptions.
§ 706.1 Definitions.
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§ 706.2 Unfair credit practices.
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§ 706.3 Unfair or deceptive cosigner practices.
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§ 706.4 Late charges.
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§ 706.5 State exemptions.
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