Title 12--Banks and Banking

CHAPTER II--FEDERAL RESERVE SYSTEM

PART 227--UNFAIR OR DECEPTIVE ACTS OR PRACTICES (REGULATION AA)

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Sec. 227.1 Definitions.
    

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                     Subpart A--Consumer Complaints
 
    Authority: Sec. 18(f), Federal Trade Commission Act, as amended by 
Pub. L. 93-637.


    For the purposes of this part,\1\ unless the context indicates 
otherwise, the following definitions apply:
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    \1\ The words this part, as used herein, mean title 12, chapter II, 
part 227 of the Code of Federal Regulations, cited as 12 CFR part 227 
and designated as Regulation AA.
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    (a) Board means the Board of Governors of the Federal Reserve 
System.
    (b) Consumer complaint means an allegation by or on behalf of an 
individual, group of individuals, or other entity that a particular act 
or practice of a State member bank is unfair or deceptive, or in 
violation of a regulation issued by the Board pursuant to a Federal 
statute, or in violation of any other Act or regulation under which the 
bank must operate.
    (c) State member bank means a bank that is chartered by a State and 
is a member of the Federal Reserve System.
    (d) Unless the context indicates otherwise, bank shall be construed 
to mean a State member bank, and complaint to mean a consumer complaint.

[Reg. AA, 41 FR 44362, Oct. 8, 1976]

Sec. 227.2 Consumer compliant procedure.
     

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                     Subpart A--Consumer Complaints
 
    (a) Submission of complaints. (1) Any consumer having a complaint 
regarding a State member bank is invited to submit it to the Federal 
Reserve System. The complaint should be submitted in writing, if 
possible, and should include the following information:
    (i) A description of the act or practice that is thought to be 
unfair or deceptive, or in violation of existing law or regulation, 
including all relevant facts;
    (ii) The name and address of the bank that is the subject of the 
complaint; and
    (iii) The name and address of the complainant.
    (2) Consumer complaints should be made to:
    (i) The Director, Division of Consumer Affairs, Board of Governors 
of the Federal Reserve System, Washington, DC 20551; or
    (ii) The Federal Reserve Bank of the District in which the bank is 
located. The addresses of the Federal Reserve Banks are as follows:

Federal Reserve Bank of Boston, 30 Pearl Street, Boston, MA 02106.
Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045.
Federal Reserve Bank of Philadelphia, 100 North 6th Street, 
Philadelphia, PA 19105.

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Federal Reserve Bank of Cleveland, 1455 East Sixth Street, Cleveland, OH 
44101.
Federal Reserve Bank of Richmond, 100 North Ninth Street, Richmond, VA 
23261.
Federal Reserve Bank of Chicago, 230 South La Salle Street, Chicago, IL 
60690.
Federal Reserve Bank of St. Louis, 411 Locust Street, St. Louis, MO 
63166.
Federal Reserve Bank of Minneapolis, 250 Marquette Street, Minneapolis, 
MN 55480.
Federal Reserve Bank of Kansas City, 925 Grand Avenue, Kansas City, MO 
64198.
Federal Reserve Bank of Dallas, 400 South Akard Street, Dallas, TX 
75222.
Federal Reserve Bank of Atlanta, 104 Marietta Street NW., Atlanta, GA 
30303.
Federal Reserve Bank of San Francisco, 400 Sansome Street, San 
Francisco, CA 94120.

    (b) Response to complaints. Within 15 business days of receipt of a 
written complaint by the Board or a Federal Reserve Bank, a substantive 
response or an acknowledgment setting a reasonable time for a 
substantive response will be sent to the individual making the 
complaint.
    (c) Referrals to other agencies. Complaints received by the Board or 
a Federal Reserve Bank regarding an act or practice of an institution 
other than a State member bank will be forwarded to the Federal agency 
having jurisdiction over that institution.

[Reg. AA, 41 FR 44362, Oct. 8, 1976, as amended at 42 FR 2950, Jan. 14, 
1977]

Sec. 227.11 Authority, purpose, and scope.
     

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                   Subpart B--Credit Practices Rule 

    Authority: 15 U.S.C. 57a.

    Source: Reg. AA, 50 FR 16697, Apr. 29, 1985, unless otherwise noted.

    (a) Authority. This subpart is issued by the Board under section 
18(f) of the Federal Trade Commission Act, 15 U.S.C. 57a(f) (section 
202(a) of the Magnuson-Moss Warranty--Federal Trade Commission 
Improvement Act, Pub. L. 93-637).
    (b) Purpose. Unfair or deceptive acts or practices in or affecting 
commerce are unlawful under section 5(a)(1) of the Federal Trade 
Commission Act, 15 U.S.C. 45(a)(1). This subpart defines unfair or 
deceptive acts or practices of banks in connection with extensions of 
credit to consumers.
    (c) Scope. This subpart applies to all banks and their subsidiaries, 
except savings banks that are members of the Federal Home Loan Bank 
System. Compliance is to be enforced by:
    (1) The Comptroller of the Currency, in the case of national banks, 
banks operating under the code of laws for the District of Columbia, and 
federal branches and federal agencies of foreign banks;
    (2) The Board of Governors of the Federal Reserve System, in the 
case of banks that are members of the Federal Reserve System (other than 
banks referred to in paragraph (c)(1) of this section), branches and 
agencies of foreign banks (other than federal branches, federal 
agencies, and insured state branches of foreign banks), commercial 
lending companies owned or controlled by foreign banks, and 
organizations operating under section 25 or 25A of the Federal Reserve 
Act; and
    (3) The Federal Deposit Insurance Corporation, in the case of banks 
insured by the Federal Deposit Insurance Corporation (other than banks 
referred to in paragraphs (c)(1) and (c)(2) of this section), and 
insured state branches of foreign banks.
    (d) The terms used in paragraph (c) of this section that are not 
defined in the Federal Trade Commission Act or in section 3(s) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning 
given to them in section 1(b) of the International Banking Act of 1978 
(12 U.S.C. 3101).

[Reg. AA, 50 FR 16697, Apr. 29, 1985, as amended at 57 FR 20401, May 13, 
1992]

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                    Subpart B--Credit Practices Rule
 
    For the purposes of this subpart, the following definitions apply:
    (a) Consumer means a natural person who seeks or acquires goods, 
services, or money for personal, family, or household use other than for 
the purchase of real property.
    (b)(1) 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.

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    (2) Cosigner 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.
    (3) A person who meets the definition in this paragraph is a 
cosigner, whether or not the person is designated as such on the credit 
obligation.
    (c) Earnings means compensation paid or payable to an individual or 
for the individual's account for personal services rendered or to be 
rendered by the individual, whether denominated as wages, salary, 
commission, bonus, or otherwise, including periodic payments pursuant to 
a pension, retirement, or disability program.
    (d) Household goods means clothing, furniture, appliances, linens, 
china, crockery, kitchenware, and personal effects of the consumer and 
the consumer's dependents. The term household goods does not include:
    (1) Works of art;
    (2) Electronic entertainment equipment (other than one television 
and one radio);
    (3) Items acquired as antiques; that is, items 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).
    (e) Obligation means an agreement between a consumer and a creditor.
    (f) Person means an individual, corporation, or other business 
organization.

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                    Subpart B--Credit Practices Rule
 
    It is an unfair act or practice for a bank to enter into a consumer 
credit obligation that contains, or to enforce in a consumer credit 
obligation purchased by the bank, any of the following provisions:
    (a) Confession of judgment. 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 of notice and the 
opportunity to be heard in the event of suit or process thereon.
    (b) Waiver of exemption. 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.
    (c) Assignment of wages. An assignment of wages or other earnings 
unless:
    (1) The assignment by its terms is revocable at the will of the 
debtor;
    (2) 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
    (3) The assignment applies only to wages or other earnings already 
earned at the time of the assignment.
    (d) Security interest in household goods. A nonpossessory security 
interest in household goods other than a purchase money security 
interest.

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                    Subpart B--Credit Practices Rule
 
    (a) Prohibited practices. In connection with the extension of credit 
to consumers, it is:
    (1) A deceptive act or practice for a bank to misrepresent the 
nature or extent of cosigner liability to any person; and
    (2) An unfair act or practice for a bank to obligate a cosigner 
unless the cosigner is informed prior to becoming obligated of the 
nature of the cosigner's liability.
    (b) Disclosure requirement. (1) A clear and conspicuous disclosure 
statement shall be given in writing to the cosigner prior to becoming 
obligated. The disclosure statement shall be substantially similar to 
the following statement 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

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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 bank can collect this debt from you without first trying to 
collect from the borrower. The bank 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) In the case of open-end credit, the disclosure statement shall 
be given to the cosigner prior to the time that the cosigner becomes 
obligated for fees or transactions on the account.
    (3) A bank that is in compliance with this paragraph may not be held 
in violation of paragraph (a)(2) of this section.

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                    Subpart B--Credit Practices Rule 

    (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 bank to 
levy or collect any delinquency charge on a payment, when the only 
delinquency is attributable to late fees or delinquency charges assessed 
on earlier installments, and the payment is otherwise a full payment for 
the applicable period and is paid on its due date or within an 
applicable grace period.
    (b) For the 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 money due 
(or alleged to be due) from a consumer.

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                    Subpart B--Credit Practices Rule

    (a) General rule. (1) An appropriate state agency may apply to the 
Board for a determination that:
    (i) There is a state requirement or prohibition in effect that 
applies to any transaction to which a provision of this subpart applies; 
and
    (ii) 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 subpart.
    (2) If the Board makes such a determination, the provision of this 
subpart will not be in effect in that state to the extent specified by 
the Board in its determination, for as long as the state administers and 
enforces the state requirement or prohibition effectively.
    (b) Applications. The procedures under which a state agency may 
apply for an exemption under this section are the same as those set 
forth in appendix B to Regulation Z (12 CFR part 226).

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