[Federal Register Volume 59, Number 150 (Friday, August 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19310]
[[Page Unknown]]
[Federal Register: August 5, 1994]
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FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R-0844]
Truth in Lending
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule; temporary exceptions.
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SUMMARY: The Board is amending Regulation Z (which implements the Truth
in Lending Act) to provide relief in areas in the South recently
affected by major flooding. The amendments provide a temporary
exception from provisions of the regulation that prohibit a creditor
from using a preprinted form by a creditor to obtain a consumer's
waiver of the right to rescind certain home-secured loans when loan
proceeds are needed immediately to meet a consumer's bona fide personal
financial emergency. In addition, a consumer's need to obtain funds
immediately shall be regarded as a bona fide personal financial
emergency for purposes of Regulation Z for transactions secured by a
consumer's principal dwelling located in areas of the South recently
declared to be major disaster areas because of extensive flooding.
Generally, Regulation Z requires a mandatory three day waiting period
on rescindable transactions before funds can be disbursed. The special
exceptions expire one year from the date the area was declared a major
disaster.
EFFECTIVE DATE: July 29, 1994.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Staff Attorney, or
Adrienne D. Hurt, Managing Counsel, Division of Consumer and Community
Affairs, at (202) 452-2412 or (202) 452-3667; for the hearing impaired
only, contact Dorothea Thompson, Telecommunications Device for the Deaf
(TDD), at (202) 452-3544, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
I. Background
Under the Truth in Lending Act (TILA), 15 U.S.C 1601-1666j, and
Regulation Z, 12 CFR Part 226, with some exceptions, a consumer has the
right to rescind a credit obligation secured by the consumer's
principal dwelling for three days after becoming obligated, due to the
risk of loss of the consumer's home in the event of default. There is a
mandatory waiting period of three business days before funds can be
disbursed in order to give consumers an opportunity to reflect on the
loan terms and to elect to cancel the transaction (12 CFR 226.15 and
226.23). A consumer may modify or waive this right of rescission to
meet a bona fide personal financial emergency. The consumer must
provide the creditor a written, signed and dated waiver statement that
describes the emergency. Under Regulation Z, 12 CFR 226.15(e) and
226.23(e), the waiver statement may not be executed on a preprinted
form.
The Board has previously adopted an exception to Regulation Z for
transactions in areas affected by Hurricanes Andrew and Iniki and the
April 1992 Los Angeles civil unrest (57 FR 53545 (1992)); extensive
flooding in the Midwest (58 FR 40582 (1993)); and most recently, a
major earthquake in California (59 FR 6532 (1994)). The Board's
exception permitted a temporary waiver of the provisions in Regulation
Z that prohibit an institution's use of a preprinted form to obtain a
consumer's waiver of the right to rescind certain home-secured loans
when loan funds were needed immediately to meet a consumer's bona fide
personal financial emergency. In addition, a consumer's need to obtain
funds immediately was regarded as a bona fide personal financial
emergency for purposes of Regulation Z, where the home securing the
loan was located in the disaster area.
II. Relief for Flood Affected Communities
During the summer of 1994, extensive flooding has occurred in
several Southern States, including Alabama, Florida, and Georgia. As a
result, the President has determined that extensive major disaster
areas exist in those states. In order to aid consumers in obtaining
credit speedily to begin repairs in these areas and to ease the
paperwork burden on banks extending credit in these areas, the Board
has determined to provide a temporary exception in this situation to
the restrictions in Secs. 226.15(e) and 23(e) of Regulation Z in flood
affected areas. This exception will expire one year from the date the
President determined that an area was a major disaster.
The Board is amending Regulation Z to permit a temporary exception
to its provisions that prohibit the use of a preprinted form by an
institution to obtain a consumer's waiver of the right to rescind
certain home-secured loans when the home is located in an area that the
President has determined, pursuant to section 401 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act , (42 U.S.C. 5170
(1989)), is a major disaster area as a result of the extensive flooding
in 1994 in the South. The Board notes, however, that the consumer must
still sign and date the waiver statement. The following counties in
Alabama, Florida, and Georgia have been declared major disaster areas.
Alabama: Barbour, Coffee, Covington, Dale, Geneva, Henry, Houston,
Randolph
Florida: Calhoun, Gulf, Holmes, Jackson, Walton, Washington
Georgia: Baker, Bibb, Butts, Calhoun, Clay, Clayton, Coweta,
Crawford, Crisp, Decatur, Dooly, Dougherty, Early, Fayette, Fulton,
Henry, Houston, Jones, Lamar, Lee, Macon, Meriwether, Miller,
Mitchell, Monroe, Peach, Pike, Pulaski, Randolph, Seminole,
Spalding, Stewart, Sumter, Talbot, Taylor, Terrell, Troup, Twiggs,
Upson, Webster, Wilcox, Worth
III. Public Comment and Effective Date
The Administrative Procedures Act (APA) grants specific exemptions
from its notice and public comment requirements for rulemakings when
these requirements are contrary to the public interest (5 U.S.C.
553(b)(3)(B)). The amendments in the final rule provide a temporary
exemption to Regulation Z and remove a restriction that may impair the
availability of loans to consumers who have encountered a bona fide
personal financial emergency as a result of having a home located in an
area where a major disaster has occurred. The Board finds that it is in
the public interest to permit this relief immediately and without
advance notice and public comment. As explained above, the amendment to
Regulation Z may reduce the paperwork burden on banks extending credit
in certain disaster areas and aid in making credit speedily available
to consumers in these areas. In addition, consumers continue to have
the right to rescind certain loans unless that right is specifically
waived. Moreover, the exemption is limited in scope and duration and
would provide immediate assistance to consumers' and lenders' ongoing
efforts to reconstruct and rehabilitate only in certain areas that have
been affected by recent major disasters recognized under the
appropriate federal relief statutes.
For reasons explained above, the Board also believes that deferring
the effective date of this action is contrary to the public interest in
connection with the adoption of the final rule. The APA grants a
specific exemption from its requirements relating to this item in these
instances (5 U.S.C. 553 (d)(3)). Accordingly, the amendments to
Regulation Z are effective immediately.
IV. Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 605(b)), the Board does not believe that the adoption of this
final rule would have a significant adverse impact on a substantial
number of small entities. The amendment imposes no new requirements and
temporarily removes a restriction imposed by Regulation Z on entities
subject to the regulation.
V. Paperwork Reduction Act Analysis
No collection of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in these
changes.
List of Subjects in 12 CFR Part 226
Advertising, Banks, banking, Consumer protection, Credit, Federal
Reserve System, Finance, Penalties, Rate limitations, Reporting and
recordkeeping requirements, Truth in lending.
For the reasons set forth in the preamble, the Board is amending 12
CFR part 226 as follows:
PART 226--TRUTH IN LENDING (REGULATION Z)
1. The authority citation for part 226 is revised to read as
follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
Subart B--Open-End Credit
Sec. 226.16 [Amended]
2. In Sec. 226.16 footnotes 36b and 36c are redesignated 36c and
36d, respectively.
3. In Sec. 226.15 a new paragraph (e)(3) and footnote 36b are added
to read as follows:
Sec. 226.15 Right of rescission.
* * * * *
(e) * * *
(3) The consumer's need to obtain funds immediately shall be
regarded as a bona fide personal financial emergency provided that the
dwelling securing the extension of credit is located in an area
declared during June through September 1994 to be a major disaster
area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding
in the South.36b In this instance, creditors may use printed forms
for the consumer to waive the right to rescind. This exemption to
paragraph (e)(1) of this section shall expire one year from the date an
area was declared a major disaster.
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\3\6bA list of the affected areas will be maintained and
published by the Board. Such areas now include parts of Alabama,
Florida, and Georgia.
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* * * * *
Subpart C--Closed-End Credit
4. In Sec. 226.23 a new paragraph (e)(3) and footnote 48(b) are
added to read as follows:
Sec. 226.23 Right of rescission.
* * * * *
(e) * * *
(3) The consumer's need to obtain funds immediately shall be
regarded as a bona fide personal financial emergency provided that the
dwelling securing the extension of credit is located in an area
declared during June through September 1994 to be a major disaster
area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding
in the South.48b In this instance, creditors may use printed forms
for the consumer to waive the right to rescind. This exemption to
paragraph (e)(1) of this section shall expire one year from the date an
area was declared a major disaster.
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\4\8bA list of the affected areas will be maintained and
published by the Board. Such areas now include parts of Alabama,
Florida, and Georgia.
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* * * * *
By order of the Board of Governors of the Federal Reserve
System, July 29, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-19310 Filed 8-4-94; 8:45 am]
BILLING CODE 6210-01-P
