[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2015 Edition]
[From the U.S. Government Publishing Office]


 
[[Page i]]

          

          Title 12

Banks and Banking


________________________

Parts 900 to 1025

                         Revised as of January 1, 2015

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2015
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

          U.S. GOVERNMENT OFFICIAL EDITION NOTICE

          Legal Status and Use of Seals and Logos
          
          
          The seal of the National Archives and Records Administration 
              (NARA) authenticates the Code of Federal Regulations (CFR) as 
              the official codification of Federal regulations established 
              under the Federal Register Act. Under the provisions of 44 
              U.S.C. 1507, the contents of the CFR, a special edition of the 
              Federal Register, shall be judicially noticed. The CFR is 
              prima facie evidence of the original documents published in 
              the Federal Register (44 U.S.C. 1510).

          It is prohibited to use NARA's official seal and the stylized Code 
              of Federal Regulations logo on any republication of this 
              material without the express, written permission of the 
              Archivist of the United States or the Archivist's designee. 
              Any person using NARA's official seals and logos in a manner 
              inconsistent with the provisions of 36 CFR part 1200 is 
              subject to the penalties specified in 18 U.S.C. 506, 701, and 
              1017.

          Use of ISBN Prefix

          This is the Official U.S. Government edition of this publication 
              and is herein identified to certify its authenticity. Use of 
              the 0-16 ISBN prefix is for U.S. Government Publishing Office 
              Official Editions only. The Superintendent of Documents of the 
              U.S. Government Publishing Office requests that any reprinted 
              edition clearly be labeled as a copy of the authentic work 
              with a new ISBN.

              
              
          U . S . G O V E R N M E N T P U B L I S H I N G O F F I C E

          ------------------------------------------------------------------

          U.S. Superintendent of Documents  Washington, DC 20402-0001

          http://bookstore.gpo.gov

          Phone: toll-free (866) 512-1800; DC area (202) 512-1800

[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter IX--Federal Housing Finance Board                  3
          Chapter X--Bureau of Consumer Financial Protection        45
  Finding Aids:
      Table of CFR Titles and Chapters........................     599
      Alphabetical List of Agencies Appearing in the CFR......     619
      List of CFR Sections Affected...........................     629

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 900.1 refers 
                       to title 12, part 900, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2015), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
an approved incorporation by reference, please contact the agency that 
issued the regulation containing that incorporation. If, after 
contacting the agency, you find the material is not available, please 
notify the Director of the Federal Register, National Archives and 
Records Administration, 8601 Adelphi Road, College Park, MD 20740-6001, 
or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page vii]]

    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, 8601 Adelphi Road, College Park, MD 
20740-6001 or e-mail [email protected].

SALES

    The Government Publishing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call toll-free, 
866-512-1800, or DC area, 202-512-1800, M-F 8 a.m. to 4 p.m. e.s.t. or 
fax your order to 202-512-2104, 24 hours a day. For payment by check, 
write to: US Government Publishing Office - New Orders, P.O. Box 979050, 
St. Louis, MO 63197-9000.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers of the Presidents of the United 
States, Compilation of Presidential Documents and the Privacy Act 
Compilation are available in electronic format via www.ofr.gov. For more 
information, contact the GPO Customer Contact Center, U.S. Government 
Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-
mail, [email protected].
    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.archives.gov/federal-
register.
    The e-CFR is a regularly updated, unofficial editorial compilation 
of CFR material and Federal Register amendments, produced by the Office 
of the Federal Register and the Government Publishing Office. It is 
available at www.ecfr.gov.

    Amy P. Bunk,
    Acting Director,
    Office of the Federal Register.
    January 1, 2015.







[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of eight volumes. The parts 
in these volumes are arranged in the following order: Parts 1-199, 200-
219, 220-229, 230-299, 300-499, 500-599, part 600-899, and 900-end. The 
first volume containing parts 1-199 is comprised of chapter I--
Comptroller of the Currency, Department of the Treasury. The second, 
third and fourth volumes containing parts 200-299 are comprised of 
chapter II--Federal Reserve System. The fifth volume containing parts 
300-499 is comprised of chapter III--Federal Deposit Insurance 
Corporation and chapter IV--Export-Import Bank of the United States. The 
sixth volume containing parts 500-599 is comprised of chapter V--Office 
of Thrift Supervision, Department of the Treasury. The seventh volume 
containing parts 600-899 is comprised of chapter VI--Farm Credit 
Administration, chapter VII--National Credit Union Administration, 
chapter VIII--Federal Financing Bank. The eighth volume containing part 
900-end is comprised of chapter IX--Federal Housing Finance Board, 
chapter XI--Federal Financial Institutions Examination Council, chapter 
XIV--Farm Credit System Insurance Corporation, chapter XV--Department of 
the Treasury, chapter XVII--Office of Federal Housing Enterprise 
Oversight, Department of Housing and Urban Development and chapter 
XVIII--Community Development Financial Institutions Fund, Department of 
the Treasury. The contents of these volumes represent all of the current 
regulations codified under this title of the CFR as of January 1, 2015.

    For this volume, Ann Worley was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by Stephen J. Frattini.

[[Page 1]]
 


                       TITLE 12--BANKS AND BANKING




                  (This book contains part 900 to 1025)

  --------------------------------------------------------------------
                                                                    Part

chapter ix--Federal Housing Finance Board...................         900

chapter x-- Bureau of Consumer Financial Protection.........        1002

[[Page 3]]



                CHAPTER IX--FEDERAL HOUSING FINANCE BOARD




  --------------------------------------------------------------------

                    SUBCHAPTER A--GENERAL DEFINITIONS
Part                                                                Page
900             General definitions applying to all Finance 
                    Board regulations.......................           5
 SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
906             Operations..................................           8
 SUBCHAPTER C--GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS
914             Data availability and reporting.............           9
917             Powers and responsibilities of Bank boards 
                    of directors and senior management......           9
    SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS
930             Definitions applying to risk management and 
                    capital regulations.....................          17
931             Federal Home Loan Bank capital stock........          18
932             Federal Home Loan Bank capital requirements.          22
933             Bank capital structure plans................          34
934-999         [Reserved]

                         SUBCHAPTER F [RESERVED]
                       SUBCHAPTERS H-L [RESERVED]
            SUBCHAPTER M--FEDERAL HOME LOAN BANK DISCLOSURES

[[Page 5]]



                    SUBCHAPTER A_GENERAL DEFINITIONS





PART 900_GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD REGULATIONS
--Table of Contents



Sec.
900.1 Basic terms relating to the Finance Board, the Bank System and 
          related entities.
900.2 Terms relating to Bank operations, mission and supervision.
900.3 Terms relating to other entities and concepts used throughout 12 
          CFR chapter IX.

    Authority: 12 U.S.C. 1422b(a).

    Source: 67 FR 12842, Mar. 20, 2002, unless otherwise noted.



Sec. 900.1  Basic terms relating to the Finance Board, the Bank System
and related entities.

    As used throughout this chapter, the following basic terms relating 
to the Finance Board, the Bank System and related entities have the 
meanings set forth below, unless otherwise indicated in a particular 
subchapter, part, section, or paragraph:
    Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421 
through 1449).
    Bank, written in title case, means a Federal Home Loan Bank 
established under section 12 of the Act (12 U.S.C. 1432).
    Bank System means the Federal Home Loan Bank System, consisting of 
the 12 Banks and the Office of Finance.
    Board of Directors, written in title case, means the Board of 
Directors of the Federal Housing Finance Board; the term board of 
directors, written in lower case, has the meaning indicated in context.
    Chairperson means the Chairperson of the Board of Directors of the 
Finance Board.
    Executive Secretary means an employee within the Office of 
Management of the Finance Board who is responsible for records 
management.
    Finance Board means the Federal Housing Finance Board established by 
section 2A of the Act (12 U.S.C. 1422a).
    Financing Corporation or FICO means the Financing Corporation 
established and supervised by the Finance Board under section 21 of the 
Act (12 U.S.C. 1441) and part 995 of this chapter.
    Housing associate means an entity that has been approved as a 
housing associate pursuant to part 926 of this chapter.
    Member means an institution that has been approved for membership in 
a Bank and has purchased capital stock in the Bank in accordance with 
Sec. Sec. 925.20 or 925.24(b) of this chapter.
    Office of Finance or OF means the Office of Finance, a joint office 
of the Banks referred to in section 2B of the Act (12 U.S.C. 1422b) and 
established under part 985 of this chapter.
    Resolution Funding Corporation or REFCORP means the Resolution 
Funding Corporation established by section 21B of the Act (12 U.S.C. 
1441b) and addressed in parts 996 and 997 of this chapter.
    Secretary to the Board means employees within the Office of General 
Counsel of the Finance Board who are responsible for issues concerning 
meetings of the Board of Directors.

[67 FR 12842, Mar. 20, 2002, as amended at 68 FR 38169, June 27, 2003]



Sec. 900.2  Terms relating to Bank operations, mission and supervision.

    As used throughout this chapter, the following terms relating to 
Bank operations, mission and supervision have the meanings set forth 
below, unless otherwise indicated in a particular subchapter, part, 
section or paragraph:
    Acquired member assets or AMA means those assets that may be 
acquired by a Bank under part 955 of this chapter.
    Advance means a loan from a Bank that is:
    (1) Provided pursuant to a written agreement;
    (2) Supported by a note or other written evidence of the borrower's 
obligation; and
    (3) Fully secured by collateral in accordance with the Act and part 
950 of this chapter.
    Affordable Housing Program or AHP means the Affordable Housing 
Program, the CICA program that each Bank is required to establish 
pursuant

[[Page 6]]

to section 10(j) of the Act (12 U.S.C. 1430(j)) and part 951 of this 
chapter.
    Capital plan means the capital structure plan required for each Bank 
by section 6(b) of the Act, as amended (12 U.S.C. 1426(b)), and part 933 
of this chapter, as approved by the Finance Board, unless the context of 
the regulation refers to the capital plan prior to its approval by the 
Finance Board.
    CIP means the Community Investment Program, an advance program under 
CICA required to be offered pursuant to section 10(i) of the Act (12 
U.S.C. 1430(i)).
    Community Investment Cash Advance or CICA means any advance made 
through a program offered by a Bank under section 10 of the Act (12 
U.S.C. 1430) and parts 951 and 952 of this chapter to provide funding 
for targeted community lending and affordable housing, including 
advances made under a Bank's Rural Development Funding (RDF) program, 
offered under section 10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a 
Bank's Urban Development Funding (UDF) program, offered under section 
10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a Bank's Affordable 
Housing Program (AHP), offered under section 10(j) of the Act (12 U.S.C. 
1430(j)); a Bank's Community Investment Program (CIP), offered under 
section 10(i) of the Act (12 U.S.C. 1430(i)); or any other program 
offered by a Bank that meets the requirements of part 952 of this 
chapter.
    Community lending means providing financing for economic development 
projects for targeted beneficiaries, and, for community financial 
institutions (as defined in Sec. 925.1 of this chapter), purchasing or 
funding small business loans, small farm loans or small agri-business 
loans (as defined in Sec. 950.1 of this chapter).
    Consolidated obligation or CO means any bond, debenture, or note 
authorized under part 966 of this chapter to be issued jointly by the 
Banks pursuant to section 11(a) of the Act, as amended (12 U.S.C. 
1431(a)), or any bond or note issued by the Finance Board on behalf of 
all Banks pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)), on 
which the Banks are jointly and severally liable.
    Data Reporting Manual or DRM means a manual issued by the Finance 
Board and amended from time to time containing reporting requirements 
for the Banks.
    Excess stock means that amount of a Bank's capital stock owned by a 
member or other institution in excess of that member's or other 
institution's minimum investment in capital stock required under the 
Bank's capital plan, the Act, or the Finance Board's regulations, as 
applicable.
    Financial Management Policy or FMP means the Financial Management 
Policy For The Federal Home Loan Bank System approved by the Finance 
Board pursuant to Finance Board Resolution No. 96-45 (July 3, 1996), as 
amended by Finance Board Resolution No. 96-90 (Dec. 6, 1996), Finance 
Board Resolution No. 97-05 (Jan. 14, 1997), and Finance Board Resolution 
No. 97-86 (Dec. 17, 1997).

[67 FR 12842, Mar. 20, 2002, as amended at 71 FR 35499, June 21, 2006; 
71 FR 78050, Dec. 28, 2006]



Sec. 900.3  Terms relating to other entities and concepts used 
throughout 12 CFR chapter IX.

    As used throughout this chapter, the following terms relating to 
other entities and concepts used throughout 12 CFR chapter IX have the 
meanings set forth below, unless otherwise indicated in a particular 
subchapter, part, section or paragraph:
    Appropriate Federal banking agency has the meaning set forth in 
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)) 
and, for federally-insured credit unions, means the NCUA.
    Appropriate state regulator means any state officer, agency, 
supervisor or other entity that has regulatory authority over, or is 
empowered to institute enforcement action against, a particular 
institution.
    Fannie Mae means the Federal National Mortgage Association 
established under authority of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1716, et seq.).
    FDIC means the Federal Deposit Insurance Corporation.
    FRB means the Board of Governors of the Federal Reserve System.

[[Page 7]]

    Freddie Mac means the Federal Home Loan Mortgage Corporation 
established under authority of the Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1451, et seq.).
    Generally Accepted Accounting Principles or GAAP means accounting 
principles generally accepted in the United States.
    Ginnie Mae means the Government National Mortgage Association 
established under authority of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1716, et seq.).
    GLB Act means the Gramm-Leach-Bliley Act (Pub. L. 106-102 (1999)).
    HUD means the United States Department of Housing and Urban 
Development.
    NCUA means the National Credit Union Administration.
    NRSRO means a credit rating organization regarded as a Nationally 
Recognized Statistical Rating Organization by the Securities and 
Exchange Commission.
    OCC means the Office of the Comptroller of the Currency.
    OTS means the Office of Thrift Supervision.
    SBIC means a small business investment company formed pursuant to 
section 301 of the Small Business Investment Act (15 U.S.C. 681).
    SEC means the United States Securities and Exchange Commission.
    State means a state of the United States, American Samoa, the 
Commonwealth of the Northern Mariana Islands, the District of Columbia, 
Guam, Puerto Rico, or the United States Virgin Islands.
    1934 Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.).

[67 FR 12842, Mar. 20, 2002, as amended at 69 FR 38811, June 29, 2004]

[[Page 8]]



 SUBCHAPTER B_FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS





PART 906_OPERATIONS--Table of Contents



Subpart A [Reserved]

              Subpart B_Monthly Interest Rate Survey (MIRS)

Sec.
906.5 Monthly interest rate survey.

Subpart C [Reserved]

    Authority: 12 U.S.C. 4516.

    Source: 70 FR 9509, Feb. 28, 2005, unless otherwise noted.

Subpart A [Reserved]



              Subpart B_Monthly Interest Rate Survey (MIRS)



Sec. 906.5  Monthly interest rate survey.

    The Finance Board conducts its Monthly Survey of Rates and Terms on 
Conventional One-Family Non-farm Mortgage Loans in the following manner:
    (a) Initial survey. Each month, the Finance Board samples savings 
institutions, commercial banks, and mortgage loan companies, and asks 
them to report the terms and conditions on all conventional mortgages 
(i.e., those not federally insured or guaranteed) used to purchase 
single-family homes that each such lender closes during the last five 
working days of the month. In most cases, the information is reported 
electronically in a format similar to Finance Board Form FHFB 10-91. The 
initial weights are based on lender type and lender size. The data also 
is weighted so that the pattern of weighted responses matches the actual 
pattern of mortgage originations by lender type and by region. The 
Finance Board tabulates the data and publishes standard data tables late 
in the following month.
    (b) Adjustable-rate mortgage index. The weighted data, tabulated and 
published pursuant to paragraph (a) of this section, is used to compile 
the Finance Board's adjustable-rate mortgage index, entitled the 
``National Average Contract Mortgage Rate for the Purchase of Previously 
Occupied Homes by Combined Lenders.'' This index is the successor to the 
index maintained by the former Federal Home Loan Bank Board and is used 
for determining the movement of the interest rate on renegotiable-rate 
mortgages and on some other adjustable-rate mortgages.

Subpart C [Reserved]

[[Page 9]]



  SUBCHAPTER C_GOVERNANCE AND MANAGEMENT OF THE FEDERAL HOME LOAN BANKS





PART 914_DATA AVAILABILITY AND REPORTING--Table of Contents



Sec.
914.1 Regulatory Report defined.
914.2 Filing Regulatory Reports.
914.3 [Reserved]

    Authority: 12 U.S.C. 1440 and 4526.

    Source: 71 FR 35499, June 21, 2006, unless otherwise noted.



Sec. 914.1  Regulatory Report defined.

    (a) Definition. Regulatory Report means any report of raw or summary 
data needed to evaluate the safe and sound condition and operations of a 
Bank or to determine compliance with any:
    (1) Provision in the Act or other law, order, rule, or regulation;
    (2) Condition imposed in writing by the Finance Board in connection 
with the granting of any application or other request by a Bank; or
    (3) Written agreement entered into between the Finance Board and a 
Bank.
    (b) Examples. Regulatory Report includes:
    (1) Call reports and reports of instrument-level risk modeling data;
    (2) Reports related to a Bank's housing mission achievement, such as 
reports related to AMA, AHP, CIP, and other CICA programs; and
    (3) Reports submitted in response to requests to one or more Banks 
for information on a nonrecurring basis.



Sec. 914.2  Filing Regulatory Reports.

    Each Bank shall file Regulatory Reports with the Finance Board in 
accordance with the forms, instructions, and schedules issued by the 
Finance Board from time to time. If no regularly scheduled reporting 
dates are established, Regulatory Reports shall be filed as requested by 
the Finance Board.



Sec. 914.3  [Reserved]



PART 917_POWERS AND RESPONSIBILITIES OF BANK BOARDS OF DIRECTORS
AND SENIOR MANAGEMENT--Table of Contents



Sec.
917.1 Definitions.
917.2 General authorities and duties of Bank boards of directors.
917.3 Risk management.
917.4 Bank Member Products Policy.
917.5 Strategic business plan.
917.6 Internal control system.
917.7 Audit committees.
917.8 Budget preparation.
917.9 Dividends.
917.10 Bank bylaws.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a)(1), 1426, 1427, 1432(a), 
1436(a), 1440.

    Source: 65 FR 25274, May 1, 2000, unless otherwise noted.



Sec. 917.1  Definitions.

    As used in this part:
    Business risk means the risk of an adverse impact on a Bank's 
profitability resulting from external factors as may occur in both the 
short and long run.
    Community financial institution has the meaning set forth in 
Sec. 925.1 of this chapter.
    Contingency liquidity means the sources of cash a Bank may use to 
meet its operational requirements when its access to the capital markets 
is impeded, and includes:
    (1) Marketable assets with a maturity of one year or less;
    (2) Self-liquidating assets with a maturity of seven days or less;
    (3) Assets that are generally accepted as collateral in the 
repurchase agreement market; and
    (4) Irrevocable lines of credit from financial institutions rated 
not lower than the second highest credit rating category by an NRSRO.
    Credit risk means the risk that the market value, or estimated fair 
value if market value is not available, of an obligation will decline as 
a result of deterioration in creditworthiness.

[[Page 10]]

    Immediate family member means a parent, sibling, spouse, child, 
dependent, or any relative sharing the same residence.
    Internal auditor means the individual responsible for the internal 
audit function at the Bank.
    Liquidity risk means the risk that a Bank will be unable to meet its 
obligations as they come due or meet the credit needs of its members and 
associates in a timely and cost-efficient manner.
    Market risk means the risk that the market value, or estimated fair 
value if market value is not available, of a Bank's portfolio will 
decline as a result of changes in interest rates, foreign exchange 
rates, equity and commodity prices.
    Operational liquidity means sources of cash from both a Bank's 
ongoing access to the capital markets and its holding of liquid assets 
to meet operational requirements in a Bank's normal course of business.
    Operations risk means the risk of an unexpected loss to a Bank 
resulting from human error, fraud, unenforceability of legal contracts, 
or deficiencies in internal controls or information systems.
    Reportable conditions means matters that represent significant 
deficiencies in the design or operation of the internal control system 
that could adversely affect a Bank's ability to record, process, 
summarize and report financial data consistent with the assertions of 
management.

[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]



Sec. 917.2  General authorities and duties of Bank boards of directors.

    (a) Management of a Bank. The management of each Bank shall be 
vested in its board of directors. While Bank boards of directors may 
delegate the execution of operational functions to Bank personnel, the 
ultimate responsibility of each Bank's board of directors for that 
Bank's management is non-delegable.
    (b) Duties of Bank directors. Each Bank director shall have the duty 
to:
    (1) Carry out his or her duties as director in good faith, in a 
manner such director believes to be in the best interests of the Bank, 
and with such care, including reasonable inquiry, as an ordinarily 
prudent person in a like position would use under similar circumstances;
    (2) Administer the affairs of the Bank fairly and impartially and 
without discrimination in favor of or against any member;
    (3) At the time of appointment or election, or within a reasonable 
time thereafter, have a working familiarity with basic finance and 
accounting practices, including the ability to read and understand the 
Bank's balance sheet and income statement and to ask substantive 
questions of management and the internal and external auditors; and
    (4) Direct the operations of the Bank in conformity with the 
requirements set forth in the Act and this chapter.
    (c) Authority regarding staff and outside consultants. (1) In 
carrying out its duties and responsibilities under the Act and this 
chapter, each Bank's board of directors and all committees thereof shall 
have authority to retain staff and outside counsel, independent 
accountants, or other outside consultants at the expense of the Bank.
    (2) Bank staff providing services to the board of directors or any 
committee of the board under paragraph (c)(1) of this section may be 
required by the board of directors or such committee to report directly 
to the board or such committee, as appropriate.



Sec. 917.3  Risk management.

    (a) Risk management policy--(1) Adoption. Beginning August 29, 2000, 
each Bank's board of directors shall have in effect at all times a risk 
management policy that addresses the Bank's exposure to credit risk, 
market risk, liquidity risk, business risk and operations risk and that 
conforms to the requirements of paragraph (b) of this section and to all 
applicable Finance Board regulations and policies.
    (2) Review and compliance. Each Bank's board of directors shall:
    (i) Review the Bank's risk management policy at least annually;
    (ii) Amend the risk management policy as appropriate;
    (iii) Re-adopt the Bank's risk management policy, including interim

[[Page 11]]

amendments, not less often than every three years; and
    (iv) Ensure that policies and procedures are in place that are 
reasonably designed to achieve continuing Bank compliance with the risk 
management policy.
    (b) Risk management policy requirements. In addition to meeting any 
other requirements set forth in this chapter, each Bank's risk 
management policy shall:
    (1) After the Finance Board has approved a Bank's capital plan, but 
before the plan takes effect, the Bank shall amend its risk management 
policy to describe the specific steps the Bank will take to comply with 
its capital plan and to include specific target ratios of total capital 
and permanent capital to total assets at which the Bank intends to 
operate. The target operating capital-to-assets ratios to be specified 
in the risk management policy shall be in excess of the minimum leverage 
and risk-based capital ratios and may be expressed as a range of ratios 
or as a single ratio;
    (2) Set forth the Bank's tolerance levels for the market and credit 
risk components; and
    (3) Set forth standards for the Bank's management of each risk 
component, including but not limited to:
    (i) Regarding credit risk arising from all secured and unsecured 
transactions, standards and criteria for, and timing of, periodic 
assessment of the creditworthiness of issuers, obligors, or other 
counterparties including identifying the criteria for selecting dealers, 
brokers and other securities firms with which the Bank may execute 
transactions;
    (ii) Regarding market risk, standards for the methods and models 
used to measure and monitor such risk;
    (iii) Regarding day-to-day operational liquidity needs and 
contingency liquidity needs:
    (A) An enumeration of specific types of investments to be held for 
such liquidity purposes; and
    (B) The methodology to be used for determining the Bank's 
operational and contingency liquidity needs;
    (iv) Regarding operations risk, standards for an effective internal 
control system, including periodic testing and reporting; and
    (v) Regarding business risk, strategies for mitigating such risk, 
including contingency plans where appropriate.
    (c) Risk assessment. The senior management of each Bank shall 
perform, at least annually, a risk assessment that is reasonably 
designed to identify and evaluate all material risks, including both 
quantitative and qualitative aspects, that could adversely affect the 
achievement of the Bank's performance objectives and compliance 
requirements. The risk assessment shall be in written form and shall be 
reviewed by the Bank's board of directors promptly upon its completion.

[65 FR 25274, May 1, 2000, as amended at 66 FR 8308, Jan. 30, 2001; 67 
FR 12846, Mar. 20, 2002]



Sec. 917.4  Bank Member Products Policy.

    (a) Adoption and review of member products policy--(1) Adoption. 
Beginning November 15, 2000, each Bank's board of directors shall have 
in effect at all times a policy that addresses the Bank's management of 
products offered by the Bank to members and housing associates, 
including but not limited to advances, standby letters of credit and 
acquired member assets, consistent with the requirements of the Act, 
paragraph (b) of this section, and all applicable Finance Board 
regulations and policies.
    (2) Review and compliance. Each Bank's board of directors shall:
    (i) Review the Bank's member products policy annually;
    (ii) Amend the member products policy as appropriate; and
    (iii) Re-adopt the member products policy, including interim 
amendments, not less often than every three years.
    (b) Member products policy requirements. In addition to meeting any 
other requirements set forth in this chapter, each Bank's member 
products policy shall:
    (1) Address credit underwriting criteria to be applied in evaluating 
applications for advances, standby letters of credit, and renewals;
    (2) Address appropriate levels of collateralization, valuation of 
collateral and discounts applied to collateral

[[Page 12]]

values for advances and standby letters of credit;
    (3) Address advances-related fees to be charged by each Bank, 
including any schedules or formulas pertaining to such fees;
    (4) Address standards and criteria for pricing member products, 
including differential pricing of advances pursuant to Sec. 950.5(b)(2) 
of this chapter, and criteria regarding the pricing of standby letters 
of credit, including any special pricing provisions for standby letters 
of credit that facilitate the financing of projects that are eligible 
for any of the Banks' CICA programs under part 952 of this chapter;
    (5) Provide that, for any draw made by a beneficiary under a standby 
letter of credit, the member will be charged a processing fee calculated 
in accordance with the requirements of Sec. 975.6(b) of this chapter;
    (6) Address the maintenance of appropriate systems, procedures and 
internal controls; and
    (7) Address the maintenance of appropriate operational and personnel 
capacity.

[65 FR 44426, July 18, 2000, as amended at 67 FR 12846, Mar. 20, 2002]



Sec. 917.5  Strategic business plan.

    (a) Adoption of strategic business plan. Beginning on July 30, 2000, 
each Bank's board of directors shall have in effect at all times a 
strategic business plan that describes how the business activities of 
the Bank will achieve the mission of the Bank consistent with part 940 
of this chapter. Specifically, each Bank's strategic business plan 
shall:
    (1) Enumerate operating goals and objectives for each major business 
activity and for all new business activities, which must include plans 
for maximizing activities that enhance the carrying out of the mission 
of the Bank, consistent with part 940 of this chapter;
    (2) Discuss how the Bank will:
    (i) Address credit needs and market opportunities identified through 
ongoing market research and consultations with members, associates and 
public and private organizations; and
    (ii) Notify members and associates of relevant programs and 
initiatives;
    (3) Establish quantitative performance goals for Bank products 
related to multi-family housing, small business, small farm and small 
agri-business lending;
    (4) Describe any proposed new business activities or enhancements of 
existing activities; and
    (5) Be supported by appropriate and timely research and analysis of 
relevant market developments and member and associate demand for Bank 
products and services.
    (b) Review and monitoring. Each Bank's board of directors shall:
    (1) Review the Bank's strategic business plan at least annually;
    (2) Amend the strategic business plan as appropriate;
    (3) Re-adopt the Bank's strategic business plan, including interim 
amendments, not less often than every three years; and
    (4) Establish management reporting requirements and monitor 
implementation of the strategic business plan and the operating goals 
and objectives contained therein.
    (c) Report to Finance Board. Each Bank shall submit to the Finance 
Board annually a report analyzing and describing the Bank's performance 
in achieving the goals described in paragraph (a)(3) of this section.

[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]



Sec. 917.6  Internal control system.

    (a) Establishment and maintenance. (1) Each Bank shall establish and 
maintain an effective internal control system that addresses:
    (i) The efficiency and effectiveness of Bank activities;
    (ii) The safeguarding of Bank assets;
    (iii) The reliability, completeness and timely reporting of 
financial and management information and transparency of such 
information to the Bank's board of directors and to the Finance Board; 
and
    (iv) Compliance with applicable laws, regulations, policies, 
supervisory determinations and directives of the Bank's board of 
directors and senior management.
    (2) Ongoing internal control activities necessary to maintain the 
internal

[[Page 13]]

control system required under paragraph (a)(1) of this section shall 
include, but are not limited to:
    (i) Top level reviews by the Bank's board of directors and senior 
management, including review of financial presentations and performance 
reports;
    (ii) Activity controls, including review of standard performance and 
exception reports by department-level management on an appropriate 
periodic basis;
    (iii) Physical and procedural controls to safeguard, and prevent the 
unauthorized use of, assets;
    (iv) Monitoring for compliance with the risk tolerance limits set 
forth in the Bank's risk management policy;
    (v) Any required approvals and authorizations for specific 
activities; and
    (vi) Any required verifications and reconciliations for specific 
activities.
    (b) Internal control responsibilities of Banks' boards of directors. 
Each Bank's board of directors shall ensure that the internal control 
system required under paragraph (a)(1) of this section is established 
and maintained, and shall oversee senior management's implementation of 
such a system on an ongoing basis, by:
    (1) Conducting periodic discussions with senior management regarding 
the effectiveness of the internal control system;
    (2) Ensuring that an internal audit of the internal control system 
is performed annually and that such annual audit is reasonably designed 
to be effective and comprehensive;
    (3) Requiring that internal control deficiencies be reported to the 
Bank's board of directors in a timely manner and that such deficiencies 
are addressed promptly;
    (4) Conducting a timely review of evaluations of the effectiveness 
of the internal control system made by internal auditors, external 
auditors and Finance Board examiners;
    (5) Directing senior management to address promptly and effectively 
recommendations and concerns expressed by internal auditors, external 
auditors and Finance Board examiners regarding weaknesses in the 
internal control system;
    (6) Reporting any internal control deficiencies found, and the 
corrective action taken, to the Finance Board in a timely manner;
    (7) Establishing, documenting and communicating an organizational 
structure that clearly shows lines of authority within the Bank, 
provides for effective communication throughout the Bank, and ensures 
that there are no gaps in the lines of authority;
    (8) Reviewing all delegations of authority to specific personnel or 
committees and requiring that such delegations state the extent of the 
authority and responsibilities delegated; and
    (9) Establishing reporting requirements, including specifying the 
nature and frequency of reports it receives.
    (c) Internal control responsibilities of Banks' senior management. 
Each Bank's senior management shall be responsible for carrying out the 
directives of the Bank's board of directors, including the 
establishment, implementation and maintenance of the internal control 
system required under paragraph (a)(1) of this section, by:
    (1) Establishing, implementing and effectively communicating to Bank 
personnel policies and procedures that are adequate to ensure that 
internal control activities necessary to maintain an effective internal 
control system, including the activities enumerated in paragraph (a)(2) 
of this section, are an integral part of the daily functions of all Bank 
personnel;
    (2) Ensuring that all Bank personnel fully understand and comply 
with all policies, procedures and legal requirements applicable to their 
positions and responsibilities;
    (3) Ensuring that there is appropriate segregation of duties among 
Bank personnel and that personnel are not assigned conflicting 
responsibilities;
    (4) Establishing effective paths of communication upward, downward 
and across the organization in order to ensure that Bank personnel 
receive necessary and appropriate information, including:
    (i) Information relating to the operational policies and procedures 
of the Bank;
    (ii) Information relating to the actual operational performance of 
the Bank;

[[Page 14]]

    (iii) Adequate and comprehensive internal financial, operational and 
compliance data; and
    (iv) External market information about events and conditions that 
are relevant to decision making;
    (5) Developing and implementing procedures that translate the major 
business strategies and policies established by the Bank's board of 
directors into operating standards;
    (6) Ensuring adherence to the lines of authority and responsibility 
established by the Bank's board of directors;
    (7) Overseeing the implementation and maintenance of management 
information and other systems;
    (8) Establishing and implementing an effective system to track 
internal control weaknesses and the actions taken to correct them; and
    (9) Monitoring and reporting to the Bank's board of directors the 
effectiveness of the internal control system on an ongoing basis.

[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]



Sec. 917.7  Audit committees.

    (a) Establishment. The board of directors of each Bank shall 
establish an audit committee, consistent with the requirements set forth 
in this section.
    (b) Composition. (1) The audit committee shall comprise five or more 
persons drawn from the Bank's board of directors, each of whom shall 
meet the criteria of independence set forth in paragraph (c) of this 
section.
    (2) The audit committee shall include a balance of representatives 
of:
    (i) Community financial institutions and other members; and
    (ii) Appointive and elective directors of the Bank.
    (3) The terms of audit committee members shall be appropriately 
staggered so as to provide for continuity of service.
    (4) At least one member of the audit committee shall have extensive 
accounting or related financial management experience.
    (c) Independence. Any member of the Bank's board of directors shall 
be considered to be sufficiently independent to serve as a member of the 
audit committee if that director does not have a disqualifying 
relationship with the Bank or its management that would interfere with 
the exercise of that director's independent judgment. Such disqualifying 
relationships include, but are not limited to:
    (1) Being employed by the Bank in the current year or any of the 
past five years;
    (2) Accepting any compensation from the Bank other than compensation 
for service as a board director;
    (3) Serving or having served in any of the past five years as a 
consultant, advisor, promoter, underwriter, or legal counsel of or to 
the Bank; or
    (4) Being an immediate family member of an individual who is, or has 
been in any of the past five years, employed by the Bank as an executive 
officer.
    (d) Charter. (1) The audit committee of each Bank shall adopt, and 
the Bank's board of directors shall approve, a formal written charter 
that specifies the scope of the audit committee's powers and 
responsibilities, as well as the audit committee's structure, processes 
and membership requirements.
    (2) The audit committee and the board of directors of each Bank 
shall:
    (i) Review, assess the adequacy of and, where appropriate, amend the 
Bank's audit committee charter on an annual basis;
    (ii) Amend the audit committee charter as appropriate; and
    (iii) Re-adopt and re-approve, respectively, the Bank's audit 
committee charter not less often than every three years.
    (3) Each Bank's audit committee charter shall:
    (i) Provide that the audit committee has the responsibility to 
select, evaluate and, where appropriate, replace the internal auditor 
and that the internal auditor may be removed only with the approval of 
the audit committee;
    (ii) Provide that the internal auditor shall report directly to the 
audit committee on substantive matters and that the internal auditor is 
ultimately accountable to the audit committee and board of directors; 
and
    (iii) Provide that both the internal auditor and the external 
auditor shall have unrestricted access to the audit committee without 
the need for any

[[Page 15]]

prior management knowledge or approval.
    (e) Duties. Each Bank's audit committee shall have the duty to:
    (1) Direct senior management to maintain the reliability and 
integrity of the accounting policies and financial reporting and 
disclosure practices of the Bank;
    (2) Review the basis for the Bank's financial statements and the 
external auditor's opinion rendered with respect to such financial 
statements (including the nature and extent of any significant changes 
in accounting principles or the application therein) and ensure that 
policies are in place that are reasonably designed to achieve disclosure 
and transparency regarding the Bank's true financial performance and 
governance practices;
    (3) Oversee the internal audit function by:
    (i) Reviewing the scope of audit services required, significant 
accounting policies, significant risks and exposures, audit activities 
and audit findings;
    (ii) Assessing the performance and determining the compensation of 
the internal auditor; and
    (iii) Reviewing and approving the internal auditor's work plan;
    (4) Oversee the external audit function by:
    (i) Approving the external auditor's annual engagement letter;
    (ii) Reviewing the performance of the external auditor; and
    (iii) Making recommendations to the Bank's board of directors 
regarding the appointment, renewal, or termination of the external 
auditor;
    (5) Provide an independent, direct channel of communication between 
the Bank's board of directors and the internal and external auditors;
    (6) Conduct or authorize investigations into any matters within the 
audit committee's scope of responsibilities;
    (7) Ensure that senior management has established and is maintaining 
an adequate internal control system within the Bank by:
    (i) Reviewing the Bank's internal control system and the resolution 
of identified material weaknesses and reportable conditions in the 
internal control system, including the prevention or detection of 
management override or compromise of the internal control system; and
    (ii) Reviewing the programs and policies of the Bank designed to 
ensure compliance with applicable laws, regulations and policies and 
monitoring the results of these compliance efforts;
    (8) Review the policies and procedures established by senior 
management to assess and monitor implementation of the Bank's strategic 
business plan and the operating goals and objectives contained therein; 
and
    (9) Report periodically its findings to the Bank's board of 
directors.
    (f) Meetings. The audit committee shall prepare written minutes of 
each audit committee meeting.

[65 FR 25274, May 1, 2000, as amended at 67 FR 12846, Mar. 20, 2002]



Sec. 917.8  Budget preparation.

    (a) Adoption of budgets. Each Bank's board of directors shall be 
responsible for the adoption of an annual operating expense budget and a 
capital expenditures budget for the Bank, and any subsequent amendments 
thereto, consistent with the requirements of the Act, this section, 
other regulations and policies of the Finance Board, and with the Bank's 
responsibility to protect both its members and the public interest by 
keeping its costs to an efficient and effective minimum.
    (b) No delegation of budget authority. A Bank's board of directors 
may not delegate the authority to approve the Bank's annual budgets, or 
any subsequent amendments thereto, to Bank officers or other Bank 
employees.
    (c) Interest rate scenario. A Bank's annual budgets shall be 
prepared based upon an interest rate scenario as determined by the Bank.
    (d) Board approval for deviations. A Bank may not exceed its total 
annual operating expense budget or its total annual capital expenditures 
budget without prior approval by the Bank's board of directors of an 
amendment to such budget.



Sec. 917.9  Dividends.

    (a) A Bank's board of directors may declare and pay a dividend only 
from previously retained earnings or current net earnings and only in 
accordance

[[Page 16]]

with any other applicable limitations on dividends set forth in the Act 
or this chapter. Dividends on such capital stock shall be computed 
without preference.
    (b) A Bank's board of directors may not declare or pay a dividend 
based on projected or anticipated earnings and may not declare or pay a 
dividend if the par value of the Bank's stock is impaired or is 
projected to become impaired after paying such dividend.
    (c) The requirement in paragraph (a) of this section that dividends 
be computed without preference shall cease to apply to any Bank that has 
established any dividend preferences for 1 or more classes or subclasses 
of its capital stock as part of its approved capital plan, as of the 
date on which the capital plan takes effect.

[71 FR 78051, Dec. 28, 2006]



Sec. 917.10  Bank bylaws.

    A Bank's board of directors shall have in effect at all times bylaws 
governing the manner in which the Bank administers its affairs and such 
bylaws shall be consistent with applicable laws and regulations as 
administered by the Finance Board.

[[Page 17]]



    SUBCHAPTER E_FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS





PART 930_DEFINITIONS APPLYING TO RISK MANAGEMENT AND CAPITAL REGULATIONS
--Table of Contents



    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1436(a), 1440, 
1443, and 1446.



Sec. 930.1  Definitions.

    As used in this subchapter:
    Affiliated counterparty means a counterparty of a Bank that 
controls, is controlled by or is under common control with another 
counterparty of the Bank. For the purposes of this definition only, 
direct or indirect ownership (including beneficial ownership) of more 
than 50 percent of the voting securities or voting interests of an 
entity constitutes control.
    Certain drawdown means a legally binding agreement that commits the 
Bank to make an advance or acquire a loan, at or by a specified future 
date.
    Charges against the capital of the Bank means an other than 
temporary decline in the Bank's total equity that causes the value of 
total equity to fall below the Bank's aggregate capital stock amount.
    Class A stock means capital stock issued by a Bank, including 
subclasses, that has the characteristics specified by Sec. 931.1(a) of 
this subchapter.
    Class B stock means capital stock issued by a Bank, including 
subclasses, that has the characteristics specified by Sec. 931.1(b) of 
this subchapter.
    Contingency liquidity means the sources of cash a Bank may use to 
meet its operational requirements when its access to the capital markets 
is impeded, and includes:
    (1) Marketable assets with a maturity of one year or less;
    (2) Self-liquidating assets with a maturity of seven days or less;
    (3) Assets that are generally accepted as collateral in the 
repurchase agreement market; and
    (4) Irrevocable lines of credit from financial institutions rated 
not lower than the second highest credit rating category by an NRSRO.
    Credit derivative contract means a derivative contract that 
transfers credit risk.
    Credit risk means the risk that the market value, or estimated fair 
value if market value is not available, of an obligation will decline as 
a result of deterioration in creditworthiness.
    Derivative contract means generally a financial contract the value 
of which is derived from the values of one or more underlying assets, 
reference rates, or indices of asset values, or credit-related events. 
Derivative contracts include interest rate, foreign exchange rate, 
equity, precious metals, commodity, and credit contracts, and any other 
instruments that pose similar risks.
    Exchange rate contracts include cross-currency interest-rate swaps, 
forward foreign exchange rate contracts, currency options purchased, and 
any similar instruments that give rise to similar risks.
    General allowance for losses means an allowance established by a 
Bank in accordance with GAAP for losses, but which does not include any 
amounts held against specific assets of the Bank.
    Government Sponsored Enterprise, or GSE, means a United States 
Government-sponsored agency or instrumentality originally established or 
chartered to serve public purposes specified by the United States 
Congress, but whose obligations are not obligations of the United States 
and are not guaranteed by the United States.
    Interest rate contracts include, single currency interest-rate 
swaps, basis swaps, forward rate agreements, interest-rate options, and 
any similar instrument that gives rise to similar risks, including when-
issued securities.
    Investment grade means:
    (1) A credit quality rating in one of the four highest credit rating 
categories by an NRSRO and not below the fourth highest rating category 
by any NRSRO; or
    (2) If there is no credit quality rating by an NRSRO, a 
determination by a

[[Page 18]]

Bank that the issuer, asset or instrument is the credit equivalent of 
investment grade using credit rating standards available from an NRSRO 
or other similar standards.
    Market risk means the risk that the market value, or estimated fair 
value if market value is not available, of a Bank's portfolio will 
decline as a result of changes in interest rates, foreign exchange 
rates, equity and commodity prices.
    Marketable means, with respect to an asset, that the asset can be 
sold with reasonable promptness at a price that corresponds reasonably 
to its fair value.
    Market value at risk is the loss in the market value of a Bank's 
portfolio measured from a base line case, where the loss is estimated in 
accordance with Sec. 932.5 of this chapter.
    Minimum investment means the minimum amount of Class A and/or Class 
B stock that a member is required to own in order to be a member of a 
Bank and in order to obtain advances and to engage in other business 
activities with the Bank in accordance with Sec. 931.3 of this chapter.
    Operations risk means the risk of an unexpected loss to a Bank 
resulting from human error, fraud, unenforceability of legal contracts, 
or deficiencies in internal controls or information systems.
    Permanent capital means the retained earnings of a Bank, determined 
in accordance with GAAP, plus the amount paid-in for the Bank's Class B 
stock.
    Redeem or Redemption means the acquisition by a Bank of its 
outstanding Class A or Class B stock at par value following the 
expiration of the six-month or five-year statutory redemption period, 
respectively, for the stock.
    Regulatory risk-based capital requirement means the amount of 
permanent capital that a Bank is required to maintain in accordance with 
Sec. 932.3 of this chapter.
    Regulatory total capital requirement means the amount of total 
capital that a Bank is required to maintain in accordance with 
Sec. 932.2 of this chapter.
    Repurchase means the acquisition by a Bank of excess stock prior to 
the expiration of the six-month or five-year statutory redemption period 
for the stock.
    Repurchase agreement means an agreement between a seller and a buyer 
whereby the seller agrees to repurchase a security or similar securities 
at an agreed upon price, with or without a stated time for repurchase.
    Sales of federal funds subject to a continuing contract means an 
overnight federal funds loan that is automatically renewed each day 
unless terminated by either the lender or the borrower.
    Total assets means the total assets of a Bank, as determined in 
accordance with GAAP.
    Total capital of a Bank means the sum of permanent capital, the 
amounts paid-in for Class A stock, the amount of any general allowance 
for losses, and the amount of other instruments identified in a Bank's 
capital plan that the Finance Board has determined to be available to 
absorb losses incurred by such Bank.
    Walkaway clause means a provision in a bilateral netting contract 
that permits a nondefaulting counterparty to make a lower payment than 
it would make otherwise under the bilateral netting contract, or no 
payment at all, to a defaulter or the estate of a defaulter, even if the 
defaulter or the estate of the defaulter is a net creditor under the 
bilateral netting contract.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001; 66 
FR 66728, Dec. 27, 2001; 67 FR 12849, Mar. 20, 2002; 71 FR 78051, Dec. 
28, 2006]



PART 931_FEDERAL HOME LOAN BANK CAPITAL STOCK--Table of Contents



Sec.
931.1 Classes of capital stock.
931.2 Issuance of capital stock.
931.3 Minimum investment in capital stock.
931.4 Dividends.
931.5 Liquidation, merger, or consolidation.
931.6 Transfer of capital stock.
931.7 Redemption and repurchase of capital stock.
931.8 Other restrictions on the repurchase or redemption of Bank stock.
931.9 Transition provision.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.

    Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.

[[Page 19]]



Sec. 931.1  Classes of capital stock.

    The authorized capital stock of a Bank shall consist of the 
following instruments:
    (a) Class A stock, which shall:
    (1) Have a par value as determined by the board of directors of the 
Bank and stated in the Bank's capital plan;
    (2) Be issued, redeemed, and repurchased only at its stated par 
value; and
    (3) Be redeemable in cash only on six-months written notice to the 
Bank.
    (b) Class B stock, which shall:
    (1) Have a par value as determined by the board of directors of the 
Bank and stated in the Bank's capital plan;
    (2) Be issued, redeemed, and repurchased only at its stated par 
value;
    (3) Be redeemable in cash only on five-years written notice to the 
Bank; and
    (4) Confer an ownership interest in the retained earnings, surplus, 
undivided profits, and equity reserves of the Bank; and
    (c) Any one or more subclasses of Class A or Class B stock, each of 
which may have different rights, terms, conditions, or preferences as 
may be authorized in the Bank's capital plan, provided, however, that 
each subclass of stock shall have all of the characteristics of its 
respective class, as specified in paragraph (a) or (b) of this section.



Sec. 931.2  Issuance of capital stock.

    (a) In general. A Bank may issue either one or both classes of its 
capital stock (including subclasses), as authorized by Sec. 931.1, and 
shall not issue any other class of capital stock. A Bank shall issue its 
stock only to its members and only in book-entry form, and the Bank 
shall act as its own transfer agent. All capital stock shall be issued 
in accordance with the Bank's capital plan.
    (b) Initial issuance. In connection with the initial issuance of its 
Class A and/or Class B stock (or any subclass of either), a Bank may 
issue such stock in exchange for its existing stock, through a 
conversion of its existing stock, or through any other fair and 
equitable transaction or method of distribution. As part of its initial 
stock issuance transaction, a Bank may distribute any portion of its 
then-existing unrestricted retained earnings as shares of Class B stock.



Sec. 931.3  Minimum investment in capital stock.

    (a) A Bank shall require each member to maintain a minimum 
investment in the capital stock of the Bank, both as a condition to 
becoming and remaining a member of the Bank and as a condition to 
transacting business with the Bank or obtaining advances and other 
services from the Bank. The amount of the required minimum investment 
shall be determined in accordance with the Bank's capital plan and shall 
be sufficient to ensure that the Bank remains in compliance with its 
minimum capital requirements. A Bank shall require each member to 
maintain its minimum investment for as long as the institution remains a 
member of the Bank and for as long as the member engages in any activity 
with the Bank against which the Bank is required to maintain capital.
    (b) A Bank may establish the minimum investment required of each 
member as a percentage of the total assets of the member, as a 
percentage of the advances outstanding to the member, as a percentage of 
any other business activity conducted with the member, on any other 
basis that is approved by the Finance Board, or any combination thereof.
    (c) A Bank may require each member to satisfy the minimum investment 
requirement through the purchase of either Class A or Class B stock, or 
through the purchase of one or more combinations of Class A and Class B 
stock that have been authorized by the board of directors of the Bank in 
its capital plan. A Bank, in its discretion, may establish a lower 
minimum investment for members that invest in Class B stock than is 
required for members that invest in Class A stock, provided that such 
reduced investment provides sufficient capital for the Bank to remain in 
compliance with its minimum capital requirements.
    (d) Each member of a Bank shall at all times maintain an investment 
in the capital stock of the Bank in an amount that is sufficient to 
satisfy the minimum investment required for that

[[Page 20]]

member in accordance with the Bank's capital plan.

[66 FR 8310, Jan. 30, 2001, as amended at 70 FR 9510, Feb. 28, 2005]



Sec. 931.4  Dividends.

    (a) In general. A Bank may pay dividends on Class A or Class B 
stock, including any subclasses of such stock, only out of previously 
retained earnings or current net earnings, and shall declare and pay 
dividends only as provided by its capital plan. The capital plan may 
establish different dividend rates or preferences for each class or 
subclass of stock, which may include a dividend that tracks the economic 
performance of certain Bank assets, such as Acquired Member Assets. A 
member, including a member that has provided the Bank with a notice of 
intent to withdraw from membership or one whose membership is otherwise 
terminated, shall be entitled to receive any dividends that a Bank 
declares on its capital stock while the member owns the stock.
    (b) Limitation on payment of dividends. In no event shall a Bank 
declare or pay any dividend on its capital stock if after doing so the 
Bank would fail to meet any of its minimum capital requirements, nor 
shall a Bank that is not in compliance with any of its minimum capital 
requirements declare or pay any dividend on its capital stock.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]



Sec. 931.5  Liquidation, merger, or consolidation.

    The respective rights of the Class A and Class B stockholders, in 
the event that the Bank is liquidated, or is merged or otherwise 
consolidated with another Bank, shall be determined in accordance with 
the capital plan of the Bank.



Sec. 931.6  Transfer of capital stock.

    A Bank in its capital plan may allow a member to transfer any excess 
capital stock of the Bank to another member of that Bank or to an 
institution that has been approved for membership in that Bank and that 
has satisfied all conditions for becoming a member, other than the 
purchase of the minimum amount of Bank stock that it is required to hold 
as a condition of membership. Any such stock transfers shall be at par 
value and shall be effective upon being recorded on the appropriate 
books and records of the Bank. The Bank may, in its capital plan, 
require a member to receive the approval of the Bank before a transfer 
of the Bank's stock, as allowed under this section, is completed.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]



Sec. 931.7  Redemption and repurchase of capital stock.

    (a) Redemption. A member may have its capital stock in a Bank 
redeemed by providing written notice to the Bank in accordance with this 
section. For Class A stock, a member shall provide six-months written 
notice, and for Class B stock a member shall provide five-years written 
notice. The notice shall indicate the number of shares of Bank stock 
that are to be redeemed, and a member shall not have more than one 
notice of redemption outstanding at one time for the same shares of Bank 
stock. A member may cancel a notice of redemption by so informing the 
Bank in writing, and the Bank may impose a fee (to be specified in its 
capital plan) on any member that cancels a pending notice of redemption. 
At the expiration of the applicable notice period, the Bank shall pay 
the stated par value of that stock to the member in cash. A request by a 
member (whose membership has not been terminated) to redeem specific 
shares of stock shall automatically be cancelled if the Bank is 
prevented from redeeming the member's stock by paragraph (c) of this 
section within five business days from the end of the expiration of the 
applicable redemption notice period because the member would fail to 
maintain its minimum investment in the stock of the Bank after such 
redemption. The automatic cancellation of a member's redemption request 
shall have the same effect as if the member had cancelled its notice to 
redeem stock prior to the end of the redemption notice period, and a 
Bank may impose a fee (to be specified in its capital plan) for 
automatic cancellation of a redemption request. A Bank

[[Page 21]]

shall not be obligated to redeem its capital stock other than in 
accordance with this paragraph.
    (b) Repurchase. A Bank, in its discretion and without regard to the 
applicable redemption periods, may repurchase from a member any 
outstanding Class A or Class B capital stock that is in excess of the 
amount of that class of Bank stock that the member is required to hold 
as a minimum investment, in accordance with the capital plan of that 
Bank. A Bank undertaking such a stock repurchase at its own initiative 
shall provide the member with reasonable notice prior to repurchasing 
any excess stock, with the period of such notice to be specified in the 
Bank's capital plan, and shall pay the stated par value of that stock to 
the member in cash. For purposes of this section, any Bank stock owned 
by a member shall be considered to be excess stock if the member is not 
required to hold such stock either as a condition of remaining a member 
of the Bank or as a condition of obtaining advances or transacting other 
business with the Bank. A member's submission of a notice of intent to 
withdraw from membership, or its termination of membership in any other 
manner, shall not, in and of itself, cause any Bank stock to be deemed 
excess stock for purposes of this section.
    (c) Limitation. In no event may a Bank redeem or repurchase any 
stock if, following the redemption or repurchase, the Bank would fail to 
meet any minimum capital requirement, or if the member would fail to 
maintain its minimum investment in the stock of the Bank, as required by 
Sec. 931.3.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001; 70 
FR 9510, Feb. 28, 2005]



Sec. 931.8  Other restrictions on the repurchase or redemption of Bank stock.

    (a) Capital impairment. A Bank may not redeem or repurchase any 
capital stock without the prior written approval of the Finance Board if 
the Finance Board or the board of directors of the Bank has determined 
that the Bank has incurred or is likely to incur losses that result in 
or are likely to result in charges against the capital of the Bank. This 
prohibition shall apply even if a Bank is in compliance with its minimum 
capital requirements, and shall remain in effect for however long the 
Bank continues to incur such charges or until the Finance Board 
determines that such charges are not expected to continue.
    (b) Bank discretion to suspend redemption. A Bank, upon the approval 
of its board of directors, or of a subcommittee thereof, may suspend 
redemption of stock if the Bank reasonably believes that continued 
redemption of stock would cause the Bank to fail to meet its minimum 
capital requirements as set forth in Sec. Sec. 932.2 or 932.3 of this 
chapter, would prevent the Bank from maintaining adequate capital 
against a potential risk that may not be adequately reflected in its 
minimum capital requirements, or would otherwise prevent the Bank from 
operating in a safe and sound manner. A Bank shall notify the Finance 
Board in writing within two business days of the date of the decision to 
suspend the redemption of stock, informing the Finance Board of the 
reasons for the suspension and of the Bank's strategies and time frames 
for addressing the conditions that led to the suspension. The Finance 
Board may require the Bank to re-institute the redemption of member 
stock. A Bank shall not repurchase any stock without the written 
permission of the Finance Board during any period in which the Bank has 
suspended redemption of stock under this paragraph.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]



Sec. 931.9  Transition provision.

    (a) In general. Each Bank shall comply with the minimum leverage and 
risk-based capital requirements specified in Sec. 932.2 and Sec. 932.3 
of this chapter, respectively, and each member shall comply with the 
minimum investment established in the capital plan, as of the effective 
date of that Bank's capital plan. The effective date of a Bank's capital 
plan shall be the date on which the Bank first issues any Class A or 
Class B stock. Prior to the effective date, the issuance and retention 
of Bank stock shall be as provided in Sec. 925.20 and Sec. 925.22 of 
this chapter.

[[Page 22]]

    (b) Transition period--(1) Bank transition. A Bank that will not be 
in compliance with the minimum leverage and risk-based capital 
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter as 
of the effective date of its capital plan shall maintain compliance with 
the leverage limit requirements in Sec. 966.3(a) of this chapter and 
shall include in its capital plan a description of the steps that the 
Bank will take to achieve compliance with the minimum capital 
requirements specified in Sec. 932.2 and Sec. 932.3 of this chapter. The 
period of time for compliance with the minimum capital requirements 
shall be stated in the plan and shall not exceed three years from the 
effective date of the capital plan. When the Bank has achieved 
compliance with the leverage requirement of Sec. 932.2 of this chapter, 
the leverage limit requirements of Sec. 966.3(a) of this chapter shall 
cease to apply to that Bank.
    (2) Member transition--(i) Existing members. A Bank's capital plan 
shall require any institution that was a member on November 12, 1999, 
and whose investment in Bank stock as of the effective date of the 
capital plan will be less than the minimum investment required by the 
plan, to comply with the minimum investment by a date specified in the 
Bank's capital plan. The length of the transition period shall be 
specified in the capital plan and shall not exceed three years. The 
capital plan shall describe the actions that the existing members are 
required to take to achieve compliance with the minimum investment, and 
may require such members to purchase additional Bank stock periodically 
over the course of the transition period.
    (ii) New members. A Bank's capital plan shall require any 
institution that became a member after November 12, 1999, but prior to 
the effective date of the capital plan, to comply with the minimum 
investment specified in the Bank's capital plan as of the effective date 
of the plan. A Bank's capital plan shall require any institution that 
becomes a member after the effective date of the capital plan, to comply 
with the minimum investment upon becoming a member.
    (3) New business. A Bank's capital plan shall require any member 
that obtains an advance or other services from the Bank, or that 
initiates any other business activity with the Bank against which the 
Bank is required to hold capital, after the effective date of the 
capital plan to comply with the minimum investment specified in the 
Bank's capital plan for such advance, services, or activity at the time 
the transaction occurs.



PART 932_FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS--Table of Contents



Sec.
932.1 Risk management.
932.2 Total capital requirement.
932.3 Risk-based capital requirement.
932.4 Credit risk capital requirement.
932.5 Market risk capital requirement.
932.6 Operations risk capital requirement.
932.7 Reporting requirements.
932.8 Minimum liquidity requirements.
932.9 Limits on unsecured extensions of credit to one counterparty or 
          affiliated counterparties; reporting requirements for total 
          extensions of credit to one counterparty or affiliated 
          counterparties.

    Authority: 12 U.S.C. 1426, 1440, 1443, 1446, 4513, 4526.

    Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.



Sec. 932.1  Risk management.

    Before its new capital plan may take effect, each Bank shall obtain 
the approval of the Finance Board for the internal market risk model or 
the internal cash flow model used to calculate the market risk component 
of its risk-based capital requirement, and for the risk assessment 
procedures and controls (whether established as part of its risk 
management policy or otherwise) to be used to manage its credit, market, 
and operations risks.



Sec. 932.2  Total capital requirement.

    Each Bank shall maintain at all times:
    (a) Total capital in an amount at least equal to 4.0 percent of the 
Bank's total assets; and
    (b) A leverage ratio of total capital to total assets of at least 
5.0 percent of the Bank's total assets. For purposes of determining the 
leverage ratio, total capital shall be computed by multiplying the 
Bank's permanent capital

[[Page 23]]

by 1.5 and adding to this product all other components of total capital.

[76 FR 11674, Mar. 3, 2011]



Sec. 932.3  Risk-based capital requirement.

    Each Bank shall maintain at all times permanent capital in an amount 
at least equal to the sum of its credit risk capital requirement, its 
market risk capital requirement, and its operations risk capital 
requirement, calculated in accordance with Sec. Sec. 932.4, 932.5 and 
932.6, respectively.

[76 FR 11674, Mar. 3, 2011]



Sec. 932.4  Credit risk capital requirement.

    (a) General requirement. Each Bank's credit risk capital requirement 
shall be equal to the sum of the Bank's credit risk capital charges for 
all assets, off-balance sheet items and derivative contracts.
    (b) Credit risk capital charge for assets. Except as provided in 
paragraph (i) of this section, each Bank's credit risk capital charge 
for an asset shall be equal to the book value of the asset multiplied by 
the credit risk percentage requirement assigned to that asset pursuant 
to paragraph (e)(2) of this section.
    (c) Credit risk capital charge for off-balance sheet items. Each 
Bank's credit risk capital charge for an off-balance sheet item shall be 
equal to the credit equivalent amount of such item, as determined 
pursuant to paragraph (f) of this section multiplied by the credit risk 
percentage requirement assigned to that item pursuant to paragraph 
(e)(2) of this section, except that the credit risk percentage 
requirement applied to the credit equivalent amount for a stand-by 
letter of credit shall be that for an advance with the same remaining 
maturity as that stand-by letter of credit.
    (d) Credit risk capital charge for derivative contracts--(1) 
Derivative contracts with non-member counterparties. Except as provided 
in paragraph (j) of this section, each Bank's credit risk capital charge 
for a specific derivative contract entered into between a Bank and a 
non-member institution shall equal the sum of :
    (i) The current credit exposure for the derivative contract, 
calculated in accordance with paragraph (g) or (h) of this section, as 
applicable, multiplied by the credit risk percentage requirement 
assigned to that derivative contract pursuant to paragraph (e)(2) of 
this section, provided that:
    (A) The remaining maturity of the derivative contract shall be 
deemed to be less than one year for the purpose of applying Table 1.1 or 
1.3 of this part; and
    (B) Any collateral held against an exposure from the derivative 
contract shall be applied to reduce the portion of the credit risk 
capital charge corresponding to the current credit exposure in 
accordance with the requirements of paragraph (e)(2)(ii)(B) of this 
section; plus
    (ii) The potential future credit exposure for the derivative 
contract calculated in accordance with paragraph (g) or (h) of this 
section, as applicable, multiplied by the credit risk percentage 
requirement assigned to that derivative contract pursuant to paragraph 
(e)(2) of this section, where the actual remaining maturity of the 
derivative contract is used to apply Table 1.1 or Table 1.3 of this 
part.
    (2) Derivative contracts with a member. Except as provided in 
paragraph (j) of this section, the credit risk capital charge for any 
derivative contract entered into between a Bank and one of its member 
institutions shall be calculated in accordance with paragraph (d)(1) of 
this section. However, the credit risk percentage requirements used in 
the calculations shall be found in Table 1.1 of this part, which sets 
forth the credit risk percentage requirements for advances.
    (e) Determination of credit risk percentage requirements--(1) 
Finance Board determination of credit risk percentage requirements. The 
Finance Board shall determine, and update periodically, the credit risk 
percentage requirements set forth in Tables 1.1 through 1.4 of this part 
applicable to a Bank's assets, off-balance sheet items, and derivative 
contracts.
    (2) Bank determination of credit risk percentage requirements. (i) 
Each Bank shall determine the credit risk percentage requirement 
applicable to each

[[Page 24]]

asset, each off-balance sheet item and each derivative contract by 
identifying the category set forth in Table 1.1, Table 1.2, Table 1.3 or 
Table 1.4 of this part to which the asset, item or derivative belongs, 
given, if applicable, its demonstrated credit rating and remaining 
maturity (as determined in accordance with paragraphs (e)(2)(ii) and 
(e)(2)(iii) of this section). The applicable credit risk percentage 
requirement for an asset, off-balance sheet item or derivative contract 
shall be used to calculate the credit risk capital charge for such 
asset, item, or derivative contract in accordance with paragraphs (b), 
(c) or (d) of this section respectively. The relevant categories and 
credit risk percentage requirements are provided in the following Tables 
1.1 through 1.4 of this part:

                   Table 1.1--Requirement for Advances
------------------------------------------------------------------------
                                                              Percentage
                      Type of advances                        applicable
                                                             to advances
------------------------------------------------------------------------
Advances with:
  Remaining maturity <= 4 years............................         0.07
  Remaining maturity 4 years to 7 years.........         0.20
  Remaining maturity 7 years to 10 years........         0.30
  Remaining maturity 10 years...................         0.35
------------------------------------------------------------------------


      Table 1.2--Requirement for Rated Residential Mortgage Assets
------------------------------------------------------------------------
                                                              Percentage
                                                              applicable
                                                                  to
             Type of residential mortgage asset              residential
                                                               mortgage
                                                                assets
------------------------------------------------------------------------
Highest Investment Grade...................................         0.37
Second Highest Investment Grade............................         0.60
Third Highest Investment Grade.............................         0.86
Fourth Highest Investment Grade............................         1.20
If Downgraded to Below Investment Grade After Acquisition
 By Bank:
  Highest Below Investment Grade...........................         2.40
  Second Highest Below Investment Grade....................         4.80
  All Other Below Investment Grade.........................        34.00
Subordinated Classes of Mortgage Assets:
  Highest Investment Grade.................................         0.37
  Second Highest Investment Grade..........................         0.60
  Third Highest Investment Grade...........................         1.60
  Fourth Highest Investment Grade..........................         4.45
If Downgraded to Below Investment Grade After Acquisition
 By Bank:
  Highest Below Investment Grade...........................        13.00
  Second Highest Below Investment Grade....................        34.00
  All Other Below Investment Grade.........................       100.00
------------------------------------------------------------------------


    Table 1.3--Requirement for rated Assets or Rated Items Other Than Advances or Residential Mortgage Assets
                                          [Based on remaining maturity]
----------------------------------------------------------------------------------------------------------------
                                                                    Applicable percentage
                                           ---------------------------------------------------------------------
                                                                                     7
                                              <=1 year   1  3    yrs to 10   10
                                                          yr to 3 yrs   yrs to 7yrs       yrs           yrs
----------------------------------------------------------------------------------------------------------------
U.S. Government Securities................         0.00          0.00          0.00          0.00          0.00
Highest Investment Grade..................         0.15          0.40          0.90          1.40          2.20
Second Highest Investment Grade...........         0.20          0.45          1.00          1.45          2.30
Third Highest Investment Grade............         0.70          1.10          1.60          2.05          2.95
Fourth Highest Investment Grade...........         2.50          3.70          4.45          5.50          7.05
If Downgraded Below Investment Grade After
 Acquisition by Bank:
    Highest Below Investment Grade........        10.00         13.00         13.00         13.00         13.00
    Second Highest Below Investment Grade.        26.00         34.00         34.00         34.00         34.00
    All Other.............................       100.00        100.00        100.00        100.00        100.00
----------------------------------------------------------------------------------------------------------------


                Table 1.4--Requirement for Unrated Assets
------------------------------------------------------------------------
                                                              Applicable
                   Type of unrated asset                      percentage
------------------------------------------------------------------------
Cash.......................................................         0.00
Premises, Plant, and Equipment.............................         8.00
Investments Under Sec. 940.3(e) & (f).....................         8.00
------------------------------------------------------------------------

    (ii) When determining the applicable credit risk percentage 
requirement from Tables 1.2 or 1.3 of this part, each Bank shall apply 
the following criteria:
    (A) For assets or items that are rated directly by an NRSRO, the 
credit rating shall be the NRSRO's credit rating for the asset or item 
as determined in accordance with paragraph (e)(2)(iii) of this section.
    (B) When using Table 1.3 of this part, for an asset, off-balance 
sheet item, or derivative contract that is not rated directly by an 
NRSRO, but for which an NRSRO rating has been assigned to any 
corresponding obligor

[[Page 25]]

counterparty, third party guarantor, or collateral backing the asset, 
item, or derivative, the credit rating that shall apply to the asset, 
item, or derivative, or portion of the asset, item, or derivative so 
guaranteed or collateralized, shall be the credit rating corresponding 
to such obligor counterparty, third party guarantor, or underlying 
collateral, as determined in accordance with paragraph (e)(2)(iii) of 
this section. If there are multiple obligor counterparties, third party 
guarantors, or collateral instruments backing an asset, item, or 
derivative not rated directly by an NRSRO, or any specific portion 
thereof, then the credit rating that shall apply to that asset, item, or 
derivative or specific portion thereof, shall be the highest credit 
rating among such obligor counterparties, third party guarantors, or 
collateral instruments, as determined in accordance with paragraph 
(e)(2)(iii) of this section. Assets, items or derivatives shall be 
deemed to be backed by collateral for purposes of this paragraph if the 
collateral is:
    (1) Actually held by the Bank or an independent, third-party 
custodian, or, if permitted under the Bank's collateral agreement with 
such party, by the Bank's member or an affiliate of that member where 
the term ``affiliate'' has the same meaning as in Sec. 950.1 of this 
chapter;
    (2) Legally available to absorb losses;
    (3) Of a readily determinable value at which it can be liquidated by 
the Bank;
    (4) Held in accordance with the provisions of the Bank's member 
products policy established pursuant to Sec. 917.4 of this chapter; and
    (5) Subject to an appropriate discount to protect against price 
decline during the holding period, as well as the costs likely to be 
incurred in the liquidation of the collateral.
    (C) When using Table 1.3 of this part, for an asset with a short-
term credit rating from a given NRSRO, the credit risk percentage 
requirement shall be based on the remaining maturity of the asset and 
the long-term credit rating provided for the issuer of the asset by the 
same NRSRO. Should the issuer of the short-term asset not have a long-
term credit rating, the long-term equivalent rating shall be determined 
as follows:
    (1) The highest short-term credit rating shall be equivalent to the 
third highest long-term rating;
    (2) The second highest short-term rating shall be equivalent to the 
fourth highest long-term rating;
    (3) The third highest short-term rating shall be equivalent to the 
fourth highest long-term rating; and
    (4) If the short-term rating is downgraded to below investment grade 
after acquisition by the Bank, the short-term rating shall be equivalent 
to the second highest below investment grade long-term rating.
    (D) For residential mortgage assets and other assets or items, or 
relevant portion of an asset or item, that do not meet the requirements 
of paragraphs (e)(2)(ii)(A), (e)(2)(ii)(B) or (e)(2)(ii)(C) of this 
section, and are not identified in Tables 1.1 or Table 1.4 of this part, 
each Bank shall determine its own credit rating for such assets or 
items, or relevant portion thereof, using credit rating standards 
available from an NRSRO or other similar standards. This credit rating, 
as determined by the Bank, shall be used to identify the applicable 
credit risk percentage requirement under Table 1.2 of this part for 
residential mortgage assets, or under Table 1.3 of this part for all 
other assets or items.
    (E) The credit risk percentage requirement for mortgage assets that 
are acquired member assets described in Sec. 955.2 of this chapter shall 
be assigned from Table 1.2 of this part based on the rating of those 
assets after taking into account any credit enhancement required by 
Sec. 955.3 of this chapter. Should a Bank further enhance a pool of 
loans through the purchase of insurance or by some other means, the 
credit risk percentage requirement shall be based on the rating of such 
pool after the supplemental credit enhancement, except that the Finance 
Board retains the right to adjust the credit capital charge to account 
for any deficiencies with the supplemental enhancement on a case-by-case 
basis.
    (iii) In determining the credit ratings under paragraph 
(e)(2)(ii)(A),

[[Page 26]]

(e)(2)(ii)(B) and (e)(2)(ii)(C) of this section, each Bank shall apply 
the following criteria:
    (A) The most recent credit rating from a given NRSRO shall be 
considered. If only one NRSRO has rated an asset or item, that NRSRO's 
rating shall be used. If an asset or item has received credit ratings 
from more than one NRSRO, the lowest credit rating from among those 
NRSROs shall be used.
    (B) Where a credit rating has a modifier (e.g., A-1+ for short-term 
ratings and A+ or A- for long-term ratings) the credit rating is deemed 
to be the credit rating without the modifier (e.g., A-1+ = A-1 and A+ or 
A-= A);
    (f) Calculation of credit equivalent amount for off-balance sheet 
items--(1) General requirement. The credit equivalent amount for an off-
balance sheet item shall be determined by a Finance Board approved model 
or shall be equal to the face amount of the instrument multiplied by the 
credit conversion factor assigned to such risk category of instruments, 
subject to the exceptions in paragraph (f)(2) of this section, provided 
in the following Table 2 of this part:

     Table 2--Credit Conversion Factors for Off-Balance Sheet Items
------------------------------------------------------------------------
                                                              Credit
                                                            conversion
                       Instrument                           factor (In
                                                             percent)
------------------------------------------------------------------------
Asset sales with recourse where the credit risk remains              100
 with the Bank..........................................
Commitments to make advances subject to certain drawdown
Commitments to acquire loans subject to certain drawdown
Standby letters of credit...............................              50
Other commitments with original maturity of over one
 year...................................................
Other commitments with original maturity of one year or               20
 less...................................................
------------------------------------------------------------------------

    (2) Exceptions. The credit conversion factor shall be zero for Other 
Commitments With Original Maturity of Over One Year and Other 
Commitments With Original Maturity of One Year or Less, for which credit 
conversion factors of 50 percent or 20 percent would otherwise apply, 
that are unconditionally cancelable, or that effectively provide for 
automatic cancellation, due to the deterioration in a borrower's 
creditworthiness, at any time by the Bank without prior notice.
    (g) Calculation of current and potential future credit exposures for 
single derivative contracts--(1) Current credit exposure. The current 
credit exposure for a derivative contract that is not subject to a 
qualifying bilateral netting contract described in paragraph (h)(3) of 
this section shall be:
    (i) If the mark-to-market value of the contract is positive, the 
mark-to-market value of the contract; or
    (ii) If the mark-to-market value of the contract is zero or 
negative, zero.
    (2) Potential future credit exposure. (i) The potential future 
credit exposure for a single derivative contract, including a derivative 
contract with a negative mark-to-market value, shall be calculated using 
an internal model approved by the Finance Board or, in the alternative, 
by multiplying the effective notional amount of the derivative contract 
by one of the assigned credit conversion factors, modified as may be 
required by paragraph (g)(2)(ii) of this section, for the appropriate 
category as provided in the following Table 3 of this part:

          Table 3--Credit Conversion Factors for Potential Future Credit Exposure Derivative Contracts
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                Foreign                   Precious
              Residual maturity                  Interest    exchange and     Equity       metals       Other
                                                   rate          gold                   except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less.............................           0             1              6            7           10
Over 1 year to five years....................            .5           5              8            7           12
Over five years..............................           1.5           7.5           10            8           15
----------------------------------------------------------------------------------------------------------------


[[Page 27]]

    (ii) In applying the credit conversion factors in Table 3 of this 
part the following modifications shall be made:
    (A) For derivative contracts with multiple exchanges of principal, 
the conversion factors are multiplied by the number of remaining 
payments in the derivative contract; and
    (B) For derivative contracts that automatically reset to zero value 
following a payment, the residual maturity equals the time until the 
next payment; however, interest rate contracts with remaining maturities 
of greater than one year shall be subject to a minimum conversion factor 
of 0.5 percent.
    (iii) If a Bank uses an internal model to determine the potential 
future credit exposure for a particular type of derivative contract, the 
Bank shall use the same model for all other similar types of contracts. 
However, the Bank may use an internal model for one type of derivative 
contract and Table 3 of this part for another type of derivative 
contract.
    (iv) Forwards, swaps, purchased options and similar derivative 
contracts not included in the Interest Rate, Foreign Exchange and Gold, 
Equity, or Precious Metals Except Gold categories shall be treated as 
other commodities contracts when determining potential future credit 
exposures using Table 3 of this part.
    (v) If a Bank uses Table 3 of this part to determine the potential 
future credit exposures for credit derivative contracts, the credit 
conversion factors provided in Table 3 for equity contracts shall also 
apply to the credit derivative contracts entered into with investment 
grade counterparties. If the counterparty is downgraded to below 
investment grade, the credit conversion factor provided in Table 3 of 
this part for other commodity contracts shall apply.
    (h) Calculation of current and potential future credit exposures for 
multiple derivative contracts subject to a qualifying bilateral netting 
contract--(1) Current credit exposure. The current credit exposure for 
multiple derivative contracts executed with a single counterparty and 
subject to a qualifying bilateral netting contract described in 
paragraph (h)(3) of this section, shall be calculated on a net basis and 
shall equal:
    (i) The net sum of all positive and negative mark-to-market values 
of the individual derivative contracts subject to a qualifying bilateral 
netting contract, if the net sum of the mark-to-market values is 
positive; or
    (ii) Zero, if the net sum of the mark-to-market values is zero or 
negative.
    (2) Potential future credit exposure. The potential future credit 
exposure for each individual derivative contract from among a group of 
derivative contracts that are executed with a single counterparty and 
subject to a qualifying bilateral netting contract described in 
paragraph (h)(3) of this section shall be calculated as follows:

Anet = 0.4 x Agross + (0.6 x NGR x 
Agross),


where:
    (i) Anet is the potential future credit exposure for an 
individual derivative contract subject to the qualifying bilateral 
netting contract;
    (ii) Agross is the gross potential future credit 
exposure, i.e., the potential future credit exposure for the individual 
derivative contract, calculated in accordance with paragraph (g)(2) of 
this section but without regard to the fact that the contract is subject 
to the qualifying bilateral netting contract;
    (iii) NGR is the net to gross ratio, i.e., the ratio of the net 
current credit exposure of all the derivative contracts subject to the 
qualifying bilateral netting contract, calculated in accordance with 
paragraph (h)(1) of this section, to the gross current credit exposure; 
and
    (iv) The gross current credit exposure is the sum of the positive 
current credit exposures of all the individual derivative contracts 
subject to the qualifying bilateral netting contract, calculated in 
accordance with paragraph (g)(1) of this section but without regard to 
the fact that the contract is subject to the qualifying bilateral 
netting contract.
    (3) Qualifying bilateral netting contract. A bilateral netting 
contract shall be considered a qualifying bilateral netting contract if 
the following conditions are met:
    (i) The netting contract is in writing;
    (ii) The netting contract is not subject to a walkaway clause;

[[Page 28]]

    (iii) The netting contract provides that the Bank would have a 
single legal claim or obligation either to receive or to pay only the 
net amount of the sum of the positive and negative mark-to-market values 
on the individual derivative contracts covered by the netting contract 
in the event that a counterparty, or a counterparty to whom the netting 
contract has been assigned, fails to perform due to default, insolvency, 
bankruptcy, or other similar circumstance;
    (iv) The Bank obtains a written and reasoned legal opinion that 
represents, with a high degree of certainty, that in the event of a 
legal challenge, including one resulting from default, insolvency, 
bankruptcy, or similar circumstances, the relevant court and 
administrative authorities would find the Bank's exposure to be the net 
amount under:
    (A) The law of the jurisdiction by which the counterparty is 
chartered or the equivalent location in the case of non-corporate 
entities, and if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    (B) The law of the jurisdiction that governs the individual 
derivative contracts covered by the netting contract; and
    (C) The law of the jurisdiction that governs the netting contract;
    (v) The Bank establishes and maintains procedures to monitor 
possible changes in relevant law and to ensure that the netting contract 
continues to satisfy the requirements of this section; and
    (vi) The Bank maintains in its files documentation adequate to 
support the netting of a derivative contract.
    (i) Credit risk capital charge for assets hedged with credit 
derivatives--(1) Credit derivatives with a remaining maturity of one 
year or more. The credit risk capital charge for an asset that is hedged 
with a credit derivative that has a remaining maturity of one year or 
more may be reduced only in accordance with paragraph (i)(3) or (i)(4) 
of this section and only if the credit derivative provides substantial 
protection against credit losses.
    (2) Credit derivatives with a remaining maturity of less than one 
year. The credit risk capital charge for an asset that is hedged with a 
credit derivative that has a remaining maturity of less than one year 
may be reduced only in accordance with paragraph (i)(3) of this section 
and only if the remaining maturity on the credit derivative is identical 
to or exceeds the remaining maturity of the hedged asset and the credit 
derivative provides substantial protection against credit losses.
    (3) Capital charge reduced to zero. The credit risk capital charge 
for an asset shall be zero if a credit derivative is used to hedge the 
credit risk on that asset in accordance with paragraph (i)(1) or (i)(2) 
of this section, provided that:
    (i) The remaining maturity for the credit derivative used for the 
hedge is identical to or exceeds the remaining maturity for the hedged 
asset, and either:
    (A) The asset referenced in the credit derivative is identical to 
the hedged asset; or
    (B) The asset referenced in the credit derivative is different from 
the hedged asset, but only if the asset referenced in the credit 
derivative and the hedged asset have been issued by the same obligor, 
the asset referenced in the credit derivative ranks pari passu to or 
more junior than the hedged asset and has the same maturity as the 
hedged asset, and cross-default clauses apply; and
    (ii) The credit risk capital charge for the credit derivative 
contract calculated pursuant to paragraph (d) of this section is still 
applied.
    (4) Capital charge reduction in certain other cases. The credit risk 
capital charge for an asset hedged with a credit derivative in 
accordance with paragraph (i)(1) of this section shall equal the sum of 
the credit risk capital charges for the hedged and unhedged portion of 
the asset provided that:
    (i) The remaining maturity for the credit derivative is less than 
the remaining maturity for the hedged asset and either:
    (A) The asset referenced in the credit derivative is identical to 
the hedged asset; or
    (B) The asset referenced in the credit derivative is different from 
the hedged asset, but only if the asset referenced in the credit 
derivative and the hedged

[[Page 29]]

asset have been issued by the same obligor, the asset referenced in the 
credit derivative ranks pari passu to or more junior than the hedged 
asset and has the same maturity as the hedged asset, and cross-default 
clauses apply; and
    (ii) The credit risk capital charge for the unhedged portion of the 
asset equals:
    (A) The credit risk capital charge for the hedged asset, calculated 
as the book value of the hedged asset multiplied by the hedged asset's 
credit risk percentage requirement assigned pursuant to paragraph (e)(2) 
of this section where the appropriate credit rating is that for the 
hedged asset and the appropriate maturity is the remaining maturity of 
the hedged asset; minus
    (B) The credit risk capital charge for the hedged asset, calculated 
as the book value of the hedged asset multiplied by the hedged asset's 
credit risk percentage requirement assigned pursuant to paragraph (e)(2) 
of this section where the appropriate credit rating is that for the 
hedged asset but the appropriate maturity is deemed to be the remaining 
maturity of the credit derivative; and
    (iii) The credit risk capital charge for the hedged portion of the 
asset is equal to the credit risk capital charge for the credit 
derivative, calculated in accordance with paragraph (d) of this section.
    (j) Zero Credit risk capital charge for certain derivative 
contracts. The credit risk capital charge for the following derivative 
contracts shall be zero:
    (1) A foreign exchange rate contract with an original maturity of 14 
calendar days or less (gold contracts do not qualify for this 
exception); and
    (2) A derivative contract that is traded on an organized exchange 
requiring the daily payment of any variations in the market value of the 
contract.
    (k) Date of calculations. Unless otherwise directed by the Finance 
Board, each Bank shall perform all calculations required by this section 
using the assets, off-balance sheet items, and derivative contracts held 
by the Bank, and, if applicable, the values or credit ratings of such 
assets, items, or derivatives as of the close of business of the last 
business day of the month for which the credit risk capital charge is 
being calculated.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]



Sec. 932.5  Market risk capital requirement.

    (a) General requirement. (1) Each Bank's market risk capital 
requirement shall equal the sum of:
    (i) The market value of the Bank's portfolio at risk from movements 
in interest rates, foreign exchange rates, commodity prices, and equity 
prices that could occur during periods of market stress, where the 
market value of the Bank's portfolio at risk is determined using an 
internal market risk model that fulfills the requirements of paragraph 
(b) of this section and that has been approved by the Finance Board; and
    (ii) The amount, if any, by which the Bank's current market value of 
total capital is less than 85 percent of the Bank's book value of total 
capital, where:
    (A) The current market value of the total capital is calculated by 
the Bank using the internal market risk model approved by the Finance 
Board under paragraph (d) of this section; and
    (B) The book value of total capital is the same as the amount of 
total capital reported by the Bank to the Finance Board under Sec. 932.7 
of this part.
    (2) A Bank may substitute an internal cash flow model to derive a 
market risk capital requirement in place of that calculated using an 
internal market risk model under paragraph (a)(1) of this section, 
provided that:
    (i) The Bank obtains Finance Board approval of the internal cash 
flow model and of the assumptions to be applied to the model; and
    (ii) The Bank demonstrates to the Finance Board that the internal 
cash flow model subjects the Bank's assets and liabilities, off-balance 
sheet items and derivative contracts, including related options, to a 
comparable degree of stress for such factors as will be required for an 
internal market risk model.
    (b) Measurement of market value at risk under a Bank's internal 
market risk model. (1) Except as provided under paragraph (a)(2) of this 
section, each

[[Page 30]]

Bank shall use an internal market risk model that estimates the market 
value of the Bank's assets and liabilities, off-balance sheet items, and 
derivative contracts, including any related options, and measures the 
market value of the Bank's portfolio at risk of its assets and 
liabilities, off-balance sheet items, and derivative contracts, 
including related options, from all sources of the Bank's market risks, 
except that the Bank's model need only incorporate those risks that are 
material.
    (2) The Bank's internal market risk model may use any generally 
accepted measurement technique, such as variance-covariance models, 
historical simulations, or Monte Carlo simulations, for estimating the 
market value of the Bank's portfolio at risk, provided that any 
measurement technique used must cover the Bank's material risks.
    (3) The measures of the market value of the Bank's portfolio at risk 
shall include the risks arising from the non-linear price 
characteristics of options and the sensitivity of the market value of 
options to changes in the volatility of the options' underlying rates or 
prices.
    (4) The Bank's internal market risk model shall use interest rate 
and market price scenarios for estimating the market value of the Bank's 
portfolio at risk, but at a minimum:
    (i) The Bank's internal market risk model shall provide an estimate 
of the market value of the Bank's portfolio at risk such that the 
probability of a loss greater than that estimated shall be no more than 
one percent;
    (ii) The Bank's internal market risk model shall incorporate 
scenarios that reflect changes in interest rates, interest rate 
volatility, and shape of the yield curve, and changes in market prices, 
equivalent to those that have been observed over 120-business day 
periods of market stress. For interest rates, the relevant historical 
observations should be drawn from the period that starts at the end of 
the previous month and goes back to the beginning of 1978;
    (iii) The total number of, and specific historical observations 
identified by the Bank as, stress scenarios shall be:
    (A) Satisfactory to the Finance Board;
    (B) Representative of the periods of the greatest potential market 
stress given the Bank's portfolio, and
    (C) Comprehensive given the modeling capabilities available to the 
Bank; and
    (iv) The measure of the market value of the Bank's portfolio at risk 
may incorporate empirical correlations among interest rates.
    (5) For any consolidated obligations denominated in a currency other 
than U.S. Dollars or linked to equity or commodity prices, each Bank 
shall, in addition to fulfilling the criteria of paragraph (b)(4) of 
this section, calculate an estimate of the market value of its portfolio 
at risk due to the material foreign exchange, equity price or commodity 
price risk, such that, at a minimum:
    (i) The probability of a loss greater than that estimated shall not 
exceed one percent;
    (ii) The scenarios reflect changes in foreign exchange, equity, or 
commodity market prices that have been observed over 120-business day 
periods of market stress, as determined using historical data that is 
from an appropriate period; and
    (iii) The total number of, and specific historical observations 
identified by the Bank as, stress scenarios shall be:
    (A) Satisfactory to the Finance Board;
    (B) Representative of the periods of greatest potential stress given 
the Bank's portfolio; and
    (C) Comprehensive given the modeling capabilities available to the 
Bank; and
    (iv) The measure of the market value of the Bank's portfolio at risk 
may incorporate empirical correlations within or among foreign exchange 
rates, equity prices, or commodity prices.
    (c) Independent validation of Bank internal market risk model or 
internal cash flow model. (1) Each Bank shall conduct an independent 
validation of its internal market risk model or internal cash flow model 
within the Bank that is carried out by personnel not reporting to the 
business line responsible for conducting business transactions for the

[[Page 31]]

Bank. Alternatively, the Bank may obtain independent validation by an 
outside party qualified to make such determinations. Validations shall 
be done on an annual basis, or more frequently as required by the 
Finance Board.
    (2) The results of such independent validations shall be reviewed by 
the Bank's board of directors and provided promptly to the Finance 
Board.
    (d) Finance Board approval of Bank internal market risk model or 
internal cash flow model. Each Bank shall obtain Finance Board approval 
of an internal market risk model or an internal cash flow model, 
including subsequent material adjustments to the model made by the Bank, 
prior to the use of any model. Each Bank shall make such adjustments to 
its model as may be directed by the Finance Board.
    (e) Date of calculations. Unless otherwise directed by the Finance 
Board, each Bank shall perform any calculations or estimates required 
under this section using the assets and liabilities, off-balance sheet 
items, and derivative contracts held by the Bank, and if applicable, the 
values of any such holdings, as of the close of business of the last 
business day of the month for which the market risk capital requirement 
is being calculated.



Sec. 932.6  Operations risk capital requirement.

    (a) General requirement. Except as authorized under paragraph (b) of 
this section, each Bank's operations risk capital requirement shall at 
all times equal 30 percent of the sum of the Bank's credit risk capital 
requirement and market risk capital requirement.
    (b) Alternative requirements. With the approval of the Finance 
Board, each Bank may have an operations risk capital requirement equal 
to less than 30 percent but no less than 10 percent of the sum of the 
Bank's credit risk capital requirement and market risk capital 
requirement if:
    (1) The Bank provides an alternative methodology for assessing and 
quantifying an operations risk capital requirement; or
    (2) The Bank obtains insurance to cover operations risk from an 
insurer rated at least the second highest investment grade credit rating 
by an NRSRO.



Sec. 932.7  Reporting requirements.

    Each Bank shall report to the Finance Board by the 15th business day 
of each month its risk-based capital requirement by component amounts, 
and its actual total capital amount and permanent capital amount, 
calculated as of the close of business of the last business day of the 
preceding month, or more frequently, as may be required by the Finance 
Board.



Sec. 932.8  Minimum liquidity requirements.

    In addition to meeting the deposit liquidity requirements contained 
in Sec. 965.3 of this chapter, each Bank shall hold contingency 
liquidity in an amount sufficient to enable the Bank to meet its 
liquidity needs, which shall, at a minimum, cover five business days of 
inability to access the consolidated obligation debt markets. An asset 
that has been pledged under a repurchase agreement cannot be used to 
satisfy minimum liquidity requirements.



Sec. 932.9  Limits on unsecured extensions of credit to one 
counterparty or affiliated counterparties; reporting requirements 
for total extensions of credit to one counterparty or affiliated
counterparties.

    (a) Unsecured extensions of credit to a single counterparty. A Bank 
shall not extend unsecured credit to any single counterparty (other than 
a GSE) in an amount that would exceed the limits of this paragraph. A 
Bank shall not extend unsecured credit to a GSE in an amount that would 
exceed the limits set forth in paragraph (c) of this section. If a 
third-party provides an irrevocable, unconditional guarantee of 
repayment of a credit (or any part thereof), the third-party guarantor 
shall be considered the counterparty for purposes of calculating and 
applying the unsecured credit limits of this section with respect the to 
guaranteed portion of the transaction.
    (1) Term limits. All unsecured extensions of credit by a Bank to a 
single counterparty that arise from the Bank's on- and off-balance sheet 
and derivative transactions (but excluding

[[Page 32]]

the amount of sales of federal funds with a maturity of one day or less 
and sales of federal funds subject to a continuing contract) shall not 
exceed the product of the maximum capital exposure limit applicable to 
such counterparty, as determined in accordance with paragraph (a)(4) of 
this section and Table 4 of this part, multiplied by the lesser of:
    (i) The Bank's total capital; or
    (ii) The counterparty's Tier 1 capital, or if Tier 1 capital is not 
available, total capital (as defined by the counterparty's principal 
regulator) or some similar comparable measure identified by the Bank.
    (2) Overall limits including sales of overnight federal funds. All 
unsecured extensions of credit by a Bank to a single counterparty that 
arise from the Bank's on- and off-balance sheet and derivative 
transactions, including the amounts of sales of federal funds with a 
maturity of one day or less and sales of federal funds subject to a 
continuing contract, shall not exceed twice the limit calculated 
pursuant to paragraph (a)(1) of this section.
    (3) Limits for certain obligations issued by state, local or tribal 
governmental agencies. The term limit set forth in paragraph (a)(1) of 
this section when applied to the marketable direct obligations of state, 
local or tribal government unit or agencies that are acquired member 
assets identified in Sec. 955.2(a)(3) of this chapter or are otherwise 
excluded from the prohibition against investments in whole mortgages or 
whole loan or interests in such mortgages or loans by 
Sec. 956.3(a)(4)(iii) of this chapter shall be calculated based on the 
Bank's total capital and the credit rating assigned to the particular 
obligation as determined in accordance with paragraph (a)(5) of this 
section. If a Bank owns series or classes of obligations issued by a 
particular state, local or tribal government unit or agency or has 
extended other forms of unsecured credit to such entity falling into 
different rating categories, the total amount of unsecured credit 
extended by the Bank to that government unit or agency shall not exceed 
the term limit associated with the highest-rated obligation issued by 
the entity and actually purchased by the Bank.
    (4) Bank determination of applicable maximum capital exposure 
limits. (i) Except as set forth in paragraph (a)(4)(ii) or (a)(4)(iii) 
of this section, the applicable maximum capital exposure limits are 
assigned to each counterparty based upon the long-term credit rating of 
the counterparty, as determined in accordance with paragraph (a)(5) of 
this section, and are provided in the following Table 4 of this part:

  Table 4--Maximum Limits on Unsecured Extensions of Credit to a Single
      Counterparty by Counterparty Long-Term Credit Rating Category
------------------------------------------------------------------------
                                                              Maximum
                                                              capital
    Long-term credit rating of counterparty category      exposure limit
                                                           (in percent)
------------------------------------------------------------------------
Highest Investment Grade................................              15
Second Highest Investment Grade.........................              14
Third Highest Investment Grade..........................               9
Fourth Highest Investment Grade.........................               3
Below Investment Grade or Other.........................               1
------------------------------------------------------------------------

    (ii) If a counterparty does not have a long-term credit rating but 
has received a short-term credit rating from an NRSRO, the maximum 
capital exposure limit applicable to that counterparty shall be based 
upon the short-term credit rating, as determined in accordance with 
paragraph (a)(5) of this section, as follows:
    (A) The highest short-term investment grade credit rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the third highest long-term investment grade rating;
    (B) The second highest short-term investment grade rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the fourth highest long-term investment grade rating; and
    (C) The third highest short-term investment grade rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the fourth highest long-term investment grade rating.
    (iii) If a specific debt obligation issued by a counterparty 
receives a credit rating from an NRSRO that is lower than the 
counterparty's long-term credit rating, the total amount of

[[Page 33]]

the lower-rated obligation held by the Bank may not exceed a sub-limit 
calculated in accordance with paragraph (a)(1) of this section, except 
that the Bank shall use the credit rating associated with the specific 
obligation to determine the applicable maximum capital exposure limit. 
For purposes of this paragraph, the credit rating of the debt obligation 
shall be determined in accordance with paragraph (a)(5) of this section.
    (5) Bank determination of applicable credit ratings. The following 
criteria shall be applied to determine a counterparty's credit rating:
    (i) The counterparty's most recent credit rating from a given NRSRO 
shall be considered;
    (ii) If only one NRSRO has rated the counterparty, that NRSRO's 
rating shall be used. If a counterparty has received credit ratings from 
more than one NRSRO, the lowest credit rating from among those NRSROs 
shall be used;
    (iii) Where a credit rating has a modifier, the credit rating is 
deemed to be the credit rating without the modifier;
    (iv) If a counterparty is placed on a credit watch for a potential 
downgrade by an NRSRO, the credit rating from that NRSRO at the next 
lower grade shall be used; and
    (v) If a counterparty is not rated by an NRSRO, the Bank shall 
determine the applicable credit rating by using credit rating standards 
available from an NRSRO or other similar standards.
    (b) Unsecured extensions of credit to affiliated counterparties--(1) 
In general. The total amount of unsecured extensions of credit by a Bank 
to a group of affiliated counterparties that arise from the Bank's on- 
and off-balance sheet and derivative transactions, including sales of 
federal funds with a maturity of one day or less and sales of federal 
funds subject to a continuing contract, shall not exceed thirty percent 
of the Bank's total capital.
    (2) Relation to individual limits. The aggregate limits calculated 
under this paragraph shall apply in addition to the limits on extensions 
of unsecured credit to a single counterparty imposed by paragraph (a) of 
this section.
    (c) Special limits for GSEs--(1) In general. Unsecured extensions of 
credit by a Bank to a GSE that arise from the Bank's on- and off-balance 
sheet and derivative transactions, including from the purchase of any 
subordinated debt subject to the sub-limit set forth in paragraph (c)(2) 
of this section, from any sales of federal funds with a maturity of one 
day or less and from sales of federal funds subject to a continuing 
contract, shall not exceed the lesser of:
    (i) The Bank's total capital; or
    (ii) The GSE's total capital (as defined by the GSE's principal 
regulator) or some similar comparable measure identified by the Bank.
    (2) Sub-limit for subordinated debt. The maximum amount of 
subordinated debt issued by a GSE and held by a Bank shall not exceed 
the term limit calculated under paragraph (a)(1) of this section, except 
that a Bank shall use the credit rating of the GSE's subordinated debt 
to determine the applicable maximum capital exposure limit. The credit 
rating of the subordinated debt shall be determined in accordance with 
paragraph (a)(5) of this section.
    (3) Limits applying to a GSE after a downgrade. If any NRSRO assigns 
a credit rating to any senior debt obligation issued (or to be issued) 
by a GSE that is below the highest investment grade or downgrades, or 
places on a credit watch for a potential downgrade of the credit rating 
on any senior unsecured obligation issued by a GSE to below the highest 
investment grade, the special limits on unsecured extensions of credit 
under paragraph (c)(1) of this section shall cease to apply, and 
instead, the Bank shall calculate the maximum amount of its unsecured 
extensions of credit to that GSE in accordance with paragraphs (a)(1) 
and (a)(2) of this section.
    (4) Extensions of unsecured credit to other Banks. The limits of 
this section do not apply to unsecured credit extended by one Bank to 
another Bank.
    (d) Extensions of unsecured credit after downgrade or placement on 
credit watch. If an NRSRO downgrades the credit rating applicable to any 
counterparty or places any counterparty on a credit watch for a 
potential downgrade, a Bank need not unwind or liquidate any existing 
transaction or position with

[[Page 34]]

that counterparty that complied with the limits of this section at the 
time it was entered. In such a case, however, a Bank may extend any 
additional unsecured credit to such a counterparty only in compliance 
with the limitations that are calculated using the lower maximum 
exposure limits. For the purposes of this section, the renewal of an 
existing unsecured extension of credit, including any decision not to 
terminate any sales of federal funds subject to a continuing contract, 
shall be considered an additional extension of unsecured credit that can 
be undertaken only in accordance with the lower limit.
    (e) Reporting requirements--(1) Total unsecured extensions of 
credit. Each Bank shall report monthly to the Finance Board the amount 
of the Bank's total unsecured extensions of credit arising from on- and 
off-balance sheet and derivative transactions to any single counterparty 
or group of affiliated counterparties that exceeds 5 percent of:
    (i) The Bank's total capital; or
    (ii) The counterparty's, or affiliated counterparties' combined, 
Tier 1 capital, or if Tier 1 capital is not available, total capital (as 
defined by each counterparty's principal regulator) or some similar 
comparable measure identified by the Bank.
    (2) Total secured and unsecured extensions of credit. Each Bank 
shall report monthly to the Finance Board the amount of the Bank's total 
secured and unsecured extensions of credit arising from on- and off-
balance sheet and derivative transactions to any single counterparty or 
group of affiliated counterparties that exceeds 5 percent of the Bank's 
total assets.
    (3) Extensions of credit in excess of limits. A Bank shall report 
promptly to the Finance Board any extensions of unsecured credit that 
exceeds any limit set forth in paragraphs (a), (b) or (c) of this 
section. In making this report, a Bank shall provide the name of the 
counterparty or group of affiliated counterparties to which the excess 
unsecured credit has been extended, the dollar amount of the applicable 
limit which has been exceeded, the dollar amount by which the Bank's 
extension of unsecured credit exceeds such limit, the dates for which 
the Bank was not in compliance with the limit, and, if applicable, a 
brief explanation of any extenuating circumstances which caused the 
limit to be exceeded.
    (f) Measurement of unsecured extensions of credit--(1) In general. 
For purposes of this section, unsecured extensions of credit will be 
measured as follows:
    (i) For on-balance sheet transactions, an amount equal to the sum of 
the book value of the item plus net payments due the Bank;
    (ii) For off-balance sheet transactions, an amount equal to the 
credit equivalent amount of such item, calculated in accordance with 
Sec. 932.4(f) of this part; and
    (iii) For derivative transactions, an amount equal to the sum of the 
current and potential future credit exposures for the derivative 
contract, where those values are calculated in accordance with 
Sec. Sec. 932.4(g) or 932.4(h) of this part, as applicable, less the 
amount of any collateral that is held in accordance with the 
requirements of Sec. 932.4(e)(2)(ii)(B) of this part against the credit 
exposure from the derivative contract.
    (2) Status of debt obligations purchased by the Bank. Any debt 
obligation or debt security (other than mortgage-backed securities or 
acquired member assets that are identified in Sec. Sec. 955.2(a)(1) and 
(2) of this chapter) purchased by a Bank shall be considered an 
unsecured extension of credit for the purposes of this section, except:
    (i) Any amount owed the Bank against which the Bank holds collateral 
in accordance with Sec. 932.4(e)(2)(ii)(B) of this part; or
    (ii) Any amount which the Finance Board has determined on a case-by-
case basis shall not be considered an unsecured extension of credit.
    (g) Obligations of the United States. Obligations of, or guaranteed 
by, the United States are not subject to the requirements of this 
section.

[66728, Dec. 27, 2002]



PART 933_BANK CAPITAL STRUCTURE PLANS--Table of Contents



Sec.
933.1 Submission of plan.

[[Page 35]]

933.2 Contents of plan.
933.3 Independent review of capital plan.
933.4 Transition provisions.
933.5 Disclosure to members concerning capital plan and capital stock 
          conversion.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1440, 1443, 1446.

    Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.



Sec. 933.1  Submission of plan.

    (a) In general. By no later than October 29, 2001, the board of 
directors of each Bank shall submit to the Finance Board a plan to 
establish and implement a new capital structure for that Bank, which 
plan shall comply with part 931 of this chapter and under which, when 
implemented, the Bank shall have sufficient total and permanent capital 
to comply with the regulatory capital requirements established by part 
932 of this chapter. The Finance Board, upon a demonstration of good 
cause submitted by the board of directors of a Bank, may approve a 
reasonable extension of the 270-day period for submission of the capital 
plan. A Bank shall not implement its capital plan, or any amendment to 
the plan, without Finance Board approval.
    (b) Failure to submit a capital plan. If a Bank fails to submit a 
capital plan to the Finance Board by October 29, 2001, including any 
approved extension, the Finance Board may establish a capital plan for 
that Bank, take any enforcement action against the Bank, its directors, 
or its executive officers authorized by section 2B(a) of the Act (12 
U.S.C. 1422b(a)), or merge the Bank pursuant to section 26 of the Act 
(12 U.S.C. 1446) into any other Bank that has submitted a capital plan.
    (c) Consideration of the plan. After receipt of a Bank's capital 
plan, the Finance Board may return the plan to the Bank if it does not 
comply with section 6 of the Act (12 U.S.C. 1426) or any regulatory 
requirement or is otherwise incomplete or materially deficient. If the 
Finance Board accepts a capital plan for review, it may require the Bank 
to submit additional information regarding its plan or to amend the 
plan, prior to determining whether to approve the plan. The Finance 
Board may approve a capital plan as submitted or as amended, or may 
condition its approval on the Bank's compliance with certain stated 
conditions, and may require that the capital plans of all Banks take 
effect on the same date.



Sec. 933.2  Contents of plan.

    The capital plan for each Bank shall include, at a minimum, 
provisions addressing the following matters:
    (a) Minimum investment. (1) The capital plan shall require each 
member to purchase and maintain a minimum investment in the capital 
stock of the Bank, in accordance with Sec. 931.3, of this chapter and 
shall prescribe the manner in which the minimum investment is to be 
calculated. The plan shall require each member to maintain its minimum 
investment in the Bank's stock for as long as it remains a member and, 
with regard to Bank stock purchased to support an advance or other 
business activity, for as long as the advance or business activity 
remains outstanding.
    (2) The capital plan shall specify the amount and class (or classes) 
of Bank stock that an institution is required to own in order to become 
and remain a member of the Bank, and shall specify the amount and class 
(or classes) of Bank stock that a member is required to own in order to 
obtain advances from, or to engage in other business transactions with, 
the Bank. If a Bank requires its members to satisfy its minimum 
investment through the purchase of one or more combinations of Class A 
and Class B stock, the authorized combinations of stock shall be 
specified in the capital plan, which shall afford the members the option 
of satisfying the minimum investment through the purchase of any such 
combination of stock.
    (3) The capital plan may establish a minimum investment that is 
calculated as a percentage of the total assets of the member, as a 
percentage of the advances outstanding to the member, as a percentage of 
the other business activities conducted with the member, on any other 
basis approved by the Finance Board, or on any combination of the above.
    (4) The minimum investment established by the capital plan shall be 
set at a level that, when applied to all

[[Page 36]]

members, provides sufficient capital for the Bank to comply with its 
minimum capital requirements, as specified in part 932 of this chapter. 
The capital plan shall require the board of directors of the Bank to 
monitor and, as necessary, to adjust, the minimum investment to ensure 
that the stock required to be purchased and maintained by the members is 
sufficient to allow the Bank to comply with its minimum capital 
requirements. The plan shall require each member to comply promptly with 
any adjusted minimum investment established by the board of directors of 
the Bank, but may allow a member a reasonable time to do so and may 
allow a member to reduce its outstanding business with the Bank as an 
alternative to purchasing additional stock.
    (b) Classes of capital stock. The capital plan shall specify the 
class or classes of stock (including subclasses, if any) that the Bank 
will issue, and shall establish the par value, rights, terms, and 
preferences associated with each class (or subclass) of stock. A Bank 
may establish preferences relating to, but not limited to, the dividend, 
voting, or liquidation rights for each class or subclass of Bank stock. 
Any voting preferences established by the Bank pursuant to Sec. 915.5 of 
this chapter shall expressly state the voting rights of each class of 
stock with regard to the election of Bank directors. The capital plan 
shall provide that the owners of the Class B stock own the retained 
earnings, surplus, undivided profits, and equity reserves of the Bank, 
but shall have no right to receive any portion of those items, except 
through declaration of a dividend or capital distribution approved by 
the board of directors or through the liquidation of the Bank.
    (c) Dividends. The capital plan shall establish the manner in which 
the Bank will pay dividends, if any, on each class or subclass of stock, 
and shall provide that the Bank may not declare or pay any dividends if 
it is not in compliance with any capital requirement or if after paying 
the dividend it would not be in compliance with any capital requirement.
    (d) Initial issuance. The capital plan shall specify the date on 
which the Bank will implement the new capital structure, and shall 
establish the manner in which the Bank will issue Class A and/or Class B 
stock to its existing members, as well as to eligible institutions that 
subsequently become members. The capital plan shall address how the Bank 
will retire the stock that is outstanding as of the effective date, 
including stock held by a member that does not affirmatively elect to 
convert or exchange its existing stock to either Class A or Class B 
stock, or some combination thereof.
    (e) Members wishing not to convert existing stock. The capital plan 
shall establish an opt-out date on or before which a member that does 
not wish to convert its existing stock into Class A and/or Class B stock 
must file a written notice to withdraw from membership with the Finance 
Board. This opt-out date shall not be more than six months before the 
effective date of the capital plan. (For purposes of applying this 
provision, the membership of an institution that files its notice to 
withdraw with the Finance Board on or before the opt-out date 
established in a capital plan shall terminate six months from the date 
that the notice of withdrawal was filed with the Finance Board or on the 
effective date of the Bank's capital plan, whichever date is earlier.) 
The capital plan shall further provide that any member that is in the 
process of withdrawing on the effective date of the capital plan but did 
not file its written notice to withdraw from membership with the Finance 
Board on or before this opt-out date, shall have its existing stock 
converted into Class A and/or Class B stock as required by the capital 
plan, and that the effective date of withdrawal for such member shall be 
established in accordance with Sec. Sec. 925.26(b) and (c) of this 
chapter, provided, however, that the applicable stock redemption periods 
calculated under Sec. 925.26(c) of this chapter shall commence on date 
the member first submitted its written notice to withdraw to the Finance 
Board.
    (f) Stock transactions. The capital plan shall establish the 
criteria for the issuance, redemption, repurchase, transfer, and 
retirement of stock issued by the Bank. The capital plan also:

[[Page 37]]

    (1) Shall provide that the Bank may not issue stock other than in 
accordance with Sec. 931.2 of this chapter;
    (2) Shall provide that the stock of the Bank may be issued only to 
and held only by the members of that Bank;
    (3) Shall specify whether the stock of the Bank may be transferred 
among members, and, if such transfer is allowed, shall specify the 
procedures that a member should follow to effect such transfer, and that 
the transfer shall be undertaken only in accordance with Sec. 931.6 of 
this chapter;
    (4) Shall specify that the stock of the Bank may be traded only 
between the Bank and its members;
    (5) May provide for a minimum investment for members that purchase 
Class B stock that is lower than the minimum investment for members that 
purchase Class A stock, provided that the level of investment is 
sufficient for the Bank to comply with its regulatory capital 
requirements;
    (6) Shall specify the fee, if any, to be imposed on a member that 
cancels a request to redeem Bank stock; and
    (7) Shall specify the period of notice that the Bank will provide to 
a member before the Bank, on its own initiative, determines to 
repurchase any excess Bank stock from a member.
    (g) Termination of membership. The capital plan shall address the 
manner in which the Bank will provide for the disposition of its capital 
stock that is held by institutions that terminate their membership, and 
the manner in which the Bank will liquidate claims against its members, 
including claims resulting from prepayment of advances prior to their 
stated maturity.
    (h) Implementation. The capital plan shall demonstrate that the Bank 
has made a good faith determination that the Bank will be able to 
implement the plan as submitted and that the Bank will be in compliance 
with its regulatory total capital requirement and its regulatory risk-
based capital requirement after the plan is implemented.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001; 70 
FR 9510, Feb. 28, 2005]



Sec. 933.3  Independent review of capital plan.

    Prior to submitting its capital plan, each Bank shall conduct a 
review of the plan by an independent certified public accountant to 
ensure, to the extent possible, that the implementation of the plan 
would not result in any write-down of the redeemable stock owned by its 
members, and shall conduct a separate review by at least one NRSRO to 
determine, to the extent possible, whether the implementation of the 
plan would have a material effect on the credit rating of the Bank. The 
Bank shall submit a copy of each report to the Finance Board as part of 
its proposed capital plan.



Sec. 933.4  Transition provisions.

    (a) The capital plan of a Bank may include a transition provision 
that would allow a period of time, not to exceed three years, during 
which the Bank shall increase its total and permanent capital to levels 
that are sufficient to comply with its minimum leverage capital 
requirement and its minimum risk-based capital requirement. The capital 
plan of a Bank may also include a transition provision that would allow 
a period of time, not to exceed three years, during which institutions 
that were members of the Bank on November 12, 1999, shall increase the 
amount of Bank stock to a level that is sufficient to comply with the 
minimum investment established by the capital plan. The length of the 
transition periods need not be identical.
    (b) Any transition provision shall comply with the requirements of 
Sec. 931.9.



Sec. 933.5  Disclosure to members concerning capital plan and capital 
stock conversion.

    (a) No capital plan shall become effective until disclosure required 
by paragraphs (b) and (c) of this section has been provided to members. 
All disclosure required under this section shall be transmitted, sent or 
given to members not less than 45 days and not more than 60 days prior 
to the opt-out date established in the Bank's capital plan in accordance 
with Sec. 933.2(e).
    (b) The following information shall be provided to members about the 
Class A and/or Class B stock that a

[[Page 38]]

Bank intends to issue on the effective date of its capital plan:
    (1) With regard to each class or subclass of authorized stock, a 
description of:
    (i) Dividend rights;
    (ii) The terms of conversion;
    (iii) Redemption and repurchase rights;
    (iv) Voting rights and preferences,
    (v) Liquidation rights; and
    (vi) Any liability to further calls or to assessments by the Banks;
    (2) A description of any material differences between the securities 
to be converted into Class A and/or Class B stock and the Class A and/or 
Class B stock with regard to the rights addressed in paragraph (b)(1) of 
this section.
    (3) A statement of the reasons for the conversion to Class A and/or 
Class B stock and of the general effect thereof upon the rights of 
existing members; and
    (4) A description of any other material features concerning the 
Bank's initial issuance of Class A and/or Class B stock.
    (c) In addition to the disclosure about Class A and/or Class B 
stock, the following information shall be provided to members:
    (1) The Bank shall disclose financial information as follows:
    (i) Audited balance sheets as of the end of the two most recent 
fiscal years, audited statements of income and cash flows for each of 
the three fiscal years preceding the date of the most recent audited 
balance sheet being presented, and unaudited interim balance sheets and 
statements of income and cash flows as of and for appropriate interim 
dates that in form and content meet the requirements of Sec. 989.4 of 
this chapter;
    (ii) A pro forma capitalization table that reflects the Bank's 
projected new capital structure relative to its actual capitalization as 
of the date of the latest balance sheet required to be provided to 
members by paragraph (c)(1)(i) of this section. The Bank shall also 
provide a description of any material assumptions underlying the pro 
forma capitalization table and the basis for these assumptions, and 
shall provide estimates of its risk-based capital requirement, 
calculated in accordance with Sec. 932.3 of this chapter, and of its 
total capital-to-asset ratio (both of which shall be based on the same 
financial data used for the capitalization table), along with a 
discussion of material assumptions underlying these estimates and the 
basis for these assumptions; and
    (iii) Any of the financial information required to be disclosed by 
paragraph (c)(1) of this section may be incorporated by reference, 
provided the information being incorporated is contained in an annual or 
quarterly Bank report prepared in accordance with Sec. 989.4 of this 
chapter or an annual or quarterly Bank System report, and the disclosure 
identifies the information being incorporated by reference;
    (2) A narrative discussion of anticipated developments that could 
materially affect the liquidity, capital, earnings or continuing 
operations of the Bank, including those affecting dividends, product 
volumes, investment volumes, new business lines and risk profile.
    (3) A description of any amendments anticipated to be made to the 
Bank's by-laws, policies or other governance documents as a result of 
the implementation of the capital plan;
    (4) To the extent that such information has not been provided under 
paragraph (b) of this section, the Bank shall disclose information 
related to the capital plan as follows:
    (i) A description of the minimum stock investment requirements set 
forth in the capital plan;
    (ii) A statement outlining the requirements for amending the capital 
plan;
    (iii) A description of any restrictions or limitations under a 
Bank's capital plan on a member's rights to buy, or redeem its class A 
or class B stock, to have such stock repurchased, or otherwise to make 
use of such stock to fulfill the member's minimum stock investment 
requirement;
    (iv) A statement setting forth the opt-out date, on or before which 
a member's written notice to withdraw must be filed with the Finance 
Board (as established in accordance with Sec. 933.2(e) of this part) for 
the member not to have its existing Bank stock

[[Page 39]]

converted to Class A or Class B stock on the effective date of the 
Bank's capital plan and describing the effect on a member's effective 
date of withdrawal of failing to file its notice to withdraw on or 
before the opt-out date; and
    (v) A description of a member's rights under the capital plan to 
have its stock redeemed or repurchased upon voluntary or involuntary 
termination of its membership;
    (5) The Bank should state the name, address and telephone number 
where members may direct written or oral requests for a copy of the 
capital plan and any other instrument or document that defines the 
rights of the member/stockholders. This information shall be provided to 
the members without charge; and
    (6) The Bank shall provide a statement as to the anticipated 
accounting treatment for the transaction and the federal income tax 
implications of the transaction that members should consider in 
consultation with their own accounting and tax advisors.
    (d) Nothing in this section shall create or be deemed to create any 
rights in any third party.

[66 FR 54109, Oct. 26, 2001]



                         SUBCHAPTER F [RESERVED]



[[Page 40]]



 SUBCHAPTER G_FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS





PART 955_ACQUIRED MEMBER ASSETS--Table of Contents



Sec.
955.1 Definitions.
955.2 Authorization to hold acquired member assets.
955.3 Required credit-risk sharing structure.
955.4 Reporting requirements for acquired member assets.
955.5 Administrative and investment transactions between Banks.
955.6 Risk-based capital requirement for acquired member assets.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, 1431.

    Source: 65 FR 43981, July 17, 2000, unless otherwise noted.



Sec. 955.1  Definitions.

    As used in this part:
    Affiliate means any business entity that controls, is controlled by, 
or is under common control with, a member.
    Expected losses means the base loss scenario in the methodology of 
an NRSRO applicable to that type of AMA asset.
    Residential real property has the meaning set forth in Sec. 950.1 of 
this chapter.

[67 FR 12852, Mar. 20, 2002]



Sec. 955.2  Authorization to hold acquired member assets.

    Subject to the requirements of part 980 of this chapter, each Bank 
may hold assets acquired from or through Bank System members or housing 
associates by means of either a purchase or a funding transaction (AMA), 
subject to each of the following requirements:
    (a) Loan type requirement. The assets are either:
    (1) Whole loans that are eligible to secure advances under 
Sec. Sec. 950.7(a)(1)(i), (a)(2)(ii), (a)(4), or (b)(1) of this chapter, 
excluding:
    (i) Single-family mortgages where the loan amount exceeds the limits 
established pursuant to 12 U.S.C. 1717(b)(2); and
    (ii) Loans made to an entity, or secured by property, not located in 
a state;
    (2) Whole loans secured by manufactured housing, regardless of 
whether such housing qualifies as residential real property; or
    (3) State and local housing finance agency bonds;
    (b) Member or housing associate nexus requirement. The assets are:
    (1) Either:
    (i) Originated or issued by, through, or on behalf of a Bank System 
member or housing associate, or an affiliate thereof; or
    (ii) Held for a valid business purpose by a Bank System member or 
housing associate, or an affiliate thereof, prior to acquisition by a 
Bank; and
    (2) Acquired either:
    (i) From a member or housing associate of the acquiring Bank;
    (ii) From a member or housing associate of another Bank, pursuant to 
an arrangement with that Bank, which, in the case of state and local 
finance agency bonds only, may be reached in accordance with the 
following process:
    (A) The housing finance agency shall first offer the Bank in whose 
district the agency is located (local Bank) a right of first refusal to 
purchase, or negotiate the terms of, its proposed bond offering;
    (B) If the local Bank indicates, within a three day period, that it 
will negotiate in good faith to purchase the bonds, the agency may not 
offer to sell or negotiate the terms of a purchase with another Bank; 
and
    (C) If the local Bank declines the offer, or has failed to respond 
within the three day period, the acquiring Bank will be considered to 
have an arrangement with the local Bank for purposes of this section and 
may offer to buy or negotiate the terms of a bond sale with the agency;
    (iii) From another Bank; and
    (c) Credit risk-sharing requirement. The transactions through which 
the Bank acquires the assets either:
    (1) Meet the credit risk-sharing requirements of Sec. 955.3 of this 
part; or

[[Page 41]]

    (2) Were authorized by the Finance Board under section II.B.12 of 
the FMP and are within any total dollar cap established by the Finance 
Board at the time of such authorization.



Sec. 955.3  Required credit risk-sharing structure.

    (a) Determination of necessary credit enhancement. At the earlier of 
270 days from the date of the Bank's acquisition of the first loan in a 
pool, or the date at which the amount of a pool's assets reaches $100 
million, a Bank shall determine the total credit enhancement necessary 
to enhance the asset or pool of assets to a credit quality that is 
equivalent to that of an instrument having at least the fourth highest 
credit rating from an NRSRO, or such higher credit rating as the Bank 
may require. The Bank shall make this determination for each AMA product 
using a methodology that is confirmed in writing by an NRSRO to be 
comparable to a methodology that the NRSRO would use in determining 
credit enhancement levels when conducting a rating review of the asset 
or pool of assets in a securitization transaction.
    (b) Credit risk-sharing structure. A Bank acquiring AMA shall 
implement, and have in place at all times, a credit risk-sharing 
structure for each AMA product under which a member or housing associate 
of the Bank or, with the approval of both Banks, a member or housing 
associate of another Bank, provides a sufficient credit enhancement from 
the first dollar of credit loss for each asset or pool of assets such 
that the acquiring Bank's exposure to credit risk for the life of the 
asset or pool of assets is no greater than that of an asset rated in the 
fourth highest credit rating category, as determined pursuant to 
paragraph (a) of this section, or such higher rating as the acquiring 
Bank may require. This credit enhancement structure shall meet the 
following requirements:
    (1) A portion of the credit enhancement may be provided by:
    (i) Contracting with an insurance affiliate of that member or 
housing associate to provide an enhancement or undertaking against 
losses to the Bank, but only where such insurance is positioned in the 
credit enhancement structure so as to cover only losses remaining after 
the member or housing associate has borne losses as required under 
paragraph (b)(2) of this section;
    (ii) Purchasing loan-level insurance, which may include United 
States government insurance or guarantee, but only where:
    (A) The member or housing associate is legally obligated at all 
times to maintain such insurance with an insurer rated not lower than 
the second highest credit rating category; and
    (B) Such insurance is positioned in the credit enhancement structure 
so as to cover only losses remaining after the member or housing 
associate has borne losses as required under paragraph (b)(2) of this 
section;
    (iii) Purchasing pool-level insurance, but only where such 
insurance:
    (A) Insures that portion of the required credit enhancement 
attributable to the geographic concentration and size of the pool; and
    (B) Is positioned last in the credit enhancement structure so as to 
cover only those losses remaining after all other elements of the credit 
enhancement structure have been exhausted; or
    (iv) Contracting with another member or housing associate in the 
Bank's district or in another Bank's district, pursuant to an 
arrangement with that Bank, to provide an enhancement or undertaking 
against losses to the Bank in return for some compensation;
    (2) The member or housing associate that is providing the credit 
enhancement required under paragraph (b)(1) of this section shall in all 
cases bear the direct economic consequences of actual credit losses on 
the asset or pool of assets:
    (i) From the first dollar of loss up to the amount of expected 
losses; or
    (ii) Immediately following expected losses, but in an amount equal 
to or exceeding the amount of expected losses;
    (3) The portion of the credit enhancement that is an obligation of a 
Bank System member or housing associate shall be fully secured; and
    (4) The Bank shall obtain written verification from an NRSRO that 
concludes to the satisfaction of the Finance Board, based on the 
underlying economic terms of the credit enhancement structure as 
represented by the

[[Page 42]]

Bank for each AMA product, that either:
    (i) The level of credit enhancement provided by the member or 
housing associate is generally sufficient to enhance the asset or pool 
of assets to a credit quality that is equivalent to that of an 
instrument having the fourth highest credit rating from an NRSRO, or 
such higher rating as the Bank may require; or
    (ii) The methodology used by the Bank for estimating the level of 
credit enhancement provided by the member or housing associate is in 
accordance with the practices established by the NRSRO.
    (c) Timing of NRSRO opinions. For AMA programs already in operation 
at the time of the effective date of this rule, a Bank shall have 90 
days from the effective date of this rule to obtain the NRSRO 
verifications required under paragraphs (a) and (b)(4) of this section.

[65 FR 43981, July 17, 2000, as amended at 67 FR 12852, Mar. 20, 2002]



Sec. 955.4  Reporting requirement for acquired member assets.

    Each Bank shall report information related to AMA in accordance with 
the instructions provided in the Data Reporting Manual issued by the 
Finance Board, as amended from time to time.

[71 FR 35500, June 21, 2006]



Sec. 955.5  Administrative and investment transactions between Banks.

    (a) Delegation of administrative duties. A Bank may delegate the 
administration of an AMA program to another Bank whose administrative 
office has been examined and approved by the Finance Board to process 
AMA transactions. The existence of such a delegation, or the possibility 
that such a delegation may be made, must be disclosed to any potential 
participating member or housing associate as part of any AMA-related 
agreements are signed with that member or housing associate.
    (b) Terminability of Agreements. Any agreement made between two or 
more Banks in connection with any AMA program shall be made terminable 
by either party after a reasonable notice period.
    (c) Delegation of Pricing Authority. A Bank that has delegated its 
AMA pricing function to another Bank shall retain a right to refuse to 
acquire AMA at prices it does not consider appropriate.



Sec. 955.6  Risk-based capital requirement for acquired member assets.

    (a) General. Each Bank shall hold retained earnings plus general 
allowance for losses as support for the credit risk of all AMA estimated 
by the Bank to represent a credit risk that is greater than that of 
comparable instruments that have received the second highest credit 
rating from an NRSRO in an amount equal to or greater than the 
outstanding balance of the assets or pools of assets times a factor 
associated with the putative credit rating of the assets or pools of 
assets as determined by the Finance Board on a case-by-case basis. For 
single-family mortgage assets, the factors are as set forth in Table 1 
of this part.

                                 Table 1
------------------------------------------------------------------------
                                                           Percentage
                                                        applicable to on-
   Putative rating of single-family mortgage assets       balance sheet
                                                        equivalent value
                                                             of AMA
------------------------------------------------------------------------
Third Highest Investment Grade........................              0.90
Fourth Highest Investment Grade.......................              1.50
If Downgraded to Below Investment Grade After
 Acquisition By Bank:
    Highest Below Investment Grade....................              2.25
    Second Highest Below Investment Grade.............              2.60
    All Other Below Investment Grade..................            100.00
------------------------------------------------------------------------

    (b) Recalculation of credit enhancement. For risk-based capital 
purposes, each Bank shall recalculate the estimated credit rating of a 
pool of AMA if

[[Page 43]]

there is evidence that a decline in the credit quality of that pool may 
have occurred.

                        PARTS 934	999 [RESERVED]



                       SUBCHAPTERS H	M [RESERVED]



[[Page 45]]



           CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION




  --------------------------------------------------------------------
Part                                                                Page
1000-1001        [Reserved]

1002            Equal Credit Opportunity Act (Regulation B).          47
1003            Home mortgage disclosure (Regulation C).....         104
1004            Alternative mortgage transaction parity 
                    (Regulation D)..........................         127
1005            Electronic fund transfers (Regulation E)....         131
1006            Fair Debt Collection Practices Act 
                    (Regulation F)..........................         247
1007            S.A.F.E. Mortgage Licensing Act--Federal 
                    registration of residential mortgage 
                    loan originators (Regulation G).........         250
1008            S.A.F.E. Mortgage Licensing Act--State 
                    compliance and bureau registration 
                    system (Regulation H)...................         258
1009            Disclosure requirements for depository 
                    institutions lacking Federal deposit 
                    insurance (Regulation I)................         272
1010            Land registration (Regulation J)............         274
1011            Purchasers' revocation rights, sales 
                    practices and standards (Regulation K)..         332
1012            Special rules of practice (Regulation L)....         336
1013            Consumer leasing (Regulation M).............         340
1014            Mortgage acts and practices--Advertising 
                    (Regulation N)..........................         366
1015            Mortgage assistance relief services 
                    (Regulation O)..........................         369
1016            Privacy of consumer financial information 
                    (Regulation P)..........................         375
1022            Fair credit reporting (Regulation V)........         410
1024            Real Estate Settlement Procedures Act 
                    (Regulation X)..........................         502
1025            [Reserved]

[[Page 47]]

                       PARTS 1000	1001 [RESERVED]



PART 1002_EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)--
Table of Contents



Sec.
1002.1 Authority, scope and purpose.
1002.2 Definitions.
1002.3 Limited exceptions for certain classes of transactions.
1002.4 General rules.
1002.5 Rules concerning requests for information.
1002.6 Rules concerning evaluation of applications.
1002.7 Rules concerning extensions of credit.
1002.8 Special purpose credit programs.
1002.9 Notifications.
1002.10 Furnishing of credit information.
1002.11 Relation to state law.
1002.12 Record retention.
1002.13 Information for monitoring purposes.
1002.14 Rules on providing appraisal reports.
1002.15 Incentives for self-testing and self-correction.
1002.16 Enforcement, penalties and liabilities.

Appendix A to Part 1002--Federal Agencies to be Listed in Adverse Action 
          Notices
Appendix B to Part 1002--Model Application Forms
Appendix C to Part 1002--Sample Notification Forms
Appendix D to Part 1002--Issuance of Official Interpretations
Supplement I to Part 1002--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.

    Source: 76 FR 79445, Dec. 21, 2011, unless otherwise noted.



Sec. 1002.1  Authority, scope and purpose.

    (a) Authority and scope. This part, known as Regulation B, is issued 
by the Bureau of Consumer Financial Protection (Bureau) pursuant to 
title VII (Equal Credit Opportunity Act) of the Consumer Credit 
Protection Act, as amended (15 U.S.C. 1601 et seq.). Except as otherwise 
provided herein, this part applies to all persons who are creditors, as 
defined in Sec. 1002.2(l), other than a person excluded from coverage of 
this part by section 1029 of the Consumer Financial Protection Act of 
2010, title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 1376. Information 
collection requirements contained in this part have been approved by the 
Office of Management and Budget under the provisions of 44 U.S.C. 3501 
et seq. and have been assigned OMB No. 3170-0013.
    (b) Purpose. The purpose of this part is to promote the availability 
of credit to all creditworthy applicants without regard to race, color, 
religion, national origin, sex, marital status, or age (provided the 
applicant has the capacity to contract); to the fact that all or part of 
the applicant's income derives from a public assistance program; or to 
the fact that the applicant has in good faith exercised any right under 
the Consumer Credit Protection Act. The regulation prohibits creditor 
practices that discriminate on the basis of any of these factors. The 
regulation also requires creditors to notify applicants of action taken 
on their applications; to report credit history in the names of both 
spouses on an account; to retain records of credit applications; to 
collect information about the applicant's race and other personal 
characteristics in applications for certain dwelling-related loans; and 
to provide applicants with copies of appraisal reports used in 
connection with credit transactions.



Sec. 1002.2  Definitions.

    For the purposes of this part, unless the context indicates 
otherwise, the following definitions apply.
    (a) Account means an extension of credit. When employed in relation 
to an account, the word use refers only to open-end credit.
    (b) Act means the Equal Credit Opportunity Act (Title VII of the 
Consumer Credit Protection Act).
    (c) Adverse action. (1) The term means:
    (i) A refusal to grant credit in substantially the amount or on 
substantially the terms requested in an application unless the creditor 
makes a counteroffer (to grant credit in a different amount or on other 
terms) and the applicant uses or expressly accepts the credit offered;
    (ii) A termination of an account or an unfavorable change in the 
terms of an account that does not affect all or substantially all of a 
class of the creditor's accounts; or

[[Page 48]]

    (iii) A refusal to increase the amount of credit available to an 
applicant who has made an application for an increase.
    (2) The term does not include:
    (i) A change in the terms of an account expressly agreed to by an 
applicant;
    (ii) Any action or forbearance relating to an account taken in 
connection with inactivity, default, or delinquency as to that account;
    (iii) A refusal or failure to authorize an account transaction at 
point of sale or loan, except when the refusal is a termination or an 
unfavorable change in the terms of an account that does not affect all 
or substantially all of a class of the creditor's accounts, or when the 
refusal is a denial of an application for an increase in the amount of 
credit available under the account;
    (iv) A refusal to extend credit because applicable law prohibits the 
creditor from extending the credit requested; or
    (v) A refusal to extend credit because the creditor does not offer 
the type of credit or credit plan requested.
    (3) An action that falls within the definition of both paragraphs 
(c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of 
this section.
    (d) Age refers only to the age of natural persons and means the 
number of fully elapsed years from the date of an applicant's birth.
    (e) Applicant means any person who requests or who has received an 
extension of credit from a creditor, and includes any person who is or 
may become contractually liable regarding an extension of credit. For 
purposes of Sec. 1002.7(d), the term includes guarantors, sureties, 
endorsers, and similar parties.
    (f) Application means an oral or written request for an extension of 
credit that is made in accordance with procedures used by a creditor for 
the type of credit requested. The term application does not include the 
use of an account or line of credit to obtain an amount of credit that 
is within a previously established credit limit. A completed application 
means an application in connection with which a creditor has received 
all the information that the creditor regularly obtains and considers in 
evaluating applications for the amount and type of credit requested 
(including, but not limited to, credit reports, any additional 
information requested from the applicant, and any approvals or reports 
by governmental agencies or other persons that are necessary to 
guarantee, insure, or provide security for the credit or collateral). 
The creditor shall exercise reasonable diligence in obtaining such 
information.
    (g) Business credit refers to extensions of credit primarily for 
business or commercial (including agricultural) purposes, but excluding 
extensions of credit of the types described in Sec. Sec. 1002.3(a)-(d).
    (h) Consumer credit means credit extended to a natural person 
primarily for personal, family, or household purposes.
    (i) Contractually liable means expressly obligated to repay all 
debts arising on an account by reason of an agreement to that effect.
    (j) Credit means the right granted by a creditor to an applicant to 
defer payment of a debt, incur debt and defer its payment, or purchase 
property or services and defer payment therefor.
    (k) Credit card means any card, plate, coupon book, or other single 
credit device that may be used from time to time to obtain money, 
property, or services on credit.
    (l) Creditor means a person who, in the ordinary course of business, 
regularly participates in a credit decision, including setting the terms 
of the credit. The term creditor includes a creditor's assignee, 
transferee, or subrogee who so participates. For purposes of 
Sec. Sec. 1002.4(a) and (b), the term creditor also includes a person 
who, in the ordinary course of business, regularly refers applicants or 
prospective applicants to creditors, or selects or offers to select 
creditors to whom requests for credit may be made. A person is not a 
creditor regarding any violation of the Act or this part committed by 
another creditor unless the person knew or had reasonable notice of the 
act, policy, or practice that constituted the violation before becoming 
involved in the credit transaction. The term does

[[Page 49]]

not include a person whose only participation in a credit transaction 
involves honoring a credit card.
    (m) Credit transaction means every aspect of an applicant's dealings 
with a creditor regarding an application for credit or an existing 
extension of credit (including, but not limited to, information 
requirements; investigation procedures; standards of creditworthiness; 
terms of credit; furnishing of credit information; revocation, 
alteration, or termination of credit; and collection procedures).
    (n) Discriminate against an applicant means to treat an applicant 
less favorably than other applicants.
    (o) Elderly means age 62 or older.
    (p) Empirically derived and other credit scoring systems--(1) A 
credit scoring system is a system that evaluates an applicant's 
creditworthiness mechanically, based on key attributes of the applicant 
and aspects of the transaction, and that determines, alone or in 
conjunction with an evaluation of additional information about the 
applicant, whether an applicant is deemed creditworthy. To qualify as an 
empirically derived, demonstrably and statistically sound, credit 
scoring system, the system must be:
    (i) Based on data that are derived from an empirical comparison of 
sample groups or the population of creditworthy and non-creditworthy 
applicants who applied for credit within a reasonable preceding period 
of time;
    (ii) Developed for the purpose of evaluating the creditworthiness of 
applicants with respect to the legitimate business interests of the 
creditor utilizing the system (including, but not limited to, minimizing 
bad debt losses and operating expenses in accordance with the creditor's 
business judgment);
    (iii) Developed and validated using accepted statistical principles 
and methodology; and
    (iv) Periodically revalidated by the use of appropriate statistical 
principles and methodology and adjusted as necessary to maintain 
predictive ability.
    (2) A creditor may use an empirically derived, demonstrably and 
statistically sound, credit scoring system obtained from another person 
or may obtain credit experience from which to develop such a system. Any 
such system must satisfy the criteria set forth in paragraph (p)(1)(i) 
through (iv) of this section; if the creditor is unable during the 
development process to validate the system based on its own credit 
experience in accordance with paragraph (p)(1) of this section, the 
system must be validated when sufficient credit experience becomes 
available. A system that fails this validity test is no longer an 
empirically derived, demonstrably and statistically sound, credit 
scoring system for that creditor.
    (q) Extend credit and extension of credit mean the granting of 
credit in any form (including, but not limited to, credit granted in 
addition to any existing credit or credit limit; credit granted pursuant 
to an open-end credit plan; the refinancing or other renewal of credit, 
including the issuance of a new credit card in place of an expiring 
credit card or in substitution for an existing credit card; the 
consolidation of two or more obligations; or the continuance of existing 
credit without any special effort to collect at or after maturity).
    (r) Good faith means honesty in fact in the conduct or transaction.
    (s) Inadvertent error means a mechanical, electronic, or clerical 
error that a creditor demonstrates was not intentional and occurred 
notwithstanding the maintenance of procedures reasonably adapted to 
avoid such errors.
    (t) Judgmental system of evaluating applicants means any system for 
evaluating the creditworthiness of an applicant other than an 
empirically derived, demonstrably and statistically sound, credit 
scoring system.
    (u) Marital status means the state of being unmarried, married, or 
separated, as defined by applicable state law. The term ``unmarried'' 
includes persons who are single, divorced, or widowed.
    (v) Negative factor or value, in relation to the age of elderly 
applicants, means utilizing a factor, value, or weight that is less 
favorable regarding elderly applicants than the creditor's experience 
warrants or is less favorable than the factor, value, or weight assigned 
to the class of applicants that are not classified as elderly and are 
most favored by a creditor on the basis of age.

[[Page 50]]

    (w) Open-end credit means credit extended under a plan in which a 
creditor may permit an applicant to make purchases or obtain loans from 
time to time directly from the creditor or indirectly by use of a credit 
card, check, or other device.
    (x) Person means a natural person, corporation, government or 
governmental subdivision or agency, trust, estate, partnership, 
cooperative, or association.
    (y) Pertinent element of creditworthiness, in relation to a 
judgmental system of evaluating applicants, means any information about 
applicants that a creditor obtains and considers and that has a 
demonstrable relationship to a determination of creditworthiness.
    (z) Prohibited basis means race, color, religion, national origin, 
sex, marital status, or age (provided that the applicant has the 
capacity to enter into a binding contract); the fact that all or part of 
the applicant's income derives from any public assistance program; or 
the fact that the applicant has in good faith exercised any right under 
the Consumer Credit Protection Act or any state law upon which an 
exemption has been granted by the Bureau.
    (aa) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, or any territory or possession of the 
United States.



Sec. 1002.3  Limited exceptions for certain classes of transactions.

    (a) Public utilities credit--(1) Definition. Public utilities credit 
refers to extensions of credit that involve public utility services 
provided through pipe, wire, or other connected facilities, or radio or 
similar transmission (including extensions of such facilities), if the 
charges for service, delayed payment, and any discount for prompt 
payment are filed with or regulated by a government unit.
    (2) Exceptions. The following provisions of this part do not apply 
to public utilities credit:
    (i) Section 1002.5(d)(1) concerning information about marital 
status; and
    (ii) Section 1002.12(b) relating to record retention.
    (b) Securities credit (1) Definition. Securities credit refers to 
extensions of credit subject to regulation under section 7 of the 
Securities Exchange Act of 1934 or extensions of credit by a broker or 
dealer subject to regulation as a broker or dealer under the Securities 
Exchange Act of 1934.
    (2) Exceptions. The following provisions of this part do not apply 
to securities credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;
    (iii) Section 1002.5(d)(1) concerning information about marital 
status;
    (iv) Section 1002.7(b) relating to designation of name to the extent 
necessary to comply with rules regarding an account in which a broker or 
dealer has an interest, or rules regarding the aggregation of accounts 
of spouses to determine controlling interests, beneficial interests, 
beneficial ownership, or purchase limitations and restrictions;
    (v) Section 1002.7(c) relating to action concerning open-end 
accounts, to the extent the action taken is on the basis of a change of 
name or marital status;
    (vi) Section 1002.7(d) relating to the signature of a spouse or 
other person;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (c) Incidental credit (1) Definition. Incidental credit refers to 
extensions of consumer credit other than the types described in 
paragraphs (a) and (b) of this section:
    (i) That are not made pursuant to the terms of a credit card 
account;
    (ii) That are not subject to a finance charge (as defined in 
Regulation Z, 12 CFR 1026.4); and
    (iii) That are not payable by agreement in more than four 
installments.
    (2) Exceptions. The following provisions of this part do not apply 
to incidental credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant, but only to the extent necessary for medical records or 
similar purposes;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;
    (iii) Section 1002.5(d)(1) concerning information about marital 
status;

[[Page 51]]

    (iv) Section 1002.5(d)(2) concerning information about income 
derived from alimony, child support, or separate maintenance payments;
    (v) Section 1002.7(d) relating to the signature of a spouse or other 
person;
    (vi) Section 1002.9 relating to notifications;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (d) Government credit--(1) Definition. Government credit refers to 
extensions of credit made to governments or governmental subdivisions, 
agencies, or instrumentalities.
    (2) Applicability of regulation. Except for Sec. 1002.4(a), the 
general rule against discrimination on a prohibited basis, the 
requirements of this part do not apply to government credit.



Sec. 1002.4  General rules.

    (a) Discrimination. A creditor shall not discriminate against an 
applicant on a prohibited basis regarding any aspect of a credit 
transaction.
    (b) Discouragement. A creditor shall not make any oral or written 
statement, in advertising or otherwise, to applicants or prospective 
applicants that would discourage on a prohibited basis a reasonable 
person from making or pursuing an application.
    (c) Written applications. A creditor shall take written applications 
for the dwelling-related types of credit covered by Sec. 1002.13(a).
    (d) Form of disclosures--(1) General rule. A creditor that provides 
in writing any disclosures or information required by this part must 
provide the disclosures in a clear and conspicuous manner and, except 
for the disclosures required by Sec. Sec. 1002.5 and 1002.13, in a form 
the applicant may retain.
    (2) Disclosures in electronic form. The disclosures required by this 
part that are required to be given in writing may be provided to the 
applicant in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
Where the disclosures under Sec. Sec. 1002.5(b)(1), 1002.5(b)(2), 
1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) accompany an 
application accessed by the applicant in electronic form, these 
disclosures may be provided to the applicant in electronic form on or 
with the application form, without regard to the consumer consent or 
other provisions of the E-Sign Act.
    (e) Foreign-language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



Sec. 1002.5  Rules concerning requests for information.

    (a) General rules--(1) Requests for information. Except as provided 
in paragraphs (b) through (d) of this section, a creditor may request 
any information in connection with a credit transaction. This paragraph 
does not limit or abrogate any Federal or state law regarding privacy, 
privileged information, credit reporting limitations, or similar 
restrictions on obtainable information.
    (2) Required collection of information. Notwithstanding paragraphs 
(b) through (d) of this section, a creditor shall request information 
for monitoring purposes as required by Sec. 1002.13 for credit secured 
by the applicant's dwelling. In addition, a creditor may obtain 
information required by a regulation, order, or agreement issued by, or 
entered into with, a court or an enforcement agency (including the 
Attorney General of the United States or a similar state official) to 
monitor or enforce compliance with the Act, this part, or other Federal 
or state statutes or regulations.
    (3) Special-purpose credit. A creditor may obtain information that 
is otherwise restricted to determine eligibility for a special purpose 
credit program, as provided in Sec. Sec. 1002.8(b), (c), and (d).
    (b) Limitation on information about race, color, religion, national 
origin, or sex. A creditor shall not inquire about the race, color, 
religion, national origin, or sex of an applicant or any other person in 
connection with a credit transaction, except as provided in paragraphs 
(b)(1) and (b)(2) of this section.
    (1) Self-test. A creditor may inquire about the race, color, 
religion, national

[[Page 52]]

origin, or sex of an applicant or any other person in connection with a 
credit transaction for the purpose of conducting a self-test that meets 
the requirements of Sec. 1002.15. A creditor that makes such an inquiry 
shall disclose orally or in writing, at the time the information is 
requested, that:
    (i) The applicant will not be required to provide the information;
    (ii) The creditor is requesting the information to monitor its 
compliance with the Federal Equal Credit Opportunity Act;
    (iii) Federal law prohibits the creditor from discriminating on the 
basis of this information, or on the basis of an applicant's decision 
not to furnish the information; and
    (iv) If applicable, certain information will be collected based on 
visual observation or surname if not provided by the applicant or other 
person.
    (2) Sex. An applicant may be requested to designate a title on an 
application form (such as Ms., Miss, Mr., or Mrs.) if the form discloses 
that the designation of a title is optional. An application form shall 
otherwise use only terms that are neutral as to sex.
    (c) Information about a spouse or former spouse--(1) General rule. 
Except as permitted in this paragraph, a creditor may not request any 
information concerning the spouse or former spouse of an applicant.
    (2) Permissible inquiries. A creditor may request any information 
concerning an applicant's spouse (or former spouse under paragraph 
(c)(2)(v) of this section) that may be requested about the applicant if:
    (i) The spouse will be permitted to use the account;
    (ii) The spouse will be contractually liable on the account;
    (iii) The applicant is relying on the spouse's income as a basis for 
repayment of the credit requested;
    (iv) The applicant resides in a community property state or is 
relying on property located in such a state as a basis for repayment of 
the credit requested; or
    (v) The applicant is relying on alimony, child support, or separate 
maintenance payments from a spouse or former spouse as a basis for 
repayment of the credit requested.
    (3) Other accounts of the applicant. A creditor may request that an 
applicant list any account on which the applicant is contractually 
liable and to provide the name and address of the person in whose name 
the account is held. A creditor may also ask an applicant to list the 
names in which the applicant has previously received credit.
    (d) Other limitations on information requests--(1) Marital status. 
If an applicant applies for individual unsecured credit, a creditor 
shall not inquire about the applicant's marital status unless the 
applicant resides in a community property state or is relying on 
property located in such a state as a basis for repayment of the credit 
requested. If an application is for other than individual unsecured 
credit, a creditor may inquire about the applicant's marital status, but 
shall use only the terms married, unmarried, and separated. A creditor 
may explain that the category unmarried includes single, divorced, and 
widowed persons.
    (2) Disclosure about income from alimony, child support, or separate 
maintenance. A creditor shall not inquire whether income stated in an 
application is derived from alimony, child support, or separate 
maintenance payments unless the creditor discloses to the applicant that 
such income need not be revealed if the applicant does not want the 
creditor to consider it in determining the applicant's creditworthiness.
    (3) Childbearing, childrearing. A creditor shall not inquire about 
birth control practices, intentions concerning the bearing or rearing of 
children, or capability to bear children. A creditor may inquire about 
the number and ages of an applicant's dependents or about dependent-
related financial obligations or expenditures, provided such information 
is requested without regard to sex, marital status, or any other 
prohibited basis.
    (e) Permanent residency and immigration status. A creditor may 
inquire about the permanent residency and immigration status of an 
applicant or any other person in connection with a credit transaction.

[[Page 53]]



Sec. 1002.6  Rules concerning evaluation of applications.

    (a) General rule concerning use of information. Except as otherwise 
provided in the Act and this part, a creditor may consider any 
information obtained, so long as the information is not used to 
discriminate against an applicant on a prohibited basis. The legislative 
history of the Act indicates that the Congress intended an ``effects 
test'' concept, as outlined in the employment field by the Supreme Court 
in the cases of Griggs v. Duke Power Co., 401 U.S. 424 (1971), and 
Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975), to be applicable to a 
creditor's determination of creditworthiness.
    (b) Specific rules concerning use of information. (1) Except as 
provided in the Act and this part, a creditor shall not take a 
prohibited basis into account in any system of evaluating the 
creditworthiness of applicants.
    (2) Age, receipt of public assistance. (i) Except as permitted in 
this paragraph, a creditor shall not take into account an applicant's 
age (provided that the applicant has the capacity to enter into a 
binding contract) or whether an applicant's income derives from any 
public assistance program.
    (ii) In an empirically derived, demonstrably and statistically 
sound, credit scoring system, a creditor may use an applicant's age as a 
predictive variable, provided that the age of an elderly applicant is 
not assigned a negative factor or value.
    (iii) In a judgmental system of evaluating creditworthiness, a 
creditor may consider an applicant's age or whether an applicant's 
income derives from any public assistance program only for the purpose 
of determining a pertinent element of creditworthiness.
    (iv) In any system of evaluating creditworthiness, a creditor may 
consider the age of an elderly applicant when such age is used to favor 
the elderly applicant in extending credit.
    (3) Childbearing, childrearing. In evaluating creditworthiness, a 
creditor shall not make assumptions or use aggregate statistics relating 
to the likelihood that any category of persons will bear or rear 
children or will, for that reason, receive diminished or interrupted 
income in the future.
    (4) Telephone listing. A creditor shall not take into account 
whether there is a telephone listing in the name of an applicant for 
consumer credit but may take into account whether there is a telephone 
in the applicant's residence.
    (5) Income. A creditor shall not discount or exclude from 
consideration the income of an applicant or the spouse of an applicant 
because of a prohibited basis or because the income is derived from 
part-time employment or is an annuity, pension, or other retirement 
benefit; a creditor may consider the amount and probable continuance of 
any income in evaluating an applicant's creditworthiness. When an 
applicant relies on alimony, child support, or separate maintenance 
payments in applying for credit, the creditor shall consider such 
payments as income to the extent that they are likely to be consistently 
made.
    (6) Credit history. To the extent that a creditor considers credit 
history in evaluating the creditworthiness of similarly qualified 
applicants for a similar type and amount of credit, in evaluating an 
applicant's creditworthiness a creditor shall consider:
    (i) The credit history, when available, of accounts designated as 
accounts that the applicant and the applicant's spouse are permitted to 
use or for which both are contractually liable;
    (ii) On the applicant's request, any information the applicant may 
present that tends to indicate the credit history being considered by 
the creditor does not accurately reflect the applicant's 
creditworthiness; and
    (iii) On the applicant's request, the credit history, when 
available, of any account reported in the name of the applicant's spouse 
or former spouse that the applicant can demonstrate accurately reflects 
the applicant's creditworthiness.
    (7) Immigration status. A creditor may consider the applicant's 
immigration status or status as a permanent resident of the United 
States, and any additional information that may be necessary to 
ascertain the creditor's rights and remedies regarding repayment.

[[Page 54]]

    (8) Marital status. Except as otherwise permitted or required by 
law, a creditor shall evaluate married and unmarried applicants by the 
same standards; and in evaluating joint applicants, a creditor shall not 
treat applicants differently based on the existence, absence, or 
likelihood of a marital relationship between the parties.
    (9) Race, color, religion, national origin, sex. Except as otherwise 
permitted or required by law, a creditor shall not consider race, color, 
religion, national origin, or sex (or an applicant's or other person's 
decision not to provide the information) in any aspect of a credit 
transaction.
    (c) State property laws. A creditor's consideration or application 
of state property laws directly or indirectly affecting creditworthiness 
does not constitute unlawful discrimination for the purposes of the Act 
or this part.



Sec. 1002.7  Rules concerning extensions of credit.

    (a) Individual accounts. A creditor shall not refuse to grant an 
individual account to a creditworthy applicant on the basis of sex, 
marital status, or any other prohibited basis.
    (b) Designation of name. A creditor shall not refuse to allow an 
applicant to open or maintain an account in a birth-given first name and 
a surname that is the applicant's birth-given surname, the spouse's 
surname, or a combined surname.
    (c) Action concerning existing open-end accounts--(1) Limitations. 
In the absence of evidence of the applicant's inability or unwillingness 
to repay, a creditor shall not take any of the following actions 
regarding an applicant who is contractually liable on an existing open-
end account on the basis of the applicant's reaching a certain age or 
retiring or on the basis of a change in the applicant's name or marital 
status:
    (i) Require a reapplication, except as provided in paragraph (c)(2) 
of this section;
    (ii) Change the terms of the account; or
    (iii) Terminate the account.
    (2) Requiring reapplication. A creditor may require a reapplication 
for an open-end account on the basis of a change in the marital status 
of an applicant who is contractually liable if the credit granted was 
based in whole or in part on income of the applicant's spouse and if 
information available to the creditor indicates that the applicant's 
income may not support the amount of credit currently available.
    (d) Signature of spouse or other person--(1) Rule for qualified 
applicant. Except as provided in this paragraph, a creditor shall not 
require the signature of an applicant's spouse or other person, other 
than a joint applicant, on any credit instrument if the applicant 
qualifies under the creditor's standards of creditworthiness for the 
amount and terms of the credit requested. A creditor shall not deem the 
submission of a joint financial statement or other evidence of jointly 
held assets as an application for joint credit.
    (2) Unsecured credit. If an applicant requests unsecured credit and 
relies in part upon property that the applicant owns jointly with 
another person to satisfy the creditor's standards of creditworthiness, 
the creditor may require the signature of the other person only on the 
instrument(s) necessary, or reasonably believed by the creditor to be 
necessary, under the law of the state in which the property is located, 
to enable the creditor to reach the property being relied upon in the 
event of the death or default of the applicant.
    (3) Unsecured credit--community property states. If a married 
applicant requests unsecured credit and resides in a community property 
state, or if the applicant is relying on property located in such a 
state, a creditor may require the signature of the spouse on any 
instrument necessary, or reasonably believed by the creditor to be 
necessary, under applicable state law to make the community property 
available to satisfy the debt in the event of default if:
    (i) Applicable state law denies the applicant power to manage or 
control sufficient community property to qualify for the credit 
requested under the creditor's standards of creditworthiness; and
    (ii) The applicant does not have sufficient separate property to 
qualify for the credit requested without regard to community property.
    (4) Secured credit. If an applicant requests secured credit, a 
creditor may

[[Page 55]]

require the signature of the applicant's spouse or other person on any 
instrument necessary, or reasonably believed by the creditor to be 
necessary, under applicable state law to make the property being offered 
as security available to satisfy the debt in the event of default, for 
example, an instrument to create a valid lien, pass clear title, waive 
inchoate rights, or assign earnings.
    (5) Additional parties. If, under a creditor's standards of 
creditworthiness, the personal liability of an additional party is 
necessary to support the credit requested, a creditor may request a 
cosigner, guarantor, endorser, or similar party. The applicant's spouse 
may serve as an additional party, but the creditor shall not require 
that the spouse be the additional party.
    (6) Rights of additional parties. A creditor shall not impose 
requirements upon an additional party that the creditor is prohibited 
from imposing upon an applicant under this section.
    (e) Insurance. A creditor shall not refuse to extend credit and 
shall not terminate an account because credit life, health, accident, 
disability, or other credit-related insurance is not available on the 
basis of the applicant's age.



Sec. 1002.8  Special purpose credit programs.

    (a) Standards for programs. Subject to the provisions of paragraph 
(b) of this section, the Act and this part permit a creditor to extend 
special purpose credit to applicants who meet eligibility requirements 
under the following types of credit programs:
    (1) Any credit assistance program expressly authorized by Federal or 
state law for the benefit of an economically disadvantaged class of 
persons;
    (2) Any credit assistance program offered by a not-for-profit 
organization, as defined under section 501(c) of the Internal Revenue 
Code of 1954, as amended, for the benefit of its members or for the 
benefit of an economically disadvantaged class of persons; or
    (3) Any special purpose credit program offered by a for-profit 
organization, or in which such an organization participates to meet 
special social needs, if:
    (i) The program is established and administered pursuant to a 
written plan that identifies the class of persons that the program is 
designed to benefit and sets forth the procedures and standards for 
extending credit pursuant to the program; and
    (ii) The program is established and administered to extend credit to 
a class of persons who, under the organization's customary standards of 
creditworthiness, probably would not receive such credit or would 
receive it on less favorable terms than are ordinarily available to 
other applicants applying to the organization for a similar type and 
amount of credit.
    (b) Rules in other sections--(1) General applicability. All the 
provisions of this part apply to each of the special purpose credit 
programs described in paragraph (a) of this section except as modified 
by this section.
    (2) Common characteristics. A program described in paragraph (a)(2) 
or (a)(3) of this section qualifies as a special purpose credit program 
only if it was established and is administered so as not to discriminate 
against an applicant on any prohibited basis; however, all program 
participants may be required to share one or more common characteristics 
(for example, race, national origin, or sex) so long as the program was 
not established and is not administered with the purpose of evading the 
requirements of the Act or this part.
    (c) Special rule concerning requests and use of information. If 
participants in a special purpose credit program described in paragraph 
(a) of this section are required to possess one or more common 
characteristics (for example, race, national origin, or sex) and if the 
program otherwise satisfies the requirements of paragraph (a) of this 
section, a creditor may request and consider information regarding the 
common characteristic(s) in determining the applicant's eligibility for 
the program.
    (d) Special rule in the case of financial need. If financial need is 
one of the criteria under a special purpose credit program described in 
paragraph (a) of this section, the creditor may request

[[Page 56]]

and consider, in determining an applicant's eligibility for the program, 
information regarding the applicant's marital status; alimony, child 
support, and separate maintenance income; and the spouse's financial 
resources. In addition, a creditor may obtain the signature of an 
applicant's spouse or other person on an application or credit 
instrument relating to a special purpose credit program if the signature 
is required by Federal or state law.



Sec. 1002.9  Notifications.

    (a) Notification of action taken, ECOA notice, and statement of 
specific reasons--(1) When notification is required. A creditor shall 
notify an applicant of action taken within:
    (i) 30 days after receiving a completed application concerning the 
creditor's approval of, counteroffer to, or adverse action on the 
application;
    (ii) 30 days after taking adverse action on an incomplete 
application, unless notice is provided in accordance with paragraph (c) 
of this section;
    (iii) 30 days after taking adverse action on an existing account; or
    (iv) 90 days after notifying the applicant of a counteroffer if the 
applicant does not expressly accept or use the credit offered.
    (2) Content of notification when adverse action is taken. A 
notification given to an applicant when adverse action is taken shall be 
in writing and shall contain a statement of the action taken; the name 
and address of the creditor; a statement of the provisions of section 
701(a) of the Act; the name and address of the Federal agency that 
administers compliance with respect to the creditor; and either:
    (i) A statement of specific reasons for the action taken; or
    (ii) A disclosure of the applicant's right to a statement of 
specific reasons within 30 days, if the statement is requested within 60 
days of the creditor's notification. The disclosure shall include the 
name, address, and telephone number of the person or office from which 
the statement of reasons can be obtained. If the creditor chooses to 
provide the reasons orally, the creditor shall also disclose the 
applicant's right to have them confirmed in writing within 30 days of 
receiving the applicant's written request for confirmation.
    (3) Notification to business credit applicants. For business credit, 
a creditor shall comply with the notification requirements of this 
section in the following manner:
    (i) With regard to a business that had gross revenues of $1 million 
or less in its preceding fiscal year (other than an extension of trade 
credit, credit incident to a factoring agreement, or other similar types 
of business credit), a creditor shall comply with paragraphs (a)(1) and 
(2) of this section, except that:
    (A) The statement of the action taken may be given orally or in 
writing, when adverse action is taken;
    (B) Disclosure of an applicant's right to a statement of reasons may 
be given at the time of application, instead of when adverse action is 
taken, provided the disclosure contains the information required by 
paragraph (a)(2)(ii) of this section and the ECOA notice specified in 
paragraph (b)(1) of this section;
    (C) For an application made entirely by telephone, a creditor 
satisfies the requirements of paragraph (a)(3)(i) of this section by an 
oral statement of the action taken and of the applicant's right to a 
statement of reasons for adverse action.
    (ii) With regard to a business that had gross revenues in excess of 
$1 million in its preceding fiscal year or an extension of trade credit, 
credit incident to a factoring agreement, or other similar types of 
business credit, a creditor shall:
    (A) Notify the applicant, within a reasonable time, orally or in 
writing, of the action taken; and
    (B) Provide a written statement of the reasons for adverse action 
and the ECOA notice specified in paragraph (b)(1) of this section if the 
applicant makes a written request for the reasons within 60 days of the 
creditor's notification.
    (b) Form of ECOA notice and statement of specific reasons--(1) ECOA 
notice. To satisfy the disclosure requirements of paragraph (a)(2) of 
this section regarding section 701(a) of the Act, the creditor shall 
provide a notice that is substantially similar to the following: The 
Federal Equal Credit Opportunity Act

[[Page 57]]

prohibits creditors from discriminating against credit applicants on the 
basis of race, color, religion, national origin, sex, marital status, 
age (provided the applicant has the capacity to enter into a binding 
contract); because all or part of the applicant's income derives from 
any public assistance program; or because the applicant has in good 
faith exercised any right under the Consumer Credit Protection Act. The 
Federal agency that administers compliance with this law concerning this 
creditor is [name and address as specified by the appropriate agency or 
agencies listed in appendix A of this part]. Until January 1, 2013, a 
creditor may comply with this paragraph (b)(1) and paragraph (a)(2) of 
this section by including in the notice the name and address as 
specified by the appropriate agency in appendix A to 12 CFR part 202, as 
in effect on October 1, 2011.
    (2) Statement of specific reasons. The statement of reasons for 
adverse action required by paragraph (a)(2)(i) of this section must be 
specific and indicate the principal reason(s) for the adverse action. 
Statements that the adverse action was based on the creditor's internal 
standards or policies or that the applicant, joint applicant, or similar 
party failed to achieve a qualifying score on the creditor's credit 
scoring system are insufficient.
    (c) Incomplete applications--(1) Notice alternatives. Within 30 days 
after receiving an application that is incomplete regarding matters that 
an applicant can complete, the creditor shall notify the applicant 
either:
    (i) Of action taken, in accordance with paragraph (a) of this 
section; or
    (ii) Of the incompleteness, in accordance with paragraph (c)(2) of 
this section.
    (2) Notice of incompleteness. If additional information is needed 
from an applicant, the creditor shall send a written notice to the 
applicant specifying the information needed, designating a reasonable 
period of time for the applicant to provide the information, and 
informing the applicant that failure to provide the information 
requested will result in no further consideration being given to the 
application. The creditor shall have no further obligation under this 
section if the applicant fails to respond within the designated time 
period. If the applicant supplies the requested information within the 
designated time period, the creditor shall take action on the 
application and notify the applicant in accordance with paragraph (a) of 
this section.
    (3) Oral request for information. At its option, a creditor may 
inform the applicant orally of the need for additional information. If 
the application remains incomplete the creditor shall send a notice in 
accordance with paragraph (c)(1) of this section.
    (d) Oral notifications by small-volume creditors. In the case of a 
creditor that did not receive more than 150 applications during the 
preceding calendar year, the requirements of this section (including 
statements of specific reasons) are satisfied by oral notifications.
    (e) Withdrawal of approved application. When an applicant submits an 
application and the parties contemplate that the applicant will inquire 
about its status, if the creditor approves the application and the 
applicant has not inquired within 30 days after applying, the creditor 
may treat the application as withdrawn and need not comply with 
paragraph (a)(1) of this section.
    (f) Multiple applicants. When an application involves more than one 
applicant, notification need only be given to one of them but must be 
given to the primary applicant where one is readily apparent.
    (g) Applications submitted through a third party. When an 
application is made on behalf of an applicant to more than one creditor 
and the applicant expressly accepts or uses credit offered by one of the 
creditors, notification of action taken by any of the other creditors is 
not required. If no credit is offered or if the applicant does not 
expressly accept or use the credit offered, each creditor taking adverse 
action must comply with this section, directly or through a third party. 
A notice given by a third party shall disclose the identity of each 
creditor on whose behalf the notice is given.

[[Page 58]]



Sec. 1002.10  Furnishing of credit information.

    (a) Designation of accounts. A creditor that furnishes credit 
information shall designate:
    (1) Any new account to reflect the participation of both spouses if 
the applicant's spouse is permitted to use or is contractually liable on 
the account (other than as a guarantor, surety, endorser, or similar 
party); and
    (2) Any existing account to reflect such participation, within 90 
days after receiving a written request to do so from one of the spouses.
    (b) Routine reports to consumer reporting agency. If a creditor 
furnishes credit information to a consumer reporting agency concerning 
an account designated to reflect the participation of both spouses, the 
creditor shall furnish the information in a manner that will enable the 
agency to provide access to the information in the name of each spouse.
    (c) Reporting in response to inquiry. If a creditor furnishes credit 
information in response to an inquiry, concerning an account designated 
to reflect the participation of both spouses, the creditor shall furnish 
the information in the name of the spouse about whom the information is 
requested.



Sec. 1002.11  Relation to state law.

    (a) Inconsistent state laws. Except as otherwise provided in this 
section, this part alters, affects, or preempts only those state laws 
that are inconsistent with the Act and this part and then only to the 
extent of the inconsistency. A state law is not inconsistent if it is 
more protective of an applicant.
    (b) Preempted provisions of state law. (1) A state law is deemed to 
be inconsistent with the requirements of the Act and this part and less 
protective of an applicant within the meaning of section 705(f) of the 
Act to the extent that the law:
    (i) Requires or permits a practice or act prohibited by the Act or 
this part;
    (ii) Prohibits the individual extension of consumer credit to both 
parties to a marriage if each spouse individually and voluntarily 
applies for such credit;
    (iii) Prohibits inquiries or collection of data required to comply 
with the Act or this part;
    (iv) Prohibits asking about or considering age in an empirically 
derived, demonstrably and statistically sound, credit scoring system to 
determine a pertinent element of creditworthiness, or to favor an 
elderly applicant; or
    (v) Prohibits inquiries necessary to establish or administer a 
special purpose credit program as defined by Sec. 1002.8.
    (2) A creditor, state, or other interested party may request that 
the Bureau determine whether a state law is inconsistent with the 
requirements of the Act and this part.
    (c) Laws on finance charges, loan ceilings. If married applicants 
voluntarily apply for and obtain individual accounts with the same 
creditor, the accounts shall not be aggregated or otherwise combined for 
purposes of determining permissible finance charges or loan ceilings 
under any Federal or state law. Permissible loan ceiling laws shall be 
construed to permit each spouse to become individually liable up to the 
amount of the loan ceilings, less the amount for which the applicant is 
jointly liable.
    (d) State and Federal laws not affected. This section does not alter 
or annul any provision of state property laws, laws relating to the 
disposition of decedents' estates, or Federal or state banking 
regulations directed only toward insuring the solvency of financial 
institutions.
    (e) Exemption for state-regulated transactions--(1) Applications. A 
state may apply to the Bureau for an exemption from the requirements of 
the Act and this part for any class of credit transactions within the 
state. The Bureau will grant such an exemption if the Bureau determines 
that:
    (i) The class of credit transactions is subject to state law 
requirements substantially similar to those of the Act and this part or 
that applicants are afforded greater protection under state law; and
    (ii) There is adequate provision for state enforcement.
    (2) Liability and enforcement. (i) No exemption will extend to the 
civil liability provisions of section 706 of the Act

[[Page 59]]

or the administrative enforcement provisions of section 704 of the Act.
    (ii) After an exemption has been granted, the requirements of the 
applicable state law (except for additional requirements not imposed by 
Federal law) will constitute the requirements of the Act and this part.



Sec. 1002.12  Record retention.

    (a) Retention of prohibited information. A creditor may retain in 
its files information that is prohibited by the Act or this part for use 
in evaluating applications, without violating the Act or this part, if 
the information was obtained:
    (1) From any source prior to March 23, 1977;
    (2) From consumer reporting agencies, an applicant, or others 
without the specific request of the creditor; or
    (3) As required to monitor compliance with the Act and this part or 
other Federal or state statutes or regulations.
    (b) Preservation of records--(1) Applications. For 25 months (12 
months for business credit, except as provided in paragraph (b)(5) of 
this section) after the date that a creditor notifies an applicant of 
action taken on an application or of incompleteness, the creditor shall 
retain in original form or a copy thereof:
    (i) Any application that it receives, any information required to be 
obtained concerning characteristics of the applicant to monitor 
compliance with the Act and this part or other similar law, and any 
other written or recorded information used in evaluating the application 
and not returned to the applicant at the applicant's request;
    (ii) A copy of the following documents if furnished to the applicant 
in written form (or, if furnished orally, any notation or memorandum 
made by the creditor):
    (A) The notification of action taken; and
    (B) The statement of specific reasons for adverse action; and
    (iii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (2) Existing accounts. For 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section) after the date 
that a creditor notifies an applicant of adverse action regarding an 
existing account, the creditor shall retain as to that account, in 
original form or a copy thereof:
    (i) Any written or recorded information concerning the adverse 
action; and
    (ii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (3) Other applications. For 25 months (12 months for business 
credit, except as provided in paragraph (b)(5) of this section) after 
the date that a creditor receives an application for which the creditor 
is not required to comply with the notification requirements of 
Sec. 1002.9, the creditor shall retain all written or recorded 
information in its possession concerning the applicant, including any 
notation of action taken.
    (4) Enforcement proceedings and investigations. A creditor shall 
retain the information beyond 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section) if the creditor 
has actual notice that it is under investigation or is subject to an 
enforcement proceeding for an alleged violation of the Act or this part, 
by the Attorney General of the United States or by an enforcement agency 
charged with monitoring that creditor's compliance with the Act and this 
part, or if it has been served with notice of an action filed pursuant 
to section 706 of the Act and Sec. 1002.16 of this part. The creditor 
shall retain the information until final disposition of the matter, 
unless an earlier time is allowed by order of the agency or court.
    (5) Special rule for certain business credit applications. With 
regard to a business that had gross revenues in excess of $1 million in 
its preceding fiscal year, or an extension of trade credit, credit 
incident to a factoring agreement, or other similar types of business 
credit, the creditor shall retain records for at least 60 days after 
notifying the applicant of the action taken. If within that time period 
the applicant requests in writing the reasons for adverse action or that 
records be retained, the creditor shall retain records for 12 months.
    (6) Self-tests. For 25 months after a self-test (as defined in 
Sec. 1002.15) has

[[Page 60]]

been completed, the creditor shall retain all written or recorded 
information about the self-test. A creditor shall retain information 
beyond 25 months if it has actual notice that it is under investigation 
or is subject to an enforcement proceeding for an alleged violation, or 
if it has been served with notice of a civil action. In such cases, the 
creditor shall retain the information until final disposition of the 
matter, unless an earlier time is allowed by the appropriate agency or 
court order.
    (7) Prescreened solicitations. For 25 months after the date on which 
an offer of credit is made to potential customers (12 months for 
business credit, except as provided in paragraph (b)(5) of this 
section), the creditor shall retain in original form or a copy thereof:
    (i) The text of any prescreened solicitation;
    (ii) The list of criteria the creditor used to select potential 
recipients of the solicitation; and
    (iii) Any correspondence related to complaints (formal or informal) 
about the solicitation.



Sec. 1002.13  Information for monitoring purposes.

    (a) Information to be requested. (1) A creditor that receives an 
application for credit primarily for the purchase or refinancing of a 
dwelling occupied or to be occupied by the applicant as a principal 
residence, where the extension of credit will be secured by the 
dwelling, shall request as part of the application the following 
information regarding the applicant(s):
    (i) Ethnicity, using the categories Hispanic or Latino, and not 
Hispanic or Latino; and race, using the categories American Indian or 
Alaska Native, Asian, Black or African American, Native Hawaiian or 
Other Pacific Islander, and White;
    (ii) Sex;
    (iii) Marital status, using the categories married, unmarried, and 
separated; and
    (iv) Age.
    (2) Dwelling means a residential structure that contains one to four 
units, whether or not that structure is attached to real property. The 
term includes, but is not limited to, an individual condominium or 
cooperative unit and a mobile or other manufactured home.
    (b) Obtaining information. Questions regarding ethnicity, race, sex, 
marital status, and age may be listed, at the creditor's option, on the 
application form or on a separate form that refers to the application. 
The applicant(s) shall be asked but not required to supply the requested 
information. If the applicant(s) chooses not to provide the information 
or any part of it, that fact shall be noted on the form. The creditor 
shall then also note on the form, to the extent possible, the ethnicity, 
race, and sex of the applicant(s) on the basis of visual observation or 
surname.
    (c) Disclosure to applicant(s). The creditor shall inform the 
applicant(s) that the information regarding ethnicity, race, sex, 
marital status, and age is being requested by the Federal Government for 
the purpose of monitoring compliance with Federal statutes that prohibit 
creditors from discriminating against applicants on those bases. The 
creditor shall also inform the applicant(s) that if the applicant(s) 
chooses not to provide the information, the creditor is required to note 
the ethnicity, race and sex on the basis of visual observation or 
surname.
    (d) Substitute monitoring program. A monitoring program required by 
an agency charged with administrative enforcement under section 704 of 
the Act may be substituted for the requirements contained in paragraphs 
(a), (b), and (c) of this section.



Sec. 1002.14  Rules on providing appraisals and other valuations.

    (a) Providing appraisals and other valuations--(1) In general. A 
creditor shall provide an applicant a copy of all appraisals and other 
written valuations developed in connection with an application for 
credit that is to be secured by a first lien on a dwelling. A creditor 
shall provide a copy of each such appraisal or other written valuation 
promptly upon completion, or three business days prior to consummation 
of the transaction (for closed-end credit) or account opening (for open-
end credit), whichever is earlier. An applicant may waive the timing 
requirement in this paragraph (a)(1) and agree

[[Page 61]]

to receive any copy at or before consummation or account opening, except 
where otherwise prohibited by law. Any such waiver must be obtained at 
least three business days prior to consummation or account opening, 
unless the waiver pertains solely to the applicant's receipt of a copy 
of an appraisal or other written valuation that contains only clerical 
changes from a previous version of the appraisal or other written 
valuation provided to the applicant three or more business days prior to 
consummation or account opening. If the applicant provides a waiver and 
the transaction is not consummated or the account is not opened, the 
creditor must provide these copies no later than 30 days after the 
creditor determines consummation will not occur or the account will not 
be opened.
    (2) Disclosure. For applications subject to paragraph (a)(1) of this 
section, a creditor shall mail or deliver to an applicant, not later 
than the third business day after the creditor receives an application 
for credit that is to be secured by a first lien on a dwelling, a notice 
in writing of the applicant's right to receive a copy of all written 
appraisals developed in connection with the application. In the case of 
an application for credit that is not to be secured by a first lien on a 
dwelling at the time of application, if the creditor later determines 
the credit will be secured by a first lien on a dwelling, the creditor 
shall mail or deliver the same notice in writing not later than the 
third business day after the creditor determines that the loan is to be 
secured by a first lien on a dwelling.
    (3) Reimbursement. A creditor shall not charge an applicant for 
providing a copy of appraisals and other written valuations as required 
under this section, but may require applicants to pay a reasonable fee 
to reimburse the creditor for the cost of the appraisal or other written 
valuation unless otherwise provided by law.
    (4) Withdrawn, denied, or incomplete applications. The requirements 
set forth in paragraph (a)(1) of this section apply whether credit is 
extended or denied or if the application is incomplete or withdrawn.
    (5) Copies in electronic form. The copies required by 
Sec. 1002.14(a)(1) may be provided to the applicant in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the Electronic Signatures in Global and National Commerce 
Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (b) Definitions. For purposes of paragraph (a) of this section:
    (1) Consummation. The term ``consummation'' means the time that a 
consumer becomes contractually obligated on a closed-end credit 
transaction.
    (2) Dwelling. The term ``dwelling'' means a residential structure 
that contains one to four units whether or not that structure is 
attached to real property. The term includes, but is not limited to, an 
individual condominium or cooperative unit, and a mobile or other 
manufactured home.
    (3) Valuation. The term ``valuation'' means any estimate of the 
value of a dwelling developed in connection with an application for 
credit.

[78 FR 7248, Jan. 31, 2013]



Sec. 1002.15  Incentives for self-testing and self-correction.

    (a) General rules--(1) Voluntary self-testing and correction. The 
report or results of a self-test that a creditor voluntarily conducts 
(or authorizes) are privileged as provided in this section. Data 
collection required by law or by any governmental authority is not a 
voluntary self-test.
    (2) Corrective action required. The privilege in this section 
applies only if the creditor has taken or is taking appropriate 
corrective action.
    (3) Other privileges. The privilege created by this section does not 
preclude the assertion of any other privilege that may also apply.
    (b) Self-test defined--(1) Definition. A self-test is any program, 
practice, or study that:
    (i) Is designed and used specifically to determine the extent or 
effectiveness of a creditor's compliance with the Act or this part; and
    (ii) Creates data or factual information that is not available and 
cannot be derived from loan or application files or other records 
related to credit transactions.

[[Page 62]]

    (2) Types of information privileged. The privilege under this 
section applies to the report or results of the self-test, data or 
factual information created by the self-test, and any analysis, 
opinions, and conclusions pertaining to the self-test report or results. 
The privilege covers workpapers or draft documents as well as final 
documents.
    (3) Types of information not privileged. The privilege under this 
section does not apply to:
    (i) Information about whether a creditor conducted a self-test, the 
methodology used or the scope of the self-test, the time period covered 
by the self-test, or the dates it was conducted; or
    (ii) Loan and application files or other business records related to 
credit transactions, and information derived from such files and 
records, even if the information has been aggregated, summarized, or 
reorganized to facilitate analysis.
    (c) Appropriate corrective action--(1) General requirement. For the 
privilege in this section to apply, appropriate corrective action is 
required when the self-test shows that it is more likely than not that a 
violation occurred, even though no violation has been formally 
adjudicated.
    (2) Determining the scope of appropriate corrective action. A 
creditor must take corrective action that is reasonably likely to remedy 
the cause and effect of a likely violation by:
    (i) Identifying the policies or practices that are the likely cause 
of the violation; and
    (ii) Assessing the extent and scope of any violation.
    (3) Types of relief. Appropriate corrective action may include both 
prospective and remedial relief, except that to establish a privilege 
under this section:
    (i) A creditor is not required to provide remedial relief to a 
tester used in a self-test;
    (ii) A creditor is only required to provide remedial relief to an 
applicant identified by the self-test as one whose rights were more 
likely than not violated; and
    (iii) A creditor is not required to provide remedial relief to a 
particular applicant if the statute of limitations applicable to the 
violation expired before the creditor obtained the results of the self-
test or the applicant is otherwise ineligible for such relief.
    (4) No admission of violation. Taking corrective action is not an 
admission that a violation occurred.
    (d) Scope of privilege--(1) General rule. The report or results of a 
privileged self-test may not be obtained or used:
    (i) By a government agency in any examination or investigation 
relating to compliance with the Act or this part; or
    (ii) By a government agency or an applicant (including a prospective 
applicant who alleges a violation of Sec. 1002.4(b)) in any proceeding 
or civil action in which a violation of the Act or this part is alleged.
    (2) Loss of privilege. The report or results of a self-test are not 
privileged under paragraph (d)(1) of this section if the creditor or a 
person with lawful access to the report or results:
    (i) Voluntarily discloses any part of the report or results, or any 
other information privileged under this section, to an applicant or 
government agency or to the public;
    (ii) Discloses any part of the report or results, or any other 
information privileged under this section, as a defense to charges that 
the creditor has violated the Act or regulation; or
    (iii) Fails or is unable to produce written or recorded information 
about the self-test that is required to be retained under 
Sec. 1002.12(b)(6) when the information is needed to determine whether 
the privilege applies. This paragraph does not limit any other penalty 
or remedy that may be available for a violation of Sec. 1002.12.
    (3) Limited use of privileged information. Notwithstanding paragraph 
(d)(1) of this section, the self-test report or results and any other 
information privileged under this section may be obtained and used by an 
applicant or government agency solely to determine a penalty or remedy 
after a violation of the Act or this part has been adjudicated or 
admitted. Disclosures for this limited purpose may be used only for the 
particular proceeding in which the adjudication or admission was made. 
Information disclosed under this paragraph (d)(3) remains privileged 
under paragraph (d)(1) of this section.

[[Page 63]]



Sec. 1002.16  Enforcement, penalties and liabilities.

    (a) Administrative enforcement. (1) As set forth more fully in 
section 704 of the Act, administrative enforcement of the Act and this 
part regarding certain creditors is assigned to the Comptroller of the 
Currency, Board of Governors of the Federal Reserve System, Board of 
Directors of the Federal Deposit Insurance Corporation, National Credit 
Union Administration, Surface Transportation Board, Civil Aeronautics 
Board, Secretary of Agriculture, Farm Credit Administration, Securities 
and Exchange Commission, Small Business Administration, Secretary of 
Transportation, and Bureau of Consumer Financial Protection.
    (2) Except to the extent that administrative enforcement is 
specifically assigned to some government agency other than the Bureau, 
and subject to subtitle B of the Consumer Financial Protection Act of 
2010, the Federal Trade Commission is authorized to enforce the 
requirements imposed under the Act and this part.
    (b) Penalties and liabilities. (1) Sections 702(g) and 706(a) and 
(b) of the Act provide that any creditor that fails to comply with a 
requirement imposed by the Act or this part is subject to civil 
liability for actual and punitive damages in individual or class 
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the 
Act, violations of the Act or this part also constitute violations of 
other Federal laws. Liability for punitive damages can apply only to 
nongovernmental entities and is limited to $10,000 in individual actions 
and the lesser of $500,000 or 1 percent of the creditor's net worth in 
class actions. Section 706(c) provides for equitable and declaratory 
relief and section 706(d) authorizes the awarding of costs and 
reasonable attorney's fees to an aggrieved applicant in a successful 
action.
    (2) As provided in section 706(f) of the Act, a civil action under 
the Act or this part may be brought in the appropriate United States 
district court without regard to the amount in controversy or in any 
other court of competent jurisdiction within five years after the date 
of the occurrence of the violation, or within one year after the 
commencement of an administrative enforcement proceeding or of a civil 
action brought by the Attorney General of the United States within five 
years after the alleged violation.
    (3) If an agency responsible for administrative enforcement is 
unable to obtain compliance with the Act or this part, it may refer the 
matter to the Attorney General of the United States. If the Bureau, the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Board of Governors of the Federal Reserve System, or the National 
Credit Union Administration has reason to believe that one or more 
creditors have engaged in a pattern or practice of discouraging or 
denying applications in violation of the Act or this part, the agency 
shall refer the matter to the Attorney General. If the agency has reason 
to believe that one or more creditors violated section 701(a) of the 
Act, the agency may refer a matter to the Attorney General.
    (4) On referral, or whenever the Attorney General has reason to 
believe that one or more creditors have engaged in a pattern or practice 
in violation of the Act or this part, the Attorney General may bring a 
civil action for such relief as may be appropriate, including actual and 
punitive damages and injunctive relief.
    (5) If the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Board of Governors of the Federal Reserve 
System, or the National Credit Union Administration has reason to 
believe (as a result of a consumer complaint, a consumer compliance 
examination, or some other basis) that a violation of the Act or this 
part has occurred which is also a violation of the Fair Housing Act, and 
the matter is not referred to the Attorney General, the agency shall:
    (i) Notify the Secretary of Housing and Urban Development; and
    (ii) Inform the applicant that the Secretary of Housing and Urban 
Development has been notified and that remedies may be available under 
the Fair Housing Act.
    (c) Failure of compliance. A creditor's failure to comply with 
Sec. 1002.6(b)(6), Sec. 1002.9, Sec. 1002.10, Sec. 1002.12 or 
Sec. 1002.13 is not a violation if it results from an inadvertent error. 
On discovering an

[[Page 64]]

error under Sec. Sec. 1002.9 and 1002.10, the creditor shall correct it 
as soon as possible. If a creditor inadvertently obtains the monitoring 
information regarding the ethnicity, race, and sex of the applicant in a 
dwelling-related transaction not covered by Sec. 1002.13, the creditor 
may retain information and act on the application without violating the 
regulation.



 Sec. Appendix A to Part 1002--Federal Agencies to be Listed in Adverse 
                             Action Notices

    The following list indicates the Federal agency or agencies that 
should be listed in notices provided by creditors pursuant to 
Sec. 1002.9(b)(1). Any questions concerning a particular creditor may be 
directed to such agencies. This list is not intended to describe 
agencies' enforcement authority for ECOA and Regulation B. Terms that 
are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) 
shall have the meaning given to them in the International Banking Act of 
1978 (12 U.S.C. 3101).
    1. Banks, savings associations, and credit unions with total assets 
of over $10 billion and their affiliates: Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington DC 20006. Such affiliates that 
are not banks, savings associations, or credit unions also should list, 
in addition to the Bureau: FTC Regional Office for region in which the 
creditor operates or Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    2. To the extent not included in item 1 above:
    a. National banks, Federal savings associations, and Federal 
branches and Federal agencies of foreign banks: Office of the 
Comptroller of the Currency, Customer Assistance Group, 1301 McKinney 
Street, Suite 3450, Houston, TX 77010-9050
    b. State member banks, 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: Federal Reserve Consumer Help Center, P.O. Box 
1200, Minneapolis, MN 55480.
    c. Nonmember Insured Banks, Insured State Branches of Foreign Banks, 
and Insured State Savings Associations: FDIC Consumer Response Center, 
1100 Walnut Street, Box 11, Kansas City, MO 64106.
    d. Federal Credit Unions: National Credit Union Administration, 
Office of Consumer Protection, 1775 Duke Street, Alexandria, VA 22314.
    3. Air carriers: Assistant General Counsel for Aviation Enforcement 
and Proceedings, Department of Transportation, 400 Seventh Street SW., 
Washington, DC 20590.
    4. Creditors Subject to Surface Transportation Board: Office of 
Proceedings, Surface Transportation Board, Department of Transportation, 
1925 K Street NW., Washington, DC 20423.
    5. Creditors Subject to Packers and Stockyards Act: Nearest Packers 
and Stockyards Administration area supervisor.
    6. Small Business Investment Companies: Associate Deputy 
Administrator for Capital Access, United States Small Business 
Administration, 409 Third Street SW., 8th Floor, Washington, DC 20416.
    7. Brokers and Dealers: Securities and Exchange Commission, 
Washington, DC 20549.
    8. Federal Land Banks, Federal Land Bank Associations, Federal 
Intermediate Credit Banks, and Production Credit Associations: Farm 
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    9. Retailers, Finance Companies, and All Other Creditors Not Listed 
Above: FTC Regional Office for region in which the creditor operates or 
Federal Trade Commission, Equal Credit Opportunity, Washington, DC 
20580.



          Sec. Appendix B to Part 1002--Model Application Forms

    1. This appendix contains five model credit application forms, each 
designated for use in a particular type of consumer credit transaction 
as indicated by the bracketed caption on each form. The first sample 
form is intended for use in open-end, unsecured transactions; the second 
for closed-end, secured transactions; the third for closed-end 
transactions, whether unsecured or secured; the fourth in transactions 
involving community property or occurring in community property states; 
and the fifth in residential mortgage transactions which contains a 
model disclosure for use in complying with Sec. 1002.13 for certain 
dwelling-related loans. All forms contained in this appendix are models; 
their use by creditors is optional.
    2. The use or modification of these forms is governed by the 
following instructions. A creditor may change the forms: by asking for 
additional information not prohibited by Sec. 1002.5; by deleting any 
information request; or by rearranging the format without modifying the 
substance of the inquiries. In any of these three instances, however, 
the appropriate notices regarding the optional nature of courtesy 
titles, the option to disclose alimony, child support, or separate 
maintenance, and the limitation concerning marital status inquiries must 
be included in the appropriate places if the items to which they relate 
appear on the creditor's form.
    3. If a creditor uses an appropriate appendix B model form, or 
modifies a form in accordance with the above instructions, that

[[Page 65]]

creditor shall be deemed to be acting in compliance with the provisions 
of paragraphs (b), (c) and (d) of Sec. 1002.5 of this part.
[GRAPHIC] [TIFF OMITTED] TR21DE11.046


[[Page 66]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.047


[[Page 67]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.048


[[Page 68]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.049


[[Page 69]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.050


[[Page 70]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.051


[[Page 71]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.052


[[Page 72]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.053


[[Page 73]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.054


[[Page 74]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.055


[[Page 75]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.056


[[Page 76]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.057


[[Page 77]]





         Sec. Appendix C to Part 1002--Sample Notification Forms

    1. This Appendix contains ten sample notification forms. Forms C-1 
through C-4 are intended for use in notifying an applicant that adverse 
action has been taken on an application or account under 
Sec. Sec. 1002.9(a)(1) and (2)(i) of this part. Form C-5 is a notice of 
disclosure of the right to request specific reasons for adverse action 
under Sec. Sec. 1002.9(a)(1) and (2)(ii). Form C-6 is designed for use 
in notifying an applicant, under Sec. 1002.9(c)(2), that an application 
is incomplete. Forms C-7 and C-8 are intended for use in connection with 
applications for business credit under Sec. 1002.9(a)(3). Form C-9 is 
designed for use in notifying an applicant of the right to receive a 
copy of appraisals under Sec. 1002.14. Form C-10 is designed for use in 
notifying an applicant for nonmortgage credit that the creditor is 
requesting applicant characteristic information.
    2. Form C-1 contains the Fair Credit Reporting Act disclosure as 
required by sections 615(a) and (b) of that act. Forms C-2 through C-5 
contain only the section 615(a) disclosure (that a creditor obtained 
information from a consumer reporting agency that was considered in the 
credit decision). A creditor must provide the section 615(a) disclosure 
when adverse action is taken against a consumer based on information 
from a consumer reporting agency. A creditor must provide the section 
615(b) disclosure when adverse action is taken based on information from 
an outside source other than a consumer reporting agency. In addition, a 
creditor must provide the section 615(b) disclosure if the creditor 
obtained information from an affiliate other than information in a 
consumer report or other than information concerning the affiliate's own 
transactions or experiences with the consumer. Creditors may comply with 
the disclosure requirements for adverse action based on information in a 
consumer report obtained from an affiliate by providing either the 
section 615(a) or section 615(b) disclosure. Optional language in Forms 
C-1 through C-5 may be used to direct the consumer to the entity that 
provided the credit score for any questions about the credit score, 
along with the entity's contact information. Creditors may use or not 
use this additional language without losing the safe harbor, since the 
language is optional.
    3. The sample forms are illustrative and may not be appropriate for 
all creditors. They were designed to include some of the factors that 
creditors most commonly consider. If a creditor chooses to use the 
checklist of reasons provided in one of the sample forms in this 
appendix and if reasons commonly used by the creditor are not provided 
on the form, the creditor should modify the checklist by substituting or 
adding other reasons. For example, if ``inadequate down payment'' or 
``no deposit relationship with us'' are common reasons for taking 
adverse action on an application, the creditor ought to add or 
substitute such reasons for those presently contained on the sample 
forms.
    4. If the reasons listed on the forms are not the factors actually 
used, a creditor will not satisfy the notice requirement by simply 
checking the closest identifiable factor listed. For example, some 
creditors consider only references from banks or other depository 
institutions and disregard finance company references altogether; their 
statement of reasons should disclose ``insufficient bank references,'' 
not ``insufficient credit references.'' Similarly, a creditor that 
considers bank references and other credit references as distinct 
factors should treat the two factors separately and disclose them as 
appropriate. The creditor should either add such other factors to the 
form or check ``other'' and include the appropriate explanation. The 
creditor need not, however, describe how or why a factor adversely 
affected the application. For example, the notice may say ``length of 
residence'' rather than ``too short a period of residence.''
    5. A creditor may design its own notification forms or use all or a 
portion of the forms contained in this Appendix. Proper use of Forms C-1 
through C-4 will satisfy the requirement of Sec. 1002.9(a)(2)(i). Proper 
use of Forms C-5 and C-6 constitutes full compliance with 
Sec. Sec. 1002.9(a)(2)(ii) and 1002.9(c)(2), respectively. Proper use of 
Forms C-7 and C-8 will satisfy the requirements of 
Sec. Sec. 1002.9(a)(2)(i) and (ii), respectively, for applications for 
business credit. Proper use of Form C-9 will satisfy the requirements of 
Sec. 1002.14 of this part. Proper use of Form C-10 will satisfy the 
requirements of Sec. 1002.5(b)(1).

    Form C-1--Sample Notice of Action Taken and Statement of Reasons

Statement of Credit Denial, Termination or Change

 Date:__________________________________________________________________
 Applicant's Name:______________________________________________________
 Applicant's Address:___________________________________________________
 Description of Account, Transaction, or Requested Credit:______________
 Description of Action Taken:___________________________________________

  Part I--Principal Reason(s) for Credit Denial, Termination, or Other 
                     Action Taken Concerning Credit

    This section must be completed in all instances.

----Credit application incomplete
----Insufficient number of credit references provided
----Unacceptable type of credit references provided
----Unable to verify credit references
----Temporary or irregular employment

[[Page 78]]

----Unable to verify employment
----Length of employment
----Income insufficient for amount of credit requested
----Excessive obligations in relation to income
----Unable to verify income
----Length of residence
----Temporary residence
----Unable to verify residence
----No credit file
----Limited credit experience
----Poor credit performance with us
----Delinquent past or present credit obligations with others
----Collection action or judgment
----Garnishment or attachment
----Foreclosure or repossession
----Bankruptcy
----Number of recent inquiries on credit bureau report
----Value or type of collateral not sufficient
----Other, specify: ------

   Part II--Disclosure of Use of Information Obtained From an Outside 
                                 Source

    This section should be completed if the credit decision was based in 
whole or in part on information that has been obtained from an outside 
source.
----Our credit decision was based in whole or in part on information 
obtained in a report from the consumer reporting agency listed below. 
You have a right under the Fair Credit Reporting Act to know the 
information contained in your credit file at the consumer reporting 
agency. The reporting agency played no part in our decision and is 
unable to supply specific reasons why we have denied credit to you. You 
also have a right to a free copy of your report from the reporting 
agency, if you request it no later than 60 days after you receive this 
notice. In addition, if you find that any information contained in the 
report you receive is inaccurate or incomplete, you have the right to 
dispute the matter with the reporting agency.
 Name:__________________________________________________________________
 Address:_______________________________________________________________
 [Toll-free] Telephone number:__________________________________________
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.

 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of -------- to a high of --------.
    Key factors that adversely affected your credit score:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________

[[Toll-free] Telephone number: --------]

----Our credit decision was based in whole or in part on information 
obtained from an affiliate or from an outside source other than a 
consumer reporting agency. Under the Fair Credit Reporting Act, you have 
the right to make a written request, no later than 60 days after you 
receive this notice, for disclosure of the nature of this information.

    If you have any questions regarding this notice, you should contact:

 Creditor's name:_______________________________________________________
 Creditor's address:____________________________________________________
 Creditor's telephone number:___________________________________________

    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

    Form C-2--Sample Notice of Action Taken and Statement of Reasons

Date

    Dear Applicant: Thank you for your recent application. Your request 
for [a loan/a credit card/an increase in your credit limit] was 
carefully considered, and we regret that we are unable to approve your 
application at this time, for the following reason(s):
    Your Income:

----is below our minimum requirement.
----is insufficient to sustain payments on the amount of credit 
requested.
----could not be verified.

    Your Employment:

----is not of sufficient length to qualify.
----could not be verified.

    Your Credit History:

----of making payments on time was not satisfactory.
----could not be verified.

    Your Application:

----lacks a sufficient number of credit references.
----lacks acceptable types of credit references.

[[Page 79]]

----reveals that current obligations are excessive in relation to 
income.
 Other:_________________________________________________________________

    The consumer reporting agency contacted that provided information 
that influenced our decision in whole or in part was [name, address and 
[toll-free] telephone number of the reporting agency]. The reporting 
agency played no part in our decision and is unable to supply specific 
reasons why we have denied credit to you. You have a right under the 
Fair Credit Reporting Act to know the information contained in your 
credit file at the consumer reporting agency. You also have a right to a 
free copy of your report from the reporting agency, if you request it no 
later than 60 days after you receive this notice. In addition, if you 
find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to dispute the matter with 
the reporting agency. Any questions regarding such information should be 
directed to [consumer reporting agency]. If you have any questions 
regarding this letter, you should contact us at [creditor's name, 
address and telephone number].

    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.

 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of -------- to a high of --------.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________

[[Toll-free] Telephone number: --------]
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

Form C-3--Sample Notice of Action Taken and Statement of Reasons (Credit 
                                Scoring)

Date

    Dear Applicant: Thank you for your recent application for --------
--. We regret that we are unable to approve your request.
    [Reasons for Denial of Credit]
    Your application was processed by a [credit scoring] system that 
assigns a numerical value to the various items of information we 
consider in evaluating an application. These numerical values are based 
upon the results of analyses of repayment histories of large numbers of 
customers.
    The information you provided in your application did not score a 
sufficient number of points for approval of the application. The reasons 
you did not score well compared with other applicants were:

 Insufficient bank references
 Type of occupation
 Insufficient credit experience
 Number of recent inquiries on credit bureau report

    [Your Right to Get Your Consumer Report]
    In evaluating your application the consumer reporting agency listed 
below provided us with information that in whole or in part influenced 
our decision. The consumer reporting agency played no part in our 
decision and is unable to supply specific reasons why we have denied 
credit to you. You have a right under the Fair Credit Reporting Act to 
know the information contained in your credit file at the consumer 
reporting agency. It can be obtained by contacting: [Name, address, and 
[toll-free] telephone number of the consumer reporting agency]. You also 
have a right to a free copy of your report from the reporting agency, if 
you request it no later than 60 days after you receive this notice. In 
addition, if you find that any information contained in the report you 
receive is inaccurate or incomplete, you have the right to dispute the 
matter with the reporting agency.
    [Information about Your Credit Score]
    [Information about Your Credit Score]
    We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of -------- to a high of --------.
    Key factors that adversely affected your credit score:
________________________________________________________________________

[[Page 80]]

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:
 Address:_______________________________________________________________

[Toll-free] Telephone number: --------]
    If you have any questions regarding this letter, you should contact 
us at
 Creditor's Name:_______________________________________________________
 Address:_______________________________________________________________
 Telephone:_____________________________________________________________
     Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (with certain 
limited exceptions); because all or part of the applicant's income 
derives from any public assistance program; or because the applicant has 
in good faith exercised any right under the Consumer Credit Protection 
Act. The Federal agency that administers compliance with this law 
concerning this creditor is (name and address as specified by the 
appropriate agency listed in appendix A).

   Form C-4--Sample Notice of Action Taken, Statement of Reasons and 
                              Counteroffer

Date

    Dear Applicant: Thank you for your application for ----------. We 
are unable to offer you credit on the terms that you requested for the 
following reason(s):----------
    We can, however, offer you credit on the following terms: ----------
    If this offer is acceptable to you, please notify us within [amount 
of time] at the following address: ----------.
    Our credit decision on your application was based in whole or in 
part on information obtained in a report from [name, address and [toll-
free] telephone number of the consumer reporting agency]. You have a 
right under the Fair Credit Reporting Act to know the information 
contained in your credit file at the consumer reporting agency. The 
reporting agency played no part in our decision and is unable to supply 
specific reasons why we have denied credit to you. You also have a right 
to a free copy of your report from the reporting agency, if you request 
it no later than 60 days after you receive this notice. In addition, if 
you find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to dispute the matter with 
the reporting agency.
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
 Your credit score:_____________________________________________________
 Date:__________________________________________________________________
    Scores range from a low of -------- to a high of --------.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________
    [Toll-free] Telephone number:--------]
    You should know that the Federal Equal Credit Opportunity Act 
prohibits creditors, such as ourselves, from discriminating against 
credit applicants on the basis of their race, color, religion, national 
origin, sex, marital status, age (provided the applicant has the 
capacity to enter into a binding contract), because they receive income 
from a public assistance program, or because they may have exercised 
their rights under the Consumer Credit Protection Act. If you believe 
there has been discrimination in handling your application you should 
contact the [name and address of the appropriate Federal enforcement 
agency listed in appendix A].
     Sincerely,

  Form C-5--Sample Disclosure of Right To Request Specific Reasons for 
                              Credit Denial

Date
    Dear Applicant: Thank you for applying to us for ----------.
    After carefully reviewing your application, we are sorry to advise 
you that we cannot [open an account for you/grant a loan to you/increase 
your credit limit] at this time. If you would like a statement of 
specific reasons why your application was denied, please contact [our 
credit service manager] shown below within 60 days of the date of this 
letter. We will provide you with the statement of reasons within 30 days 
after receiving your request.

Creditor's name
Address
Telephone number

    If we obtained information from a consumer reporting agency as part 
of our consideration of your application, its name, address, and [toll-
free] telephone number is shown below. The reporting agency played

[[Page 81]]

no part in our decision and is unable to supply specific reasons why we 
have denied credit to you. [You have a right under the Fair Credit 
Reporting Act to know the information contained in your credit file at 
the consumer reporting agency.] You have a right to a free copy of your 
report from the reporting agency, if you request it no later than 60 
days after you receive this notice. In addition, if you find that any 
information contained in the report you received is inaccurate or 
incomplete, you have the right to dispute the matter with the reporting 
agency. You can find out about the information contained in your file 
(if one was used) by contacting:

Consumer reporting agency's name
Address
[Toll-free] Telephone number

    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of -------- to a high of --------.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________
[Toll-free] Telephone number: --------]
     Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

   Form C-6--Sample Notice of Incomplete Application and Request for 
                         Additional Information

Creditor's name
Address
Telephone number
Date

    Dear Applicant: Thank you for your application for credit. The 
following information is needed to make a decision on your application: 
----------
    We need to receive this information by ---------- (date). If we do 
not receive it by that date, we will regrettably be unable to give 
further consideration to your credit request.
     Sincerely,

    Form C-7--Sample Notice of Action Taken and Statement of Reasons 
                            (Business Credit)

Creditor's name
Creditor's address
Date

    Dear Applicant: Thank you for applying to us for credit. We have 
given your request careful consideration, and regret that we are unable 
to extend credit to you at this time for the following reasons:
    (Insert appropriate reason, such as: Value or type of collateral not 
sufficient; Lack of established earnings record; Slow or past due in 
trade or loan payments)
     Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is [name 
and address as specified by the appropriate agency listed in appendix 
A].

  Form C-8--Sample Disclosure of Right To Request Specific Reasons for 
      Credit Denial Given at Time of Application (Business Credit)

Creditor's name
Creditor's address

    If your application for business credit is denied, you have the 
right to a written statement of the specific reasons for the denial. To 
obtain the statement, please contact [name, address and telephone number 
of the person or office from which the statement of reasons can be 
obtained] within 60 days from the date you are notified of our decision. 
We will send you a written statement of reasons for the denial within 30 
days of receiving your request for the statement.
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex,

[[Page 82]]

marital status, age (provided the applicant has the capacity to enter 
into a binding contract); because all or part of the applicant's income 
derives from any public assistance program; or because the applicant has 
in good faith exercised any right under the Consumer Credit Protection 
Act. The Federal agency that administers compliance with this law 
concerning this creditor is [name and address as specified by the 
appropriate agency listed in appendix A].

  Form C-9--Sample Disclosure of Right To Receive a Copy of Appraisals

    We may order an appraisal to determine the property's value and 
charge you for this appraisal. We will promptly give you a copy of any 
appraisal, even if your loan does not close.
    You can pay for an additional appraisal for your own use at your own 
cost.
    [In your letter, give us the following information:]

       Form C-10--Sample Disclosure About Voluntary Data Notation

    We are requesting the following information to monitor our 
compliance with the Federal Equal Credit Opportunity Act, which 
prohibits unlawful discrimination. You are not required to provide this 
information. We will not take this information (or your decision not to 
provide this information) into account in connection with your 
application or credit transaction. The law provides that a creditor may 
not discriminate based on this information, or based on whether or not 
you choose to provide it. [If you choose not to provide the information, 
we will note it by visual observation or surname].

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



   Sec. Appendix D to Part 1002--Issuance of Official Interpretations

    1.Official Interpretations. Interpretations of this part issued by 
officials of the Bureau provide the protection afforded under section 
706(e) of the Act. Except in unusual circumstances, such interpretations 
will not be issued separately but will be incorporated in an official 
commentary to the regulation, which will be amended periodically.
    2. Requests for Issuance of Official Interpretations. A request for 
an official interpretation should be in writing and addressed to the 
Assistant Director, Office of Regulations, Division of Research, 
Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 
G Street, NW., Washington, DC 20006. The request should contain a 
complete statement of all relevant facts concerning the issue, including 
copies of all pertinent documents.
    3. Scope of Interpretations. No interpretations will be issued 
approving creditors' forms or statements. This restriction does not 
apply to forms or statements whose use is required or sanctioned by a 
government agency.



        Sec. Supplement I to Part 1002--Official Interpretations

    Following is an official interpretation of Regulation B (12 CFR part 
1002) issued by the Bureau of Consumer Financial Protection. References 
are to sections of the regulation or the Equal Credit Opportunity Act 
(15 U.S.C. 1601 et seq.).

                              Introduction

    1.Official status. Section 706(e) of the Equal Credit Opportunity 
Act protects a creditor from civil liability for any act done or omitted 
in good faith in conformity with an interpretation issued by a duly 
authorized official of the Bureau. This commentary is the means by which 
the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation B. Good-faith compliance with this 
commentary affords a creditor protection under section 706(e) of the 
Act.
    2. Issuance of interpretations. Under appendix D to the regulation, 
any person may request an official interpretation. Interpretations will 
be issued at the discretion of designated officials and incorporated in 
this commentary following publication for comment in the Federal 
Register. Except in unusual circumstances, official interpretations will 
be issued only by means of this commentary.
    3. Comment designations. The comments are designated with as much 
specificity as possible according to the particular regulatory provision 
addressed. Each comment in the commentary is identified by a number and 
the regulatory section or paragraph that it interprets. For example, 
comments to Sec. 1002.2(c) are further divided by subparagraph, such as 
comment 2(c)(1)(ii)-1 and comment 2(c)(2)(ii-1.

              Section 1002.1--Authority, Scope, and Purpose

    1(a) Authority and scope.
    1. Scope. The Equal Credit Opportunity Act and Regulation B apply to 
all credit--commercial as well as personal--without regard to the nature 
or type of the credit or the creditor, except for an entity excluded 
from coverage of this part (but not the Act) by section 1029 of the 
Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a 
transaction provides for the deferral of the payment of a debt, it is 
credit covered by Regulation B even though it may not be a credit 
transaction covered by Regulation Z (Truth in Lending) (12 CFR part 
1026). Further, the definition of creditor is not restricted to the

[[Page 83]]

party or person to whom the obligation is initially payable, as is the 
case under Regulation Z. Moreover, the Act and regulation apply to all 
methods of credit evaluation, whether performed judgmentally or by use 
of a credit scoring system.
    2. Foreign applicability. Regulation B generally does not apply to 
lending activities that occur outside the United States. The regulation 
does apply to lending activities that take place within the United 
States (as well as the Commonwealth of Puerto Rico and any territory or 
possession of the United States), whether or not the applicant is a 
citizen.
    3. Bureau. The term Bureau, as used in this part, means the Bureau 
of Consumer Financial Protection.

                       Section 1002.2--Definitions

    2(c) Adverse action.
    Paragraph 2(c)(1)(i).
    1. Application for credit. If the applicant applied in accordance 
with the creditor's procedures, a refusal to refinance or extend the 
term of a business or other loan is adverse action.
    Paragraph 2(c)(1)(ii).
    1. Move from service area. If a credit card issuer terminates the 
open-end account of a customer because the customer has moved out of the 
card issuer's service area, the termination is adverse action unless 
termination on this ground was explicitly provided for in the credit 
agreement between the parties. In cases where termination is adverse 
action, notification is required under Sec. 1002.9.
    2. Termination based on credit limit. If a creditor terminates 
credit accounts that have low credit limits (for example, under $400) 
but keeps open accounts with higher credit limits, the termination is 
adverse action and notification is required under Sec. 1002.9.
    Paragraph 2(c)(2)(ii).
    1. Default--exercise of due-on-sale clause. If a mortgagor sells or 
transfers mortgaged property without the consent of the mortgagee, and 
the mortgagee exercises its contractual right to accelerate the mortgage 
loan, the mortgagee may treat the mortgagor as being in default. An 
adverse action notice need not be given to the mortgagor or the 
transferee. (See comment 2(e)-1 for treatment of a purchaser who 
requests to assume the loan.)
    2. Current delinquency or default. The term adverse action does not 
include a creditor's termination of an account when the accountholder is 
currently in default or delinquent on that account. Notification in 
accordance with Sec. 1002.9 of the regulation generally is required, 
however, if the creditor's action is based on a past delinquency or 
default on the account.
    Paragraph 2(c)(2)(iii).
    1. Point-of-sale transactions. Denial of credit at point of sale is 
not adverse action except under those circumstances specified in the 
regulation. For example, denial at point of sale is not adverse action 
in the following situations:
    i. A credit cardholder presents an expired card or a card that has 
been reported to the card issuer as lost or stolen.
    ii. The amount of a transaction exceeds a cash advance or credit 
limit.
    iii. The circumstances (such as excessive use of a credit card in a 
short period of time) suggest that fraud is involved.
    iv. The authorization facilities are not functioning.
    v. Billing statements have been returned to the creditor for lack of 
a forwarding address.
    2. Application for increase in available credit. A refusal or 
failure to authorize an account transaction at the point of sale or loan 
is not adverse action except when the refusal is a denial of an 
application, submitted in accordance with the creditor's procedures, for 
an increase in the amount of credit.
    Paragraph 2(c)(2)(v).
    1. Terms of credit versus type of credit offered. When an applicant 
applies for credit and the creditor does not offer the credit terms 
requested by the applicant (for example, the interest rate, length of 
maturity, collateral, or amount of downpayment), a denial of the 
application for that reason is adverse action (unless the creditor makes 
a counteroffer that is accepted by the applicant) and the applicant is 
entitled to notification under Sec. 1002.9.
    2(e) Applicant.
    1. Request to assume loan. If a mortgagor sells or transfers the 
mortgaged property and the buyer makes an application to the creditor to 
assume the mortgage loan, the mortgagee must treat the buyer as an 
applicant unless its policy is not to permit assumptions.
    2(f) Application.
    1. General. A creditor has the latitude under the regulation to 
establish its own application process and to decide the type and amount 
of information it will require from credit applicants.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a creditor for making credit decisions as well as 
its stated application procedures. For example, if a creditor's stated 
policy is to require all applications to be in writing on the creditor's 
application form, but the creditor also makes credit decisions based on 
oral requests, the creditor's procedures are to accept both oral and 
written applications.
    3. When an inquiry or prequalification request becomes an 
application. A creditor is encouraged to provide consumers with 
information about loan terms. However, if in giving information to the 
consumer the creditor also evaluates information about the consumer,

[[Page 84]]

decides to decline the request, and communicates this to the consumer, 
the creditor has treated the inquiry or prequalification request as an 
application and must then comply with the notification requirements 
under Sec. 1002.9. Whether the inquiry or prequalification request 
becomes an application depends on how the creditor responds to the 
consumer, not on what the consumer says or asks. (See comment 9-5 for 
further discussion of prequalification requests; see comment 2(f)-5 for 
a discussion of preapproval requests.)
    4. Examples of inquiries that are not applications. The following 
examples illustrate situations in which only an inquiry has taken place:
    i. A consumer calls to ask about loan terms and an employee explains 
the creditor's basic loan terms, such as interest rates, loan-to-value 
ratio, and debt-to-income ratio.
    ii. A consumer calls to ask about interest rates for car loans, and, 
in order to quote the appropriate rate, the loan officer asks for the 
make and sales price of the car and the amount of the downpayment, then 
gives the consumer the rate.
    iii. A consumer asks about terms for a loan to purchase a home and 
tells the loan officer her income and intended downpayment, but the loan 
officer only explains the creditor's loan-to-value ratio policy and 
other basic lending policies, without telling the consumer whether she 
qualifies for the loan.
    iv. A consumer calls to ask about terms for a loan to purchase 
vacant land and states his income and the sales price of the property to 
be financed, and asks whether he qualifies for a loan; the employee 
responds by describing the general lending policies, explaining that he 
would need to look at all of the consumer's qualifications before making 
a decision, and offering to send an application form to the consumer.
    5. Examples of an application. An application for credit includes 
the following situations:
    i. A person asks a financial institution to ``preapprove'' her for a 
loan (for example, to finance a house or a vehicle she plans to buy) and 
the institution reviews the request under a program in which the 
institution, after a comprehensive analysis of her creditworthiness, 
issues a written commitment valid for a designated period of time to 
extend a loan up to a specified amount. The written commitment may not 
be subject to conditions other than conditions that require the 
identification of adequate collateral, conditions that require no 
material change in the applicant's financial condition or 
creditworthiness prior to funding the loan, and limited conditions that 
are not related to the financial condition or creditworthiness of the 
applicant that the lender ordinarily attaches to a traditional 
application (such as certification of a clear termite inspection for a 
home purchase loan, or a maximum mileage requirement for a used car 
loan). But if the creditor's program does not provide for giving written 
commitments, requests for preapprovals are treated as prequalification 
requests for purposes of the regulation.
    ii. Under the same facts as above, the financial institution 
evaluates the person's creditworthiness and determines that she does not 
qualify for a preapproval.
    6. Completed application--diligence requirement. The regulation 
defines a completed application in terms that give a creditor the 
latitude to establish its own information requirements. Nevertheless, 
the creditor must act with reasonable diligence to collect information 
needed to complete the application. For example, the creditor should 
request information from third parties, such as a credit report, 
promptly after receiving the application. If additional information is 
needed from the applicant, such as an address or a telephone number to 
verify employment, the creditor should contact the applicant promptly. 
(But see comment 9(a)(1)-3, which discusses the creditor's option to 
deny an application on the basis of incompleteness.)2(g) Business 
credit.
    1. Definition. The test for deciding whether a transaction qualifies 
as business credit is one of primary purpose. For example, an open-end 
credit account used for both personal and business purposes is not 
business credit unless the primary purpose of the account is business-
related. A creditor may rely on an applicant's statement of the purpose 
for the credit requested.
    2(j) Credit.
    1. General. Regulation B covers a wider range of credit transactions 
than Regulation Z (Truth in Lending). Under Regulation B, a transaction 
is credit if there is a right to defer payment of a debt--regardless of 
whether the credit is for personal or commercial purposes, the number of 
installments required for repayment, or whether the transaction is 
subject to a finance charge.
    2(l) Creditor.
    1. Assignees. The term creditor includes all persons participating 
in the credit decision. This may include an assignee or a potential 
purchaser of the obligation who influences the credit decision by 
indicating whether or not it will purchase the obligation if the 
transaction is consummated.
    2. Referrals to creditors. For certain purposes, the term creditor 
includes persons such as real estate brokers, automobile dealers, home 
builders, and home-improvement contractors who do not participate in 
credit decisions but who only accept applications and refer applicants 
to creditors, or select or offer to select creditors to whom credit 
requests can be made. These persons must

[[Page 85]]

comply with Sec. 1002.4(a), the general rule prohibiting discrimination, 
and with Sec. 1002.4(b), the general rule against discouraging 
applications.
    2(p) Empirically derived and other credit scoring systems.
    1. Purpose of definition. The definition under 
Sec. Sec. 1002.2(p)(1)(i) through (iv) sets the criteria that a credit 
system must meet in order to use age as a predictive factor. Credit 
systems that do not meet these criteria are judgmental systems and may 
consider age only for the purpose of determining a ``pertinent element 
of creditworthiness.'' (Both types of systems may favor an elderly 
applicant. See Sec. 1002.6(b)(2).)
    2. Periodic revalidation. The regulation does not specify how often 
credit scoring systems must be revalidated. The credit scoring system 
must be revalidated frequently enough to ensure that it continues to 
meet recognized professional statistical standards for statistical 
soundness. To ensure that predictive ability is being maintained, the 
creditor must periodically review the performance of the system. This 
could be done, for example, by analyzing the loan portfolio to determine 
the delinquency rate for each score interval, or by analyzing population 
stability over time to detect deviations of recent applications from the 
applicant population used to validate the system. If this analysis 
indicates that the system no longer predicts risk with statistical 
soundness, the system must be adjusted as necessary to reestablish its 
predictive ability. A creditor is responsible for ensuring its system is 
validated and revalidated based on the creditor's own data.
    3. Pooled data scoring systems. A scoring system or the data from 
which to develop such a system may be obtained from either a single 
credit grantor or multiple credit grantors. The resulting system will 
qualify as an empirically derived, demonstrably and statistically sound, 
credit scoring system provided the criteria set forth in paragraph 
(p)(1)(i) through (iv) of this section are met. A creditor is 
responsible for ensuring its system is validated and revalidated based 
on the creditor's own data when it becomes available.
    4. Effects test and disparate treatment. An empirically derived, 
demonstrably and statistically sound, credit scoring system may include 
age as a predictive factor (provided that the age of an elderly 
applicant is not assigned a negative factor or value). Besides age, no 
other prohibited basis may be used as a variable. Generally, credit 
scoring systems treat all applicants objectively and thus avoid problems 
of disparate treatment. In cases where a credit scoring system is used 
in conjunction with individual discretion, disparate treatment could 
conceivably occur in the evaluation process. In addition, neutral 
factors used in credit scoring systems could nonetheless be subject to 
challenge under the effects test. (See comment 6(a)-2 for a discussion 
of the effects test).
    2(w) Open-end credit.
    1. Open-end real estate mortgages. The term ``open-end credit'' does 
not include negotiated advances under an open-end real estate mortgage 
or a letter of credit.
    2(z) Prohibited basis.
    1. Persons associated with applicant. As used in this part, 
prohibited basis refers not only to characteristics--the race, color, 
religion, national origin, sex, marital status, or age--of an applicant 
(or officers of an applicant in the case of a corporation) but also to 
the characteristics of individuals with whom an applicant is affiliated 
or with whom the applicant associates. This means, for example, that 
under the general rule stated in Sec. 1002.4(a), a creditor may not 
discriminate against an applicant because of that person's personal or 
business dealings with members of a certain religion, because of the 
national origin of any persons associated with the extension of credit 
(such as the tenants in the apartment complex being financed), or 
because of the race of other residents in the neighborhood where the 
property offered as collateral is located.
    2. National origin. A creditor may not refuse to grant credit 
because an applicant comes from a particular country but may take the 
applicant's immigration status into account. A creditor may also take 
into account any applicable law, regulation, or executive order 
restricting dealings with citizens (or the government) of a particular 
country or imposing limitations regarding credit extended for their use.
    3. Public assistance program. Any Federal, state, or local 
governmental assistance program that provides a continuing, periodic 
income supplement, whether premised on entitlement or need, is ``public 
assistance'' for purposes of the regulation. The term includes (but is 
not limited to) Temporary Aid to Needy Families, food stamps, rent and 
mortgage supplement or assistance programs, social security and 
supplemental security income, and unemployment compensation. Only 
physicians, hospitals, and others to whom the benefits are payable need 
consider Medicare and Medicaid as public assistance.

 Section 1002.3--Limited Exceptions for Certain Classes of Transactions

    1. Scope. Under this section, procedural requirements of the 
regulation do not apply to certain types of credit. All classes of 
transactions remain subject to Sec. 1002.4(a), the general rule barring 
discrimination on a prohibited basis, and to any other provision not 
specifically excepted.
    3(a) Public-utilities credit.
    1. Definition. This definition applies only to credit for the 
purchase of a utility service,

[[Page 86]]

such as electricity, gas, or telephone service. Credit provided or 
offered by a public utility for some other purpose--such as for 
financing the purchase of a gas dryer, telephone equipment, or other 
durable goods, or for insulation or other home improvements--is not 
excepted.
    2. Security deposits. A utility company is a creditor when it 
supplies utility service and bills the user after the service has been 
provided. Thus, any credit term (such as a requirement for a security 
deposit) is subject to the regulation's bar against discrimination on a 
prohibited basis.
    3. Telephone companies. A telephone company's credit transactions 
qualify for the exceptions provided in Sec. 1002.3(a)(2) only if the 
company is regulated by a government unit or files the charges for 
service, delayed payment, or any discount for prompt payment with a 
government unit.
    3(c) Incidental credit.
    1. Examples. If a service provider (such as a hospital, doctor, 
lawyer, or merchant) allows the client or customer to defer the payment 
of a bill, this deferral of debt is credit for purposes of the 
regulation, even though there is no finance charge and no agreement for 
payment in installments. Because of the exceptions provided by this 
section, however, these particular credit extensions are excepted from 
compliance with certain procedural requirements as specified in 
Sec. 1002.3(c).
    3(d) Government credit.
    1. Credit to governments. The exception relates to credit extended 
to (not by) governmental entities. For example, credit extended to a 
local government is covered by this exception, but credit extended to 
consumers by a Federal or state housing agency does not qualify for 
special treatment under this category.

                      Section 1002.4--General Rules

    Paragraph 4(a).
    1. Scope of rule. The general rule stated in Sec. 1002.4(a) covers 
all dealings, without exception, between an applicant and a creditor, 
whether or not addressed by other provisions of the regulation. Other 
provisions of the regulation identify specific practices that the Bureau 
has decided are impermissible because they could result in credit 
discrimination on a basis prohibited by the Act. The general rule 
covers, for example, application procedures, criteria used to evaluate 
creditworthiness, administration of accounts, and treatment of 
delinquent or slow accounts. Thus, whether or not specifically 
prohibited elsewhere in the regulation, a credit practice that treats 
applicants differently on a prohibited basis violates the law because it 
violates the general rule. Disparate treatment on a prohibited basis is 
illegal whether or not it results from a conscious intent to 
discriminate.
    2. Examples.
    i. Disparate treatment would exist, for example, in the following 
situations:
    A. A creditor provides information only on ``subprime'' and similar 
products to minority applicants who request information about the 
creditor's mortgage products, but provides information on a wider 
variety of mortgage products to similarly situated nonminority 
applicants.
    B. A creditor provides more comprehensive information to men than to 
similarly situated women.
    C. A creditor requires a minority applicant to provide greater 
documentation to obtain a loan than a similarly situated nonminority 
applicant.
    D. A creditor waives or relaxes credit standards for a nonminority 
applicant but not for a similarly situated minority applicant.
    ii. Treating applicants differently on a prohibited basis is 
unlawful if the creditor lacks a legitimate nondiscriminatory reason for 
its action, or if the asserted reason is found to be a pretext for 
discrimination.
    Paragraph 4(b).
    1. Prospective applicants. Generally, the regulation's protections 
apply only to persons who have requested or received an extension of 
credit. In keeping with the purpose of the Act--to promote the 
availability of credit on a nondiscriminatory basis--Sec. 1002.4(b) 
covers acts or practices directed at prospective applicants that could 
discourage a reasonable person, on a prohibited basis, from applying for 
credit. Practices prohibited by this section include:
    i. A statement that the applicant should not bother to apply, after 
the applicant states that he is retired.
    ii. The use of words, symbols, models or other forms of 
communication in advertising that express, imply, or suggest a 
discriminatory preference or a policy of exclusion in violation of the 
Act.
    iii. The use of interview scripts that discourage applications on a 
prohibited basis.
    2. Affirmative advertising. A creditor may affirmatively solicit or 
encourage members of traditionally disadvantaged groups to apply for 
credit, especially groups that might not normally seek credit from that 
creditor.
    Paragraph 4(c).
    1. Requirement for written applications. Model application forms are 
provided in appendix B to the regulation, although use of a printed form 
is not required. A creditor will satisfy the requirement by writing down 
the information that it normally considers in making a credit decision. 
The creditor may complete an application on behalf of an applicant and 
need not require the applicant to sign the application.
    2. Telephone applications. A creditor that accepts applications by 
telephone for dwelling-related credit covered by Sec. 1002.13 can

[[Page 87]]

meet the requirement for written applications by writing down pertinent 
information that is provided by the applicant.
    3. Computerized entry. Information entered directly into and 
retained by a computerized system qualifies as a written application 
under this paragraph. (See the commentary to Sec. 1002.13(b), 
Applications through electronic media and Applications through video.)
    Paragraph 4(d).
    1. Clear and conspicuous. This standard requires that disclosures be 
presented in a reasonably understandable format in a way that does not 
obscure the required information. No minimum type size is mandated, but 
the disclosures must be legible, whether typewritten, handwritten, or 
printed by computer.
    2. Form of disclosures. Whether the disclosures required to be on or 
with an application must be in electronic form depends upon the 
following:
    i. If an applicant accesses a credit application electronically 
(other than as described under ii below), such as online at a home 
computer, the creditor must provide the disclosures in electronic form 
(such as with the application form on its Web site) in order to meet the 
requirement to provide disclosures in a timely manner on or with the 
application. If the creditor instead mailed paper disclosures to the 
applicant, this requirement would not be met.
    ii. In contrast, if an applicant is physically present in the 
creditor's office, and accesses a credit application electronically, 
such as via a terminal or kiosk (or if the applicant uses a terminal or 
kiosk located on the premises of an affiliate or third party that has 
arranged with the creditor to provide applications to consumers), the 
creditor may provide disclosures in either electronic or paper form, 
provided the creditor complies with the timing, delivery, and 
retainability requirements of the regulation.

        Section 1002.5--Rules Concerning Requests for Information

    5(a) General rules.
    Paragraph 5(a)(1).
    1. Requests for information. This section governs the types of 
information that a creditor may gather. Section1002.6 governs how 
information may be used.
    Paragraph 5(a)(2).
    1. Local laws. Information that a creditor is allowed to collect 
pursuant to a ``state'' statute or regulation includes information 
required by a local statute, regulation, or ordinance.
    2. Information required by Regulation C. Regulation C generally 
requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to 
collect and report information about the race, ethnicity, and sex of 
applicants for home-improvement loans and home-purchase loans, including 
some types of loans not covered by Sec. 1002.13.
    3. Collecting information on behalf of creditors. Persons such as 
loan brokers and correspondents do not violate the ECOA or Regulation B 
if they collect information that they are otherwise prohibited from 
collecting, where the purpose of collecting the information is to 
provide it to a creditor that is subject to the Home Mortgage Disclosure 
Act or another Federal or state statute or regulation requiring data 
collection.
    5(d) Other limitations on information requests.
    Paragraph 5(d)(1).
    1. Indirect disclosure of prohibited information. The fact that 
certain credit-related information may indirectly disclose marital 
status does not bar a creditor from seeking such information. For 
example, the creditor may ask about:
    i. The applicant's obligation to pay alimony, child support, or 
separate maintenance income.
    ii. The source of income to be used as the basis for repaying the 
credit requested, which could disclose that it is the income of a 
spouse.
    iii. Whether any obligation disclosed by the applicant has a co-
obligor, which could disclose that the co-obligor is a spouse or former 
spouse.
    iv. The ownership of assets, which could disclose the interest of a 
spouse.
    Paragraph 5(d)(2).
    1. Disclosure about income. The sample application forms in appendix 
B to the regulation illustrate how a creditor may inform an applicant of 
the right not to disclose alimony, child support, or separate 
maintenance income.
    2. General inquiry about source of income. Since a general inquiry 
about the source of income may lead an applicant to disclose alimony, 
child support, or separate maintenance income, a creditor making such an 
inquiry on an application form should preface the request with the 
disclosure required by this paragraph.
    3. Specific inquiry about sources of income. A creditor need not 
give the disclosure if the inquiry about income is specific and worded 
in a way that is unlikely to lead the applicant to disclose the fact 
that income is derived from alimony, child support, or separate 
maintenance payments. For example, an application form that asks about 
specific types of income such as salary, wages, or investment income 
need not include the disclosure.

       Section 1002.6--Rules Concerning Evaluation of Applications

    6(a) General rule concerning use of information.
    1. General. When evaluating an application for credit, a creditor 
generally may consider

[[Page 88]]

any information obtained. However, a creditor may not consider in its 
evaluation of creditworthiness any information that it is barred by 
Sec. 1002.5 from obtaining or from using for any purpose other than to 
conduct a self-test under Sec. 1002.15.
    2. Effects test. The effects test is a judicial doctrine that was 
developed in a series of employment cases decided by the U.S. Supreme 
Court under title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e 
et seq.,) and the burdens of proof for such employment cases were 
codified by Congress in the Civil Rights Act of 1991 (42 U.S.C. 2000e-
2). Congressional intent that this doctrine apply to the credit area is 
documented in the Senate Report that accompanied H.R. 6516, No. 94-589, 
pp. 4-5; and in the House Report that accompanied H.R. 6516, No. 94-210, 
p.5. The Act and regulation may prohibit a creditor practice that is 
discriminatory in effect because it has a disproportionately negative 
impact on a prohibited basis, even though the creditor has no intent to 
discriminate and the practice appears neutral on its face, unless the 
creditor practice meets a legitimate business need that cannot 
reasonably be achieved as well by means that are less disparate in their 
impact. For example, requiring that applicants have income in excess of 
a certain amount to qualify for an overdraft line of credit could mean 
that women and minority applicants will be rejected at a higher rate 
than men and nonminority applicants. If there is a demonstrable 
relationship between the income requirement and creditworthiness for the 
level of credit involved, however, use of the income standard would 
likely be permissible.
    6(b) Specific rules concerning use of information.
    Paragraph 6(b)(1).
    1. Prohibited basis--special purpose credit. In a special purpose 
credit program, a creditor may consider a prohibited basis to determine 
whether the applicant possesses a characteristic needed for eligibility. 
(See Sec. 1002.8.)
    Paragraph 6(b)(2).
    1. Favoring the elderly. Any system of evaluating creditworthiness 
may favor a credit applicant who is age 62 or older. A credit program 
that offers more favorable credit terms to applicants age 62 or older is 
also permissible; a program that offers more favorable credit terms to 
applicants at an age lower than 62 is permissible only if it meets the 
special-purpose credit requirements of Sec. 1002.8.
    2. Consideration of age in a credit scoring system. Age may be taken 
directly into account in a credit scoring system that is ``demonstrably 
and statistically sound,'' as defined in Sec. 1002.2(p), with one 
limitation: Applicants age 62 years or older must be treated at least as 
favorably as applicants who are under age 62. If age is scored by 
assigning points to an applicant's age category, elderly applicants must 
receive the same or a greater number of points as the most favored class 
of nonelderly applicants.
    i. Age-split scorecards. Some credit systems segment the population 
and use different scorecards based on the age of an applicant. In such a 
system, one card may cover a narrow age range (for example, applicants 
in their twenties or younger) who are evaluated under attributes 
predictive for that age group. A second card may cover all other 
applicants, who are evaluated under the attributes predictive for that 
broader class. When a system uses a card covering a wide age range that 
encompasses elderly applicants, the credit scoring system is not deemed 
to score age. Thus, the system does not raise the issue of assigning a 
negative factor or value to the age of elderly applicants. But if a 
system segments the population by age into multiple scorecards, and 
includes elderly applicants in a narrower age range, the credit scoring 
system does score age. To comply with the Act and regulation in such a 
case, the creditor must ensure that the system does not assign a 
negative factor or value to the age of elderly applicants as a class.
    3. Consideration of age in a judgmental system. In a judgmental 
system, defined in Sec. 1002.2(t), a creditor may not decide whether to 
extend credit or set the terms and conditions of credit based on age or 
information related exclusively to age. Age or age-related information 
may be considered only in evaluating other ``pertinent elements of 
creditworthiness'' that are drawn from the particular facts and 
circumstances concerning the applicant. For example, a creditor may not 
reject an application or terminate an account because the applicant is 
60 years old. But a creditor that uses a judgmental system may relate 
the applicant's age to other information about the applicant that the 
creditor considers in evaluating creditworthiness. As the following 
examples illustrate, the evaluation must be made in an individualized, 
case-by-case manner:
    i. A creditor may consider the applicant's occupation and length of 
time to retirement to ascertain whether the applicant's income 
(including retirement income) will support the extension of credit to 
its maturity.
    ii. A creditor may consider the adequacy of any security offered 
when the term of the credit extension exceeds the life expectancy of the 
applicant and the cost of realizing on the collateral could exceed the 
applicant's equity. An elderly applicant might not qualify for a 5 
percent down, 30-year mortgage loan but might qualify with a larger 
downpayment or a shorter loan maturity.
    iii. A creditor may consider the applicant's age to assess the 
significance of length of employment (a young applicant may have just 
entered the job market) or length of time at an address (an elderly 
applicant may

[[Page 89]]

recently have retired and moved from a long-term residence).
    4. Consideration of age in a reverse mortgage. A reverse mortgage is 
a home-secured loan in which the borrower receives payments from the 
creditor, and does not become obligated to repay these amounts (other 
than in the case of default) until the borrower dies, moves permanently 
from the home, or transfers title to the home, or upon a specified 
maturity date. Disbursements to the borrower under a reverse mortgage 
typically are determined by considering the value of the borrower's 
home, the current interest rate, and the borrower's life expectancy. A 
reverse mortgage program that requires borrowers to be age 62 or older 
is permissible under Sec. 1002.6(b)(2)(iv). In addition, under 
Sec. 1002.6(b)(2)(iii), a creditor may consider a borrower's age to 
evaluate a pertinent element of creditworthiness, such as the amount of 
the credit or monthly payments that the borrower will receive, or the 
estimated repayment date.
    5. Consideration of age in a combined system. A creditor using a 
credit scoring system that qualifies as ``empirically derived'' under 
Sec. 1002.2(p) may consider other factors (such as a credit report or 
the applicant's cash flow) on a judgmental basis. Doing so will not 
negate the classification of the credit scoring component of the 
combined system as ``demonstrably and statistically sound.'' While age 
could be used in the credit scoring portion, however, in the judgmental 
portion age may not be considered directly. It may be used only for the 
purpose of determining a ``pertinent element of creditworthiness.'' (See 
comment 6(b)(2)-3.)
    6. Consideration of public assistance. When considering income 
derived from a public assistance program, a creditor may take into 
account, for example:
    i. The length of time an applicant will likely remain eligible to 
receive such income.
    ii. Whether the applicant will continue to qualify for benefits 
based on the status of the applicant's dependents (as in the case of 
Temporary Aid to Needy Families, or social security payments to a 
minor).
    iii. Whether the creditor can attach or garnish the income to assure 
payment of the debt in the event of default.
    Paragraph 6(b)(5).
    1. Consideration of an individual applicant. A creditor must 
evaluate income derived from part-time employment, alimony, child 
support, separate maintenance payments, retirement benefits, or public 
assistance on an individual basis, not on the basis of aggregate 
statistics; and must assess its reliability or unreliability by 
analyzing the applicant's actual circumstances, not by analyzing 
statistical measures derived from a group.
    2. Payments consistently made. In determining the likelihood of 
consistent payments of alimony, child support, or separate maintenance, 
a creditor may consider factors such as whether payments are received 
pursuant to a written agreement or court decree; the length of time that 
the payments have been received; whether the payments are regularly 
received by the applicant; the availability of court or other procedures 
to compel payment; and the creditworthiness of the payor, including the 
credit history of the payor when it is available to the creditor.
    3. Consideration of income.
    i. A creditor need not consider income at all in evaluating 
creditworthiness. If a creditor does consider income, there are several 
acceptable methods, whether in a credit scoring or a judgmental system:
    A. A creditor may score or take into account the total sum of all 
income stated by the applicant without taking steps to evaluate the 
income for reliability.
    B. A creditor may evaluate each component of the applicant's income, 
and then score or take into account income determined to be reliable 
separately from other income; or the creditor may disregard that portion 
of income that is not reliable when it aggregates reliable income.
    C. A creditor that does not evaluate all income components for 
reliability must treat as reliable any component of protected income 
that is not evaluated.
    ii. In considering the separate components of an applicant's income, 
the creditor may not automatically discount or exclude from 
consideration any protected income. Any discounting or exclusion must be 
based on the applicant's actual circumstances.
    4. Part-time employment, sources of income. A creditor may score or 
take into account the fact that an applicant has more than one source of 
earned income--a full-time and a part-time job or two part-time jobs. A 
creditor may also score or treat earned income from a secondary source 
differently than earned income from a primary source. The creditor may 
not, however, score or otherwise take into account the number of sources 
for income such as retirement income, social security, supplemental 
security income, and alimony. Nor may the creditor treat negatively the 
fact that an applicant's only earned income is derived from, for 
example, a part-time job.
    Paragraph 6(b)(6).
    1. Types of credit references. A creditor may restrict the types of 
credit history and credit references that it will consider, provided 
that the restrictions are applied to all credit applicants without 
regard to sex, marital status, or any other prohibited basis. On the 
applicant's request, however, a creditor must consider credit 
information not reported

[[Page 90]]

through a credit bureau when the information relates to the same types 
of credit references and history that the creditor would consider if 
reported through a credit bureau.
    Paragraph 6(b)(7).
    1. National origin--immigration status. The applicant's immigration 
status and ties to the community (such as employment and continued 
residence in the area) could have a bearing on a creditor's ability to 
obtain repayment. Accordingly, the creditor may consider immigration 
status and differentiate, for example, between a noncitizen who is a 
long-time resident with permanent resident status and a noncitizen who 
is temporarily in this country on a student visa.
    2. National origin--citizenship. A denial of credit on the ground 
that an applicant is not a United States citizen is not per se 
discrimination based on national origin.
    Paragraph 6(b)(8).
    1. Prohibited basis--marital status. A creditor may consider the 
marital status of an applicant or joint applicant for the purpose of 
ascertaining the creditor's rights and remedies applicable to the 
particular extension of credit. For example, in a secured transaction 
involving real property, a creditor could take into account whether 
state law gives the applicant's spouse an interest in the property being 
offered as collateral.

          Section 1002.7--Rules Concerning Extensions of Credit

    7(a) Individual accounts.
    1. Open-end credit--authorized user. A creditor may not require a 
creditworthy applicant seeking an individual credit account to provide 
additional signatures. But the creditor may condition the designation of 
an authorized user by the account holder on the authorized user's 
becoming contractually liable for the account, as long as the creditor 
does not differentiate on any prohibited basis in imposing this 
requirement.
    2. Open-end credit--choice of authorized user. A creditor that 
permits an account holder to designate an authorized user may not 
restrict this designation on a prohibited basis. For example, if the 
creditor allows the designation of spouses as authorized users, the 
creditor may not refuse to accept a non-spouse as an authorized user.
    3. Overdraft authority on transaction accounts. If a transaction 
account (such as a checking account or NOW account) includes an 
overdraft line of credit, the creditor may require that all persons 
authorized to draw on the transaction account assume liability for any 
overdraft.
    7(b) Designation of name.
    1. Single name on account. A creditor may require that joint 
applicants on an account designate a single name for purposes of 
administering the account and that a single name be embossed on any 
credit cards issued on the account. But the creditor may not require 
that the name be the husband's name. (See Sec. 1002.10 for rules 
governing the furnishing of credit history on accounts held by spouses.)
    7(c) Action concerning existing open-end accounts.
    Paragraph 7(c)(1).
    1. Termination coincidental with marital status change. When an 
account holder's marital status changes, a creditor generally may not 
terminate the account unless it has evidence that the account holder is 
now unable or unwilling to repay. But the creditor may terminate an 
account on which both spouses are jointly liable, even if the action 
coincides with a change in marital status, when one or both spouses:
    i. Repudiate responsibility for future charges on the joint account.
    ii. Request separate accounts in their own names.
    iii. Request that the joint account be closed.
    2. Updating information. A creditor may periodically request updated 
information from applicants but may not use events related to a 
prohibited basis--such as an applicant's retirement or reaching a 
particular age, or a change in name or marital status--to trigger such a 
request.
    Paragraph 7(c)(2).
    1. Procedure pending reapplication. A creditor may require a 
reapplication from an account holder, even when there is no evidence of 
unwillingness or inability to repay, if (1) the credit was based on the 
qualifications of a person who is no longer available to support the 
credit and (2) the creditor has information indicating that the account 
holder's income may be insufficient to support the credit. While a 
reapplication is pending, the creditor must allow the account holder 
full access to the account under the existing contract terms. The 
creditor may specify a reasonable time period within which the account 
holder must submit the required information.
    7(d) Signature of spouse or other person.
    1. Qualified applicant. The signature rules ensure that qualified 
applicants are able to obtain credit in their own names. Thus, when an 
applicant requests individual credit, a creditor generally may not 
require the signature of another person unless the creditor has first 
determined that the applicant alone does not qualify for the credit 
requested.
    2. Unqualified applicant. When an applicant requests individual 
credit but does not meet a creditor's standards, the creditor may 
require a cosigner, guarantor, endorser, or similar party--but cannot 
require that it be the spouse. (See commentary to Sec. Sec. 1002.7(d)(5) 
and (6).)
    Paragraph 7(d)(1).

[[Page 91]]

    1. Signature of another person. It is impermissible for a creditor 
to require an applicant who is individually creditworthy to provide a 
cosigner--even if the creditor applies the requirement without regard to 
sex, marital status, or any other prohibited basis. (But see comment 
7(d)(6)-1 concerning guarantors of closely held corporations.)
    2. Joint applicant. The term ``joint applicant'' refers to someone 
who applies contemporaneously with the applicant for shared or joint 
credit. It does not refer to someone whose signature is required by the 
creditor as a condition for granting the credit requested.
    3. Evidence of joint application. A person's intent to be a joint 
applicant must be evidenced at the time of application. Signatures on a 
promissory note may not be used to show intent to apply for joint 
credit. On the other hand, signatures or initials on a credit 
application affirming applicants' intent to apply for joint credit may 
be used to establish intent to apply for joint credit. (See appendix B.) 
The method used to establish intent must be distinct from the means used 
by individuals to affirm the accuracy of information. For example, 
signatures on a joint financial statement affirming the veracity of 
information are not sufficient to establish intent to apply for joint 
credit.
    Paragraph 7(d)(2).
    1. Jointly owned property. If an applicant requests unsecured 
credit, does not own sufficient separate property, and relies on joint 
property to establish creditworthiness, the creditor must value the 
applicant's interest in the jointly owned property. A creditor may not 
request that a nonapplicant joint owner sign any instrument as a 
condition of the credit extension unless the applicant's interest does 
not support the amount and terms of the credit sought.
    i. Valuation of applicant's interest. In determining the value of an 
applicant's interest in jointly owned property, a creditor may consider 
factors such as the form of ownership and the property's susceptibility 
to attachment, execution, severance, or partition; the value of the 
applicant's interest after such action; and the cost associated with the 
action. This determination must be based on the existing form of 
ownership, and not on the possibility of a subsequent change. For 
example, in determining whether a married applicant's interest in 
jointly owned property is sufficient to satisfy the creditor's standards 
of creditworthiness for individual credit, a creditor may not consider 
that the applicant's separate property could be transferred into tenancy 
by the entirety after consummation. Similarly, a creditor may not 
consider the possibility that the couple may divorce. Accordingly, a 
creditor may not require the signature of the non-applicant spouse in 
these or similar circumstances.
    ii. Other options to support credit. If the applicant's interest in 
jointly owned property does not support the amount and terms of credit 
sought, the creditor may offer the applicant other options to qualify 
for the extension of credit. For example:
    A. Providing a co-signer or other party (Sec. 1002.7(d)(5));
    B. Requesting that the credit be granted on a secured basis 
(Sec. 1002.7(d)(4)); or
    C. Providing the signature of the joint owner on an instrument that 
ensures access to the property in the event of the applicant's death or 
default, but does not impose personal liability unless necessary under 
state law (such as a limited guarantee). A creditor may not routinely 
require, however, that a joint owner sign an instrument (such as a 
quitclaim deed) that would result in the forfeiture of the joint owner's 
interest in the property.
    2. Need for signature--reasonable belief. A creditor's reasonable 
belief as to what instruments need to be signed by a person other than 
the applicant should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    Paragraph 7(d)(3).
    1. Residency. In assessing the creditworthiness of a person who 
applies for credit in a community property state, a creditor may assume 
that the applicant is a resident of the state unless the applicant 
indicates otherwise.
    Paragraph 7(d)(4).
    1. Creation of enforceable lien. Some state laws require that both 
spouses join in executing any instrument by which real property is 
encumbered. If an applicant offers such property as security for credit, 
a creditor may require the applicant's spouse to sign the instruments 
necessary to create a valid security interest in the property. The 
creditor may not require the spouse to sign the note evidencing the 
credit obligation if signing only the mortgage or other security 
agreement is sufficient to make the property available to satisfy the 
debt in the event of default. However, if under state law both spouses 
must sign the note to create an enforceable lien, the creditor may 
require the signatures.
    2. Need for signature--reasonable belief. Generally, a signature to 
make the secured property available will only be needed on a security 
agreement. A creditor's reasonable belief that, to ensure access to the 
property, the spouse's signature is needed on an instrument that imposes 
personal liability should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    3. Integrated instruments. When a creditor uses an integrated 
instrument that combines the note and the security agreement, the

[[Page 92]]

spouse cannot be asked to sign the integrated instrument if the 
signature is only needed to grant a security interest. But the spouse 
could be asked to sign an integrated instrument that makes clear--for 
example, by a legend placed next to the spouse's signature--that the 
spouse's signature is only to grant a security interest and that signing 
the instrument does not impose personal liability.
    Paragraph 7(d)(5).
    1. Qualifications of additional parties. In establishing guidelines 
for eligibility of guarantors, cosigners, or similar additional parties, 
a creditor may restrict the applicant's choice of additional parties but 
may not discriminate on the basis of sex, marital status, or any other 
prohibited basis. For example, the creditor could require that the 
additional party live in the creditor's market area.
    2. Reliance on income of another person--individual credit. An 
applicant who requests individual credit relying on the income of 
another person (including a spouse in a non-community property state) 
may be required to provide the signature of the other person to make the 
income available to pay the debt. In community property states, the 
signature of a spouse may be required if the applicant relies on the 
spouse's separate income. If the applicant relies on the spouse's future 
earnings that as a matter of state law cannot be characterized as 
community property until earned, the creditor may require the spouse's 
signature, but need not do so--even if it is the creditor's practice to 
require the signature when an applicant relies on the future earnings of 
a person other than a spouse. (See Sec. 1002.6(c) on consideration of 
state property laws.)
    3. Renewals. If the borrower's creditworthiness is reevaluated when 
a credit obligation is renewed, the creditor must determine whether an 
additional party is still warranted and, if not warranted, release the 
additional party.
    Paragraph 7(d)(6).
    1. Guarantees. A guarantee on an extension of credit is part of a 
credit transaction and therefore subject to the regulation. A creditor 
may require the personal guarantee of the partners, directors, or 
officers of a business, and the shareholders of a closely held 
corporation, even if the business or corporation is creditworthy. The 
requirement must be based on the guarantor's relationship with the 
business or corporation, however, and not on a prohibited basis. For 
example, a creditor may not require guarantees only for women-owned or 
minority-owned businesses. Similarly, a creditor may not require 
guarantees only of the married officers of a business or the married 
shareholders of a closely held corporation.
    2. Spousal guarantees. The rules in Sec. 1002.7(d) bar a creditor 
from requiring the signature of a guarantor's spouse just as they bar 
the creditor from requiring the signature of an applicant's spouse. For 
example, although a creditor may require all officers of a closely held 
corporation to personally guarantee a corporate loan, the creditor may 
not automatically require that spouses of married officers also sign the 
guarantee. If an evaluation of the financial circumstances of an officer 
indicates that an additional signature is necessary, however, the 
creditor may require the signature of another person in appropriate 
circumstances in accordance with Sec. 1002.7(d)(2).
    7(e) Insurance.
    1. Differences in terms. Differences in the availability, rates, and 
other terms on which credit-related casualty insurance or credit life, 
health, accident, or disability insurance is offered or provided to an 
applicant does not violate Regulation B.
    2. Insurance information. A creditor may obtain information about an 
applicant's age, sex, or marital status for insurance purposes. The 
information may only be used for determining eligibility and premium 
rates for insurance, however, and not in making the credit decision.

             Section 1002.8--Special Purpose Credit Programs

    8(a) Standards for programs.
    1. Determining qualified programs. The Bureau does not determine 
whether individual programs qualify for special purpose credit status, 
or whether a particular program benefits an ``economically disadvantaged 
class of persons.'' The agency or creditor administering or offering the 
loan program must make these decisions regarding the status of its 
program.
    2. Compliance with a program authorized by Federal or state law. A 
creditor does not violate Regulation B when it complies in good faith 
with a regulation promulgated by a government agency implementing a 
special purpose credit program under Sec. 1002.8(a)(1). It is the 
agency's responsibility to promulgate a regulation that is consistent 
with Federal and state law.
    3. Expressly authorized. Credit programs authorized by Federal or 
state law include programs offered pursuant to Federal, state, or local 
statute, regulation or ordinance, or pursuant to judicial or 
administrative order.
    4. Creditor liability. A refusal to grant credit to an applicant is 
not a violation of the Act or regulation if the applicant does not meet 
the eligibility requirements under a special purpose credit program.
    5. Determining need. In designing a special purpose credit program 
under Sec. 1002.8(a), a for-profit organization must determine that the 
program will benefit a class of people who would otherwise be denied 
credit or would receive it on less favorable terms. This determination 
can be based on a broad analysis using the organization's own research 
or

[[Page 93]]

data from outside sources, including governmental reports and studies. 
For example, a creditor might design new products to reach consumers who 
would not meet, or have not met, its traditional standards of 
creditworthiness due to such factors as credit inexperience or the use 
of credit sources that may not report to consumer reporting agencies. 
Or, a bank could review Home Mortgage Disclosure Act data along with 
demographic data for its assessment area and conclude that there is a 
need for a special purpose credit program for low-income minority 
borrowers.
    6. Elements of the program. The written plan must contain 
information that supports the need for the particular program. The plan 
also must either state a specific period of time for which the program 
will last, or contain a statement regarding when the program will be 
reevaluated to determine if there is a continuing need for it.
    8(b) Rules in other sections.
    1. Applicability of rules. A creditor that rejects an application 
because the applicant does not meet the eligibility requirements (common 
characteristic or financial need, for example) must nevertheless notify 
the applicant of action taken as required by Sec. 1002.9.
    8(c) Special rule concerning requests and use of information.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Sec. Sec. 1002.5 and 1002.6 to determine an 
applicant's eligibility for a particular program.
    2. Examples. Examples of programs under which the creditor can ask 
for and consider information about a prohibited basis are:
    i. Energy conservation programs to assist the elderly, for which the 
creditor must consider the applicant's age.
    ii. Programs under a Minority Enterprise Small Business Investment 
Corporation, for which a creditor must consider the applicant's minority 
status.
    8(d) Special rule in the case of financial need.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Sec. Sec. 1002.5 and 1002.6, and to require 
signatures that would otherwise be prohibited by Sec. 1002.7(d).
    2. Examples. Examples of programs in which financial need is a 
criterion are:
    i. Subsidized housing programs for low-to moderate-income 
households, for which a creditor may have to consider the applicant's 
receipt of alimony or child support, the spouse's or parents' income, 
etc.
    ii. Student loan programs based on the family's financial need, for 
which a creditor may have to consider the spouse's or parents' financial 
resources.
    3. Student loans. In a guaranteed student loan program, a creditor 
may obtain the signature of a parent as a guarantor when required by 
Federal or state law or agency regulation, or when the student does not 
meet the creditor's standards of creditworthiness. (See 
Sec. Sec. 1002.7(d)(1) and (5).) The creditor may not require an 
additional signature when a student has a work or credit history that 
satisfies the creditor's standards.

                      Section 1002.9--Notifications

    1. Use of the term adverse action. The regulation does not require 
that a creditor use the term adverse action in communicating to an 
applicant that a request for an extension of credit has not been 
approved. In notifying an applicant of adverse action as defined by 
Sec. 1002.2(c)(1), a creditor may use any words or phrases that describe 
the action taken on the application.
    2. Expressly withdrawn applications. When an applicant expressly 
withdraws a credit application, the creditor is not required to comply 
with the notification requirements under Sec. 1002.9. (The creditor must 
comply, however, with the record retention requirements of the 
regulation. See Sec. 1002.12(b)(3).)
    3. When notification occurs. Notification occurs when a creditor 
delivers or mails a notice to the applicant's last known address or, in 
the case of an oral notification, when the creditor communicates the 
credit decision to the applicant.
    4. Location of notice. The notifications required under Sec. 1002.9 
may appear on either or both sides of a form or letter.
    5. Prequalification requests. Whether a creditor must provide a 
notice of action taken for a prequalification request depends on the 
creditor's response to the request, as discussed in comment 2(f)-3. For 
instance, a creditor may treat the request as an inquiry if the creditor 
evaluates specific information about the consumer and tells the consumer 
the loan amount, rate, and other terms of credit the consumer could 
qualify for under various loan programs, explaining the process the 
consumer must follow to submit a mortgage application and the 
information the creditor will analyze in reaching a credit decision. On 
the other hand, a creditor has treated a request as an application, and 
is subject to the adverse action notice requirements of Sec. 1002.9 if, 
after evaluating information, the creditor decides that it will not 
approve the request and communicates that decision to the consumer. For 
example, if the creditor tells the consumer that it would not approve an 
application for a mortgage because of a bankruptcy in the consumer's 
record, the creditor has denied an application for credit.
    9(a) Notification of action taken, ECOA notice, and statement of 
specific reasons.
    Paragraph 9(a)(1).

[[Page 94]]

    1. Timing of notice--when an application is complete. Once a 
creditor has obtained all the information it normally considers in 
making a credit decision, the application is complete and the creditor 
has 30 days in which to notify the applicant of the credit decision. 
(See also comment 2(f)-6.)
    2. Notification of approval. Notification of approval may be express 
or by implication. For example, the creditor will satisfy the 
notification requirement when it gives the applicant the credit card, 
money, property, or services requested.
    3. Incomplete application--denial for incompleteness. When an 
application is incomplete regarding information that the applicant can 
provide and the creditor lacks sufficient data for a credit decision, 
the creditor may deny the application giving as the reason for denial 
that the application is incomplete. The creditor has the option, 
alternatively, of providing a notice of incompleteness under 
Sec. 1002.9(c).
    4. Incomplete application--denial for reasons other than 
incompleteness. When an application is missing information but provides 
sufficient data for a credit decision, the creditor may evaluate the 
application, make its credit decision, and notify the applicant 
accordingly. If credit is denied, the applicant must be given the 
specific reasons for the credit denial (or notice of the right to 
receive the reasons); in this instance missing information or 
``incomplete application'' cannot be given as the reason for the denial.
    5. Length of counteroffer. Section 1002.9(a)(1)(iv) does not require 
a creditor to hold a counteroffer open for 90 days or any other 
particular length of time.
    6. Counteroffer combined with adverse action notice. A creditor that 
gives the applicant a combined counteroffer and adverse action notice 
that complies with Sec. 1002.9(a)(2) need not send a second adverse 
action notice if the applicant does not accept the counteroffer. A 
sample of a combined notice is contained in form C-4 of appendix C to 
the regulation.
    7. Denial of a telephone application. When an application is made by 
telephone and adverse action is taken, the creditor must request the 
applicant's name and address in order to provide written notification 
under this section. If the applicant declines to provide that 
information, then the creditor has no further notification 
responsibility.
    Paragraph 9(a)(3).
    1. Coverage. In determining which rules in this paragraph apply to a 
given business credit application, a creditor may rely on the 
applicant's assertion about the revenue size of the business. 
(Applications to start a business are governed by the rules in 
Sec. 1002.9(a)(3)(i).) If an applicant applies for credit as a sole 
proprietor, the revenues of the sole proprietorship will determine which 
rules govern the application. However, if an applicant applies for 
business credit as an individual, the rules in Sec. 1002.9(a)(3)(i) 
apply unless the application is for trade or similar credit.
    2. Trade credit. The term trade credit generally is limited to a 
financing arrangement that involves a buyer and a seller--such as a 
supplier who finances the sale of equipment, supplies, or inventory; it 
does not apply to an extension of credit by a bank or other financial 
institution for the financing of such items.
    3. Factoring. Factoring refers to a purchase of accounts receivable, 
and thus is not subject to the Act or regulation. If there is a credit 
extension incident to the factoring arrangement, the notification rules 
in Sec. 1002.9(a)(3)(ii) apply, as do other relevant sections of the Act 
and regulation.
    4. Manner of compliance. In complying with the notice provisions of 
the Act and regulation, creditors offering business credit may follow 
the rules governing consumer credit. Similarly, creditors may elect to 
treat all business credit the same (irrespective of revenue size) by 
providing notice in accordance with Sec. 1002.9(a)(3)(i).
    5. Timing of notification. A creditor subject to 
Sec. 1002.9(a)(3)(ii)(A) is required to notify a business credit 
applicant, orally or in writing, of action taken on an application 
within a reasonable time of receiving a completed application. Notice 
provided in accordance with the timing requirements of Sec. 1002.9(a)(1) 
is deemed reasonable in all instances.
    9(b) Form of ECOA notice and statement of specific reasons.
    Paragraph 9(b)(1).
    1. Substantially similar notice. The ECOA notice sent with a 
notification of a credit denial or other adverse action will comply with 
the regulation if it is ``substantially similar'' to the notice 
contained in Sec. 1002.9(b)(1). For example, a creditor may add a 
reference to the fact that the ECOA permits age to be considered in 
certain credit scoring systems, or add a reference to a similar state 
statute or regulation and to a state enforcement agency.
    Paragraph 9(b)(2).
    1. Number of specific reasons. A creditor must disclose the 
principal reasons for denying an application or taking other adverse 
action. The regulation does not mandate that a specific number of 
reasons be disclosed, but disclosure of more than four reasons is not 
likely to be helpful to the applicant.
    2. Source of specific reasons. The specific reasons disclosed under 
Sec. Sec. 1002.9(a)(2) and (b)(2) must relate to and accurately describe 
the factors actually considered or scored by a creditor.
    3. Description of reasons. A creditor need not describe how or why a 
factor adversely

[[Page 95]]

affected an applicant. For example, the notice may say ``length of 
residence'' rather than ``too short a period of residence.''
    4. Credit scoring system. If a creditor bases the denial or other 
adverse action on a credit scoring system, the reasons disclosed must 
relate only to those factors actually scored in the system. Moreover, no 
factor that was a principal reason for adverse action may be excluded 
from disclosure. The creditor must disclose the actual reasons for 
denial (for example, ``age of automobile'') even if the relationship of 
that factor to predicting creditworthiness may not be clear to the 
applicant.
    5. Credit scoring--method for selecting reasons. The regulation does 
not require that any one method be used for selecting reasons for a 
credit denial or other adverse action that is based on a credit scoring 
system. Various methods will meet the requirements of the regulation. 
One method is to identify the factors for which the applicant's score 
fell furthest below the average score for each of those factors achieved 
by applicants whose total score was at or slightly above the minimum 
passing score. Another method is to identify the factors for which the 
applicant's score fell furthest below the average score for each of 
those factors achieved by all applicants. These average scores could be 
calculated during the development or use of the system. Any other method 
that produces results substantially similar to either of these methods 
is also acceptable under the regulation.
    6. Judgmental system. If a creditor uses a judgmental system, the 
reasons for the denial or other adverse action must relate to those 
factors in the applicant's record actually reviewed by the person making 
the decision.
    7. Combined credit scoring and judgmental system. If a creditor 
denies an application based on a credit evaluation system that employs 
both credit scoring and judgmental components, the reasons for the 
denial must come from the component of the system that the applicant 
failed. For example, if a creditor initially credit scores an 
application and denies the credit request as a result of that scoring, 
the reasons disclosed to the applicant must relate to the factors scored 
in the system. If the application passes the credit scoring stage but 
the creditor then denies the credit request based on a judgmental 
assessment of the applicant's record, the reasons disclosed must relate 
to the factors reviewed judgmentally, even if the factors were also 
considered in the credit scoring component. If the application is not 
approved or denied as a result of the credit scoring, but falls into a 
gray band, and the creditor performs a judgmental assessment and denies 
the credit after that assessment, the reasons disclosed must come from 
both components of the system. The same result applies where a 
judgmental assessment is the first component of the combined system. As 
provided in comment 9(b)(2)-1, disclosure of more than a combined total 
of four reasons is not likely to be helpful to the applicant.
    8. Automatic denial. Some credit decision methods contain features 
that call for automatic denial because of one or more negative factors 
in the applicant's record (such as the applicant's previous bad credit 
history with that creditor, the applicant's declaration of bankruptcy, 
or the fact that the applicant is a minor). When a creditor denies the 
credit request because of an automatic-denial factor, the creditor must 
disclose that specific factor.
    9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of 
the principal reasons for denying or taking other adverse action on an 
application for an extension of credit. The Fair Credit Reporting Act 
(FCRA) requires a creditor to disclose when it has based its decision in 
whole or in part on information from a source other than the applicant 
or its own files. Disclosing that a credit report was obtained and used 
in the denial of the application, as the FCRA requires, does not satisfy 
the ECOA requirement to disclose specific reasons. For example, if the 
applicant's credit history reveals delinquent credit obligations and the 
application is denied for that reason, to satisfy Sec. 1002.9(b)(2) the 
creditor must disclose that the application was denied because of the 
applicant's delinquent credit obligations. The FCRA also requires a 
creditor to disclose, as applicable, a credit score it used in taking 
adverse action along with related information, including up to four key 
factors that adversely affected the consumer's credit score (or up to 
five factors if the number of inquiries made with respect to that 
consumer report is a key factor). Disclosing the key factors that 
adversely affected the consumer's credit score does not satisfy the ECOA 
requirement to disclose specific reasons for denying or taking other 
adverse action on an application or extension of credit. Sample forms C-
1 through C-5 of appendix C of the regulation provide for both the ECOA 
and FCRA disclosures. See also comment 9(b)(2)-1.
    9(c) Incomplete applications.
    Paragraph 9(c)(1).
    1. Exception for preapprovals. The requirement to provide a notice 
of incompleteness does not apply to preapprovals that constitute 
applications under Sec. 1002.2(f).
    Paragraph 9(c)(2).
    1. Reapplication. If information requested by a creditor is 
submitted by an applicant after the expiration of the time period 
designated by the creditor, the creditor may require the applicant to 
make a new application.
    Paragraph 9(c)(3).

[[Page 96]]

    1. Oral inquiries for additional information. If an applicant fails 
to provide the information in response to an oral request, a creditor 
must send a written notice to the applicant within the 30-day period 
specified in Sec. Sec. 1002.9(c)(1) and (2). If the applicant provides 
the information, the creditor must take action on the application and 
notify the applicant in accordance with Sec. 1002.9(a).
    9(g) Applications submitted through a third party.
    1. Third parties. The notification of adverse action may be given by 
one of the creditors to whom an application was submitted, or by a 
noncreditor third party. If one notification is provided on behalf of 
multiple creditors, the notice must contain the name and address of each 
creditor. The notice must either disclose the applicant's right to a 
statement of specific reasons within 30 days, or give the primary 
reasons each creditor relied upon in taking the adverse action--clearly 
indicating which reasons relate to which creditor.
    2. Third party notice--enforcement agency. If a single adverse 
action notice is being provided to an applicant on behalf of several 
creditors and they are under the jurisdiction of different Federal 
enforcement agencies, the notice need not name each agency; disclosure 
of any one of them will suffice.
    3. Third-party notice--liability. When a notice is to be provided 
through a third party, a creditor is not liable for an act or omission 
of the third party that constitutes a violation of the regulation if the 
creditor accurately and in a timely manner provided the third party with 
the information necessary for the notification and maintains reasonable 
procedures adapted to prevent such violations.

            Section 1002.10--Furnishing of Credit Information

    1. Scope. The requirements of Sec. 1002.10 for designating and 
reporting credit information apply only to consumer credit transactions. 
Moreover, they apply only to creditors that opt to furnish credit 
information to credit bureaus or to other creditors; there is no 
requirement that a creditor furnish credit information on its accounts.
    2. Reporting on all accounts. The requirements of Sec. 1002.10 apply 
only to accounts held or used by spouses. However, a creditor has the 
option to designate all joint accounts (or all accounts with an 
authorized user) to reflect the participation of both parties, whether 
or not the accounts are held by persons married to each other.
    3. Designating accounts. In designating accounts and reporting 
credit information, a creditor need not distinguish between accounts on 
which the spouse is an authorized user and accounts on which the spouse 
is a contractually liable party.
    4. File and index systems. The regulation does not require the 
creation or maintenance of separate files in the name of each 
participant on a joint or user account, or require any other particular 
system of recordkeeping or indexing. It requires only that a creditor be 
able to report information in the name of each spouse on accounts 
covered by Sec. 1002.10. Thus, if a creditor receives a credit inquiry 
about the wife, it should be able to locate her credit file without 
asking the husband's name.
    10(a) Designation of accounts.
    1. New parties. When new parties who are spouses undertake a legal 
obligation on an account, as in the case of a mortgage loan assumption, 
the creditor must change the designation on the account to reflect the 
new parties and must furnish subsequent credit information on the 
account in the new names.
    2. Request to change designation of account. A request to change the 
manner in which information concerning an account is furnished does not 
alter the legal liability of either spouse on the account and does not 
require a creditor to change the name in which the account is 
maintained.

                 Section 1002.11--Relation to State Law

    11(a) Inconsistent state laws.
    1. Preemption determination--New York. The Bureau recognizes state 
law preemption determinations made by the Board of Governors of the 
Federal Reserve System prior to July 21, 2011, until and unless the 
Bureau makes and publishes any contrary determination. The Board of 
Governors determined that the following provisions in the state law of 
New York are preempted by the Federal law, effective November 11, 1988:
    i. Article 15, section 296a(1)(b). Unlawful discriminatory practices 
in relation to credit on the basis of race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars taking a prohibited basis into 
account when establishing eligibility for certain special-purpose credit 
programs.
    ii. Article 15, section 296a(1)(c). Unlawful discriminatory practice 
to make any record or inquiry based on race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars a creditor from requesting and 
considering information regarding the particular characteristics (for 
example, race, national origin, or sex) required for eligibility for 
special-purpose credit programs.
    2. Preemption determination--Ohio. The Bureau recognizes state law 
preemption determinations made by the Board of Governors of the Federal 
Reserve System prior to July 21, 2011, until and unless the Bureau makes 
and publishes any contrary determination. The Board of Governors 
determined that the following provision in the state law of Ohio

[[Page 97]]

is preempted by the Federal law, effective July 23, 1990:
    i. Section 4112.021(B)(1)--Unlawful discriminatory practices in 
credit transactions. This provision is preempted to the extent that it 
bars asking or favorably considering the age of an elderly applicant; 
prohibits the consideration of age in a credit scoring system; permits 
without limitation the consideration of age in real estate transactions; 
and limits the consideration of age in special-purpose credit programs 
to certain government-sponsored programs identified in the state law.

                    Section 1002.12--Record Retention

    12(a) Retention of prohibited information.
    1. Receipt of prohibited information. Unless the creditor 
specifically requested such information, a creditor does not violate 
this section when it receives prohibited information from a consumer 
reporting agency.
    2. Use of retained information. Although a creditor may keep in its 
files prohibited information as provided in Sec. 1002.12(a), the 
creditor may use the information in evaluating credit applications only 
if permitted to do so by Sec. 1002.6.
    12(b) Preservation of records.
    1. Copies. Copies of the original record include carbon copies, 
photocopies, microfilm or microfiche copies, or copies produced by any 
other accurate retrieval system, such as documents stored and reproduced 
by computer. A creditor that uses a computerized or mechanized system 
need not keep a paper copy of a document (for example, of an adverse 
action notice) if it can regenerate all pertinent information in a 
timely manner for examination or other purposes.
    2. Computerized decisions. A creditor that enters information items 
from a written application into a computerized or mechanized system and 
makes the credit decision mechanically, based only on the items of 
information entered into the system, may comply with Sec. 1002.12(b) by 
retaining the information actually entered. It is not required to store 
the complete written application, nor is it required to enter the 
remaining items of information into the system. If the transaction is 
subject to Sec. 1002.13, however, the creditor is required to enter and 
retain the data on personal characteristics in order to comply with the 
requirements of that section.
    Paragraph 12(b)(3).
    1. Withdrawn and brokered applications. In most cases, the 25-month 
retention period for applications runs from the date a notification is 
sent to the applicant granting or denying the credit requested. In 
certain transactions, a creditor is not obligated to provide a notice of 
the action taken. (See, for example, comment 9-2.) In such cases, the 
25-month requirement runs from the date of application, as when:
    i. An application is withdrawn by the applicant.
    ii. An application is submitted to more than one creditor on behalf 
of the applicant, and the application is approved by one of the other 
creditors.
    12(b)(6) Self-tests.
    1. The rule requires all written or recorded information about a 
self-test to be retained for 25 months after a self-test has been 
completed. For this purpose, a self-test is completed after the creditor 
has obtained the results and made a determination about what corrective 
action, if any, is appropriate. Creditors are required to retain 
information about the scope of the self-test, the methodology used and 
time period covered by the self-test, the report or results of the self-
test including any analysis or conclusions, and any corrective action 
taken in response to the self-test.
    12(b)(7) Preapplication marketing information.
    1. Prescreened credit solicitations. The rule requires creditors to 
retain copies of prescreened credit solicitations. For purposes of this 
part, a prescreened solicitation is an ``offer of credit'' as described 
in 15 U.S.C. 1681a(1) of the Fair Credit Reporting Act. A creditor 
complies with this rule if it retains a copy of each solicitation 
mailing that contains different terms, such as the amount of credit 
offered, annual percentage rate, or annual fee.
    2. List of criteria. A creditor must retain the list of criteria 
used to select potential recipients. This includes the criteria used by 
the creditor both to determine the potential recipients of the 
particular solicitation and to determine who will actually be offered 
credit.
    3. Correspondence. A creditor may retain correspondence relating to 
consumers' complaints about prescreened solicitations in any manner that 
is reasonably accessible and is understandable to examiners. There is no 
requirement to establish a separate database or set of files for such 
correspondence, or to match consumer complaints with specific 
solicitation programs.

          Section 1002.13--Information for Monitoring Purposes

    13(a) Information to be requested.
    1. Natural person. Section1002.13 applies only to applications from 
natural persons.
    2. Principal residence. The requirements of Sec. 1002.13 apply only 
if an application relates to a dwelling that is or will be occupied by 
the applicant as the principal residence. A credit application related 
to a vacation home or a rental unit is not covered. In the case of a 
two-to four-unit dwelling, the application is covered if the applicant 
intends to occupy one of the units as a principal residence.

[[Page 98]]

    3. Temporary financing. An application for temporary financing to 
construct a dwelling is not subject to Sec. 1002.13. But an application 
for both a temporary loan to finance construction of a dwelling and a 
permanent mortgage loan to take effect upon the completion of 
construction is subject to Sec. 1002.13.
    4. New principal residence. A person can have only one principal 
residence at a time. However, if a person buys or builds a new dwelling 
that will become that person's principal residence within a year or upon 
completion of construction, the new dwelling is considered the principal 
residence for purposes of Sec. 1002.13.
    5. Transactions not covered. The information-collection requirements 
of this section apply to applications for credit primarily for the 
purchase or refinancing of a dwelling that is or will become the 
applicant's principal residence. Therefore, applications for credit 
secured by the applicant's principal residence but made primarily for a 
purpose other than the purchase or refinancing of the principal 
residence (such as loans for home improvement and debt consolidation) 
are not subject to the information-collection requirements. An 
application for an open-end home equity line of credit is not subject to 
this section unless it is readily apparent to the creditor when the 
application is taken that the primary purpose of the line is for the 
purchase or refinancing of a principal dwelling.
    6. Refinancings. A refinancing occurs when an existing obligation is 
satisfied and replaced by a new obligation undertaken by the same 
borrower. A creditor that receives an application to refinance an 
existing extension of credit made by that creditor for the purchase of 
the applicant's dwelling may request the monitoring information again 
but is not required to do so if it was obtained in the earlier 
transaction.
    7. Data collection under Regulation C. See comment 5(a)(2)-2.
    13(b) Obtaining of information.
    1. Forms for collecting data. A creditor may collect the information 
specified in Sec. 1002.13(a) either on an application form or on a 
separate form referring to the application. The applicant must be 
offered the option to select more than one racial designation.
    2. Written applications. The regulation requires written 
applications for the types of credit covered by Sec. 1002.13. A creditor 
can satisfy this requirement by recording on paper or by means of 
computer the information that the applicant provides orally and that the 
creditor normally considers in a credit decision.
    3. Telephone, mail applications.
    i. A creditor that accepts an application by telephone or mail must 
request the monitoring information.
    ii. A creditor that accepts an application by mail need not make a 
special request for the monitoring information if the applicant has 
failed to provide it on the application form returned to the creditor.
    iii. If it is not evident on the face of an application that it was 
received by mail, telephone, or via an electronic medium, the creditor 
should indicate on the form or other application record how the 
application was received.
    4. Video and other electronic-application processes.
    i. If a creditor takes an application through an electronic medium 
that allows the creditor to see the applicant, the creditor must treat 
the application as taken in person. The creditor must note the 
monitoring information on the basis of visual observation or surname, if 
the applicant chooses not to provide the information.
    ii. If an applicant applies through an electronic medium without 
video capability, the creditor treats the application as if it were 
received by mail.
    5. Applications through loan-shopping services. When a creditor 
receives an application through an unaffiliated loan-shopping service, 
it does not have to request the monitoring information for purposes of 
the ECOA or Regulation B. Creditors subject to the Home Mortgage 
Disclosure Act should be aware, however, that data collection may be 
called for under Regulation C (12 CFR part 1003), which generally 
requires creditors to report, among other things, the sex and race of an 
applicant on brokered applications or applications received through a 
correspondent.
    6. Inadvertent notation. If a creditor inadvertently obtains the 
monitoring information in a dwelling-related transaction not covered by 
Sec. 1002.13, the creditor may process and retain the application 
without violating the regulation.
    13(c) Disclosure to applicants.
    1. Procedures for providing disclosures. The disclosure to an 
applicant regarding the monitoring information may be provided in 
writing. appendix B contains a sample disclosure. A creditor may devise 
its own disclosure so long as it is substantially similar. The creditor 
need not orally request the monitoring information if it is requested in 
writing.
    13(d) Substitute monitoring program.
    1. Substitute program. An enforcement agency may adopt, under its 
established rulemaking or enforcement procedures, a program requiring 
creditors under its jurisdiction to collect information in addition to 
information required by this section.

      Section 1002.14--Rules on Providing Appraisals and Valuations

    14(a) Providing appraisals and other valuations.

[[Page 99]]

    1. Multiple applicants. If there is more than one applicant, the 
written disclosure about written appraisals, and the copies of 
appraisals and other written valuations, need only be given to one 
applicant. However, these materials must be given to the primary 
applicant where one is readily apparent. Similarly, if there is more 
than one applicant for credit in the transaction, one applicant may 
provide a waiver under Sec. 1002.14(a)(1), but it must be the primary 
applicant where one is readily apparent.
    14(a)(1) In general.
    1. Coverage. Section 1002.14 covers applications for credit to be 
secured by a first lien on a dwelling, as that term is defined in 
Sec. 1002.14(b)(2), whether the credit is for a business purpose (for 
example, a loan to start a business) or a consumer purpose (for example, 
a loan to purchase a home).
    2. Renewals. Section 1002.14(a)(1) applies when an applicant 
requests the renewal of an existing extension of credit and the creditor 
develops a new appraisal or other written valuation. Section 
1002.14(a)(1) does not apply to the extent a creditor uses the 
appraisals and other written valuations that were previously developed 
in connection with the prior extension of credit to evaluate the renewal 
request.
    3. Written. For purposes of Sec. 1002.14, an ``appraisal or other 
written valuation'' includes, without limitation, an appraisal or other 
valuation received or developed by the creditor in paper form (hard 
copy); electronically, such as CD or email; or by any other similar 
media. See Sec. 1002.14(a)(5) regarding the provision of copies of 
appraisals and other written valuations to applicants via electronic 
means.
    4. Timing. Section 1002.14(a)(1) requires that the creditor 
``provide'' copies of appraisals and other written valuations to the 
applicant ``promptly upon completion,'' or no later than three business 
days before consummation (for closed-end credit) or account opening (for 
open-end credit), whichever is earlier.
    i. For purposes of this timing requirement, ``provide'' means 
``deliver.'' Delivery occurs three business days after mailing or 
delivering the copies to the last-known address of the applicant, or 
when evidence indicates actual receipt by the applicant, whichever is 
earlier. Delivery to or actual receipt by the applicant by electronic 
means must comply with the E-Sign Act, as provided for in 
Sec. 1002.14(a)(5).
    ii. The application and meaning of the ``promptly upon completion'' 
standard depends upon the facts and circumstances, including but not 
limited to when the creditor receives the appraisal or other written 
valuation, and the extent of any review or revision after the creditor 
receives it.
    iii. ``Completion'' occurs when the last version is received by the 
creditor, or when the creditor has reviewed and accepted the appraisal 
or other written valuation to include any changes or corrections 
required, whichever is later. See also comment 14(a)(1)-7.
    iv. In a transaction that is being consummated (for closed-end 
credit) or in which the account is being opened (for open-end credit), 
if an appraisal or other written valuation has been developed but is not 
yet complete, the deadline for providing a copy of three business days 
before consummation or account opening still applies, unless the 
applicant waived that deadline as provided under Sec. 1002.14(a)(1), in 
which case the copy must be provided at or before consummation or 
account opening.
    v. Even if the transaction will not be consummated (for closed-end 
credit) or the account will not be opened (for open-end credit), the 
copy must be provided ``promptly upon completion'' as provided for in 
Sec. 1002.14(a)(1), unless the applicant has waived that deadline as 
provided under Sec. 1002.14(a)(1), in which case as provided for in 
Sec. 1002.14(a)(1) the copy must be provided to the applicant no later 
than 30 days after the creditor determines the transaction will not be 
consummated or the account will not be opened.
    5. Promptly upon completion-examples. Examples in which the 
``promptly upon completion'' standard would be satisfied include, but 
are not limited to, those in subparagraphs i, ii, and iii below. 
Examples in which the ``promptly upon completion'' standard would not be 
satisfied include, but are not limited to, those in subparagraphs iv and 
v below.
    i. Sending a copy of an appraisal within a week of completion with 
sufficient time before consummation (or account opening for open-end 
credit). On day 15 after receipt of the application, the creditor's 
underwriting department reviews an appraisal and determines it is 
acceptable. One week later, the creditor sends a copy of the appraisal 
to the applicant. The applicant actually receives the copy more than 
three business days before the date of consummation (or account 
opening). The creditor has provided the copy of the appraisal promptly 
upon completion.
    ii. Sending a copy of a revised appraisal within a week after 
completion and with sufficient time before consummation (or account 
opening for open-end credit). An appraisal is being revised, and the 
creditor does not receive the revised appraisal until day 45 after the 
application, when the creditor immediately determines the revised 
appraisal is acceptable. A week later, the creditor sends a copy of the 
revised appraisal to the applicant, and does not send a copy of the 
initial appraisal to the applicant. The applicant actually receives the 
copy of the revised appraisal three business days before the date of 
consummation

[[Page 100]]

(or account opening). The creditor has provided the appraisal copy 
promptly upon completion.
    iii. Sending a copy of an AVM report within a week after its receipt 
and with sufficient time before consummation (or account opening for 
open-end credit). The creditor receives an automated valuation model 
(AVM) report on day 5 after receipt of the application and treats the 
AVM report as complete when it is received. On day 12 after receipt of 
the application, the creditor sends the applicant a copy of the 
valuation. The applicant actually receives the valuation more than three 
business days before the date of consummation (or account opening). The 
creditor has provided the copy of the AVM report promptly upon 
completion.
    iv. Delay in sending an appraisal. On day 12 after receipt of the 
application, the creditor's underwriting department reviews an appraisal 
and determines it is acceptable. Although the creditor has determined 
the appraisal is complete, the creditor waits to provide a copy to the 
applicant until day 42, when the creditor schedules the consummation (or 
account opening) to occur on day 50. The creditor has not provided the 
copy of the appraisal promptly upon completion.
    v. Delay in sending an AVM report while waiting for completion of a 
second valuation. The creditor receives an AVM report on day 5 after 
application and completes its review of the AVM report the day it is 
received. The creditor also has ordered an appraisal, but the initial 
version of the appraisal received by the creditor is found to be 
deficient and is sent for review. The creditor waits 30 days to provide 
a copy of the completed AVM report, until the appraisal is completed on 
day 35. The creditor then provides the applicant with copies of the AVM 
report and the revised appraisal. While the appraisal report was 
provided promptly upon completion, the AVM report was not.
    6. Waiver. Section 1002.14(a)(1) permits the applicant to waive the 
timing requirement if the creditor provides the copies at or before 
consummation or account opening, except where otherwise prohibited by 
law. Except where otherwise prohibited by law, an applicant's waiver is 
effective under Sec. 1002.14(a)(1) in either of the following two 
situations:
    i. If, no later than three business days prior to consummation or 
account opening, the applicant provides the creditor an affirmative oral 
or written statement waiving the timing requirement under this rule; or
    ii. If, within three business days of consummation or account 
opening, the applicant provides the creditor an affirmative oral or 
written statement waiving the timing requirement under this rule and the 
waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical changes 
from a previous version of the appraisal or other written valuation 
provided to the applicant three or more business days prior to 
consummation or account opening. For purpose of this second type of 
waiver, revisions will only be considered to be clerical in nature if 
they have no impact on the estimated value, and have no impact on the 
calculation or methodology used to derive the estimate. In addition, 
under Sec. 1002.14(a)(1) the applicant still must receive the copy of 
the revision at or prior to consummation or account opening.
    7. Multiple versions of appraisals or valuations. For purposes of 
Sec. 1002.14(a)(1), the reference to ``all'' appraisals and other 
written valuations does not refer to all versions of the same appraisal 
or other valuation. If a creditor has received multiple versions of an 
appraisal or other written valuation, the creditor is required to 
provide only a copy of the latest version received. If, however, a 
creditor already has provided a copy of one version of an appraisal or 
other written valuation to an applicant, and the creditor later receives 
a revision of that appraisal or other written valuation, then the 
creditor also must provide the applicant with a copy of the revision to 
comply with Sec. 1002.14(a)(1). If a creditor receives only one version 
of an appraisal or other valuation that is developed in connection with 
the applicant's application, then that version must be provided to the 
applicant to comply with Sec. 1002.14(a)(1). See also comment 14(a)(1)-4 
above.
    14(a)(2) Disclosure.
    1. Appraisal independence requirements not affected. Nothing in the 
text of the disclosure required by Sec. 1002.14(a)(2) should be 
construed to affect, modify, limit, or supersede the operation of any 
legal, regulatory, or other requirements or standards relating to 
independence in the conduct of appraisers or the use of applicant-
ordered appraisals by creditors.
    14(a)(3) Reimbursement.
    1. Photocopy, postage, or other costs. Creditors may not charge for 
photocopy, postage, or other costs incurred in providing a copy of an 
appraisal or other written valuation in accordance with section 
14(a)(1).
    2. Reasonable fee for reimbursement. Section 1002.14(a)(3) does not 
prohibit a creditor from imposing a reasonable fee to reimburse the 
creditor's costs of the appraisal or other written valuation, so long as 
the fee is not increased to cover the costs of providing copies of such 
appraisals or other written valuations under Sec. 1002.14(a)(1). A 
creditor's cost may include an administration fee charged to the 
creditor by an appraisal management company as defined in 12 U.S.C. 
3350(11). Section 1002.14(a)(3) does not, however, legally obligate the 
applicant to pay such fees. Further, creditors may not impose fees for 
reimbursement of the costs of an appraisal or other valuation where 
otherwise prohibited by law. For instance, a creditor may not

[[Page 101]]

charge a consumer a fee for the performance of a second appraisal if the 
second appraisal is required under 15 U.S.C. 1639h(b)(2) and 12 CFR 
1026.35(c).
    14(b) Definitions.
    14(b)(1) Consummation.
    1. State law governs. When a contractual obligation on the 
consumer's part is created is a matter to be determined under applicable 
law; Sec. 1002.14 does not make this determination. A contractual 
commitment agreement, for example, that under applicable law binds the 
consumer to the credit terms would be consummation. Consummation, 
however, does not occur merely because the consumer has made some 
financial investment in the transaction (for example, by paying a 
nonrefundable fee) unless, of course, applicable law holds otherwise.
    2. Credit vs. sale. Consummation does not occur when the consumer 
becomes contractually committed to a sale transaction, unless the 
consumer also becomes legally obligated to accept a particular credit 
arrangement.
    14(b)(2) Dwelling.
    1. ``Motor vehicles'' not covered. The requirements of Sec. 1002.14 
do not apply to ``motor vehicles'' as defined by 12 U.S.C. 5519(f)(1).
    14(b)(3) Valuation.
    1. Valuations--examples. Examples of valuations include but are not 
limited to:
    i. A report prepared by an appraiser (whether or not licensed or 
certified) including the appraiser's estimate of the property's value or 
opinion of value.
    ii. A document prepared by the creditor's staff that assigns value 
to the property.
    iii. A report approved by a government-sponsored enterprise for 
describing to the applicant the estimate of the property's value 
developed pursuant to the proprietary methodology or mechanism of the 
government-sponsored enterprise.
    iv. A report generated by use of an automated valuation model to 
estimate the property's value.
    v. A broker price opinion prepared by a real estate broker, agent, 
or sales person to estimate the property's value.
    2. Attachments and exhibits. The term ``valuation'' includes any 
attachments and exhibits that are an integrated part of the valuation.
    3. Other documentation. Not all documents that discuss or restate a 
valuation of an applicant's property constitute a ``valuation'' for 
purposes of Sec. 1002.14(b)(3). Examples of documents that discuss the 
valuation of the applicant's property or may reflect its value but 
nonetheless are not ``valuations'' include but are not limited to:
    i. Internal documents that merely restate the estimated value of the 
dwelling contained in an appraisal or written valuation being provided 
to the applicant.
    ii. Governmental agency statements of appraised value that are 
publically available.
    iii. Publicly-available lists of valuations (such as published sales 
prices or mortgage amounts, tax assessments, and retail price ranges).
    iv. Manufacturers' invoices for manufactured homes.
    v. Reports reflecting property inspections that do not provide an 
estimate of the value of the property and are not used to develop an 
estimate of the value of the property.
    vi. Appraisal reviews that do not include the appraiser's estimate 
of the property's value or opinion of value.
    14(c) Definitions.
    1. Appraisal reports. Examples of appraisal reports are:
    i. A report prepared by an appraiser (whether or not licensed or 
certified), including written comments and other documents submitted to 
the creditor in support of the appraiser's estimate or opinion of the 
property's value.
    ii. A document prepared by the creditor's staff that assigns value 
to the property, if a third-party appraisal report has not been used.
    iii. An internal review document reflecting that the creditor's 
valuation is different from a valuation in a third party's appraisal 
report (or different from valuations that are publicly available or 
valuations such as manufacturers' invoices for mobile homes).
    2. Other reports. The term ``appraisal report'' does not cover all 
documents relating to the value of the applicant's property. Examples of 
reports not covered are:
    i. Internal documents, if a third-party appraisal report was used to 
establish the value of the property.
    ii. Governmental agency statements of appraised value.
    iii. Valuations lists that are publicly available (such as published 
sales prices or mortgage amounts, tax assessments, and retail price 
ranges) and valuations such as manufacturers' invoices for mobile homes.

    Section 1002.15--Incentives for Self-Testing and Self-Correction

    15(a) General rules.
    15(a)(1) Voluntary self-testing and correction.
    1. Activities required by any governmental authority are not 
voluntary self-tests. A governmental authority includes both 
administrative and judicial authorities for Federal, State, and local 
governments.
    15(a)(2) Corrective action required.
    1. To qualify for the privilege, appropriate corrective action is 
required when the results of a self-test show that it is more likely 
than not that there has been a violation of the ECOA or this part. A 
self-test is also privileged when it identifies no violations.

[[Page 102]]

    2. In some cases, the issue of whether certain information is 
privileged may arise before the self-test is complete or corrective 
actions are fully under way. This would not necessarily prevent a 
creditor from asserting the privilege. In situations where the self-test 
is not complete, for the privilege to apply the lender must satisfy the 
regulation's requirements within a reasonable period of time. To assert 
the privilege where the self-test shows a likely violation, the rule 
requires, at a minimum, that the creditor establish a plan for 
corrective action and a method to demonstrate progress in implementing 
the plan. Creditors must take appropriate corrective action on a timely 
basis after the results of the self-test are known.
    3. A creditor's determination about the type of corrective action 
needed, or a finding that no corrective action is required, is not 
conclusive in determining whether the requirements of this paragraph 
have been satisfied. If a creditor's claim of privilege is challenged, 
an assessment of the need for corrective action or the type of 
corrective action that is appropriate must be based on a review of the 
self-testing results, which may require an in camera inspection of the 
privileged documents.
    15(a)(3) Other privileges.
    1. A creditor may assert the privilege established under this 
section in addition to asserting any other privilege that may apply, 
such as the attorney-client privilege or the work-product privilege. 
Self-testing data may be privileged under this section whether or not 
the creditor's assertion of another privilege is upheld.
    15(b) Self-test defined.
    15(b)(1) Definition.
    Paragraph 15(b)(1)(i).
    1. To qualify for the privilege, a self-test must be sufficient to 
constitute a determination of the extent or effectiveness of the 
creditor's compliance with the Act and Regulation B. Accordingly, a 
self-test is only privileged if it was designed and used for that 
purpose. A self-test that is designed or used to determine compliance 
with other laws or regulations or for other purposes is not privileged 
under this rule. For example, a self-test designed to evaluate employee 
efficiency or customers' satisfaction with the level of service provided 
by the creditor is not privileged even if evidence of discrimination is 
uncovered incidentally. If a self-test is designed for multiple 
purposes, only the portion designed to determine compliance with the 
ECOA is eligible for the privilege.
    Paragraph 15(b)(1)(ii).
    1. The principal attribute of self-testing is that it constitutes a 
voluntary undertaking by the creditor to produce new data or factual 
information that otherwise would not be available and could not be 
derived from loan or application files or other records related to 
credit transactions. Self-testing includes, but is not limited to, the 
practice of using fictitious applicants for credit (testers), either 
with or without the use of matched pairs. A creditor may elect to test a 
defined segment of its business, for example, loan applications 
processed by a specific branch or loan officer, or applications made for 
a particular type of credit or loan program. A creditor also may use 
other methods of generating information that is not available in loan 
and application files, such as surveying mortgage loan applicants. To 
the extent permitted by law, creditors might also develop new methods 
that go beyond traditional pre-application testing, such as hiring 
testers to submit fictitious loan applications for processing.
    2. The privilege does not protect a creditor's analysis performed as 
part of processing or underwriting a credit application. A creditor's 
evaluation or analysis of its loan files, Home Mortgage Disclosure Act 
data, or similar types of records (such as broker or loan officer 
compensation records) does not produce new information about a 
creditor's compliance and is not a self-test for purposes of this 
section. Similarly, a statistical analysis of data derived from existing 
loan files is not privileged.
    15(b)(3) Types of information not privileged.
    Paragraph 15(b)(3)(i).
    1. The information listed in this paragraph is not privileged and 
may be used to determine whether the prerequisites for the privilege 
have been satisfied. Accordingly, a creditor might be asked to identify 
the self-testing method, for example, whether preapplication testers 
were used or data were compiled by surveying loan applicants. 
Information about the scope of the self-test (such as the types of 
credit transactions examined, or the geographic area covered by the 
test) also is not privileged.
    Paragraph 15(b)(3)(ii).
    1. Property appraisal reports, minutes of loan committee meetings or 
other documents reflecting the basis for a decision to approve or deny 
an application, loan policies or procedures, underwriting standards, and 
broker compensation records are examples of the types of records that 
are not privileged. If a creditor arranges for testers to submit loan 
applications for processing, the records are not related to actual 
credit transactions for purposes of this paragraph and may be privileged 
self-testing records.
    15(c) Appropriate corrective action.
    1. The rule only addresses the corrective actions required for a 
creditor to take advantage of the privilege in this section. A creditor 
may be required to take other actions or provide additional relief if a 
formal finding of discrimination is made.
    15(c)(1) General requirement.
    1. Appropriate corrective action is required even though no 
violation has been formally adjudicated or admitted by the creditor. In

[[Page 103]]

determining whether it is more likely than not that a violation 
occurred, a creditor must treat testers as if they are actual applicants 
for credit. A creditor may not refuse to take appropriate corrective 
action under this section because the self-test used fictitious loan 
applicants. The fact that a tester's agreement with the creditor waives 
the tester's legal right to assert a violation does not eliminate the 
requirement for the creditor to take corrective action, although no 
remedial relief for the tester is required under paragraph 15(c)(3).
    15(c)(2) Determining the scope of appropriate corrective action.
    1. Whether a creditor has taken or is taking corrective action that 
is appropriate will be determined on a case-by-case basis. Generally, 
the scope of the corrective action that is needed to preserve the 
privilege is governed by the scope of the self-test. For example, a 
creditor that self-tests mortgage loans and discovers evidence of 
discrimination may focus its corrective actions on mortgage loans, and 
is not required to expand its testing to other types of loans.
    2. In identifying the policies or practices that are a likely cause 
of the violation, a creditor might identify inadequate or improper 
lending policies, failure to implement established policies, employee 
conduct, or other causes. The extent and scope of a likely violation may 
be assessed by determining which areas of operations are likely to be 
affected by those policies and practices, for example, by determining 
the types of loans and stages of the application process involved and 
the branches or offices where the violations may have occurred.
    3. Depending on the method and scope of the self-test and the 
results of the test, appropriate corrective action may include one or 
more of the following:
    i. If the self-test identifies individuals whose applications were 
inappropriately processed, offering to extend credit if the application 
was improperly denied and compensating such persons for out-of-pocket 
costs and other compensatory damages;
    ii. Correcting institutional policies or procedures that may have 
contributed to the likely violation, and adopting new policies as 
appropriate;
    iii. Identifying and then training and/or disciplining the employees 
involved;
    iv. Developing outreach programs, marketing strategies, or loan 
products to serve more effectively segments of the lender's markets that 
may have been affected by the likely discrimination; and
    v. Improving audit and oversight systems to avoid a recurrence of 
the likely violations.
    15(c)(3) Types of relief.
    Paragraph 15(c)(3)(ii).
    1. The use of pre-application testers to identify policies and 
practices that illegally discriminate does not require creditors to 
review existing loan files for the purpose of identifying and 
compensating applicants who might have been adversely affected.
    2. If a self-test identifies a specific applicant who was 
discriminated against on a prohibited basis, to qualify for the 
privilege in this section the creditor must provide appropriate remedial 
relief to that applicant; the creditor is not required to identify other 
applicants who might also have been adversely affected.
    Paragraph 15(c)(3)(iii).
    1. A creditor is not required to provide remedial relief to an 
applicant that would not be available by law. An applicant might also be 
ineligible for certain types of relief due to changed circumstances. For 
example, a creditor is not required to offer credit to a denied 
applicant if the applicant no longer qualifies for the credit due to a 
change in financial circumstances, although some other type of relief 
might be appropriate.
    15(d)(1) Scope of privilege.
    1. The privilege applies with respect to any examination, 
investigation or proceeding by Federal, State, or local government 
agencies relating to compliance with the Act or this part. Accordingly, 
in a case brought under the ECOA, the privilege established under this 
section preempts any inconsistent laws or court rules to the extent they 
might require disclosure of privileged self-testing data. The privilege 
does not apply in other cases (such as in litigation filed solely under 
a State's fair lending statute). In such cases, if a court orders a 
creditor to disclose self-test results, the disclosure is not a 
voluntary disclosure or waiver of the privilege for purposes of 
paragraph 15(d)(2); a creditor may protect the information by seeking a 
protective order to limit availability and use of the self-testing data 
and prevent dissemination beyond what is necessary in that case. 
Paragraph 15(d)(1) precludes a party who has obtained privileged 
information from using it in a case brought under the ECOA, provided the 
creditor has not lost the privilege through voluntary disclosure under 
paragraph 15(d)(2).
    15(d)(2) Loss of privilege.
    Paragraph 15(d)(2)(i).
    1. A creditor's corrective action, by itself, is not considered a 
voluntary disclosure of the self-test report or results. For example, a 
creditor does not disclose the results of a self-test merely by offering 
to extend credit to a denied applicant or by inviting the applicant to 
reapply for credit. Voluntary disclosure could occur under this 
paragraph, however, if the creditor disclosed the self-test results in 
connection with a new offer of credit.

[[Page 104]]

    2. The disclosure of self-testing results to an independent 
contractor acting as an auditor or consultant for the creditor on 
compliance matters does not result in loss of the privilege.
    Paragraph 15(d)(2)(ii).
    1. The privilege is lost if the creditor discloses privileged 
information, such as the results of the self-test. The privilege is not 
lost if the creditor merely reveals or refers to the existence of the 
self-test.
    Paragraph 15(d)(2)(iii).
    1. A creditor's claim of privilege may be challenged in a court or 
administrative law proceeding with appropriate jurisdiction. In 
resolving the issue, the presiding officer may require the creditor to 
produce privileged information about the self-test.
    Paragraph 15(d)(3) Limited use of privileged information.
    1. A creditor may be required to produce privileged documents for 
the purpose of determining a penalty or remedy after a violation of the 
ECOA or Regulation B has been formally adjudicated or admitted. A 
creditor's compliance with such a requirement does not evidence the 
creditor's intent to forfeit the privilege.

        Section 1002.16--Enforcement, Penalties, and Liabilities

    16(c) Failure of compliance.
    1. Inadvertent errors. Inadvertent errors include, but are not 
limited to, clerical mistake, calculation error, computer malfunction, 
and printing error. An error of legal judgment is not an inadvertent 
error under the regulation.
    2. Correction of error. For inadvertent errors that occur under 
Sec. Sec. 1002.12 and 1002.13, this section requires that they be 
corrected prospectively.

                   Appendix B--Model Application Forms

    1. Freddie Mac/Fannie Mae form--residential loan application. The 
uniform residential loan application form (Freddie Mac 65/Fannie Mae 
1003), including supplemental form (Freddie Mac 65A/Fannie Mae 1003A), 
prepared by the Federal Home Loan Mortgage Corporation and the Federal 
National Mortgage Association and dated October 1992 may be used by 
creditors without violating this part. Creditors that are governed by 
the monitoring requirements of this part (which limits collection to 
applications primarily for the purchase or refinancing of the 
applicant's principal residence) should delete, strike, or modify the 
data-collection section on the form when using it for transactions not 
covered by Sec. 1002.13(a) to ensure that they do not collect the 
information. Creditors that are subject to more extensive collection 
requirements by a substitute monitoring program under Sec. 1002.13(d) or 
by the Home Mortgage Disclosure Act (HMDA) may use the form as issued, 
in compliance with the substitute program or HMDA.
    2. FHLMC/FNMA form--home improvement loan application. The home-
improvement and energy loan application form (FHLMC 703/FNMA 1012), 
prepared by the Federal Home Loan Mortgage Corporation and the Federal 
National Mortgage Association and dated October 1986, complies with the 
requirements of the regulation for some creditors but not others because 
of the form's section ``Information for Government Monitoring 
Purposes.'' Creditors that are governed by Sec. 1002.13(a) of the 
regulation (which limits collection to applications primarily for the 
purchase or refinancing of the applicant's principal residence) should 
delete, strike, or modify the data-collection section on the form when 
using it for transactions not covered by Sec. 1002.13(a) to ensure that 
they do not collect the information. Creditors that are subject to more 
extensive collection requirements by a substitute monitoring program 
under Sec. 1002.13(d) may use the form as issued, in compliance with 
that substitute program.

                  Appendix C--Sample Notification Forms

    1. Form C-9. If not otherwise provided under other applicable 
disclosure requirements, creditors may design their own form, add to, or 
modify the model form to reflect their individual policies and 
procedures. For example, a creditor may want to add:
    i. A telephone number that applicants may call to leave their name 
and the address to which a copy of the appraisal or other written 
valuation should be sent.
    ii. A notice of the cost the applicant will be required to pay the 
creditor for the appraisal or other valuation

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



PART 1003_HOME MORTGAGE DISCLOSURE (REGULATION C)--Table of Contents



Sec.
1003.1 Authority, purpose, and scope.
1003.2 Definitions.
1003.3 Exempt institutions.
1003.4 Compilation of loan data.
1003.5 Disclosure and reporting.
1003.6 Enforcement.

Appendix A to Part 1003--Form and Instructions for Completion of HMDA 
          Loan/Application Register
Appendix B to Part 1003--Form and Instructions for Data Collection on 
          Ethnicity, Race, and Sex
Supplement I to Part 1003--Staff Commentary

    Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.

[[Page 105]]


    Source: 76 FR 78468, Dec. 19, 2011, unless otherwise noted.



Sec. 1003.1  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation C, is issued by the 
Bureau of Consumer Financial Protection (Bureau) pursuant to the Home 
Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et seq.,) as amended. The 
information-collection requirements have been approved by the U.S. 
Office of Management and Budget (OMB) under 44 U.S.C. 3501 et seq. and 
have been assigned OMB numbers for institutions reporting data to the 
Office of the Comptroller of the Currency (1557-0159), the Federal 
Deposit Insurance Corporation (3064-0046), the Federal Reserve System 
(7100-0247), the Department of Housing and Urban Development (HUD) 
(2502-0529), the National Credit Union Administration (3133-0166), and 
the Bureau of Consumer Financial Protection (3170-0008).
    (b) Purpose. (1) This part implements the Home Mortgage Disclosure 
Act, which is intended to provide the public with loan data that can be 
used:
    (i) To help determine whether financial institutions are serving the 
housing needs of their communities;
    (ii) To assist public officials in distributing public-sector 
investment so as to attract private investment to areas where it is 
needed; and
    (iii) To assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes.
    (2) Neither the act nor this part is intended to encourage unsound 
lending practices or the allocation of credit.
    (c) Scope. This part applies to certain financial institutions, 
including banks, savings associations, credit unions, and other mortgage 
lending institutions, as defined in Sec. 1003.2. The regulation requires 
an institution to report data to the appropriate Federal agency about 
home purchase loans, home improvement loans, and refinancings that it 
originates or purchases, or for which it receives applications; and to 
disclose certain data to the public.



Sec. 1003.2  Definitions.

    In this part:
    Act means the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et 
seq.,) as amended.
    Application. (1) In general. Application means an oral or written 
request for a home purchase loan, a home improvement loan, or a 
refinancing that is made in accordance with procedures used by a 
financial institution for the type of credit requested.
    (2) Preapproval programs. A request for preapproval for a home 
purchase loan is an application under this section if the request is 
reviewed under a program in which the financial institution, after a 
comprehensive analysis of the creditworthiness of the applicant, issues 
a written commitment to the applicant valid for a designated period of 
time to extend a home purchase loan up to a specified amount. The 
written commitment may not be subject to conditions other than:
    (i) Conditions that require the identification of a suitable 
property;
    (ii) Conditions that require that no material change has occurred in 
the applicant's financial condition or creditworthiness prior to 
closing; and
    (iii) Limited conditions that are not related to the financial 
condition or creditworthiness of the applicant that the lender 
ordinarily attaches to a traditional home mortgage application (such as 
certification of a clear termite inspection).
    Branch office means:
    (1) Any office of a bank, savings association, or credit union that 
is approved as a branch by a Federal or state supervisory agency, but 
excludes free-standing electronic terminals such as automated teller 
machines; and
    (2) Any office of a for-profit mortgage-lending institution (other 
than a bank, savings association, or credit union) that takes 
applications from the public for home purchase loans, home improvement 
loans, or refinancings. A for-profit mortgage-lending institution is 
also deemed to have a branch office in an MSA or in a Metropolitan 
Division, if, in the preceding calendar year, it received applications 
for, originated, or purchased five or more home purchase loans, home 
improvement loans, or refinancings related to property located in that 
MSA or Metropolitan Division, respectively.

[[Page 106]]

    Dwelling means a residential structure (whether or not attached to 
real property) located in a state of the United States of America, the 
District of Columbia, or the Commonwealth of Puerto Rico. The term 
includes an individual condominium unit, cooperative unit, or mobile or 
manufactured home.
    Financial institution means:
    (1) A bank, savings association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Bureau for coverage 
by the act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in an 
MSA;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan (excluding temporary financing such as a construction 
loan) or refinancing of a home purchase loan, secured by a first lien on 
a one-to four-family dwelling; and
    (iv) Meets one or more of the following three criteria:
    (A) The institution is Federally insured or regulated;
    (B) The mortgage loan referred to in paragraph (1)(iii) of this 
definition was insured, guaranteed, or supplemented by a Federal agency; 
or
    (C) The mortgage loan referred to in paragraph (1)(iii) of this 
definition was intended by the institution for sale to Fannie Mae or 
Freddie Mac; and
    (2) A for-profit mortgage-lending institution (other than a bank, 
savings association, or credit union) that:
    (i) In the preceding calendar year, either:
    (A) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least 10 percent of its loan-origination 
volume, measured in dollars; or
    (B) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least $25 million; and
    (ii) On the preceding December 31, had a home or branch office in an 
MSA; and
    (iii) Either:
    (A) On the preceding December 31, had total assets of more than $10 
million, counting the assets of any parent corporation; or
    (B) In the preceding calendar year, originated at least 100 home 
purchase loans, including refinancings of home purchase loans.
    Home-equity line of credit means an open-end credit plan secured by 
a dwelling as defined in Regulation Z (Truth in Lending), 12 CFR part 
1026.
    Home improvement loan means:
    (1) A loan secured by a lien on a dwelling that is for the purpose, 
in whole or in part, of repairing, rehabilitating, remodeling, or 
improving a dwelling or the real property on which it is located; and
    (2) A non-dwelling secured loan that is for the purpose, in whole or 
in part, of repairing, rehabilitating, remodeling, or improving a 
dwelling or the real property on which it is located, and that is 
classified by the financial institution as a home improvement loan.
    Home purchase loan means a loan secured by and made for the purpose 
of purchasing a dwelling.
    Manufactured home means any residential structure as defined under 
regulations of the Department of Housing and Urban Development 
establishing manufactured home construction and safety standards (24 CFR 
3280.2).
    Metropolitan Statistical Area or MSA and Metropolitan Division or 
MD--(1) Metropolitan Statistical Area or MSA means a metropolitan 
statistical area as defined by the U.S. Office of Management and Budget.
    (2) Metropolitan Division or MD means a metropolitan division of an 
MSA, as defined by the U.S. Office of Management and Budget.
    Refinancing means a new obligation that satisfies and replaces an 
existing obligation by the same borrower, in which:
    (1) For coverage purposes, the existing obligation is a home 
purchase loan (as determined by the lender, for example, by reference to 
available documents; or as stated by the applicant),

[[Page 107]]

and both the existing obligation and the new obligation are secured by 
first liens on dwellings; and
    (2) For reporting purposes, both the existing obligation and the new 
obligation are secured by liens on dwellings.



Sec. 1003.3  Exempt institutions.

    (a) Exemption based on state law. (1) A state-chartered or state-
licensed financial institution is exempt from the requirements of this 
part if the Bureau determines that the institution is subject to a state 
disclosure law that contains requirements substantially similar to those 
imposed by this part and that contains adequate provisions for 
enforcement.
    (2) Any state, state-chartered or state-licensed financial 
institution, or association of such institutions, may apply to the 
Bureau for an exemption under paragraph (a) of this section.
    (3) An institution that is exempt under paragraph (a) of this 
section shall use the disclosure form required by its state law and 
shall submit the data required by that law to its state supervisory 
agency for purposes of aggregation.
    (b) Loss of exemption. An institution losing a state-law exemption 
under paragraph (a) of this section shall comply with this part 
beginning with the calendar year following the year for which it last 
reported loan data under the state disclosure law.



Sec. 1003.4  Compilation of loan data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for, and originations and purchases 
of, home purchase loans, home improvement loans, and refinancings for 
each calendar year. An institution is required to collect data regarding 
requests under a preapproval program (as defined in Sec. 1003.2) only if 
the preapproval request is denied or results in the origination of a 
home purchase loan. All reportable transactions shall be recorded, 
within thirty calendar days after the end of the calendar quarter in 
which final action is taken (such as origination or purchase of a loan, 
or denial or withdrawal of an application), on a register in the format 
prescribed in appendix A of this part. The data recorded shall include 
the following items:
    (1) An identifying number for the loan or loan application, and the 
date the application was received.
    (2) The type of loan or application.
    (3) The purpose of the loan or application.
    (4) Whether the application is a request for preapproval and whether 
it resulted in a denial or in an origination.
    (5) The property type to which the loan or application relates.
    (6) The owner-occupancy status of the property to which the loan or 
application relates.
    (7) The amount of the loan or the amount applied for.
    (8) The type of action taken, and the date.
    (9) The location of the property to which the loan or application 
relates, by MSA or by Metropolitan Division, by state, by county, and by 
census tract, if the institution has a home or branch office in that MSA 
or Metropolitan Division.
    (10) The ethnicity, race, and sex of the applicant or borrower, and 
the gross annual income relied on in processing the application.
    (11) The type of entity purchasing a loan that the institution 
originates or purchases and then sells within the same calendar year 
(this information need not be included in quarterly updates).
    (12)(i) For originated loans subject to Regulation Z, 12 CFR part 
1026, the difference between the loan's annual percentage rate (APR) and 
the average prime offer rate for a comparable transaction as of the date 
the interest rate is set, if that difference is equal to or greater than 
1.5 percentage points for loans secured by a first lien on a dwelling, 
or equal to or greater than 3.5 percentage points for loans secured by a 
subordinate lien on a dwelling.
    (ii) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates, points, and other loan 
pricing terms currently offered to consumers by a representative sample 
of creditors for mortgage loans that have low-risk pricing 
characteristics. The Bureau publishes average prime offer rates for

[[Page 108]]

a broad range of types of transactions in tables updated at least 
weekly, as well as the methodology the Bureau uses to derive these 
rates.
    (13) Whether the loan is subject to the Home Ownership and Equity 
Protection Act of 1994, as implemented in Regulation Z (12 CFR 1026.32).
    (14) The lien status of the loan or application (first lien, 
subordinate lien, or not secured by a lien on a dwelling).
    (b) Collection of data on ethnicity, race, sex, and income. (1) A 
financial institution shall collect data about the ethnicity, race, and 
sex of the applicant or borrower as prescribed in appendix B of this 
part.
    (2) Ethnicity, race, sex, and income data may but need not be 
collected for loans purchased by the financial institution.
    (c) Optional data. A financial institution may report:
    (1) The reasons it denied a loan application;
    (2) Requests for preapproval that are approved by the institution 
but not accepted by the applicant; and
    (3) Home-equity lines of credit made in whole or in part for the 
purpose of home improvement or home purchase.
    (d) Excluded data. A financial institution shall not report:
    (1) Loans originated or purchased by the financial institution 
acting in a fiduciary capacity (such as trustee);
    (2) Loans on unimproved land;
    (3) Temporary financing (such as bridge or construction loans);
    (4) The purchase of an interest in a pool of loans (such as 
mortgage-participation certificates, mortgage-backed securities, or real 
estate mortgage investment conduits);
    (5) The purchase solely of the right to service loans; or
    (6) Loans acquired as part of a merger or acquisition, or as part of 
the acquisition of all of the assets and liabilities of a branch office 
as defined in Sec. 1003.2.
    (e) Data reporting for banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under CRA. Banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under regulations that implement the Community 
Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) shall also collect the 
location of property located outside MSAs and Metropolitan Divisions in 
which the institution has a home or branch office, or outside any MSA.



Sec. 1003.5  Disclosure and reporting.

    (a) Reporting to agency. (1) By March 1 following the calendar year 
for which the loan data are compiled, a financial institution shall send 
its complete loan/application register to the agency office specified in 
appendix A of this part. The institution shall retain a copy for its 
records for at least three years.
    (2) A subsidiary of a bank or savings association shall complete a 
separate loan/application register. The subsidiary shall submit the 
register, directly or through its parent, to the same agency as its 
parent.
    (b) Public disclosure of statement. (1) The Federal Financial 
Institutions Examination Council (FFIEC) will prepare a disclosure 
statement from the data each financial institution submits.
    (2) An institution shall make its disclosure statement (prepared by 
the FFIEC) available to the public at the institution's home office no 
later than three business days after receiving the disclosure statement 
from the FFIEC.
    (3) In addition, an institution shall either:
    (i) Make its disclosure statement available to the public, within 
ten business days of receiving it, in at least one branch office in each 
other MSA and each other Metropolitan Division where the institution has 
offices (the disclosure statement need only contain data relating to the 
MSA or Metropolitan Division where the branch is located); or
    (ii) Post the address for sending written requests in the lobby of 
each branch office in other MSAs and Metropolitan Divisions where the 
institution has offices; and mail or deliver a copy of the disclosure 
statement within fifteen calendar days of receiving a written request 
(the disclosure statement need only contain data relating to the MSA or 
Metropolitan Division for which the request is made). Including

[[Page 109]]

the address in the general notice required under paragraph (e) of this 
section satisfies this requirement.
    (c) Public disclosure of modified loan/application register. A 
financial institution shall make its loan/application register available 
to the public after removing the following information regarding each 
entry: The application or loan number, the date that the application was 
received, and the date action was taken. An institution shall make its 
modified register available following the calendar year for which the 
data are compiled, by March 31 for a request received on or before March 
1, and within thirty calendar days for a request received after March 1. 
The modified register need only contain data relating to the MSA or 
Metropolitan Division for which the request is made.
    (d) Availability of data. A financial institution shall make its 
modified register available to the public for a period of three years 
and its disclosure statement available for a period of five years. An 
institution shall make the data available for inspection and copying 
during the hours the office is normally open to the public for business. 
It may impose a reasonable fee for any cost incurred in providing or 
reproducing the data.
    (e) Notice of availability. A financial institution shall post a 
general notice about the availability of its HMDA data in the lobby of 
its home office and of each branch office located in an MSA and 
Metropolitan Division. An institution shall provide promptly upon 
request the location of the institution's offices where the statement is 
available for inspection and copying, or it may include the location in 
the lobby notice.
    (f) Loan aggregation and central data depositories. Using the loan 
data submitted by financial institutions, the FFIEC will produce reports 
for individual institutions and reports of aggregate data for each MSA 
and Metropolitan Division, showing lending patterns by property 
location, age of housing stock, and income level, sex, ethnicity, and 
race. These reports will be available to the public at central data 
depositories located in each MSA and Metropolitan Division. A listing of 
central data depositories can be obtained from the Federal Financial 
Institutions Examination Council, Washington, DC 20006.



Sec. 1003.6  Enforcement.

    (a) Administrative enforcement. A violation of the Act or this part 
is subject to administrative sanctions as provided in section 305 of the 
Act, including the imposition of civil money penalties, where 
applicable. Compliance is enforced by the agencies listed in section 305 
of the Act (12 U.S.C. 2804).
    (b) Bona fide errors. (1) An error in compiling or recording loan 
data is not a violation of the act or this part if the error was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such errors.
    (2) An incorrect entry for a census tract number is deemed a bona 
fide error, and is not a violation of the act or this part, provided 
that the institution maintains procedures reasonably adapted to avoid 
such errors.
    (3) If an institution makes a good-faith effort to record all data 
concerning covered transactions fully and accurately within thirty 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the error or omission is not a 
violation of the act or this part provided that the institution corrects 
or completes the information prior to submitting the loan/application 
register to its regulatory agency.



 Sec. Appendix A to Part 1003--Form and Instructions for Completion of 
                     HMDA Loan/Application Register

                     Paperwork Reduction Act Notice

    This report is required by law (12 U.S.C. 2801-2810 and 12 CFR 
1003). An agency may not conduct or sponsor, and an organization is not 
required to respond to, a collection of information unless it displays a 
valid Office of Management and Budget (OMB) Control Number. See 12 CFR 
1003.1(a) for the valid OMB Control Numbers applicable to this 
information collection. Send comments regarding this burden estimate or 
any other aspect of this collection of information, including 
suggestions for reducing the burden, to the respective agencies and to 
OMB, Office of Information and Regulatory Affairs, Paperwork Reduction 
Project, Washington,

[[Page 110]]

DC 20503. Be sure to reference the applicable agency and the OMB Control 
Number, as found in 12 CFR 1003.1(a), when submitting comments to OMB.

       I. Instructions for Completion of Loan/Application Register

                   A. Application or Loan Information

    1. Application or Loan Number. Enter an identifying loan number that 
can be used later to retrieve the loan or application file. It can be 
any number of your institution's choosing (not exceeding 25 characters). 
You may use letters, numerals, or a combination of both.
    2. Date Application Received. Enter the date the loan application 
was received by your institution by month, day, and year. If your 
institution normally records the date shown on the application form you 
may use that date instead. Enter ``NA'' for loans purchased by your 
institution. For paper submissions only, use numerals in the form MM/DD/
YYYY (for example, 01/15/2003). For submissions in electronic form, the 
proper format is YYYYMMDD.
    3. Type of Loan or Application. Indicate the type of loan or 
application by entering the applicable Code from the following:

Code 1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
Code 2--FHA-insured (Federal Housing Administration)
Code 3--VA-guaranteed (Veterans Administration)
Code 4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing 
Service)

    4. Property Type. Indicate the property type by entering the 
applicable Code from the following:

Code 1--One-to four-family dwelling (other than manufactured housing)
Code 2--Manufactured housing
Code 3--Multifamily dwelling

    a. Use Code 1, not Code 3, for loans on individual condominium or 
cooperative units.
    b. If you cannot determine (despite reasonable efforts to find out) 
whether the loan or application relates to a manufactured home, use Code 
1.
    5. Purpose of Loan or Application. Indicate the purpose of the loan 
or application by entering the applicable Code from the following:

Code 1--Home purchase
Code 2--Home improvement
Code 3--Refinancing

    a. Do not report a refinancing if, under the loan agreement, you 
were unconditionally obligated to refinance the obligation, or you were 
obligated to refinance the obligation subject to conditions within the 
borrower's control.
    6. Owner Occupancy. Indicate whether the property to which the loan 
or loan application relates is to be owner-occupied as a principal 
residence by entering the applicable Code from the following:

Code 1--Owner-occupied as a principal dwelling
Code 2--Not owner-occupied as a principal dwelling
Code 3--Not applicable

    a. For purchased loans, use Code 1 unless the loan documents or 
application indicate that the property will not be owner-occupied as a 
principal residence.
    b. Use Code 2 for second homes or vacation homes, as well as for 
rental properties.
    c. Use Code 3 if the property to which the loan relates is a 
multifamily dwelling; is not located in an MSA; or is located in an MSA 
or an MD in which your institution has neither a home nor a branch 
office. Alternatively, at your institution's option, you may report the 
actual occupancy status, using Code 1 or 2 as applicable.
    7. Loan Amount. Enter the amount of the loan or application. Do not 
report loans below $500. Show the amount in thousands, rounding to the 
nearest thousand (round $500 up to the next $1,000). For example, a loan 
for $167,300 should be entered as 167 and one for $15,500 as 16.
    a. For a home purchase loan that you originated, enter the principal 
amount of the loan.
    b. For a home purchase loan that you purchased, enter the unpaid 
principal balance of the loan at the time of purchase.
    c. For a home improvement loan, enter the entire amount of the 
loan--including unpaid finance charges if that is how such loans are 
recorded on your books--even if only a part of the proceeds is intended 
for home improvement.
    d. If you opt to report home-equity lines of credit, report only the 
portion of the line intended for home improvement or home purchase.
    e. For a refinancing, indicate the total amount of the refinancing, 
including both the amount outstanding on the original loan and any 
amount of ``new money.''
    f. For a loan application that was denied or withdrawn, enter the 
amount for which the applicant applied.
    8. Request for Preapproval of a Home Purchase Loan. Indicate whether 
the application or loan involved a request for preapproval of a home 
purchase loan by entering the applicable Code from the following:

Code 1--Preapproval requested
Code 2--Preapproval not requested
Code 3--Not applicable

    a. Enter Code 2 if your institution has a covered preapproval 
program but the applicant does not request a preapproval.

[[Page 111]]

    b. Enter Code 3 if your institution does not have a preapproval 
program as defined in Sec. 1003.2.
    c. Enter Code 3 for applications or loans for home improvement or 
refinancing, and for purchased loans.

                             B. Action Taken

    1. Type of Action. Indicate the type of action taken on the 
application or loan by using one of the following Codes.

Code 1--Loan originated
Code 2--Application approved but not accepted
Code 3--Application denied
Code 4--Application withdrawn
Code 5--File closed for incompleteness
Code 6--Loan purchased by your institution
Code 7--Preapproval request denied
Code 8--Preapproval request approved but not accepted (optional 
reporting)

    a. Use Code 1 for a loan that is originated, including one resulting 
from a request for preapproval.
    b. For a counteroffer (your offer to the applicant to make the loan 
on different terms or in a different amount from the terms or amount 
applied for), use Code 1 if the applicant accepts. Use Code 3 if the 
applicant turns down the counteroffer or does not respond.
    c. Use Code 2 when the application is approved but the applicant (or 
the loan broker or correspondent) fails to respond to your notification 
of approval or your commitment letter within the specified time. Do not 
use this Code for a preapproval request.
    d. Use Code 4 only when the application is expressly withdrawn by 
the applicant before a credit decision is made. Do not use Code 4 if a 
request for preapproval is withdrawn; preapproval requests that are 
withdrawn are not reported under HMDA.
    e. Use Code 5 if you sent a written notice of incompleteness under 
Sec. 1002.9(c)(2) of Regulation B (Equal Credit Opportunity) and the 
applicant did not respond to your request for additional information 
within the period of time specified in your notice. Do not use this Code 
for requests for preapproval that are incomplete; these preapproval 
requests are not reported under HMDA.
    2. Date of Action. For paper submissions only, enter the date by 
month, day, and year, using numerals in the form MM/DD/YYYY (for 
example, 02/22/2003). For submissions in electronic form, the proper 
format is YYYYMMDD.
    a. For loans originated, enter the settlement or closing date.
    b. For loans purchased, enter the date of purchase by your 
institution.
    c. For applications and preapprovals denied, applications and 
preapprovals approved but not accepted by the applicant, and files 
closed for incompleteness, enter the date that the action was taken by 
your institution or the date the notice was sent to the applicant.
    d. For applications withdrawn, enter the date you received the 
applicant's express withdrawal, or enter the date shown on the 
notification from the applicant, in the case of a written withdrawal.
    e. For preapprovals that lead to a loan origination, enter the date 
of the origination.

                          C. Property Location

    Except as otherwise provided, enter in these columns the applicable 
Codes for the MSA, or the MD if the MSA is divided into MDs, state, 
county, and census tract to indicate the location of the property to 
which a loan relates.
    1. MSA or Metropolitan Division.--For each loan or loan application, 
enter the MSA, or the MD number if the MSA is divided into MDs. MSA and 
MD boundaries are defined by OMB; use the boundaries that were in effect 
on January 1 of the calendar year for which you are reporting. A listing 
of MSAs and MDs is available from the appropriate Federal agency to 
which you report data or the FFIEC.
    2. State and County. Use the Federal Information Processing Standard 
(FIPS) two-digit numerical code for the state and the three-digit 
numerical code for the county. These codes are available from the 
appropriate Federal agency to which you report data or the FFIEC.
    3. Census Tract.--Indicate the census tract where the property is 
located. Notwithstanding paragraph 6, if the property is located in a 
county with a population of 30,000 or less in the 2000 Census, enter 
``NA'' (even if the population has increased above 30,000 since 2000), 
or enter the census tract number. County population data can be obtained 
from the U.S. Census Bureau.
    4. Census Tract Number.--For the census tract number, consult the 
resources provided by the U.S. Census Bureau or the FFIEC.
    5. Property Located Outside MSAs or Metropolitan Divisions.--For 
loans on property located outside the MSAs and MDs in which an 
institution has a home or branch office, or for property located outside 
of any MSA or MD, the institution may choose one of the following two 
options. Under option one, the institution may enter the MSA or MD, 
state and county codes and the census tract number; and if the property 
is not located in any MSA or MD, the institution may enter ``NA'' in the 
MSA or MD column. (Codes exist for all states and counties and numbers 
exist for all census tracts.) Under this first option, the codes and 
census tract number must accurately identify the property location. 
Under the second option, which is not available if paragraph 6 applies, 
an institution

[[Page 112]]

may enter ``NA'' in all four columns, whether or not the codes or 
numbers exist for the property location.
    6. Data Reporting for Banks and Savings Associations Required To 
Report Data on Small Business, Small Farm, and Community Development 
Lending Under the CRA Regulations.--If your institution is a bank or 
savings association that is required to report data under the 
regulations that implement the CRA, you must enter the property location 
on your HMDA/LAR even if the property is outside the MSAs or MDs in 
which you have a home or branch office, or is not located in any MSA.
    7. Requests for Preapproval. Notwithstanding paragraphs 1 through 6, 
if the application is a request for preapproval that is denied or that 
is approved but not accepted by the applicant, you may enter ``NA'' in 
all four columns.

       D. Applicant Information--Ethnicity, Race, Sex, and Income

    Appendix B contains instructions for the collection of data on 
ethnicity, race, and sex, and also contains a sample form for data 
collection.
    1. Applicability. Report this information for loans that you 
originate as well as for applications that do not result in an 
origination.
    a. You need not collect or report this information for loans 
purchased. If you choose not to report this information, use the Codes 
for ``not applicable.''
    b. If the borrower or applicant is not a natural person (a 
corporation or partnership, for example), use the Codes for ``not 
applicable.''
    2. Mail, Internet, or Telephone Applications.--All loan 
applications, including applications taken by mail, internet, or 
telephone must use a collection form similar to that shown in appendix B 
regarding ethnicity, race, and sex. For applications taken by telephone, 
the information in the collection form must be stated orally by the 
lender, except for information that pertains uniquely to applications 
taken in writing. If the applicant does not provide these data in an 
application taken by mail or telephone or on the internet, enter the 
Code for ``information not provided by applicant in mail, internet, or 
telephone application'' specified in paragraphs I.D.3., 4., and 5. of 
this appendix. (See appendix B for complete information on the 
collection of these data in mail, Internet, or telephone applications.)
    3. Ethnicity of Borrower or Applicant. Use the following Codes to 
indicate the ethnicity of the applicant or borrower under column ``A'' 
and of any co-applicant or co-borrower under column ``CA.''

Code 1--Hispanic or Latino
Code 2--Not Hispanic or Latino
Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant

    4. Race of Borrower or Applicant. Use the following Codes to 
indicate the race of the applicant or borrower under column ``A'' and of 
any co-applicant or co-borrower under column ``CA.''

Code 1--American Indian or Alaska Native
Code 2--Asian
Code 3--Black or African American
Code 4--Native Hawaiian or Other Pacific Islander
Code 5--White
Code 6--Information not provided by applicant in mail, internet, or 
telephone application
Code 7--Not applicable
Code 8--No co-applicant

    a. If an applicant selects more than one racial designation, enter 
all Codes corresponding to the applicant's selections.
    b. Use Code 4 (for ethnicity) and Code 7 (for race) for ``not 
applicable'' only when the applicant or co-applicant is not a natural 
person or when applicant or co-applicant information is unavailable 
because the loan has been purchased by your institution.
    c. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the application 
form. If there are no co-applicants or co-borrowers, use Code 5 (for 
ethnicity) and Code 8 (for race) for ``no co-applicant'' in the co-
applicant column.
    5. Sex of Borrower or Applicant. Use the following Codes to indicate 
the sex of the applicant or borrower under column ``A'' and of any co-
applicant or co-borrower under column ``CA.''

Code 1--Male
Code 2--Female
Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant or co-borrower

    a. Use Code 4 for ``not applicable'' only when the applicant or co-
applicant is not a natural person or when applicant or co-applicant 
information is unavailable because the loan has been purchased by your 
institution.
    b. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the application 
form. If there are no co-applicants or co-borrowers, use Code 5 for ``no 
co-applicant'' in the co-applicant column.
    6. Income. Enter the gross annual income that your institution 
relied on in making the credit decision.
    a. Round all dollar amounts to the nearest thousand (round $500 up 
to the next $1,000),

[[Page 113]]

and show in thousands. For example, report $35,500 as 36.
    b. For loans on multifamily dwellings, enter ``NA.''
    c. If no income information is asked for or relied on in the credit 
decision, enter ``NA.''
    d. If the applicant or co-applicant is not a natural person or the 
applicant or co-applicant information is unavailable because the loan 
has been purchased by your institution, enter ``NA.''

                          E. Type of Purchaser

    Enter the applicable Code to indicate whether a loan that your 
institution originated or purchased was then sold to a secondary market 
entity within the same calendar year:

Code 0--Loan was not originated or was not sold in calendar year covered 
by register
Code 1--Fannie Mae
Code 2--Ginnie Mae
Code 3--Freddie Mac
Code 4--Farmer Mac
Code 5--Private securitization
Code 6--Commercial bank, savings bank, or savings association
Code 7--Life insurance company, credit union, mortgage bank, or finance 
company
Code 8--Affiliate institution
Code 9--Other type of purchaser

    a. Use Code 0 for applications that were denied, withdrawn, or 
approved but not accepted by the applicant; and for files closed for 
incompleteness.
    b. Use Code 0 if you originated or purchased a loan and did not sell 
it during that same calendar year. If you sell the loan in a succeeding 
year, you need not report the sale.
    c. Use Code 2 if you conditionally assign a loan to Ginnie Mae in 
connection with a mortgage-backed security transaction.
    d. Use Code 8 for loans sold to an institution affiliated with you, 
such as your subsidiary or a subsidiary of your parent corporation.

                          F. Reasons for Denial

    1. You may report the reason for denial, and you may indicate up to 
three reasons, using the following Codes. Leave this column blank if the 
``action taken'' on the application is not a denial. For example, do not 
complete this column if the application was withdrawn or the file was 
closed for incompleteness.

Code 1--Debt-to-income ratio
Code 2--Employment history
Code 3--Credit history
Code 4--Collateral
Code 5--Insufficient cash (downpayment, closing costs)
Code 6--Unverifiable information
Code 7--Credit application incomplete
Code 8--Mortgage insurance denied
Code 9--Other

    2. If your institution uses the model form for adverse action 
contained in appendix C to Regulation B (Form C-1, Sample Notification 
Form), use the foregoing Codes as follows:
    a. Code 1 for: Income insufficient for amount of credit requested, 
and Excessive obligations in relation to income.
    b. Code 2 for: Temporary or irregular employment, and Length of 
employment.
    c. Code 3 for: Insufficient number of credit references provided; 
Unacceptable type of credit references provided; No credit file; Limited 
credit experience; Poor credit performance with us; Delinquent past or 
present credit obligations with others; Garnishment, attachment, 
foreclosure, repossession, collection action, or judgment; and 
Bankruptcy.
    d. Code 4 for: Value or type of collateral not sufficient.
    e. Code 6 for: Unable to verify credit references; Unable to verify 
employment; Unable to verify income; and Unable to verify residence.
    f. Code 7 for: Credit application incomplete.
    g. Code 9 for: Length of residence; Temporary residence; and Other 
reasons specified on notice.

                         G. Pricing-Related Data

    1. Rate Spread. a. For a home-purchase loan, a refinancing, or a 
dwelling-secured home improvement loan that you originated, report the 
spread between the annual percentage rate (APR) and the average prime 
offer rate for a comparable transaction if the spread is equal to or 
greater than 1.5 percentage points for first-lien loans or 3.5 
percentage points for subordinate-lien loans. To determine whether the 
rate spread meets this threshold, use the average prime offer rate in 
effect for the type of transaction as of the date the interest rate was 
set, and use the APR for the loan, as calculated and disclosed to the 
consumer under Sec. Sec. 1026.6 or 1026.18, as applicable, of Regulation 
Z (12 CFR part 1026). Current and historic average prime offer rates are 
set forth in the tables published on the FFIEC's Web site (http://
www.ffiec.gov/hmda) entitled ``Average Prime Offer Rates-Fixed'' and 
``Average Prime Offer Rates-Adjustable.'' Use the most recently 
available average prime offer rate. ``Most recently available'' means 
the average prime offer rate set forth in the applicable table with the 
most recent effective date as of the date the interest rate was set. Do 
not use an average prime offer rate before its effective date.
    b. If the loan is not subject to Regulation Z, or is a home 
improvement loan that is not dwelling-secured, or is a loan that you 
purchased, enter ``NA.''

[[Page 114]]

    c. Enter ``NA'' in the case of an application that does not result 
in a loan origination.
    d. Enter the rate spread to two decimal places, and use a leading 
zero. For example, enter 03.29. If the difference between the APR and 
the average prime offer rate is a figure with more than two decimal 
places, round the figure or truncate the digits beyond two decimal 
places.
    e. If the difference between the APR and the average prime offer 
rate is less than 1.5 percentage points for a first-lien loan and less 
than 3.5 percentage points for a subordinate-lien loan, enter ``NA.''
    2. Date the interest rate was set. The relevant date to use to 
determine the average prime offer rate for a comparable transaction is 
the date on which the loan's interest rate was set by the financial 
institution for the final time before closing. If an interest rate is 
set pursuant to a ``lock-in'' agreement between the lender and the 
borrower, then the date on which the agreement fixes the interest rate 
is the date the rate was set. If a rate is re-set after a lock-in 
agreement is executed (for example, because the borrower exercises a 
float-down option or the agreement expires), then the relevant date is 
the date the rate is re-set for the final time before closing. If no 
lock-in agreement is executed, then the relevant date is the date on 
which the institution sets the rate for the final time before closing.
    3. HOEPA Status. a. For a loan that you originated or purchased that 
is subject to the Home Ownership and Equity Protection Act of 1994 
(HOEPA), as implemented in Regulation Z (12 CFR 1026.32), because the 
APR or the points and fees on the loan exceed the HOEPA triggers, enter 
Code 1.
    b. Enter Code 2 in all other cases. For example, enter Code 2 for a 
loan that you originated or purchased that is not subject to the 
requirements of HOEPA for any reason; also enter Code 2 in the case of 
an application that does not result in a loan origination.

                             H. Lien Status

    Use the following Codes for loans that you originate and for 
applications that do not result in an origination:

Code 1--Secured by a first lien.
Code 2--Secured by a subordinate lien.
Code 3--Not secured by a lien.
Code 4--Not applicable (purchased loan).

    a. Use Codes 1 through 3 for loans that you originate, as well as 
for applications that do not result in an origination (applications that 
are approved but not accepted, denied, withdrawn, or closed for 
incompleteness).
    b. Use Code 4 for loans that you purchase.

           II. Appropriate Federal Agencies for HMDA Reporting

    A. You are strongly encouraged to submit your loan/application 
register via email. If you elect to use this method of transmission and 
the appropriate Federal agency for your institution is the Bureau of 
Consumer Financial Protection, the Office of the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, or the National 
Credit Union Administration, then you should submit your institution's 
files to the email address dedicated to that purpose by the Bureau, 
which can be found on the Web site of the FFIEC. If one of the foregoing 
agencies is the appropriate Federal agency for your institution and you 
elect to submit your data by regular mail, then use the following 
address: HMDA, Federal Reserve Board, Attention: HMDA Processing, 
(insert name of the appropriate Federal agency for your institution), 
20th & Constitution Ave NW., MS N502, Washington, DC 20551-0001.
    B. If the Federal Reserve System (but not the Bureau of Consumer 
Financial Protection) is the appropriate Federal agency for your 
institution, you should use the email or regular mail address of your 
district bank indicated on the Web site of the FFIEC. If the Department 
of Housing and Urban Development is the appropriate Federal agency for 
your institution, then you should use the email or regular mail address 
indicated on the Web site of the FFIEC.

[[Page 115]]

[GRAPHIC] [TIFF OMITTED] TR19DE11.016


[[Page 116]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.017


[[Page 117]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.018


[[Page 118]]





Sec. Appendix B to Part 1003--Form and Instructions for Data Collection 
                       on Ethnicity, Race, and Sex

    I. Instructions on Collection of Data on Ethnicity, Race, and Sex

    You may list questions regarding the ethnicity, race, and sex of the 
applicant on your loan application form, or on a separate form that 
refers to the application. (See the sample form below for model 
language.)

                             II. Procedures

    A. You must ask the applicant for this information (but you cannot 
require the applicant to provide it) whether the application is taken in 
person, by mail or telephone, or on the internet. For applications taken 
by telephone, the information in the collection form must be stated 
orally by the lender, except for that information which pertains 
uniquely to applications taken in writing.
    B. Inform the applicant that the Federal government requests this 
information in order to monitor compliance with Federal statutes that 
prohibit lenders from discriminating against applicants on these bases. 
Inform the applicant that if the information is not provided where the 
application is taken in person, you are required to note the data on the 
basis of visual observation or surname.
    C. You must offer the applicant the option of selecting one or more 
racial designations.
    D. If the applicant chooses not to provide the information for an 
application taken in person, note this fact on the form and then note 
the applicant's ethnicity, race, and sex on the basis of visual 
observation and surname, to the extent possible.
    E. If the applicant declines to answer these questions or fails to 
provide the information on an application taken by mail or telephone or 
on the internet, the data need not be provided. In such a case, indicate 
that the application was received by mail, telephone, or Internet, if it 
is not otherwise evident on the face of the application.

[[Page 119]]

[GRAPHIC] [TIFF OMITTED] TR19DE11.019


[76 FR 78468, Dec. 19, 2011, as amended at 77 FR 8722, Feb. 15, 2012]



            Sec. Supplement I to Part 1003--Staff Commentary

                              Introduction

    1. Status. The commentary in this supplement is the vehicle by which 
the Bureau of Consumer Financial Protection issues formal staff 
interpretations of Regulation C (12 CFR part 1003).

              Section 1003.1--Authority, Purpose, and Scope

    1(c) Scope.
    1. General. The comments in this section address issues affecting 
coverage of institutions and exemptions from coverage.
    2. The broker rule and the meaning of ``broker'' and ``investor.'' 
For the purposes of the guidance given in this commentary, an 
institution that takes and processes a loan

[[Page 120]]

application and arranges for another institution to acquire the loan at 
or after closing is acting as a ``broker,'' and an institution that 
acquires a loan from a broker at or after closing is acting as an 
``investor.'' (The terms used in this commentary may have different 
meanings in certain parts of the mortgage lending industry, and other 
terms may be used in place of these terms, for example in the Federal 
Housing Administration mortgage insurance programs.) Depending on the 
facts, a broker may or may not make a credit decision on an application 
(and thus it may or may not have reporting responsibilities). If the 
broker makes a credit decision, it reports that decision; if it does not 
make a credit decision, it does not report. If an investor reviews an 
application and makes a credit decision prior to closing, the investor 
reports that decision. If the investor does not review the application 
prior to closing, it reports only the loans that it purchases; it does 
not report the loans it does not purchase. An institution that makes a 
credit decision on an application prior to closing reports that decision 
regardless of whose name the loan closes in.
    3. Illustrations of the broker rule. Assume that, prior to closing, 
four investors receive the same application from a broker; two deny it, 
one approves it, and one approves it and acquires the loan. In these 
circumstances, the first two report denials, the third reports the 
transaction as approved but not accepted, and the fourth reports an 
origination (whether the loan closes in the name of the broker or the 
investor). Alternatively, assume that the broker denies a loan before 
sending it to an investor; in this situation, the broker reports a 
denial.
    4. Broker's use of investor's underwriting criteria. If a broker 
makes a credit decision based on underwriting criteria set by an 
investor, but without the investor's review prior to closing, the broker 
has made the credit decision. The broker reports as an origination a 
loan that it approves and closes, and reports as a denial an application 
that it turns down (either because the application does not meet the 
investor's underwriting guidelines or for some other reason). The 
investor reports as purchases only those loans it purchases.
    5. Insurance and other criteria. If an institution evaluates an 
application based on the criteria or actions of a third party other than 
an investor (such as a government or private insurer or guarantor), the 
institution must report the action taken on the application (loan 
originated, approved but not accepted, or denied, for example).
    6. Credit decision of agent is decision of principal. If an 
institution approves loans through the actions of an agent, the 
institution must report the action taken on the application (loan 
originated, approved but not accepted, or denied, for example). State 
law determines whether one party is the agent of another.
    7. Affiliate bank underwriting (250.250 review). If an institution 
makes an independent evaluation of the creditworthiness of an applicant 
(for example, as part of a preclosing review by an affiliate bank under 
12 CFR 250.250, a regulation of the Board of Governors of the Federal 
Reserve System that interprets section 23A of the Federal Reserve Act), 
the institution is making a credit decision. If the institution then 
acquires the loan, it reports the loan as an origination whether the 
loan closes in the name of the institution or its affiliate. An 
institution that does not acquire the loan but takes some other action 
reports that action.
    8. Participation loan. An institution that originates a loan and 
then sells partial interests to other institutions reports the loan as 
an origination. An institution that acquires only a partial interest in 
such a loan does not report the transaction even if it has participated 
in the underwriting and origination of the loan.
    9. Assumptions. An assumption occurs when an institution enters into 
a written agreement accepting a new borrower as the obligor on an 
existing obligation. An institution reports an assumption (or an 
application for an assumption) as a home purchase loan in the amount of 
the outstanding principal. If a transaction does not involve a written 
agreement between a new borrower and the institution, it is not an 
assumption for HMDA purposes and is not reported.

                       Section 1003.2--Definitions

    Application.
    1. Consistency With Regulation B. Bureau interpretations that appear 
in the official staff commentary to Regulation B (Equal Credit 
Opportunity, 12 CFR part 1002, Supplement I) are generally applicable to 
the definition of an application under Regulation C. However, under 
Regulation C the definition of an application does not include 
prequalification requests.
    2. Prequalification. A prequalification request is a request by a 
prospective loan applicant (other than a request for preapproval) for a 
preliminary determination on whether the prospective applicant would 
likely qualify for credit under an institution's standards, or for a 
determination on the amount of credit for which the prospective 
applicant would likely qualify. Some institutions evaluate 
prequalification requests through a procedure that is separate from the 
institution's normal loan application process; others use the same 
process. In either case, Regulation C does not require an institution to 
report prequalification requests on the HMDA/LAR, even though these 
requests may constitute applications under Regulation B for purposes of 
adverse action notices.

[[Page 121]]

    3. Requests for preapproval. To be a covered preapproval program, 
the written commitment issued under the program must result from a full 
review of the creditworthiness of the applicant, including such 
verification of income, resources and other matters as is typically done 
by the institution as part of its normal credit evaluation program. In 
addition to conditions involving the identification of a suitable 
property and verification that no material change has occurred in the 
applicant's financial condition or creditworthiness, the written 
commitment may be subject only to other conditions (unrelated to the 
financial condition or creditworthiness of the applicant) that the 
lender ordinarily attaches to a traditional home mortgage application 
approval. These conditions are limited to conditions such as requiring 
an acceptable title insurance binder or a certificate indicating clear 
termite inspection, and, in the case where the applicant plans to use 
the proceeds from the sale of the applicant's present home to purchase a 
new home, a settlement statement showing adequate proceeds from the sale 
of the present home.
    Branch office.
    1. Credit union. For purposes of Regulation C, a ``branch'' of a 
credit union is any office where member accounts are established or 
loans are made, whether or not the office has been approved as a branch 
by a Federal or state agency. (See 12 U.S.C. 1752.)
    2. Depository institution. A branch of a depository institution does 
not include a loan-production office, the office of an affiliate, or the 
office of a third party such as a loan broker. (But see appendix A, 
paragraph I.C.6, which requires certain depository institutions to 
report property location even for properties located outside those MSAs 
or Metropolitan Divisions in which the institution has a home or branch 
office.)
    3. Nondepository institution. For a nondepository institution, 
``branch office'' does not include the office of an affiliate or other 
third party such as a loan broker. (But note that certain nondepository 
institutions must report property location even in MSAs or Metropolitan 
Divisions where they do not have a physical location.)
    Dwelling.
    1. Coverage. The definition of ``dwelling'' is not limited to the 
principal or other residence of the applicant or borrower, and thus 
includes vacation or second homes and rental properties. A dwelling also 
includes a multifamily structure such as an apartment building.
    2. Exclusions. Recreational vehicles such as boats or campers are 
not dwellings for purposes of HMDA. Also excluded are transitory 
residences such as hotels, hospitals, and college dormitories, whose 
occupants have principal residences elsewhere.
    Financial institution.
    1. General. An institution that met the test for coverage under HMDA 
in year 1, and then ceases to meet the test (for example, because its 
assets fall below the threshold on December 31 of year 2) stops 
collecting HMDA data beginning with year 3. Similarly, an institution 
that did not meet the coverage test for a given year, and then meets the 
test in the succeeding year, begins collecting HMDA data in the calendar 
year following the year in which it meets the test for coverage. For 
example, a for-profit mortgage lending institution (other than a bank, 
savings association, or credit union) that, in year 1, falls below the 
thresholds specified in the definition of Financial institution in 
Sec. 1003.2, but meets one of them in year 2, need not collect data in 
year 2, but begins collecting data in year 3.
    2. Adjustment of exemption threshold for banks, savings 
associations, and credit unions. For data collection in 2015, the asset-
size exemption threshold is $44 million. Banks, savings associations, 
and credit unions with assets at or below $44 million as of December 31, 
2014, are exempt from collecting data for 2015.
    3. Coverage after a merger. Several scenarios of data-collection 
responsibilities for the calendar year of a merger are described below. 
Under all the scenarios, if the merger results in a covered institution, 
that institution must begin data collection January 1 of the following 
calendar year.
    i. Two institutions are not covered by Regulation C because of asset 
size. The institutions merge. No data collection is required for the 
year of the merger (even if the merger results in a covered 
institution).
    ii. A covered institution and an exempt institution merge. The 
covered institution is the surviving institution. For the year of the 
merger, data collection is required for the covered institution's 
transactions. Data collection is optional for transactions handled in 
offices of the previously exempt institution.
    iii. A covered institution and an exempt institution merge. The 
exempt institution is the surviving institution, or a new institution is 
formed. Data collection is required for transactions of the covered 
institution that take place prior to the merger. Data collection is 
optional for transactions taking place after the merger date.
    iv. Two covered institutions merge. Data collection is required for 
the entire year. The surviving or resulting institution files either a 
consolidated submission or separate submissions for that year.
    4. Originations. HMDA coverage depends in part on whether an 
institution has originated home purchase loans. To determine whether 
activities with respect to a particular loan constitute an origination, 
institutions should consult, among other parts of

[[Page 122]]

the staff commentary, the discussion of the broker rule under 
Sec. Sec. 1003.1(c) and 1003.4(a).
    5. Branches of foreign banks--treated as banks. A Federal branch or 
a state-licensed insured branch of a foreign bank is a ``bank'' under 
section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(a)), and is covered by HMDA if it meets the tests for a depository 
institution found in Sec. 1003.2 of Regulation C.
    6. Branches and offices of foreign banks--treated as for-profit 
mortgage lending institutions. Federal agencies, state-licensed 
agencies, state-licensed uninsured branches of foreign banks, commercial 
lending companies owned or controlled by foreign banks, and entities 
operating under section 25 or 25A of the Federal Reserve Act, 12 U.S.C. 
601 and 611 (Edge Act and agreement corporations) are not ``banks'' 
under the Federal Deposit Insurance Act. These entities are nonetheless 
covered by HMDA if they meet the tests for a for-profit nondepository 
mortgage lending institution found in Sec. 1003.2 of Regulation C.
    Home improvement loan.
    1. Classification requirement for loans not secured by a lien on a 
dwelling. An institution has ``classified'' a loan that is not secured 
by a lien on a dwelling as a home improvement loan if it has entered the 
loan on its books as a home improvement loan, or has otherwise coded or 
identified the loan as a home improvement loan. For example, an 
institution that has booked a loan or reported it on a ``call report'' 
as a home improvement loan has classified it as a home improvement loan. 
An institution may also classify loans as home improvement loans in 
other ways (for example, by color-coding loan files).
    2. Improvements to real property. Home improvements include 
improvements both to a dwelling and to the real property on which the 
dwelling is located (for example, installation of a swimming pool, 
construction of a garage, or landscaping).
    3. Commercial and other loans. A home improvement loan may include a 
loan originated outside an institution's residential mortgage lending 
division (such as a loan to improve an apartment building made through 
the commercial loan department).
    4. Mixed-use property. A loan to improve property used for 
residential and commercial purposes (for example, a building containing 
apartment units and retail space) is a home improvement loan if the loan 
proceeds are used primarily to improve the residential portion of the 
property. If the loan proceeds are used to improve the entire property 
(for example, to replace the heating system), the loan is a home 
improvement loan if the property itself is primarily residential. An 
institution may use any reasonable standard to determine the primary use 
of the property, such as by square footage or by the income generated. 
An institution may select the standard to apply on a case-by-case basis. 
If the loan is unsecured, to report the loan as a home improvement loan 
the institution must also have classified it as such.
    5. Multiple-category loans. If a loan is a home improvement loan as 
well as a refinancing, an institution reports the loan as a home 
improvement loan.
    Home purchase loan.
    1. Multiple properties. A home purchase loan includes a loan secured 
by one dwelling and used to purchase another dwelling.
    2. Mixed-use property. A dwelling-secured loan to purchase property 
used primarily for residential purposes (for example, an apartment 
building containing a convenience store) is a home purchase loan. An 
institution may use any reasonable standard to determine the primary use 
of the property, such as by square footage or by the income generated. 
An institution may select the standard to apply on a case-by-case basis.
    3. Farm loan. A loan to purchase property used primarily for 
agricultural purposes is not a home purchase loan even if the property 
includes a dwelling. An institution may use any reasonable standard to 
determine the primary use of the property, such as by reference to the 
exemption from Regulation X (Real Estate Settlement Procedures, 12 CFR 
1024.5(b)(1)) for a loan on property of 25 acres or more. An institution 
may select the standard to apply on a case-by-case basis.
    4. Commercial and other loans. A home purchase loan may include a 
loan originated outside an institution's residential mortgage lending 
division (such as a loan for the purchase of an apartment building made 
through the commercial loan department).
    5. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan and the permanent 
financing that replaces a construction-only loan. It does not include a 
construction-only loan, which is considered ``temporary financing'' 
under Regulation C and is not reported.
    6. Second mortgages that finance the downpayments on first 
mortgages. If an institution making a first mortgage loan to a home 
purchaser also makes a second mortgage loan to the same purchaser to 
finance part or all of the home purchaser's downpayment, the institution 
reports each loan separately as a home purchase loan.
    7. Multiple-category loans. If a loan is a home purchase loan as 
well as a home improvement loan, or a refinancing, an institution 
reports the loan as a home purchase loan.
    Manufactured home.
    1. Definition of a manufactured home. The definition in Sec. 1003.2 
refers to the Federal building code for factory-built housing 
established by the Department of Housing and Urban Development (HUD). 
The HUD code

[[Page 123]]

requires generally that housing be essentially ready for occupancy upon 
leaving the factory and being transported to a building site. Modular 
homes that meet all of the HUD code standards are included in the 
definition because they are ready for occupancy upon leaving the 
factory. Other factory-built homes, such as panelized and pre-cut homes, 
generally do not meet the HUD code because they require a significant 
amount of construction on site before they are ready for occupancy. 
Loans and applications relating to manufactured homes that do not meet 
the HUD code should not be identified as manufactured housing under 
HMDA.
    Metropolitan Statistical Areas and Metropolitan Divisions.
    1. Use of terms ``Metropolitan Statistical Area'' and ``Metropolitan 
Division.'' The U.S. Office of Management and Budget defines 
Metropolitan Statistical Areas and Metropolitan Divisions to provide 
nationally consistent definitions for collecting, tabulating, and 
publishing Federal statistics for a set of geographic areas. OMB divides 
every Metropolitan Statistical Area (MSA) with a population of 2.5 
million or more into Metropolitan Divisions (MDs); MSAs with populations 
under 2.5 million population are not so divided. 67 FR 82228 (December 
27, 2000). For all purposes under Regulation C, if an MSA is divided by 
OMB into MDs, the appropriate geographic unit to be used is the MD; if 
an MSA is not so divided by OMB into MDs, the appropriate geographic 
unit to be used is the MSA.

                Section 1003.4--Compilation of Loan Data

    4(a) Data format and itemization.
    1. Reporting requirements. i. An institution reports data on loans 
that it originated and loans that it purchased during the calendar year 
described in the report. An institution reports these data even if the 
loans were subsequently sold by the institution.
    ii. An institution reports the data for loan applications that did 
not result in originations--for example, applications that the 
institution denied or that the applicant withdrew during the calendar 
year covered by the report.
    iii. In the case of brokered loan applications or applications 
forwarded through a correspondent, the institution reports as 
originations the loans that it approved and subsequently acquired per a 
pre-closing arrangement (whether or not they closed in the institution's 
name). Additionally, the institution reports the data for all 
applications that did not result in originations--for example, 
applications that the institution denied or that the applicant withdrew 
during the calendar year covered by the report (whether or not they 
would have closed in the institution's name). For all of these loans and 
applications, the institution reports the required data regarding the 
borrower's or applicant's ethnicity, race, sex, and income.
    iv. Loan originations are to be reported only once. If the 
institution is the loan broker or correspondent, it does not report as 
originations the loans that it forwarded to another lender for approval 
prior to closing, and that were approved and subsequently acquired by 
that lender (whether or not they closed in the institution's name).
    v. An institution reports applications that were received in the 
previous calendar year but were acted upon during the calendar year 
covered by the current register.
    vi. A financial institution submits all required data to the 
appropriate Federal agency in one package, with the prescribed 
transmittal sheet. An officer of the institution certifies to the 
accuracy of the data.
    vii. The transmittal sheet states the total number of line entries 
contained in the accompanying data transmission.
    2. Updating--agency requirements. Certain state or Federal 
regulations, such as the Federal Deposit Insurance Corporation's 
regulations, may require an institution to update its data more 
frequently than is required under Regulation C.
    3. Form of quarterly updating. An institution may maintain the 
quarterly updates of the HMDA/LAR in electronic or any other format, 
provided the institution can make the information available to its 
regulatory agency in a timely manner upon request.
    Paragraph 4(a)(1).
    1. Application date--consistency. In reporting the date of 
application, an institution reports the date the application was 
received or the date shown on the application. Although an institution 
need not choose the same approach for its entire HMDA submission, it 
should be generally consistent (such as by routinely using one approach 
within a particular division of the institution or for a category of 
loans).
    2. Application date--application forwarded by a broker. For an 
application forwarded by a broker, an institution reports the date the 
application was received by the broker, the date the application was 
received by the institution, or the date shown on the application. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks an institution to reinstate a 
counteroffer that the applicant previously did not accept (or asks the 
institution to reconsider an application that was denied, withdrawn, or 
closed for incompleteness), the institution may treat that request as 
the continuation of the earlier transaction or as a new transaction. If 
the institution treats

[[Page 124]]

the request for reinstatement or reconsideration as a new transaction, 
it reports the date of the request as the application date.
    4. Application or loan number. An institution must ensure that each 
identifying number is unique within the institution. If an institution's 
register contains data for branch offices, for example, the institution 
could use a letter or a numerical code to identify the loans or 
applications of different branches, or could assign a certain series of 
numbers to particular branches to avoid duplicate numbers. Institutions 
are strongly encouraged not to use the applicant's or borrower's name or 
social security number, for privacy reasons.
    5. Application--year action taken. An institution must report an 
application in the calendar year in which the institution takes final 
action on the application.
    Paragraph 4(a)(3).
    1. Purpose--statement of applicant. An institution may rely on the 
oral or written statement of an applicant regarding the proposed use of 
loan proceeds. For example, a lender could use a check-box, or a purpose 
line, on a loan application to determine whether or not the applicant 
intends to use loan proceeds for home improvement purposes.
    2. Purpose--multiple-purpose loan. If a loan is a home purchase loan 
as well as a home improvement loan, or a refinancing, an institution 
reports the loan as a home purchase loan. If a loan is a home 
improvement loan as well as a refinancing, an institution reports the 
loan as a home improvement loan.
    Paragraph 4(a)(6).
    1. Occupancy--multiple properties. If a loan relates to multiple 
properties, the institution reports the owner occupancy status of the 
property for which property location is being reported. (See the 
comments to paragraph 4(a)(9)).
    Paragraph 4(a)(7).
    1. Loan amount--counteroffer. If an applicant accepts a counteroffer 
for an amount different from the amount initially requested, the 
institution reports the loan amount granted. If an applicant does not 
accept a counteroffer or fails to respond, the institution reports the 
loan amount initially requested.
    2. Loan amount--multiple-purpose loan. Except in the case of a home-
equity line of credit, an institution reports the entire amount of the 
loan, even if only a part of the proceeds is intended for home purchase 
or home improvement.
    3. Loan amount--home-equity line. An institution that has chosen to 
report home-equity lines of credit reports only the part that is 
intended for home-improvement or home-purchase purposes.
    4. Loan amount--assumption. An institution that enters into a 
written agreement accepting a new party as the obligor on a loan reports 
the amount of the outstanding principal on the assumption as the loan 
amount.
    Paragraph 4(a)(8).
    1. Action taken--counteroffers. If an institution makes a 
counteroffer to lend on terms different from the applicant's initial 
request (for example, for a shorter loan maturity or in a different 
amount) and the applicant does not accept the counteroffer or fails to 
respond, the institution reports the action taken as a denial on the 
original terms requested by the applicant.
    2. Action taken--rescinded transactions. If a borrower rescinds a 
transaction after closing, the institution may report the transaction 
either as an origination or as an application that was approved but not 
accepted.
    3. Action taken--purchased loans. An institution reports the loans 
that it purchased during the calendar year, and does not report the 
loans that it declined to purchase.
    4. Action taken--conditional approvals. If an institution issues a 
loan approval subject to the applicant's meeting underwriting conditions 
(other than customary loan commitment or loan-closing conditions, such 
as a clear-title requirement or an acceptable property survey) and the 
applicant does not meet them, the institution reports the action taken 
as a denial.
    5. Action taken date--approved but not accepted. For a loan approved 
by an institution but not accepted by the applicant, the institution 
reports any reasonable date, such as the approval date, the deadline for 
accepting the offer, or the date the file was closed. Although an 
institution need not choose the same approach for its entire HMDA 
submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans).
    6. Action taken date--originations. For loan originations, an 
institution generally reports the settlement or closing date. For loan 
originations that an institution acquires through a broker, the 
institution reports either the settlement or closing date, or the date 
the institution acquired the loan from the broker. If the disbursement 
of funds takes place on a date later than the settlement or closing 
date, the institution may use the date of disbursement. For a 
construction/permanent loan, the institution reports either the 
settlement or closing date, or the date the loan converts to the 
permanent financing. Although an institution need not choose the same 
approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of loans). Notwithstanding 
this flexibility regarding the use of the closing date in connection 
with reporting the date action was taken, the year in which an 
origination goes to closing is the

[[Page 125]]

year in which the institution must report the origination.
    7. Action taken--pending applications. An institution does not 
report any loan application still pending at the end of the calendar 
year; it reports that application on its register for the year in which 
final action is taken.
    Paragraph 4(a)(9).
    1. Property location--multiple properties (home improvement/
refinance of home improvement). For a home improvement loan, an 
institution reports the property being improved. If more than one 
property is being improved, the institution reports the location of one 
of the properties or reports the loan using multiple entries on its 
HMDA/LAR (with unique identifiers) and allocating the loan amount among 
the properties.
    2. Property location--multiple properties (home purchase/refinance 
of home purchase). For a home purchase loan, an institution reports the 
property taken as security. If an institution takes more than one 
property as security, the institution reports the location of the 
property being purchased if there is just one. If the loan is to 
purchase multiple properties and is secured by multiple properties, the 
institution reports the location of one of the properties or reports the 
loan using multiple entries on its HMDA/LAR (with unique identifiers) 
and allocating the loan amount among the properties.
    3. Property location--loans purchased from another institution. The 
requirement to report the property location by census tract in an MSA or 
Metropolitan Division where the institution has a home or branch office 
applies not only to loan applications and originations but also to loans 
purchased from another institution. This includes loans purchased from 
an institution that did not have a home or branch office in that MSA or 
Metropolitan Division and did not collect the property-location 
information.
    4. Property location--mobile or manufactured home. If information 
about the potential site of a mobile or manufactured home is not 
available, an institution reports using the Code for ``not applicable.''
    Paragraph 4(a)(10).
    1. Applicant data--completion by applicant. An institution reports 
the monitoring information as provided by the applicant. For example, if 
an applicant checks the ``Asian'' box the institution reports using the 
``Asian'' Code.
    2. Applicant data--completion by lender. If an applicant fails to 
provide the requested information for an application taken in person, 
the institution reports the data on the basis of visual observation or 
surname.
    3. Applicant data--application completed in person. When an 
applicant meets in person with a lender to complete an application that 
was begun by mail, internet, or telephone, the institution must request 
the monitoring information. If the meeting occurs after the application 
process is complete, for example, at closing, the institution is not 
required to obtain monitoring information.
    4. Applicant data--joint applicant. A joint applicant may enter the 
government monitoring information on behalf of an absent joint 
applicant. If the information is not provided, the institution reports 
using the Code for ``information not provided by applicant in mail, 
internet, or telephone application.''
    5. Applicant data--video and other electronic-application processes. 
An institution that accepts applications through electronic media with a 
video component treats the applications as taken in person and collects 
the information about the ethnicity, race, and sex of applicants. An 
institution that accepts applications through electronic media without a 
video component (for example, the internet or facsimile) treats the 
applications as accepted by mail.
    6. Income data--income relied on. An institution reports the gross 
annual income relied on in evaluating the creditworthiness of 
applicants. For example, if an institution relies on an applicant's 
salary to compute a debt-to-income ratio but also relies on the 
applicant's annual bonus to evaluate creditworthiness, the institution 
reports the salary and the bonus to the extent relied upon. Similarly, 
if an institution relies on the income of a cosigner to evaluate 
creditworthiness, the institution includes this income to the extent 
relied upon. But an institution does not include the income of a 
guarantor who is only secondarily liable.
    7. Income data--co-applicant. If two persons jointly apply for a 
loan and both list income on the application, but the institution relies 
only on the income of one applicant in computing ratios and in 
evaluating creditworthiness, the institution reports only the income 
relied on.
    8. Income data--loan to employee. An institution may report ``NA'' 
in the income field for loans to its employees to protect their privacy, 
even though the institution relied on their income in making its credit 
decisions.
    Paragraph 4(a)(11).
    1. Type of purchaser--loan-participation interests sold to more than 
one entity. An institution that originates a loan, and then sells it to 
more than one entity, reports the ``type of purchaser'' based on the 
entity purchasing the greatest interest, if any. If an institution 
retains a majority interest, it does not report the sale.
    2. Type of purchaser--swapped loans. Loans ``swapped'' for mortgage-
backed securities are to be treated as sales; the purchaser is the type 
of entity receiving the loans that are swapped.
    Paragraph 4(a)(12)(ii).
    1. Average prime offer rate. Average prime offer rates are annual 
percentage rates derived from average interest rates, points, and

[[Page 126]]

other loan pricing terms offered to borrowers by a representative sample 
of lenders for mortgage loans that have low-risk pricing 
characteristics. Other pricing terms include commonly used indices, 
margins, and initial fixed-rate periods for variable-rate transactions. 
Relevant pricing characteristics include a consumer's credit history and 
transaction characteristics such as the loan-to-value ratio, owner-
occupant status, and purpose of the transaction. To obtain average prime 
offer rates, the Bureau uses a survey of lenders that both meets the 
criteria of Sec. 1003.4(a)(12)(ii) and provides pricing terms for at 
least two types of variable-rate transactions and at least two types of 
non-variable-rate transactions. An example of such a survey is the 
Freddie Mac Primary Mortgage Market Survey[supreg].
    2. Comparable transaction. The rate spread reporting requirement 
applies to a reportable loan with an annual percentage rate that exceeds 
by the specified margin (or more) the average prime offer rate for a 
comparable transaction as of the date the interest rate is set. The 
tables of average prime offer rates published by the Bureau (see comment 
4(a)(12)(ii)-3) indicate how to identify the comparable transaction.
    3. Bureau tables. The Bureau publishes on the FFIEC's Web site 
(http://www.ffiec.gov/hmda), in table form, average prime offer rates 
for a wide variety of transaction types. The Bureau calculates an annual 
percentage rate, consistent with Regulation Z (see 12 CFR 1026.22 and 
part 1026, appendix J), for each transaction type for which pricing 
terms are available from the survey described in comment 4(a)(12)(ii)-1. 
The Bureau estimates annual percentage rates for other types of 
transactions for which direct survey data are not available based on the 
loan pricing terms available in the survey and other information. The 
Bureau publishes on the FFIEC's Web site the methodology it uses to 
arrive at these estimates.
    Paragraph 4(a)(14).
    1. Determining lien status for applications and loans originated. i. 
Lenders are required to report lien status for loans they originate and 
applications that do not result in originations. Lien status is 
determined by reference to the best information readily available to the 
lender at the time final action is taken and to the lender's own 
procedures. Thus, lenders may rely on the title search they routinely 
perform as part of their underwriting procedures--for example, for home 
purchase loans. Regulation C does not require lenders to perform title 
searches solely to comply with HMDA reporting requirements. Lenders may 
rely on other information that is readily available to them at the time 
final action is taken and that they reasonably believe is accurate, such 
as the applicant's statement on the application or the applicant's 
credit report. For example, where the applicant indicates on the 
application that there is a mortgage on the property or where the 
applicant's credit report shows that the applicant has a mortgage--and 
that mortgage is not going to be paid off as part of the transaction--
the lender may assume that the loan it originates is secured by a 
subordinate lien. If the same application did not result in an 
origination--for example, because the application is denied or 
withdrawn--the lender would report the application as an application for 
a subordinate-lien loan.
    ii. Lenders may also consider their established procedures when 
determining lien status for applications that do not result in 
originations. For example, a consumer applies to a lender to refinance a 
$100,000 first mortgage; the consumer also has a home equity line of 
credit for $20,000. If the lender's practice in such a case is to ensure 
that it will have first-lien position--through a subordination agreement 
with the holder of the mortgage on the home equity line--then the lender 
should report the application as an application for a first-lien loan.
    Paragraph 4(c)(3).
    1. An institution that opts to report home-equity lines reports the 
disposition of all applications, not just originations.
    4(d) Excluded data.
    1. Mergers, purchases in bulk, and branch acquisitions. If a covered 
institution acquires loans in bulk from another institution (for 
example, from the receiver for a failed institution) but no merger or 
acquisition of the institution, or acquisition of a branch, is involved, 
the institution reports the loans as purchased loans.

               Section 1003.5(a)--Disclosure and Reporting

    5(a) Reporting to agency.
    1. Submission of data. Institutions submit data to the appropriate 
Federal agencies in an automated, machine-readable form. The format must 
conform to that of the HMDA/LAR. An institution should contact the 
appropriate Federal agency for information regarding procedures and 
technical specifications for automated data submission; in some cases, 
agencies also make software available for automated data submission. The 
data are edited before submission, using the edits included in the 
agency-supplied software or equivalent edits in software available from 
vendors or developed in-house.
    2. Submission in paper form. Institutions that report twenty-five or 
fewer entries on their HMDA/LAR may collect and report the data in paper 
form. An institution that submits its register in non-automated form 
sends two copies that are typed or computer printed and must use the 
format of the HMDA/LAR (but need not use the form itself). Each page 
must be numbered along

[[Page 127]]

with the total number of pages (for example, ``Page 1 of 3'').
    3. Procedures for entering data. The required data are entered in 
the register for each loan origination, each application acted on, and 
each loan purchased during the calendar year. The institution should 
decide on the procedure it wants to follow--for example, whether to 
begin entering the required data, when an application is received, or to 
wait until final action is taken (such as when a loan goes to closing or 
an application is denied).
    4. Options for collection. An institution may collect data on 
separate registers at different branches, or on separate registers for 
different loan types (such as for home purchase or home improvement 
loans, or for loans on multifamily dwellings). Entries need not be 
grouped on the register by MSA or Metropolitan Division, or 
chronologically, or by census tract numbers, or in any other particular 
order.
    5. Change in appropriate Federal agency. If the appropriate Federal 
agency for a covered institution changes (as a consequence of a merger 
or a change in the institution's charter, for example), the institution 
must report data to the new appropriate Federal agency beginning with 
the year of the change.
    6. Subsidiaries. An institution is a subsidiary of a bank or savings 
association (for purposes of reporting HMDA data to the same agency as 
the parent) if the bank or savings association holds or controls an 
ownership interest that is greater than 50 percent of the institution.
    7. Transmittal sheet--additional data submissions. If an additional 
data submission becomes necessary (for example, because the institution 
discovers that data were omitted from the initial submission, or because 
revisions are called for), that submission must be accompanied by a 
transmittal sheet.
    8. Transmittal sheet--revisions or deletions. If a data submission 
involves revisions or deletions of previously submitted data, it must 
state the total of all line entries contained in that submission, 
including both those representing revisions or deletions of previously 
submitted entries, and those that are being resubmitted unchanged or are 
being submitted for the first time. Depository institutions must provide 
a list of the MSAs or Metropolitan Divisions in which they have home or 
branch offices.
    5(b) Public disclosure of statement.
    1. Business day. For purposes of Sec. 1003.5, a business day is any 
calendar day other than a Saturday, Sunday, or legal public holiday.
    2. Format. An institution may make the disclosure statement 
available in paper form or, if the person requesting the data agrees, in 
electronic form.
    5(c) Public disclosure of modified loan/application register.
    1. Format. An institution may make the modified register available 
in paper or electronic form. Although institutions are not required to 
make the modified register available in census tract order, they are 
strongly encouraged to do so in order to enhance its utility to users.
    5(e) Notice of availability.
    1. Poster--suggested text. An institution may use any text that 
meets the requirements of the regulation. Some of the Federal agencies 
that receive HMDA data provide HMDA posters that an institution can use 
to inform the public of the availability of its HMDA data, or the 
institution may create its own posters. If an institution prints its 
own, the following language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, and income of applicants and 
borrowers; and information about loan approvals and denials. Inquire at 
this office regarding the locations where HMDA data may be inspected.
    2. Additional language for institutions making the disclosure 
statement available on request. An institution that posts a notice 
informing the public of the address to which a request should be sent 
could include the following sentence, for example, in its general 
notice: ``To receive a copy of these data send a written request to 
[address].''

                       Section 1003.6--Enforcement

    6(b) Bona fide errors.
    1. Bona fide error--information from third parties. An institution 
that obtains the property-location information for applications and 
loans from third parties (such as appraisers or vendors of ``geocoding'' 
services) is responsible for ensuring that the information reported on 
its HMDA/LAR is correct.

[76 FR 78468, Dec. 19, 2011, as amended at 78 FR 79286, Dec. 30, 2013; 
79 FR 77855, Dec. 29, 2014]



PART 1004_ALTERNATIVE MORTGAGE TRANSACTION PARITY (REGULATION D)
--Table of Contents



Sec.
1004.1 Authority, purpose, and scope
1004.2 Definitions
1004.3 Preemption of State law
1004.4 Requirements for alternative mortgage transactions

Appendix A to Part 1004--Official Commentary on Regulation D

    Authority: 12 U.S.C. 3802, 3803; 15 U.S.C. 1604, 1639b; Pub. L. No. 
111-203, 124 Stat. 1376.

[[Page 128]]


    Source: 76 FR 44242, July 22, 2011, unless otherwise noted.



Sec. 1004.1  Authority, purpose, and scope.

    (a) Authority. This regulation, known as Regulation D, is issued by 
the Bureau of Consumer Financial Protection to implement the Alternative 
Mortgage Transaction Parity Act, 12 U.S.C. 3801 et seq., as amended by 
title X, Section 1083 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203, 124 Stat. 1376). Section 1004.4 is 
issued pursuant to the Alternative Mortgage Transaction Parity Act (as 
amended) and the Truth in Lending Act, 15 U.S.C. 1601 et seq.
    (b) Purpose. Consistent with the Alternative Mortgage Transaction 
Parity Act, the Truth in Lending Act, and the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, the purpose of this regulation is to 
balance access to responsible credit and enhanced parity between State 
and federal housing creditors regarding the making, purchase, and 
enforcement of alternative mortgage transactions with consumer 
protection and the interests of the States in regulating mortgage 
transactions generally.
    (c) Scope. This regulation applies to an alternative mortgage 
transaction if the creditor received an application for that transaction 
on or after July 22, 2011. This regulation does not apply to a 
transaction if the creditor received the application for that 
transaction before July 22, 2011.



Sec. 1004.2  Definitions.

    For purposes of this part:
    Alternative mortgage transaction means a loan, credit sale, or 
account:
    (1) That is secured by an interest in a residential structure that 
contains one to four units, whether or not that structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence;
    (2) That is made primarily for personal, family, or household 
purposes; and
    (3) In which the interest rate or finance charge may be adjusted or 
renegotiated.
    Creditor shall have the same meaning as in 12 CFR 226.2.
    Housing creditor means:
    (1) A depository institution, as defined in section 501(a)(2) of the 
Depository Institutions Deregulation and Monetary Control Act of 1980;
    (2) A lender approved by the Secretary of Housing and Urban 
Development for participation in any mortgage insurance program under 
the National Housing Act;
    (3) Any person who regularly makes loans, credit sales, or advances 
on an account secured by an interest in a residential structure that 
contains one to four units, whether or not the structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence; and
    (4) Any transferee of a party listed in paragraph (c)(1), (2), or 
(3) of this section.
    State means any State of the United States of America, the District 
of Columbia, Puerto Rico, the Virgin Islands, the Northern Mariana 
Islands, American Samoa, Guam, and any other territory or possession of 
the United States.
    State law means a State constitution, statute, or regulation or any 
provision thereof.



Sec. 1004.3  Preemption of State law.

    Pursuant to 12 U.S.C. 3803, a State-chartered or -licensed housing 
creditor may make, purchase, and enforce alternative mortgage 
transactions in accordance with Sec. 1004.4(a) through (c) of this part 
(as applicable), notwithstanding any provision of State law that 
restricts the ability of the housing creditor to adjust or renegotiate 
an interest rate or finance charge with respect to the transaction or to 
change the amount of interest or finance charges included in a regular 
periodic payment as a result of such an adjustment or renegotiation.



Sec. 1004.4  Requirements for alternative mortgage transactions.

    (a) Mortgages with adjustable rates or finance charges and home 
equity lines of credit. A creditor that makes an alternative mortgage 
transaction with an adjustable rate or finance charge may

[[Page 129]]

only increase the interest rate or finance charge as follows:
    (1) If the transaction is subject to 12 CFR 226.5b, the creditor 
must comply with 12 CFR 226.5b(f)(1).
    (2) For all other transactions, the creditor must use either:
    (i) An index to which changes in the interest rate are tied that is 
readily available to and verifiable by the borrower and beyond the 
control of the creditor; or
    (ii) A formula or schedule identifying the amount that the interest 
rate or finance charge may increase and the times at which, or 
circumstances under which, a change may be made.
    (b) Renegotiable rates for renewable balloon-payment mortgages. A 
creditor that makes an alternative mortgage transaction with payments 
based on an amortization period and a large final payment due after a 
shorter term may negotiate an increase or decrease in the interest rate 
when the transaction is renewed only if the creditor makes a written 
commitment to renew the transaction at specified intervals throughout 
the amortization period. However, the creditor is not required to renew 
the transaction if:
    (1) Any action or inaction by the consumer materially and adversely 
affects the creditor's security for the transaction or any right of the 
creditor in such security;
    (2) There is a material failure by the consumer to meet the 
repayment terms of the transaction;
    (3) There is fraud or a willful or knowing material 
misrepresentation by the consumer in connection with the transaction; or
    (4) Federal law dealing with credit extended by a depository 
institution to its executive officers specifically requires that as a 
condition of the extension the credit shall become due and payable on 
demand, provided that the creditor includes such a provision in the 
initial agreement.
    (c) Requirements for high-cost and higher-priced mortgage loans. (1) 
If an alternative mortgage transaction is subject to 12 CFR 226.32, the 
creditor must comply with 12 CFR 226.32 and 12 CFR 226.34.
    (2) If an alternative mortgage transaction is subject to 12 CFR 
226.35, the creditor must comply with 12 CFR 226.35.
    (d) Other applicable law. Notwithstanding paragraphs (a) through (c) 
of this section, a housing creditor that is not making an alternative 
mortgage transaction pursuant to Sec. 1004.3 of this part may make that 
transaction consistent with applicable State or Federal law other than 
this section.
    (e) Reductions in interest rate or finance charge. Nothing in this 
section prohibits a creditor from decreasing the interest rate or 
finance charge on an alternative mortgage transaction.



    Sec. Appendix A to Part 1004--Official Commentary on Regulation D

                Sec. 1004.1 Authority, Purpose, and Scope

                               1(c) Scope.

    1. Application received before July 22, 2011. This part does not 
apply to a transaction if the creditor received the application for that 
transaction before July 22, 2011, even if the transaction was 
consummated or completed on or after July 22, 2011. Whether 12 U.S.C. 
3803(c) preempts State law with respect to such a transaction depends on 
whether: (1) The transaction was an alternative mortgage transaction as 
defined by the version of 12 U.S.C. 3802(1) in effect at the time of 
application; and (2) the State housing creditor complied with applicable 
federal regulations issued by the Office of the Comptroller of the 
Currency, the National Credit Union Administration, the Office of Thrift 
Supervision, or the Federal Home Loan Bank Board in effect at the time 
of application.
    2. Subsequent modifications and other actions. If applicable 
regulations under 12 U.S.C. 3803(c) (including this Part) preempted 
State law with respect to an alternative mortgage transaction at the 
time the application was received, the following actions with respect to 
that transaction are entitled to the same degree of preemption under 
such regulations:
    i. The subsequent consummation, completion, purchase, or enforcement 
of the transaction by a housing creditor.
    ii. The subsequent modification, renewal, or extension of the 
transaction. However, if such a transaction is satisfied and replaced by 
another transaction, the second transaction must independently meet the 
requirements for preemption in effect at the time the application for 
the second transaction was received.

                         Sec. 1004.2 Definitions

                  2(a) Alternative Mortgage Transaction

    1. Alternative mortgage transaction. For purposes of this Part, an 
alternative mortgage

[[Page 130]]

transaction that meets the definition in Sec. 1004.2(a) includes any 
consumer credit transaction that is secured by a mortgage, deed of 
trust, or other equivalent consensual security interest in a dwelling or 
in residential real property that includes a dwelling. The dwelling need 
not be the primary dwelling of the consumer. Home equity lines of credit 
and subordinate lien mortgages are alternative mortgage transactions for 
purposes of this part to the extent they meet the definition in 
Sec. 1004.2(a).
    2. Examples of alternative mortgage transactions. Examples of 
alternative mortgage transactions include:
    i. Transactions in which the interest rate changes in accordance 
with fluctuations in an index.
    ii. Transactions in which the interest rate or finance charge may be 
increased or decreased after a specified period of time or under 
specified circumstances.
    iii. Balloon transactions in which payments are based on an 
amortization schedule and a large final payment is due after a shorter 
term, where the creditor makes a commitment to renew the transaction at 
specified intervals throughout the amortization period, but the interest 
rate may be renegotiated at renewal. For example, a fixed-rate mortgage 
loan with a 30-year amortization period but a balloon payment due five 
years after consummation is an alternative mortgage transaction under 
Sec. 1004.2(a) if the creditor commits to renew the mortgage at five-
year intervals for the entire 30-year amortization period.
    iv. Transactions in which the creditor and the consumer agree to 
share some or all of the appreciation in the value of the property 
(shared equity/shared appreciation).
    However, this part preempts State law only to the extent provided in 
Sec. 1004.3 and only to the extent that the requirements of 
Sec. 1004.4(a) through (c) (as applicable) are met.
    3. Examples of transactions that are not alternative mortgage 
transactions. The following are examples of transactions that are not 
alternative mortgage transactions:
    i. Transactions with a fixed interest rate where one or more of the 
regular periodic payments may be applied solely to accrued interest and 
not to loan principal (an interest-only feature).
    ii. Balloon transactions with a fixed interest rate where payments 
are based on an amortization schedule and a large final payment is due 
after a shorter term, where the creditor does not make a commitment to 
renew the transaction at specified intervals throughout the amortization 
period.
    iii. Transactions with a fixed interest rate where one or more of 
the regular periodic payments may result in an increase in the principal 
balance (a negative amortization feature).

                              2(b) Creditor

    1. Creditor. As defined in 12 CFR 226.2, ``creditor'' includes 
federally and State-chartered banks, thrifts, and credit unions, as well 
as non-depository institutions, such as State-licensed lenders. The 
Official Staff Commentary to 12 CFR 226.2 contains additional guidance 
on the definition of the term ``creditor.'' See 12 CFR 226.2, Supp. I.

                   Sec. 1004.3 Preemption of State Law

    1. Scope of State laws. Regardless of whether a State law applies 
solely to alternative mortgage transactions or applies to both 
alternative mortgage transactions and other mortgage or consumer credit 
transactions, that law is preempted by Sec. 1004.3 only to the extent 
that it restricts the ability of a State-chartered or -licensed housing 
creditor to adjust or renegotiate an interest rate or finance charge 
with respect to an alternative mortgage transaction or to change the 
amount of interest or finance charges included in a regular periodic 
payment as a result of such an adjustment or renegotiation.
    2. Examples of State laws that are preempted. The following are 
examples of State laws that are preempted by Sec. 1004.3:
    i. Restrictions on the adjustment or renegotiation of an interest 
rate or finance charge, including restrictions on the circumstances 
under which a rate or charge may be adjusted, the method by which a rate 
or charge may be adjusted, and the amount of the adjustment to the rate 
or charge. For example, if a provision of State law prohibits creditors 
from increasing an adjustable rate more than two percentage points or 
from increasing an adjustable rate more than once during a year, that 
provision is preempted by Sec. 1004.3 with respect to alternative 
mortgage transactions that comply with Sec. 1004.4(a) through (c), as 
applicable. Similarly, if a provision of State law prohibits housing 
creditors from renewing balloon transactions that meet the definition of 
an alternative mortgage transaction in Sec. 1004.2(a) on different 
terms, that provision is preempted by Sec. 1004.3 only to the extent 
that it restricts a state housing creditor's ability to adjust or 
renegotiate the interest rate or finance charge at renewal. See also 
comment 1004.3-3.i.
    ii. Restrictions on the ability of a housing creditor to change the 
amount of interest or finance charges included in regular periodic 
payments as a result of the adjustment or renegotiation of an interest 
rate or finance charge. For example, if a provision of State law 
prohibits housing creditors from increasing payments or limits the 
amount of such increases with respect to both alternative mortgage 
transactions and other mortgage or consumer credit transactions, that 
provision is preempted by Sec. 1004.3 to the extent that it restricts a 
housing creditor's ability

[[Page 131]]

to adjust payments as a result of the adjustment or renegotiation of an 
interest rate on an alternative mortgage transaction. Other restrictions 
on changes to payments are not preempted, including restrictions on 
transactions in which one or more of the regular periodic payments may 
result in an increase in the principal balance (a negative amortization 
feature) or may be applied solely to accrued interest and not to loan 
principal (an interest-only feature).
    iii. Restrictions on the creditor and the consumer sharing some or 
all of the appreciation in the value of the property (shared equity/
shared appreciation).
    iv. Underwriting requirements that address the adjustment or 
renegotiation of interest rates or finance charges. For example, if a 
provision of State law requires housing creditors to underwrite based on 
the maximum contractual rate, that provision is preempted by Sec. 1004.3 
with respect to alternative mortgage transactions, regardless of whether 
the provision applies solely to alternative mortgage transactions or to 
both alternative mortgage transactions and other mortgage or consumer 
credit transactions.
    3. Examples of State laws that are not preempted. The following are 
examples of State laws that are not preempted by Sec. 1004.3 regardless 
of whether the provision applies solely to alternative mortgage 
transactions or to both alternative mortgage transactions and other 
mortgage or consumer credit transactions:
    i. Restrictions on prepayment penalties or late charges (including 
an increase in an interest rate or finance charge as a result of a late 
payment).
    ii. Restrictions on transactions in which one or more of the regular 
periodic payments may result in an increase in the principal balance (a 
negative amortization feature) or may be applied solely to accrued 
interest and not to loan principal (an interest-only feature).
    iii. Requirements that disclosures be provided.

     Sec. 1004.4 Requirements for Alternative Mortgage Transactions

4(a) Mortgages With Adjustable or Renegotiable Rates or Finance Charges 
                     and Home Equity Lines of Credit

    1. Index values. A creditor may use any measure of index values that 
meets the requirements in Sec. 1004.4(a)(2)(i). For example, the index 
may be either single values as of a specific date or an average of 
values calculated over a specified period.
    2. Index beyond creditor's control. A creditor may increase an 
adjustable interest rate pursuant to Sec. 1004.4(a)(2)(i) only if the 
increase is based on an index that is beyond the creditor's control. For 
purposes of Sec. 1004.4(a)(2)(i), an index is not beyond the creditor's 
control if the index is the creditor's own prime rate or cost of funds. 
A creditor is permitted, however, to use a published prime rate, such as 
the prime rate published in the Wall Street Journal, even if the 
creditor's own prime rate is one of several rates used to establish the 
published rate.
    3. Publicly available. For purposes of Sec. 1004.4(a)(2)(i), the 
index must be available to the public. A publicly available index need 
not be published in a newspaper, but it must be one the consumer can 
independently obtain (by telephone, for example) and use to verify the 
annual percentage rate applied to the alternative mortgage transaction.

    4(c) Requirements for High-Cost and Higher-Priced Mortgage Loans

    1. Prepayment penalties. If applicable, creditors must comply with 
12 CFR 226.32, including 12 CFR 226.32(d)(6) and (d)(7) which provide 
limitations on prepayment penalties. Similarly, if applicable, creditors 
must comply with 12 CFR 226.35, including 12 CFR 226.35(b)(2), which 
also provides limitations on prepayment penalties. However, under 
Sec. 1004.3, State laws regarding prepayment penalties are not 
preempted. See comment 1004.3-3.i. Accordingly, creditors must also 
comply with any State laws regarding prepayment penalties unless an 
independent basis for preemption exists, such as because the State law 
is inconsistent with the requirements of Regulation Z, 12 CFR part 226. 
See 12 CFR 226.28.

                        4(d) Other Applicable Law

    1. Other applicable law. Section 1004.4(d) permits state housing 
creditors that do not seek preemption under Sec. 1004.3 and federal 
housing creditors to make alternative mortgage transactions consistent 
with applicable State or federal law other than Sec. 1004.4(a) through 
(c). However, Sec. 1004.4(d) does not exempt those housing creditors 
from complying with the provisions of federal law that are incorporated 
by reference in Sec. 1004.4 and are otherwise applicable to the 
creditor. Specifically, nothing in Sec. 1004.4(d) exempts a housing 
creditor from complying with 12 CFR 226.5b, 226.32, 226.34, or 226.35.



PART 1005_ELECTRONIC FUND TRANSFERS (REGULATION E)--Table of Contents



                            Subpart A_General

Sec.
1005.1 Authority and purpose.
1005.2 Definitions.
1005.3 Coverage.
1005.4 General disclosure requirements; jointly offered services.
1005.5 Issuance of access devices.
1005.6 Liability of consumer for unauthorized transfers.

[[Page 132]]

1005.7 Initial disclosures.
1005.8 Change in terms notice; error resolution notice.
1005.9 Receipts at electronic terminals; periodic statements.
1005.10 Preauthorized transfers.
1005.11 Procedures for resolving errors.
1005.12 Relation to other laws.
1005.13 Administrative enforcement; record retention.
1005.14 Electronic fund transfer service provider not holding consumer's 
          account.
1005.15 Electronic fund transfer of government benefits.
1005.16 Disclosures at automated teller machines.
1005.17 Requirements for overdraft services.
1005.18 Requirements for financial institutions offering payroll card 
          accounts.
1005.20 Requirements for gift cards and gift certificates.

             Subpart B_Requirements for Remittance Transfers

1005.30 Remittance transfer definitions.
1005.31 Disclosures.
1005.32 Estimates.
1005.33 Procedures for resolving errors.
1005.34 Procedures for cancellation and refund of remittance transfers.
1005.35 Acts of agents.
1005.36 Transfers scheduled before the date of transfer.

Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005 [Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.
    Subpart B is also issued under 12 U.S.C. 5601.

    Source: 76 FR 81023, Dec. 27, 2011, unless otherwise noted.



                            Subpart A_General



Sec. 1005.1  Authority and purpose.

    (a) Authority. The regulation in this part, known as Regulation E, 
is issued by the Bureau of Consumer Financial Protection (Bureau) 
pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.). 
The information-collection requirements have been approved by the Office 
of Management and Budget under 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 3170-0014.
    (b) Purpose. This part carries out the purposes of the Electronic 
Fund Transfer Act, which establishes the basic rights, liabilities, and 
responsibilities of consumers who use electronic fund transfer and 
remittance transfer services and of financial institutions or other 
persons that offer these services. The primary objective of the act and 
this part is the protection of individual consumers engaging in 
electronic fund transfers and remittance transfers.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec. 1005.2  Definitions.

    Except as otherwise provided in subpart B, for purposes of this 
part, the following definitions apply:
    (a)(1) ``Access device'' means a card, code, or other means of 
access to a consumer's account, or any combination thereof, that may be 
used by the consumer to initiate electronic fund transfers.
    (2) An access device becomes an ``accepted access device'' when the 
consumer:
    (i) Requests and receives, or signs, or uses (or authorizes another 
to use) the access device to transfer money between accounts or to 
obtain money, property, or services;
    (ii) Requests validation of an access device issued on an 
unsolicited basis; or
    (iii) Receives an access device in renewal of, or in substitution 
for, an accepted access device from either the financial institution 
that initially issued the device or a successor.
    (b)(1) ``Account'' means a demand deposit (checking), savings, or 
other consumer asset account (other than an occasional or incidental 
credit balance in a credit plan) held directly or indirectly by a 
financial institution and established primarily for personal, family, or 
household purposes.
    (2) The term includes a ``payroll card account'' which is an account 
that is directly or indirectly established through an employer and to 
which electronic fund transfers of the consumer's wages, salary, or 
other employee compensation (such as commissions), are made on a 
recurring basis, whether the account is operated or managed by the 
employer, a third-

[[Page 133]]

party payroll processor, a depository institution or any other person. 
For rules governing payroll card accounts, see Sec. 1005.18.
    (3) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (c) ``Act'' means the Electronic Fund Transfer Act (Title IX of the 
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
    (d) ``Business day'' means any day on which the offices of the 
consumer's financial institution are open to the public for carrying on 
substantially all business functions.
    (e) ``Consumer'' means a natural person.
    (f) ``Credit'' means the right granted by a financial institution to 
a consumer to defer payment of debt, incur debt and defer its payment, 
or purchase property or services and defer payment therefor.
    (g) ``Electronic fund transfer'' is defined in Sec. 1005.3.
    (h) ``Electronic terminal'' means an electronic device, other than a 
telephone operated by a consumer, through which a consumer may initiate 
an electronic fund transfer. The term includes, but is not limited to, 
point-of-sale terminals, automated teller machines (ATMs), and cash 
dispensing machines.
    (i) ``Financial institution'' means a bank, savings association, 
credit union, or any other person that directly or indirectly holds an 
account belonging to a consumer, or that issues an access device and 
agrees with a consumer to provide electronic fund transfer services, 
other than a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 1376.
    (j) ``Person'' means a natural person or an organization, including 
a corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (k) ``Preauthorized electronic fund transfer'' means an electronic 
fund transfer authorized in advance to recur at substantially regular 
intervals.
    (l) ``State'' means any state, territory, or possession of the 
United States; the District of Columbia; the Commonwealth of Puerto 
Rico; or any political subdivision of the thereof in this paragraph (l).
    (m) ``Unauthorized electronic fund transfer'' means an electronic 
fund transfer from a consumer's account initiated by a person other than 
the consumer without actual authority to initiate the transfer and from 
which the consumer receives no benefit. The term does not include an 
electronic fund transfer initiated:
    (1) By a person who was furnished the access device to the 
consumer's account by the consumer, unless the consumer has notified the 
financial institution that transfers by that person are no longer 
authorized;
    (2) With fraudulent intent by the consumer or any person acting in 
concert with the consumer; or
    (3) By the financial institution or its employee.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec. 1005.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, this part applies to financial institutions. For 
purposes of Sec. Sec. 1005.3(b)(2) and (3), 1005.10(b), (d), and (e), 
1005.13, and 1005.20, this part applies to any person, other than a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376. The requirements of subpart B apply to remittance transfer 
providers.
    (b) Electronic fund transfer--(1) Definition. The term ``electronic 
fund transfer'' means any transfer of funds that is initiated through an 
electronic terminal, telephone, computer, or magnetic tape for the 
purpose of ordering, instructing, or authorizing a financial institution 
to debit or credit a consumer's account. The term includes, but is not 
limited to:
    (i) Point-of-sale transfers;
    (ii) Automated teller machine transfers;

[[Page 134]]

    (iii) Direct deposits or withdrawals of funds;
    (iv) Transfers initiated by telephone; and
    (v) Transfers resulting from debit card transactions, whether or not 
initiated through an electronic terminal.
    (2) Electronic fund transfer using information from a check. (i) 
This part applies where a check, draft, or similar paper instrument is 
used as a source of information to initiate a one-time electronic fund 
transfer from a consumer's account. The consumer must authorize the 
transfer.
    (ii) The person initiating an electronic fund transfer using the 
consumer's check as a source of information for the transfer must 
provide a notice that the transaction will or may be processed as an 
electronic fund transfer, and obtain a consumer's authorization for each 
transfer. A consumer authorizes a one-time electronic fund transfer (in 
providing a check to a merchant or other payee for the MICR encoding, 
that is, the routing number of the financial institution, the consumer's 
account number and the serial number) when the consumer receives notice 
and goes forward with the underlying transaction. For point-of-sale 
transfers, the notice must be posted in a prominent and conspicuous 
location, and a copy thereof, or a substantially similar notice, must be 
provided to the consumer at the time of the transaction.
    (iii) A person may provide notices that are substantially similar to 
those set forth in appendix A-6 to comply with the requirements of this 
paragraph (b)(2).
    (3) Collection of returned item fees via electronic fund 
transfer.(i) General. The person initiating an electronic fund transfer 
to collect a fee for the return of an electronic fund transfer or a 
check that is unpaid, including due to insufficient or uncollected funds 
in the consumer's account, must obtain the consumer's authorization for 
each transfer. A consumer authorizes a one-time electronic fund transfer 
from his or her account to pay the fee for the returned item or transfer 
if the person collecting the fee provides notice to the consumer stating 
that the person may electronically collect the fee, and the consumer 
goes forward with the underlying transaction. The notice must state that 
the fee will be collected by means of an electronic fund transfer from 
the consumer's account if the payment is returned unpaid and must 
disclose the dollar amount of the fee. If the fee may vary due to the 
amount of the transaction or due to other factors, then, except as 
otherwise provided in paragraph (b)(3)(ii) of this section, the person 
collecting the fee may disclose, in place of the dollar amount of the 
fee, an explanation of how the fee will be determined.
    (ii) Point-of-sale transactions. If a fee for an electronic fund 
transfer or check returned unpaid may be collected electronically in 
connection with a point-of-sale transaction, the person initiating an 
electronic fund transfer to collect the fee must post the notice 
described in paragraph (b)(3)(i) of this section in a prominent and 
conspicuous location. The person also must either provide the consumer 
with a copy of the posted notice (or a substantially similar notice) at 
the time of the transaction, or mail the copy (or a substantially 
similar notice) to the consumer's address as soon as reasonably 
practicable after the person initiates the electronic fund transfer to 
collect the fee. If the amount of the fee may vary due to the amount of 
the transaction or due to other factors, the posted notice may explain 
how the fee will be determined, but the notice provided to the consumer 
must state the dollar amount of the fee if the amount can be calculated 
at the time the notice is provided or mailed to the consumer.
    (c) Exclusions from coverage. The term ``electronic fund transfer'' 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization. Any transfer of funds that 
guarantees payment or authorizes acceptance of a check, draft, or 
similar paper instrument but that does not directly result in a debit or 
credit to a consumer's account.
    (3) Wire or other similar transfers. Any transfer of funds through 
Fedwire or

[[Page 135]]

through a similar wire transfer system that is used primarily for 
transfers between financial institutions or between businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or Federal 
agency.
    (5) Automatic transfers by account-holding institution. Any transfer 
of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate individual 
transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to 
Sec. 1005.10(e) regarding compulsory use and sections 916 and 917 of the 
Act regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone communication between a consumer and 
a financial institution making the transfer; and
    (ii) Does not take place under a telephone bill-payment or other 
written plan in which periodic or recurring transfers are contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution were 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph (c)(7) 
remain subject to Sec. 1005.10(e) regarding compulsory use and sections 
916 and 917 of the Act regarding civil and criminal liability.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec. 1005.4  General disclosure requirements; jointly offered services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form the 
consumer may keep, except as otherwise provided in this part. The 
disclosures required by this part may be provided to the consumer in 
electronic form, subject to compliance with the consumer-consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). A financial 
institution may use commonly accepted or readily understandable 
abbreviations in complying with the disclosure requirements of this 
part.
    (2) Foreign language disclosures. Disclosures required under this 
part may be made in a language other than English, provided that the 
disclosures are made available in English upon the consumer's request.
    (b) Additional information; disclosures required by other laws. A 
financial institution may include additional information and may combine 
disclosures required by other laws (such as the Truth in Lending Act (15 
U.S.C. 1601 et seq.) or the Truth in Savings Act (12 U.S.C. 4301 et 
seq.) with the disclosures required by this part.
    (c) Multiple accounts and account holders.(1) Multiple accounts. A 
financial institution may combine the required disclosures into a single 
statement for a consumer who holds more than one account at the 
institution.
    (2) Multiple account holders. For joint accounts held by two or more 
consumers, a financial institution need provide only one set of the 
required disclosures and may provide them to any of the account holders.

[[Page 136]]

    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this part imposes on any or all of 
them. An institution need make only the disclosures required by 
Sec. Sec. 1005.7 and 1005.8 that are within its knowledge and within the 
purview of its relationship with the consumer for whom it holds an 
account.



Sec. 1005.5  Issuance of access devices.

    (a) Solicited issuance. Except as provided in paragraph (b) of this 
section, a financial institution may issue an access device to a 
consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access device 
is:
    (1) Not validated, meaning that the institution has not yet 
performed all the procedures that would enable a consumer to initiate an 
electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is not 
validated and how the consumer may dispose of it if validation is not 
desired;
    (3) Accompanied by the disclosures required by Sec. 1005.7, of the 
consumer's rights and liabilities that will apply if the access device 
is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution has verified the 
consumer's identity by a reasonable means.



Sec. 1005.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec. 1005.7(b)(1), (2), and (3). If the unauthorized transfer 
involved an access device, it must be an accepted access device and the 
financial institution must have provided a means to identify the 
consumer to whom it was issued.
    (b) Limitations on amount of liability. A consumer's liability for 
an unauthorized electronic fund transfer or a series of related 
unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or theft 
of the access device, the consumer's liability shall not exceed the 
lesser of $50 or the amount of unauthorized transfers that occur before 
notice to the financial institution.
    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:
    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the close 
of two business days and before notice to the institution, provided the 
institution establishes that these transfers would not have occurred had 
the consumer notified the institution within that two-day period.
    (3) Periodic statement; timely notice not given. A consumer must 
report an unauthorized electronic fund transfer that appears on a 
periodic statement within 60 days of the financial institution's 
transmittal of the statement to avoid liability for subsequent 
transfers. If the consumer fails to do so, the consumer's liability 
shall not exceed the amount of the unauthorized transfers that occur 
after the close of the 60 days and before notice to the institution, and 
that the institution establishes would not have occurred had the 
consumer notified the institution within the 60-day period. When an 
access device is involved in the unauthorized transfer, the consumer may 
be liable for other amounts set forth in paragraphs (b)(1) or (b)(2) of 
this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial

[[Page 137]]

institution was due to extenuating circumstances, the institution shall 
extend the times specified above to a reasonable period.
    (5) Notice to financial institution. (i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary to 
provide the institution with the pertinent information, whether or not a 
particular employee or agent of the institution actually receives the 
information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission to the institution by 
any other usual means. Notice may be considered constructively given 
when the institution becomes aware of circumstances leading to the 
reasonable belief that an unauthorized transfer to or from the 
consumer's account has been or may be made.
    (6) Liability under state law or agreement. If state law or an 
agreement between the consumer and the financial institution imposes 
less liability than is provided by this section, the consumer's 
liability shall not exceed the amount imposed under the state law or 
agreement.



Sec. 1005.7  Initial disclosures.

    (a) Timing of disclosures. A financial institution shall make the 
disclosures required by this section at the time a consumer contracts 
for an electronic fund transfer service or before the first electronic 
fund transfer is made involving the consumer's account.
    (b) Content of disclosures. A financial institution shall provide 
the following disclosures, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec. 1005.6 or under state or other applicable law or agreement, 
for unauthorized electronic fund transfers.
    (2) Telephone number and address. The telephone number and address 
of the person or office to be notified when the consumer believes that 
an unauthorized electronic fund transfer has been or may be made.
    (3) Business days. The financial institution's business days.
    (4) Types of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. Details of the limitations 
need not be disclosed if confidentiality is essential to maintain the 
security of the electronic fund transfer system.
    (5) Fees. Any fees imposed by the financial institution for 
electronic fund transfers or for the right to make transfers.
    (6) Documentation. A summary of the consumer's right to receipts and 
periodic statements, as provided in Sec. 1005.9 of this part, and 
notices regarding preauthorized transfers as provided in Sec. 1005.10(a) 
and (d).
    (7) Stop payment. A summary of the consumer's right to stop payment 
of a preauthorized electronic fund transfer and the procedure for 
placing a stop-payment order, as provided in Sec. 1005.10(c).
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the Act for 
failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in the ordinary 
course of business, the financial institution may provide information 
concerning the consumer's account to third parties.
    (10) Error resolution. A notice that is substantially similar to 
Model Form A-3 as set out in appendix A of this part concerning error 
resolution.
    (11) ATM fees. A notice that a fee may be imposed by an automated 
teller machine operator as defined in Sec. 1005.16(a)(1), when the 
consumer initiates an electronic fund transfer or makes a balance 
inquiry, and by any network used to complete the transaction.
    (c) Addition of electronic fund transfer services. If an electronic 
fund transfer service is added to a consumer's account and is subject to 
terms and conditions different from those described in the initial 
disclosures, disclosures for the new service are required.



Sec. 1005.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice--(1) Prior notice required. A financial 
institution

[[Page 138]]

shall mail or deliver a written notice to the consumer, at least 21 days 
before the effective date, of any change in a term or condition required 
to be disclosed under Sec. 1005.7(b) of this part if the change would 
result in:
    (i) Increased fees for the consumer;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an account or an electronic fund 
transfer system. If the institution makes such a change permanent and 
disclosure would not jeopardize the security of the account or system, 
the institution shall notify the consumer in writing on or with the next 
regularly scheduled periodic statement or within 30 days of making the 
change permanent.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, an 
error resolution notice substantially similar to the model form set 
forth in appendix A of this part (Model Form A-3). Alternatively, an 
institution may include an abbreviated notice substantially similar to 
the model form error resolution notice set forth in appendix A of this 
part (Model Form A-3), on or with each periodic statement required by 
Sec. 1005.9(b).



Sec. 1005.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals--General. Except as provided in 
paragraph (e) of this section, a financial institution shall make a 
receipt available to a consumer at the time the consumer initiates an 
electronic fund transfer at an electronic terminal. The receipt shall 
set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account(s) to or from which funds are transferred. The type of account 
may be omitted if the access device used is able to access only one 
account at that terminal.
    (4) Identification. A number or code that identifies the consumer's 
account or accounts, or the access device used to initiate the transfer. 
The number or code need not exceed four digits or letters to comply with 
the requirements of this paragraph (a)(4).
    (5) Terminal location. The location of the terminal where the 
transfer is initiated, or an identification such as a code or terminal 
number. Except in limited circumstances where all terminals are located 
in the same city or state, if the location is disclosed, it shall 
include the city and state or foreign country and one of the following:
    (i) The street address; or
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For an account to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth the 
following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the consumer's 
account;
    (iii) The type of transfer and type of account to or from which 
funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location described in paragraph (a)(5) 
of this section; and

[[Page 139]]

    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account.
    (3) Fees. The amount of any fees assessed against the account during 
the statement period for electronic fund transfers, the right to make 
transfers, or account maintenance.
    (4) Account balances. The balance in the account at the beginning 
and at the close of the statement period.
    (5) Address and telephone number for inquiries. The address and 
telephone number to be used for inquiries or notice of errors, preceded 
by ``Direct inquiries to'' or similar language. The address and 
telephone number provided on an error resolution notice under 
Sec. 1005.8(b) given on or with the statement satisfies this 
requirement.
    (6) Telephone number for preauthorized transfers. A telephone number 
the consumer may call to ascertain whether preauthorized transfers to 
the consumer's account have occurred, if the financial institution uses 
the telephone-notice option under Sec. 1005.10(a)(1)(iii).
    (c) Exceptions to the periodic statement requirement for certain 
accounts--(1) Preauthorized transfers to accounts. For accounts that may 
be accessed only by preauthorized transfers to the account the following 
rules apply:
    (i) Passbook accounts. For passbook accounts, the financial 
institution need not provide a periodic statement if the institution 
updates the passbook upon presentation or enters on a separate document 
the amount and date of each electronic fund transfer since the passbook 
was last presented.
    (ii) Other accounts. For accounts other than passbook accounts, the 
financial institution must send a periodic statement at least quarterly.
    (2) Intra-institutional transfers. For an electronic fund transfer 
initiated by the consumer between two accounts of the consumer in the 
same institution, documenting the transfer on a periodic statement for 
one of the two accounts satisfies the periodic statement requirement.
    (3) Relationship between paragraphs (c)(1) and (2) of this section. 
An account that is accessed by preauthorized transfers to the account 
described in paragraph (c)(1) of this section and by intra-institutional 
transfers described in paragraph (c)(2) of this section, but by no other 
type of electronic fund transfers, qualifies for the exceptions provided 
by paragraph (c)(1) of this section.
    (d) Documentation for foreign-initiated transfers. The failure by a 
financial institution to provide a terminal receipt for an electronic 
fund transfer or to document the transfer on a periodic statement does 
not violate this part if:
    (1) The transfer is not initiated within a state; and
    (2) The financial institution treats an inquiry for clarification or 
documentation as a notice of error in accordance with Sec. 1005.11.
    (e) Exception for receipts in small-value transfers. A financial 
institution is not subject to the requirement to make available a 
receipt under paragraph (a) of this section if the amount of the 
transfer is $15 or less.



Sec. 1005.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account--(1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Readily-available telephone line. Providing a readily 
available telephone line that the consumer may call to determine whether 
the transfer occurred and disclosing the telephone number on the initial 
disclosure of account terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide notice 
of a transfer if the payor gives the consumer positive notice that the 
transfer has been initiated.
    (3) Crediting. A financial institution that receives a preauthorized 
transfer of the type described in paragraph

[[Page 140]]

(a)(1) of this section shall credit the amount of the transfer as of the 
date the funds for the transfer are received.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment--(1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding after 
14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount--(1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send the consumer written notice of the amount and 
date of the transfer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic fund transfers with a particular institution as a 
condition of employment or receipt of a government benefit.



Sec. 1005.11  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. The term ``error'' means:
    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the consumer's 
account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec. 1005.9 or Sec. 1005.10(a); or
    (vii) The consumer's request for documentation required by 
Sec. 1005.9 or Sec. 1005.10(a) or for additional information or 
clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1)(i) through (vi) of this section.
    (2) Types of inquiries not covered. The term ``error'' does not 
include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer--(1) Timing; contents. A financial 
institution shall comply with the requirements of this section with 
respect to any oral or

[[Page 141]]

written notice of error from the consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation, required by Sec. 1005.9, on which the alleged error is 
first reflected;
    (ii) Enables the institution to identify the consumer's name and 
account number; and
    (iii) Indicates why the consumer believes an error exists and 
includes to the extent possible the type, date, and amount of the error, 
except for requests described in paragraph (a)(1)(vii) of this section.
    (2) Written confirmation. A financial institution may require the 
consumer to give written confirmation of an error within 10 business 
days of an oral notice. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification.
    (3) Request for documentation or clarifications. When a notice of 
error is based on documentation or clarification that the consumer 
requested under paragraph (a)(1)(vii) of this section, the consumer's 
notice of error is timely if received by the financial institution no 
later than 60 days after the institution sends the information 
requested.
    (c) Time limits and extent of investigation--(1) Ten-day period. A 
financial institution shall investigate promptly and, except as 
otherwise provided in this paragraph (c), shall determine whether an 
error occurred within 10 business days of receiving a notice of error. 
The institution shall report the results to the consumer within three 
business days after completing its investigation. The institution shall 
correct the error within one business day after determining that an 
error occurred.
    (2) Forty-five day period. If the financial institution is unable to 
complete its investigation within 10 business days, the institution may 
take up to 45 days from receipt of a notice of error to investigate and 
determine whether an error occurred, provided the institution does the 
following:
    (i) Provisionally credits the consumer's account in the amount of 
the alleged error (including interest where applicable) within 10 
business days of receiving the error notice. If the financial 
institution has a reasonable basis for believing that an unauthorized 
electronic fund transfer has occurred and the institution has satisfied 
the requirements of Sec. 1005.6(a), the institution may withhold a 
maximum of $50 from the amount credited. An institution need not 
provisionally credit the consumer's account if:
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220);
    (ii) Informs the consumer, within two business days after the 
provisional crediting, of the amount and date of the provisional 
crediting and gives the consumer full use of the funds during the 
investigation;
    (iii) Corrects the error, if any, within one business day after 
determining that an error occurred; and
    (iv) Reports the results to the consumer within three business days 
after completing its investigation (including, if applicable, notice 
that a provisional credit has been made final).
    (3) Extension of time periods. The time periods in paragraphs (c)(1) 
and (c)(2) of this section are extended as follows:
    (i) The applicable time is 20 business days in place of 10 business 
days under paragraphs (c)(1) and (2) of this section if the notice of 
error involves an electronic fund transfer to or from the account within 
30 days after the first deposit to the account was made.
    (ii) The applicable time is 90 days in place of 45 days under 
paragraph (c)(2) of this section, for completing an investigation, if a 
notice of error involves an electronic fund transfer that:
    (A) Was not initiated within a state;
    (B) Resulted from a point-of-sale debit card transaction; or
    (C) Occurred within 30 days after the first deposit to the account 
was made.

[[Page 142]]

    (4) Investigation. With the exception of transfers covered by 
Sec. 1005.14 of this part, a financial institution's review of its own 
records regarding an alleged error satisfies the requirements of this 
section if:
    (i) The alleged error concerns a transfer to or from a third party; 
and
    (ii) There is no agreement between the institution and the third 
party for the type of electronic fund transfer involved.
    (d) Procedures if financial institution determines no error or 
different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the financial institution 
shall follow the procedures set forth in this paragraph (d) if it 
determines that no error occurred or that an error occurred in a manner 
or amount different from that described by the consumer:
    (1) Written explanation. The institution's report of the results of 
its investigation shall include a written explanation of the 
institution's findings and shall note the consumer's right to request 
the documents that the institution relied on in making its 
determination. Upon request, the institution shall promptly provide 
copies of the documents.
    (2) Debiting provisional credit. Upon debiting a provisionally 
credited amount, the financial institution shall:
    (i) Notify the consumer of the date and amount of the debiting;
    (ii) Notify the consumer that the institution will honor checks, 
drafts, or similar instruments payable to third parties and 
preauthorized transfers from the consumer's account (without charge to 
the consumer as a result of an overdraft) for five business days after 
the notification. The institution shall honor items as specified in the 
notice, but need honor only items that it would have paid if the 
provisionally credited funds had not been debited.
    (e) Reassertion of error. A financial institution that has fully 
complied with the error resolution requirements has no further 
responsibilities under this section should the consumer later reassert 
the same error, except in the case of an error asserted by the consumer 
following receipt of information provided under paragraph (a)(1)(vii) of 
this section.



Sec. 1005.12  Relation to other laws.

    (a) Relation to Truth in Lending. (1) The Electronic Fund Transfer 
Act and this part govern:
    (i) The addition to an accepted credit card, as defined in 
Regulation Z (12 CFR 1026.12, comment 12-2), of the capability to 
initiate electronic fund transfers;
    (ii) The issuance of an access device that permits credit extensions 
(under a preexisting agreement between a consumer and a financial 
institution) only when the consumer's account is overdrawn or to 
maintain a specified minimum balance in the consumer's account, or under 
an overdraft service, as defined in Sec. 1005.17(a) of this part;
    (iii) The addition of an overdraft service, as defined in 
Sec. 1005.17(a), to an accepted access device; and
    (iv) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of errors involving an extension of 
credit that occurs under an agreement between the consumer and a 
financial institution to extend credit when the consumer's account is 
overdrawn or to maintain a specified minimum balance in the consumer's 
account, or under an overdraft service, as defined in Sec. 1005.17(a).
    (2) The Truth in Lending Act and Regulation Z (12 CFR part 1026), 
which prohibit the unsolicited issuance of credit cards, govern:
    (i) The addition of a credit feature to an accepted access device; 
and
    (ii) Except as provided in paragraph (a)(1)(ii) of this section, the 
issuance of a credit card that is also an access device.
    (b) Preemption of inconsistent state laws--(1) Inconsistent 
requirements. The Bureau shall determine, upon its own motion or upon 
the request of a state, financial institution, or other interested 
party, whether the Act and this part preempt state law relating to 
electronic fund transfers, or dormancy, inactivity, or service fees, or 
expiration dates in the case of gift certificates, store gift cards, or 
general-use prepaid cards.
    (2) Standards for determination. State law is inconsistent with the 
requirements of the Act and this part if state law:

[[Page 143]]

    (i) Requires or permits a practice or act prohibited by the Federal 
law;
    (ii) Provides for consumer liability for unauthorized electronic 
fund transfers that exceeds the limits imposed by the Federal law;
    (iii) Allows longer time periods than the Federal law for 
investigating and correcting alleged errors, or does not require the 
financial institution to credit the consumer's account during an error 
investigation in accordance with Sec. 1005.11(c)(2)(i) of this part; or
    (iv) Requires initial disclosures, periodic statements, or receipts 
that are different in content from those required by the Federal law 
except to the extent that the disclosures relate to consumer rights 
granted by the state law and not by the Federal law.
    (c) State exemptions--(1) General rule. Any state may apply for an 
exemption from the requirements of the Act or this part for any class of 
electronic fund transfers within the state. The Bureau shall grant an 
exemption if it determines that:
    (i) Under state law the class of electronic fund transfers is 
subject to requirements substantially similar to those imposed by the 
Federal law; and
    (ii) There is adequate provision for state enforcement.
    (2) Exception. To assure that the Federal and state courts continue 
to have concurrent jurisdiction, and to aid in implementing the Act:
    (i) No exemption shall extend to the civil liability provisions of 
section 916 of the Act; and
    (ii) When the Bureau grants an exemption, the state law requirements 
shall constitute the requirements of the Federal law for purposes of 
section 916 of the Act, except for state law requirements not imposed by 
the Federal law.



Sec. 1005.13  Administrative enforcement; record retention.

    (a) Enforcement by Federal agencies. Compliance with this part is 
enforced in accordance with section 918 of the Act.
    (b) Record retention. (1) Any person subject to the Act and this 
part shall retain evidence of compliance with the requirements imposed 
by the Act and this part for a period of not less than two years from 
the date disclosures are required to be made or action is required to be 
taken.
    (2) Any person subject to the Act and this part having actual notice 
that it is the subject of an investigation or an enforcement proceeding 
by its enforcement agency, or having been served with notice of an 
action filed under sections 910, 916, or 917(a) of the Act, shall retain 
the records that pertain to the investigation, action, or proceeding 
until final disposition of the matter unless an earlier time is allowed 
by court or agency order.



Sec. 1005.14  Electronic fund transfer service provider not holding
consumer's account.

    (a) Provider of electronic fund transfer service. A person that 
provides an electronic fund transfer service to a consumer but that does 
not hold the consumer's account is subject to all requirements of this 
part if the person:
    (1) Issues a debit card (or other access device) that the consumer 
can use to access the consumer's account held by a financial 
institution; and
    (2) Has no agreement with the account-holding institution regarding 
such access.
    (b) Compliance by service provider. In addition to the requirements 
generally applicable under this part, the service provider shall comply 
with the following special rules:
    (1) Disclosures and documentation. The service provider shall give 
the disclosures and documentation required by Sec. Sec. 1005.7, 1005.8, 
and 1005.9 of this part that are within the purview of its relationship 
with the consumer. The service provider need not furnish the periodic 
statement required by Sec. 1005.9(b) if the following conditions are 
met:
    (i) The debit card (or other access device) issued to the consumer 
bears the service provider's name and an address or telephone number for 
making inquiries or giving notice of error;
    (ii) The consumer receives a notice concerning use of the debit card 
that is substantially similar to the notice contained in appendix A of 
this part;
    (iii) The consumer receives, on or with the receipts required by 
Sec. 1005.9(a), the address and telephone number to be used for an 
inquiry, to give notice of an

[[Page 144]]

error, or to report the loss or theft of the debit card;
    (iv) The service provider transmits to the account-holding 
institution the information specified in Sec. 1005.9(b)(1), in the 
format prescribed by the automated clearinghouse (ACH) system used to 
clear the fund transfers;
    (v) The service provider extends the time period for notice of loss 
or theft of a debit card, set forth in Sec. 1005.6(b)(1) and (2), from 
two business days to four business days after the consumer learns of the 
loss or theft; and extends the time periods for reporting unauthorized 
transfers or errors, set forth in Sec. Sec. 1005.6(b)(3) and 
1005.11(b)(1)(i), from 60 days to 90 days following the transmittal of a 
periodic statement by the account-holding institution.
    (2) Error resolution. (i) The service provider shall extend by a 
reasonable time the period in which notice of an error must be received, 
specified in Sec. 1005.11(b)(1)(i), if a delay resulted from an initial 
attempt by the consumer to notify the account-holding institution.
    (ii) The service provider shall disclose to the consumer the date on 
which it initiates a transfer to effect a provisional credit in 
accordance with Sec. 1005.11(c)(2)(ii).
    (iii) If the service provider determines an error occurred, it shall 
transfer funds to or from the consumer's account, in the appropriate 
amount and within the applicable time period, in accordance with 
Sec. 1005.11(c)(2)(i).
    (iv) If funds were provisionally credited and the service provider 
determines no error occurred, it may reverse the credit. The service 
provider shall notify the account-holding institution of the period 
during which the account-holding institution must honor debits to the 
account in accordance with Sec. 1005.11(d)(2)(ii). If an overdraft 
results, the service provider shall promptly reimburse the account-
holding institution in the amount of the overdraft.
    (c) Compliance by account-holding institution. The account-holding 
institution need not comply with the requirements of the Act and this 
part with respect to electronic fund transfers initiated through the 
service provider except as follows:
    (1) Documentation. The account-holding institution shall provide a 
periodic statement that describes each electronic fund transfer 
initiated by the consumer with the access device issued by the service 
provider. The account-holding institution has no liability for the 
failure to comply with this requirement if the service provider did not 
provide the necessary information; and
    (2) Error resolution. Upon request, the account-holding institution 
shall provide information or copies of documents needed by the service 
provider to investigate errors or to furnish copies of documents to the 
consumer. The account-holding institution shall also honor debits to the 
account in accordance with Sec. 1005.11(d)(2)(ii).



Sec. 1005.15  Electronic fund transfer of government benefits.

    (a) Government agency subject to regulation. (1) A government agency 
is deemed to be a financial institution for purposes of the Act and this 
part if directly or indirectly it issues an access device to a consumer 
for use in initiating an electronic fund transfer of government benefits 
from an account, other than needs-tested benefits in a program 
established under state or local law or administered by a state or local 
agency. The agency shall comply with all applicable requirements of the 
Act and this part, except as provided in this section.
    (2) For purposes of this section, the term ``account'' means an 
account established by a government agency for distributing government 
benefits to a consumer electronically, such as through automated teller 
machines or point-of-sale terminals, but does not include an account for 
distributing needs-tested benefits in a program established under state 
or local law or administered by a state or local agency.
    (b) Issuance of access devices. For purposes of this section, a 
consumer is deemed to request an access device when the consumer applies 
for government benefits that the agency disburses or will disburse by 
means of an electronic fund transfer. The agency shall verify the 
identity of the consumer receiving the device by reasonable means before 
the device is activated.

[[Page 145]]

    (c) Alternative to periodic statement. A government agency need not 
furnish the periodic statement required by Sec. 1005.9(b) if the agency 
makes available to the consumer:
    (1) The consumer's account balance, through a readily available 
telephone line and at a terminal (such as by providing balance 
information at a balance-inquiry terminal or providing it, routinely or 
upon request, on a terminal receipt at the time of an electronic fund 
transfer); and
    (2) A written history of the consumer's account transactions that is 
provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date of a request by the consumer.
    (d) Modified requirements. A government agency that does not furnish 
periodic statements, in accordance with paragraph (c) of this section, 
shall comply with the following special rules:
    (1) Initial disclosures. The agency shall modify the disclosures 
under Sec. 1005.7(b) by disclosing:
    (i) Account balance. The means by which the consumer may obtain 
information concerning the account balance, including a telephone 
number. The agency provides a notice substantially similar to the notice 
contained in paragraph A-5 in appendix A of this part.
    (ii) Written account history. A summary of the consumer's right to 
receive a written account history upon request, in place of the periodic 
statement required by Sec. 1005.7(b)(6), and the telephone number to 
call to request an account history. This disclosure may be made by 
providing a notice substantially similar to the notice contained in 
paragraph A-5 in appendix A of this part.
    (iii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-5 in 
appendix A of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The agency shall provide an 
annual notice concerning error resolution that is substantially similar 
to the notice contained in paragraph A-5 in appendix A, in place of the 
notice required by Sec. 1005.8(b).
    (3) Limitations on liability. For purposes of Sec. 1005.6(b)(3), 
regarding a 60-day period for reporting any unauthorized transfer that 
appears on a periodic statement, the 60-day period shall begin with 
transmittal of a written account history or other account information 
provided to the consumer under paragraph (c) of this section.
    (4) Error resolution. The agency shall comply with the requirements 
of Sec. 1005.11 of this part in response to an oral or written notice of 
an error from the consumer that is received no later than 60 days after 
the consumer obtains the written account history or other account 
information, under paragraph (c) of this section, in which the error is 
first reflected.



Sec. 1005.16  Disclosures at automated teller machines.

    (a) Definition. ``Automated teller machine operator'' means any 
person that operates an automated teller machine at which a consumer 
initiates an electronic fund transfer or a balance inquiry and that does 
not hold the account to or from which the transfer is made, or about 
which an inquiry is made.
    (b) General. An automated teller machine operator that imposes a fee 
on a consumer for initiating an electronic fund transfer or a balance 
inquiry must provide a notice that a fee will be imposed for providing 
electronic fund transfer services or a balance inquiry that discloses 
the amount of the fee.
    (c) Notice requirement. An automated teller machine operator must 
provide the notice required by paragraph (b) of this section either by 
showing it on the screen of the automated teller machine or by providing 
it on paper, before the consumer is committed to paying a fee.
    (d) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer or 
a balance inquiry only if:
    (1) The consumer is provided the notice required under paragraph (c) 
of this section, and

[[Page 146]]

    (2) The consumer elects to continue the transaction or inquiry after 
receiving such notice.

[76 FR 81023, Dec. 27, 2011, as amended at 78 FR 18224, Mar. 26, 2013]



Sec. 1005.17  Requirements for overdraft services.

    (a) Definition. For purposes of this section, the term ``overdraft 
service'' means a service under which a financial institution assesses a 
fee or charge on a consumer's account held by the institution for paying 
a transaction (including a check or other item) when the consumer has 
insufficient or unavailable funds in the account. The term ``overdraft 
service'' does not include any payment of overdrafts pursuant to:
    (1) A line of credit subject to Regulation Z (12 CFR part 1026), 
including transfers from a credit card account, home equity line of 
credit, or overdraft line of credit;
    (2) A service that transfers funds from another account held 
individually or jointly by a consumer, such as a savings account; or
    (3) A line of credit or other transaction exempt from Regulation Z 
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d).
    (b) Opt-in requirement--(1) General. Except as provided under 
paragraph (c) of this section, a financial institution holding a 
consumer's account shall not assess a fee or charge on a consumer's 
account for paying an ATM or one-time debit card transaction pursuant to 
the institution's overdraft service, unless the institution:
    (i) Provides the consumer with a notice in writing, or if the 
consumer agrees, electronically, segregated from all other information, 
describing the institution's overdraft service;
    (ii) Provides a reasonable opportunity for the consumer to 
affirmatively consent, or opt in, to the service for ATM and one-time 
debit card transactions;
    (iii) Obtains the consumer's affirmative consent, or opt-in, to the 
institution's payment of ATM or one-time debit card transactions; and
    (iv) Provides the consumer with confirmation of the consumer's 
consent in writing, or if the consumer agrees, electronically, which 
includes a statement informing the consumer of the right to revoke such 
consent.
    (2) Conditioning payment of other overdrafts on consumer's 
affirmative consent. A financial institution shall not:
    (i) Condition the payment of any overdrafts for checks, ACH 
transactions, and other types of transactions on the consumer 
affirmatively consenting to the institution's payment of ATM and one-
time debit card transactions pursuant to the institution's overdraft 
service; or
    (ii) Decline to pay checks, ACH transactions, and other types of 
transactions that overdraw the consumer's account because the consumer 
has not affirmatively consented to the institution's overdraft service 
for ATM and one-time debit card transactions.
    (3) Same account terms, conditions, and features. A financial 
institution shall provide to consumers who do not affirmatively consent 
to the institution's overdraft service for ATM and one-time debit card 
transactions the same account terms, conditions, and features that it 
provides to consumers who affirmatively consent, except for the 
overdraft service for ATM and one-time debit card transactions.
    (c) Timing--(1) Existing account holders. For accounts opened prior 
to July 1, 2010, the financial institution must not assess any fees or 
charges on a consumer's account on or after August 15, 2010, for paying 
an ATM or one-time debit card transaction pursuant to the overdraft 
service, unless the institution has complied with Sec. 1005.17(b)(1) and 
obtained the consumer's affirmative consent.
    (2) New account holders. For accounts opened on or after July 1, 
2010, the financial institution must comply with Sec. 1005.17(b)(1) and 
obtain the consumer's affirmative consent before the institution 
assesses any fee or charge on the consumer's account for paying an ATM 
or one-time debit card transaction pursuant to the institution's 
overdraft service.
    (d) Content and format. The notice required by paragraph (b)(1)(i) 
of this section shall be substantially similar to Model Form A-9 set 
forth in appendix A of this part, include all applicable items in this 
paragraph, and may not

[[Page 147]]

contain any information not specified in or otherwise permitted by this 
paragraph.
    (1) Overdraft service. A brief description of the financial 
institution's overdraft service and the types of transactions for which 
a fee or charge for paying an overdraft may be imposed, including ATM 
and one-time debit card transactions.
    (2) Fees imposed. The dollar amount of any fees or charges assessed 
by the financial institution for paying an ATM or one-time debit card 
transaction pursuant to the institution's overdraft service, including 
any daily or other overdraft fees. If the amount of the fee is 
determined on the basis of the number of times the consumer has 
overdrawn the account, the amount of the overdraft, or other factors, 
the institution must disclose the maximum fee that may be imposed.
    (3) Limits on fees charged. The maximum number of overdraft fees or 
charges that may be assessed per day, or, if applicable, that there is 
no limit.
    (4) Disclosure of opt-in right. An explanation of the consumer's 
right to affirmatively consent to the financial institution's payment of 
overdrafts for ATM and one-time debit card transactions pursuant to the 
institution's overdraft service, including the methods by which the 
consumer may consent to the service; and
    (5) Alternative plans for covering overdrafts. If the institution 
offers a line of credit subject to Regulation Z (12 CFR part 1026) or a 
service that transfers funds from another account of the consumer held 
at the institution to cover overdrafts, the institution must state that 
fact. An institution may, but is not required to, list additional 
alternatives for the payment of overdrafts.
    (6) Permitted modifications and additional content. If applicable, 
the institution may modify the content required by Sec. 1005.17(d) to 
indicate that the consumer has the right to opt into, or opt out of, the 
payment of overdrafts under the institution's overdraft service for 
other types of transactions, such as checks, ACH transactions, or 
automatic bill payments; to provide a means for the consumer to exercise 
this choice; and to disclose the associated returned item fee and that 
additional merchant fees may apply. The institution may also disclose 
the consumer's right to revoke consent. For notices provided to 
consumers who have opened accounts prior to July 1, 2010, the financial 
institution may describe the institution's overdraft service with 
respect to ATM and one-time debit card transactions with a statement 
such as ``After August 15, 2010, we will not authorize and pay 
overdrafts for the following types of transactions unless you ask us to 
(see below).''
    (e) Joint relationships. If two or more consumers jointly hold an 
account, the financial institution shall treat the affirmative consent 
of any of the joint consumers as affirmative consent for that account. 
Similarly, the financial institution shall treat a revocation of 
affirmative consent by any of the joint consumers as revocation of 
consent for that account.
    (f) Continuing right to opt in or to revoke the opt-in. A consumer 
may affirmatively consent to the financial institution's overdraft 
service at any time in the manner described in the notice required by 
paragraph (b)(1)(i) of this section. A consumer may also revoke consent 
at any time in the manner made available to the consumer for providing 
consent. A financial institution must implement a consumer's revocation 
of consent as soon as reasonably practicable.
    (g) Duration and revocation of opt-in. A consumer's affirmative 
consent to the institution's overdraft service is effective until 
revoked by the consumer, or unless the financial institution terminates 
the service.



Sec. 1005.18  Requirements for financial institutions offering payroll
card accounts.

    (a) Coverage. A financial institution shall comply with all 
applicable requirements of the Act and this part with respect to payroll 
card accounts except as provided in this section.
    (b) Alternative to periodic statements. (1) A financial institution 
need not furnish periodic statements required by Sec. 1005.9(b) if the 
institution makes available to the consumer:
    (i) The consumer's account balance, through a readily available 
telephone line;

[[Page 148]]

    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 60 days preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date the financial institution 
receives the consumer's request.
    (2) The history of account transactions provided under paragraphs 
(b)(1)(ii) and (iii) of this section must include the information set 
forth in Sec. 1005.9(b).
    (c) Modified requirements. A financial institution that provides 
information under paragraph (b) of this section, shall comply with the 
following:
    (1) Initial disclosures. The financial institution shall modify the 
disclosures under Sec. 1005.7(b) by disclosing:
    (i) Account information. A telephone number that the consumer may 
call to obtain the account balance, the means by which the consumer can 
obtain an electronic account history, such as the address of a Web site, 
and a summary of the consumer's right to receive a written account 
history upon request (in place of the summary of the right to receive a 
periodic statement required by Sec. 1005.7(b)(6)), including a telephone 
number to call to request a history. The disclosure required by this 
paragraph (c)(1)(i) may be made by providing a notice substantially 
similar to the notice contained in paragraph A-7(a) in appendix A of 
this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The financial institution shall 
provide an annual notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by 
Sec. 1005.8(b). Alternatively, a financial institution may include on or 
with each electronic and written history provided in accordance with 
Sec. 1005.18(b)(1), a notice substantially similar to the abbreviated 
notice for periodic statements contained in paragraph A-3(b) in appendix 
A of this part, modified as necessary to reflect the error resolution 
provisions set forth in this section.
    (3) Limitations on liability. (i) For purposes of Sec. 1005.6(b)(3), 
the 60-day period for reporting any unauthorized transfer shall begin on 
the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (b)(1)(ii) of this section, provided that the 
electronic history made available to the consumer reflects the transfer; 
or
    (B) The date the financial institution sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (b)(1)(iii) of this section in which the unauthorized transfer 
is first reflected.
    (ii) A financial institution may comply with paragraph (c)(3)(i) of 
this section by limiting the consumer's liability for an unauthorized 
transfer as provided under Sec. 1005.6(b)(3) for any transfer reported 
by the consumer within 120 days after the transfer was credited or 
debited to the consumer's account.
    (4) Error resolution. (i) The financial institution shall comply 
with the requirements of Sec. 1005.11 in response to an oral or written 
notice of an error from the consumer that is received by the earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (b)(1)(ii) of this section, 
provided that the electronic history made available to the consumer 
reflects the alleged error; or
    (B) Sixty days after the date the financial institution sends a 
written history of the consumer's account transactions requested by the 
consumer under paragraph (b)(1)(iii) of this section in which the 
alleged error is first reflected.
    (ii) In lieu of following the procedures in paragraph (c)(4)(i) of 
this section, a financial institution complies with the requirements for 
resolving errors in Sec. 1005.11 if it investigates any oral or written 
notice of an error from the consumer that is received by the institution 
within 120 days after the

[[Page 149]]

transfer allegedly in error was credited or debited to the consumer's 
account.



Sec. 1005.20  Requirements for gift cards and gift certificates.

    (a) Definitions. For purposes of this section, except as excluded 
under paragraph (b), the following definitions apply:
    (1) ``Gift certificate'' means a card, code, or other device that 
is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount that may not be 
increased or reloaded in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (2) ``Store gift card'' means a card, code, or other device that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (3) ``General-use prepaid card'' means a card, code, or other device 
that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, or usable at automated teller machines.
    (4) ``Loyalty, award, or promotional gift card'' means a card, code, 
or other device that:
    (i) Is issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in connection with a loyalty, award, or 
promotional program;
    (ii) Is redeemable upon presentation at one or more merchants for 
goods or services, or usable at automated teller machines; and
    (iii) Sets forth the following disclosures, as applicable:
    (A) A statement indicating that the card, code, or other device is 
issued for loyalty, award, or promotional purposes, which must be 
included on the front of the card, code, or other device;
    (B) The expiration date for the underlying funds, which must be 
included on the front of the card, code, or other device;
    (C) The amount of any fees that may be imposed in connection with 
the card, code, or other device, and the conditions under which they may 
be imposed, which must be provided on or with the card, code, or other 
device; and
    (D) A toll-free telephone number and, if one is maintained, a Web 
site, that a consumer may use to obtain fee information, which must be 
included on the card, code, or other device.
    (5) Dormancy or inactivity fee. The terms ``dormancy fee'' and 
``inactivity fee'' mean a fee for non-use of or inactivity on a gift 
certificate, store gift card, or general-use prepaid card.
    (6) Service fee. The term ``service fee'' means a periodic fee for 
holding or use of a gift certificate, store gift card, or general-use 
prepaid card. A periodic fee includes any fee that may be imposed on a 
gift certificate, store gift card, or general-use prepaid card from time 
to time for holding or using the certificate or card.
    (7) Activity. The term ``activity'' means any action that results in 
an increase or decrease of the funds underlying a certificate or card, 
other than the imposition of a fee, or an adjustment due to an error or 
a reversal of a prior transaction.
    (b) Exclusions. The terms ``gift certificate,'' ``store gift card,'' 
and ``general-use prepaid card'', as defined in paragraph (a) of this 
section, do not include any card, code, or other device that is:
    (1) Useable solely for telephone services;
    (2) Reloadable and not marketed or labeled as a gift card or gift 
certificate. For purposes of this paragraph (b)(2), the term 
``reloadable'' includes a temporary non-reloadable card issued solely in 
connection with a reloadable card, code, or other device;
    (3) A loyalty, award, or promotional gift card;

[[Page 150]]

    (4) Not marketed to the general public;
    (5) Issued in paper form only; or
    (6) Redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain goods 
or services in conjunction with admission to such events or venues, 
either at the event or venue or at specific locations affiliated with 
and in geographic proximity to the event or venue.
    (c) Form of disclosures--(1) Clear and conspicuous. Disclosures made 
under this section must be clear and conspicuous. The disclosures may 
contain commonly accepted or readily understandable abbreviations or 
symbols.
    (2) Format. Disclosures made under this section generally must be 
provided to the consumer in written or electronic form. Except for the 
disclosures in paragraphs (c)(3) and (h)(2) of this section, written and 
electronic disclosures made under this section must be in a retainable 
form. Only disclosures provided under paragraphs (c)(3) and (h)(2) may 
be given orally.
    (3) Disclosures prior to purchase. Before a gift certificate, store 
gift card, or general-use prepaid card is purchased, a person that 
issues or sells such certificate or card must disclose to the consumer 
the information required by paragraphs (d)(2), (e)(3), and (f)(1) of 
this section. The fees and terms and conditions of expiration that are 
required to be disclosed prior to purchase may not be changed after 
purchase.
    (4) Disclosures on the certificate or card. Disclosures required by 
paragraphs (a)(4)(iii), (d)(2), (e)(3), and (f)(2) of this section must 
be made on the certificate or card, or in the case of a loyalty, award, 
or promotional gift card, on the card, code, or other device. A 
disclosure made in an accompanying terms and conditions document, on 
packaging surrounding a certificate or card, or on a sticker or other 
label affixed to the certificate or card does not constitute a 
disclosure on the certificate or card. For an electronic certificate or 
card, disclosures must be provided electronically on the certificate or 
card provided to the consumer. An issuer that provides a code or 
confirmation to a consumer orally must provide to the consumer a written 
or electronic copy of the code or confirmation promptly, and the 
applicable disclosures must be provided on the written copy of the code 
or confirmation.
    (d) Prohibition on imposition of fees or charges. No person may 
impose a dormancy, inactivity, or service fee with respect to a gift 
certificate, store gift card, or general-use prepaid card, unless:
    (1) There has been no activity with respect to the certificate or 
card, in the one-year period ending on the date on which the fee is 
imposed;
    (2) The following are stated, as applicable, clearly and 
conspicuously on the gift certificate, store gift card, or general-use 
prepaid card:
    (i) The amount of any dormancy, inactivity, or service fee that may 
be charged;
    (ii) How often such fee may be assessed; and
    (iii) That such fee may be assessed for inactivity; and
    (3) Not more than one dormancy, inactivity, or service fee is 
imposed in any given calendar month.
    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The person has established policies and procedures to provide 
consumers with a reasonable opportunity to purchase a certificate or 
card with at least five years remaining until the certificate or card 
expiration date;
    (2) The expiration date for the underlying funds is at least the 
later of:
    (i) Five years after the date the gift certificate was initially 
issued, or the date on which funds were last loaded to a store gift card 
or general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a

[[Page 151]]

consumer may use to obtain a replacement certificate or card after the 
certificate or card expires if the underlying funds may be available; 
and
    (iii) Except where a non-reloadable certificate or card bears an 
expiration date that is at least seven years from the date of 
manufacture, a statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that:
    (A) The certificate or card expires, but the underlying funds either 
do not expire or expire later than the certificate or card, and;
    (B) The consumer may contact the issuer for a replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card or for 
providing the certificate or card holder with the remaining balance in 
some other manner prior to the funds expiration date, unless such 
certificate or card has been lost or stolen.
    (f) Additional disclosure requirements for gift certificates or 
cards. The following disclosures must be provided in connection with a 
gift certificate, store gift card, or general-use prepaid card, as 
applicable:
    (1) Fee disclosures. For each type of fee that may be imposed in 
connection with the certificate or card (other than a dormancy, 
inactivity, or service fee subject to the disclosure requirements under 
paragraph (d)(2) of this section), the following information must be 
provided on or with the certificate or card:
    (i) The type of fee;
    (ii) The amount of the fee (or an explanation of how the fee will be 
determined); and
    (iii) The conditions under which the fee may be imposed.
    (2) Telephone number for fee information. A toll-free telephone 
number and, if one is maintained, a Web site, that a consumer may use to 
obtain information about fees described in paragraphs (d)(2) and (f)(1) 
of this section must be disclosed on the certificate or card.
    (g) Compliance dates--(1) Effective date for gift certificates, 
store gift cards, and general-use prepaid cards. Except as provided in 
paragraph (h) of this section, the requirements of this section apply to 
any gift certificate, store gift card, or general-use prepaid card sold 
to a consumer on or after August 22, 2010, or provided to a consumer as 
a replacement for such certificate or card.
    (2) Effective date for loyalty, award, or promotional gift cards. 
The requirements in paragraph (a)(4)(iii) of this section apply to any 
card, code, or other device provided to a consumer in connection with a 
loyalty, award, or promotional program if the period of eligibility for 
such program began on or after August 22, 2010.
    (h) Temporary exemption--(1) Delayed mandatory compliance date. For 
any gift certificate, store gift card, or general-use prepaid card 
produced prior to April 1, 2010, the mandatory compliance date of the 
requirements of paragraphs (c)(3), (d)(2), (e)(1), (e)(3), and (f) of 
this section is January 31, 2011, provided that an issuer of such 
certificate or card:
    (i) Complies with all other provisions of this section;
    (ii) Does not impose an expiration date with respect to the funds 
underlying such certificate or card;
    (iii) At the consumer's request, replaces such certificate or card 
if it has funds remaining at no cost to the consumer; and
    (iv) Satisfies the requirements of paragraph (h)(2) of this section.
    (2) Additional disclosures. Issuers relying on the delayed effective 
date in Sec. 1005.20(h)(1) must disclose through in-store signage, 
messages during customer service calls, Web sites, and general 
advertising, that:
    (i) The underlying funds of such certificate or card do not expire;
    (ii) Consumers holding such certificate or card have a right to a 
free replacement certificate or card, which must be accompanied by the 
packaging and materials typically associated with such certificate or 
card; and
    (iii) Any dormancy, inactivity, or service fee for such certificate 
or card that might otherwise be charged will not be charged if such fees 
do not comply with section 916 of the Act.
    (3) Expiration of additional disclosure requirements. The 
disclosures in paragraph (h)(2) of this section:
    (i) Are not required to be provided on or after January 31, 2011, 
with respect

[[Page 152]]

to in-store signage and general advertising.
    (ii) Are not required to be provided on or after January 31, 2013, 
with respect to messages during customer service calls and Web sites.



             Subpart B_Requirements for Remittance Transfers

    Source: 77 FR 6285, Feb. 7, 2012, unless otherwise noted.



Sec. 1005.30  Remittance transfer definitions.

    Except as otherwise provided, for purposes of this subpart, the 
following definitions apply:
    (a) ``Agent'' means an agent, authorized delegate, or person 
affiliated with a remittance transfer provider, as defined under State 
or other applicable law, when such agent, authorized delegate, or 
affiliate acts for that remittance transfer provider.
    (b) ``Business day'' means any day on which the offices of a 
remittance transfer provider are open to the public for carrying on 
substantially all business functions.
    (c) ``Designated recipient'' means any person specified by the 
sender as the authorized recipient of a remittance transfer to be 
received at a location in a foreign country.
    (d) ``Preauthorized remittance transfer'' means a remittance 
transfer authorized in advance to recur at substantially regular 
intervals.
    (e) Remittance transfer--(1) General definition. A ``remittance 
transfer'' means the electronic transfer of funds requested by a sender 
to a designated recipient that is sent by a remittance transfer 
provider. The term applies regardless of whether the sender holds an 
account with the remittance transfer provider, and regardless of whether 
the transaction is also an electronic fund transfer, as defined in 
Sec. 1005.3(b).
    (2) Exclusions from coverage. The term ``remittance transfer'' does 
not include:
    (i) Small value transactions. Transfer amounts, as described in 
Sec. 1005.31(b)(1)(i), of $15 or less.
    (ii) Securities and commodities transfers. Any transfer that is 
excluded from the definition of electronic fund transfer under 
Sec. 1005.3(c)(4).
    (f) Remittance transfer provider--(1) General definition. 
``Remittance transfer provider'' or ``provider'' means any person that 
provides remittance transfers for a consumer in the normal course of its 
business, regardless of whether the consumer holds an account with such 
person.
    (2) Normal course of business--(i) Safe harbor. For purposes of 
paragraph (f)(1) of this section, a person is deemed not to be providing 
remittance transfers for a consumer in the normal course of its business 
if the person:
    (A) Provided 100 or fewer remittance transfers in the previous 
calendar year; and
    (B) Provides 100 or fewer remittance transfers in the current 
calendar year.
    (ii) Transition period. If a person that provided 100 or fewer 
remittance transfers in the previous calendar year provides more than 
100 remittance transfers in the current calendar year, and if that 
person is then providing remittance transfers for a consumer in the 
normal course of its business pursuant to paragraph (f)(1) of this 
section, the person has a reasonable period of time, not to exceed six 
months, to begin complying with this subpart. Compliance with this 
subpart will not be required for any remittance transfers for which 
payment is made during that reasonable period of time.
    (g) ``Sender'' means a consumer in a State who primarily for 
personal, family, or household purposes requests a remittance transfer 
provider to send a remittance transfer to a designated recipient.
    (h) Third-party fees. (1) ``Covered third-party fees.'' The term 
``covered third-party fees'' means any fees imposed on the remittance 
transfer by a person other than the remittance transfer provider except 
for fees described in paragraph (h)(2) of this section.
    (2) ``Non-covered third-party fees.'' The term ``non-covered third-
party fees'' means any fees imposed by the designated recipient's 
institution for receiving a remittance transfer into an account except 
if the institution acts

[[Page 153]]

as an agent of the remittance transfer provider.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 78 
FR 30703, May 22, 2013]



Sec. 1005.31  Disclosures.

    (a) General form of disclosures--(1) Clear and conspicuous. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section or Sec. 1005.33(h)(3) must be clear and 
conspicuous. Disclosures required by this subpart or permitted by 
paragraph (b)(1)(viii) of this section or Sec. 1005.33(h)(3) may contain 
commonly accepted or readily understandable abbreviations or symbols.
    (2) Written and electronic disclosures. Disclosures required by this 
subpart generally must be provided to the sender in writing. Disclosures 
required by paragraph (b)(1) of this section may be provided 
electronically, if the sender electronically requests the remittance 
transfer provider to send the remittance transfer. Written and 
electronic disclosures required by this subpart generally must be made 
in a retainable form. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, need not be retainable.
    (3) Disclosures for oral telephone transactions. The information 
required by paragraph (b)(1) of this section may be disclosed orally if:
    (i) The transaction is conducted orally and entirely by telephone;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally a statement about the rights of 
the sender regarding cancellation required by paragraph (b)(2)(iv) of 
this section pursuant to the timing requirements in paragraph (e)(1) of 
this section; and
    (iv) The provider discloses orally, as each is applicable, the 
information required by paragraph (b)(2)(vii) of this section and the 
information required by Sec. 1005.36(d)(1)(i)(A), with respect to 
transfers subject to Sec. 1005.36(d)(2)(ii), pursuant to the timing 
requirements in paragraph (e)(1) of this section.
    (4) Oral disclosures for certain error resolution notices. The 
information required by Sec. 1005.33(c)(1) may be disclosed orally if:
    (i) The remittance transfer provider determines that an error 
occurred as described by the sender; and
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section.
    (5) Disclosures for mobile application or text message transactions. 
The information required by paragraph (b)(1) of this section may be 
disclosed orally or via mobile application or text message if:
    (i) The transaction is conducted entirely by telephone via mobile 
application or text message;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally or via mobile application or 
text message a statement about the rights of the sender regarding 
cancellation required by paragraph (b)(2)(iv) of this section pursuant 
to the timing requirements in paragraph (e)(1) of this section; and
    (iv) The provider discloses orally or via mobile application or text 
message, as each is applicable, the information required by paragraph 
(b)(2)(vii) of this section and the information required by 
Sec. 1005.36(d)(1)(i)(A), with respect to transfers subject to 
Sec. 1005.36(d)(2)(ii), pursuant to the timing requirements in paragraph 
(e)(1) of this section.
    (b) Disclosure requirements--(1) Pre-payment disclosure. A 
remittance transfer provider must disclose to a sender, as applicable:
    (i) The amount that will be transferred to the designated recipient, 
in the currency in which the remittance transfer is funded, using the 
term ``Transfer Amount'' or a substantially similar term;
    (ii) Any fees imposed and any taxes collected on the remittance 
transfer by the provider, in the currency in which the remittance 
transfer is funded, using the terms ``Transfer Fees'' for fees and 
``Transfer Taxes'' for taxes, or substantially similar terms;
    (iii) The total amount of the transaction, which is the sum of 
paragraphs (b)(1)(i) and (ii) of this section, in the currency in which 
the remittance transfer is funded, using the term ``Total'' or a 
substantially similar term;
    (iv) The exchange rate used by the provider for the remittance 
transfer,

[[Page 154]]

rounded consistently for each currency to no fewer than two decimal 
places and no more than four decimal places, using the term ``Exchange 
Rate'' or a substantially similar term;
    (v) The amount in paragraph (b)(1)(i) of this section, in the 
currency in which the funds will be received by the designated 
recipient, but only if covered third-party fees are imposed under 
paragraph (b)(1)(vi) of this section, using the term ``Transfer Amount'' 
or a substantially similar term. The exchange rate used to calculate 
this amount is the exchange rate in paragraph (b)(1)(iv) of this 
section, including an estimated exchange rate to the extent permitted by 
Sec. 1005.32, prior to any rounding of the exchange rate;
    (vi) Any covered third-party fees, in the currency in which the 
funds will be received by the designated recipient, using the term 
``Other Fees,'' or a substantially similar term. The exchange rate used 
to calculate any covered third-party fees is the exchange rate in 
paragraph (b)(1)(iv) of this section, including an estimated exchange 
rate to the extent permitted by Sec. 1005.32, prior to any rounding of 
the exchange rate;
    (vii) The amount that will be received by the designated recipient, 
in the currency in which the funds will be received, using the term 
``Total to Recipient'' or a substantially similar term except that this 
amount shall not include non-covered third party fees or taxes collected 
on the remittance transfer by a person other than the provider 
regardless of whether such fees or taxes are disclosed pursuant to 
paragraph (b)(1)(viii) of this section. The exchange rate used to 
calculate this amount is the exchange rate in paragraph (b)(1)(iv) of 
this section, including an estimated exchange rate to the extent 
permitted by Sec. 1005.32, prior to any rounding of the exchange rate.
    (viii) A statement indicating that non-covered third-party fees or 
taxes collected on the remittance transfer by a person other than the 
provider may apply to the remittance transfer and result in the 
designated recipient receiving less than the amount disclosed pursuant 
to paragraph (b)(1)(vii) of this section. A provider may only include 
this statement to the extent that such fees or taxes do or may apply to 
the transfer, using the language set forth in Model Forms A-30(a) 
through (c) of Appendix A to this part, as appropriate, or substantially 
similar language. In this statement, a provider also may, but is not 
required, to disclose any applicable non-covered third-party fees or 
taxes collected by a person other than the provider. Any such figure 
must be disclosed in the currency in which the funds will be received, 
using the language set forth in Model Forms A-30(b) through (d) of 
Appendix A to this part, as appropriate, or substantially similar 
language. The exchange rate used to calculate any disclosed non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider is the exchange rate in paragraph 
(b)(1)(iv) of this section, including an estimated exchange rate to the 
extent permitted by Sec. 1005.32, prior to any rounding of the exchange 
rate;
    (2) Receipt. A remittance transfer provider must disclose to a 
sender, as applicable:
    (i) The disclosures described in paragraphs (b)(1)(i) through (viii) 
of this section;
    (ii) The date in the foreign country on which funds will be 
available to the designated recipient, using the term ``Date Available'' 
or a substantially similar term. A provider may provide a statement that 
funds may be available to the designated recipient earlier than the date 
disclosed, using the term ``may be available sooner'' or a substantially 
similar term;
    (iii) The name and, if provided by the sender, the telephone number 
and/or address of the designated recipient, using the term ``Recipient'' 
or a substantially similar term;
    (iv) A statement about the rights of the sender regarding the 
resolution of errors and cancellation, using language set forth in Model 
Form A-37 of Appendix A to this part or substantially similar language. 
For any remittance transfer scheduled by the sender at least three 
business days before the date of the transfer, the statement about the 
rights of the sender regarding cancellation must instead reflect the 
requirements of Sec. 1005.36(c);

[[Page 155]]

    (v) The name, telephone number(s), and Web site of the remittance 
transfer provider;
    (vi) A statement that the sender can contact the State agency that 
licenses or charters the remittance transfer provider with respect to 
the remittance transfer and the Consumer Financial Protection Bureau for 
questions or complaints about the remittance transfer provider, using 
language set forth in Model Form A-37 of Appendix A to this part or 
substantially similar language. The disclosure must provide the name, 
telephone number(s), and Web site of the State agency that licenses or 
charters the remittance transfer provider with respect to the remittance 
transfer and the name, toll-free telephone number(s), and Web site of 
the Consumer Financial Protection Bureau; and
    (vii) For any remittance transfer scheduled by the sender at least 
three business days before the date of the transfer, or the first 
transfer in a series of preauthorized remittance transfers, the date the 
remittance transfer provider will make or made the remittance transfer, 
using the term ``Transfer Date,'' or a substantially similar term.
    (3) Combined disclosure--(i) In general. As an alternative to 
providing the disclosures described in paragraph (b)(1) and (2) of this 
section, a remittance transfer provider may provide the disclosures 
described in paragraph (b)(2) of this section, as applicable, in a 
single disclosure pursuant to the timing requirements in paragraph 
(e)(1) of this section. Except as provided in paragraph (b)(3)(ii) of 
this section, if the remittance transfer provider provides the combined 
disclosure and the sender completes the transfer, the remittance 
transfer provider must provide the sender with proof of payment when 
payment is made for the remittance transfer. The proof of payment must 
be clear and conspicuous, provided in writing or electronically, and 
provided in a retainable form.
    (ii) Transfers scheduled before the date of transfer. If the 
disclosure described in paragraph (b)(3)(i) of this section is provided 
in accordance with Sec. 1005.36(a)(1)(i) and payment is not processed by 
the remittance transfer provider at the time the remittance transfer is 
scheduled, a remittance transfer provider may provide confirmation that 
the transaction has been scheduled in lieu of the proof of payment 
otherwise required by paragraph (b)(3)(i) of this section. The 
confirmation of scheduling must be clear and conspicuous, provided in 
writing or electronically, and provided in a retainable form.
    (4) Long form error resolution and cancellation notice. Upon the 
sender's request, a remittance transfer provider must promptly provide 
to the sender a notice describing the sender's error resolution and 
cancellation rights, using language set forth in Model Form A-36 of 
Appendix A to this part or substantially similar language. For any 
remittance transfer scheduled by the sender at least three business days 
before the date of the transfer, the description of the rights of the 
sender regarding cancellation must instead reflect the requirements of 
Sec. 1005.36(c).
    (c) Specific format requirements--(1) Grouping. The information 
required by paragraphs (b)(1)(i), (ii), and (iii) of this section 
generally must be grouped together. The information required by 
paragraphs (b)(1)(v), (vi), (vii), and (viii) of this section generally 
must be grouped together. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, generally need not comply with the grouping requirements of 
this paragraph, however information required or permitted by paragraph 
(b)(1)(viii) of this section must be grouped with information required 
by paragraph (b)(1)(vii) of this section.
    (2) Proximity. The information required by paragraph (b)(1)(iv) of 
this section generally must be disclosed in close proximity to the other 
information required by paragraph (b)(1) of this section. The 
information required by paragraph (b)(2)(iv) of this section generally 
must be disclosed in close proximity to the other information required 
by paragraph (b)(2) of this section. The information required or 
permitted by paragraph (b)(1)(viii) must be in close proximity to the 
information required by paragraph (b)(1)(vii) of this section. 
Disclosures provided via mobile application or text message, to

[[Page 156]]

the extent permitted by paragraph (a)(5) of this section, generally need 
not comply with the proximity requirements of this paragraph, however 
information required or permitted by paragraph (b)(1)(viii) of this 
section must follow the information required by paragraph (b)(1)(vii) of 
this section.
    (3) Prominence and size. Written disclosures required by this 
subpart or permitted by paragraph (b)(1)(viii) of this section must be 
provided on the front of the page on which the disclosure is printed. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in a minimum eight-point font, except for 
disclosures provided via mobile application or text message, to the 
extent permitted by paragraph (a)(5) of this section. Disclosures 
required by paragraph (b) of this section or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in equal prominence to each other.
    (4) Segregation. Except for disclosures provided via mobile 
application or text message, to the extent permitted by paragraph (a)(5) 
of this section, disclosures required by this subpart that are provided 
in writing or electronically must be segregated from everything else and 
must contain only information that is directly related to the 
disclosures required under this subpart.
    (d) Estimates. Estimated disclosures may be provided to the extent 
permitted by Sec. 1005.32. Estimated disclosures must be described using 
the term ``Estimated'' or a substantially similar term in close 
proximity to the estimated term or terms.
    (e) Timing. (1) Except as provided in Sec. 1005.36(a), a pre-payment 
disclosure required by paragraph (b)(1) of this section or a combined 
disclosure required by paragraph (b)(3) of this section must be provided 
to the sender when the sender requests the remittance transfer, but 
prior to payment for the transfer.
    (2) Except as provided in Sec. 1005.36(a), a receipt required by 
paragraph (b)(2) of this section generally must be provided to the 
sender when payment is made for the remittance transfer. If a 
transaction is conducted entirely by telephone, a receipt required by 
paragraph (b)(2) of this section may be mailed or delivered to the 
sender no later than one business day after the date on which payment is 
made for the remittance transfer. If a transaction is conducted entirely 
by telephone and involves the transfer of funds from the sender's 
account held by the provider, the receipt required by paragraph (b)(2) 
of this section may be provided on or with the next regularly scheduled 
periodic statement for that account or within 30 days after payment is 
made for the remittance transfer if a periodic statement is not 
provided. The statement about the rights of the sender regarding 
cancellation required by paragraph (b)(2)(iv) of this section may, but 
need not, be disclosed pursuant to the timing requirements of this 
paragraph if a provider discloses this information pursuant to 
paragraphs (a)(3)(iii) or (a)(5)(iii) of this section.
    (f) Accurate when payment is made. Except as provided in 
Sec. 1005.36(b), disclosures required by this section or permitted by 
paragraph (b)(1)(viii) of this section must be accurate when a sender 
makes payment for the remittance transfer, except to the extent 
estimates are permitted by Sec. 1005.32.
    (g) Foreign language disclosures--(1) General. Except as provided in 
paragraph (g)(2) of this section, disclosures required by this subpart 
or permitted by paragraph (b)(1)(viii) of this section or 
Sec. 1005.33(h)(3) must be made in English and, if applicable, either 
in:
    (i) Each of the foreign languages principally used by the remittance 
transfer provider to advertise, solicit, or market remittance transfer 
services, either orally, in writing, or electronically, at the office in 
which a sender conducts a transaction or asserts an error; or
    (ii) The foreign language primarily used by the sender with the 
remittance transfer provider to conduct the transaction (or for written 
or electronic disclosures made pursuant to Sec. 1005.33, in the foreign 
language primarily used by the sender with the remittance transfer 
provider to assert the error), provided that such foreign language is 
principally used by the remittance transfer provider to advertise, 
solicit, or market remittance transfer services,

[[Page 157]]

either orally, in writing, or electronically, at the office in which a 
sender conducts a transaction or asserts an error, respectively.
    (2) Oral, mobile application, or text message disclosures. 
Disclosures provided orally for transactions conducted orally and 
entirely by telephone under paragraph (a)(3) of this section or orally 
or via mobile application or text message for transactions conducted via 
mobile application or text message under paragraph (a)(5) of this 
section shall be made in the language primarily used by the sender with 
the remittance transfer provider to conduct the transaction. Disclosures 
provided orally under paragraph (a)(4) of this section for error 
resolution purposes shall be made in the language primarily used by the 
sender with the remittance transfer provider to assert the error.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 77 
FR 30703, May 22, 2013]



Sec. 1005.32  Estimates.

    (a) Temporary exception for insured institutions--(1) General. For 
disclosures described in Sec. Sec. 1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided in accordance with 
paragraph (c) of this section for the amounts required to be disclosed 
under Sec. 1005.31(b)(1)(iv) through (vii), if:
    (i) A remittance transfer provider cannot determine the exact 
amounts for reasons beyond its control;
    (ii) A remittance transfer provider is an insured institution; and
    (iii) The remittance transfer is sent from the sender's account with 
the institution.
    (2) Sunset date. Paragraph (a)(1) of this section expires on July 
21, 2020.
    (3) Insured institution. For purposes of this section, the term 
``insured institution'' means insured depository institutions (which 
includes uninsured U.S. branches and agencies of foreign depository 
institutions) as defined in section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813), and insured credit unions as defined in section 
101 of the Federal Credit Union Act (12 U.S.C. 1752).
    (b) Permanent exceptions--(1) Permanent exception for transfers to 
certain countries--(i) General. For disclosures described in 
Sec. Sec. 1005.31(b)(1) through (b)(3) and 1005.36(a)(1) and (a)(2), 
estimates may be provided for transfers to certain countries in 
accordance with paragraph (c) of this section for the amounts required 
to be disclosed under Sec. 1005.31(b)(1)(iv) through (b)(1)(vii), if a 
remittance transfer provider cannot determine the exact amounts when the 
disclosure is required because:
    (A) The laws of the recipient country do not permit such a 
determination, or
    (B) The method by which transactions are made in the recipient 
country does not permit such determination.
    (ii) Safe harbor. A remittance transfer provider may rely on the 
list of countries published by the Bureau to determine whether estimates 
may be provided under paragraph (b)(1) of this section, unless the 
provider has information that a country's laws or the method by which 
transactions are conducted in that country permits a determination of 
the exact disclosure amount.
    (2) Permanent exception for transfers scheduled before the date of 
transfer. (i) Except as provided in paragraph (b)(2)(ii) of this 
section, for disclosures described in Sec. Sec. 1005.36(a)(1)(i) and 
(a)(2)(i), estimates may be provided in accordance with paragraph (d) of 
this section for the amounts to be disclosed under 
Sec. Sec. 1005.31(b)(1)(iv) through (vii) if the remittance transfer is 
scheduled by a sender five or more business days before the date of the 
transfer. In addition, if, at the time the sender schedules such a 
transfer, the provider agrees to a sender's request to fix the amount to 
be transferred in the currency in which the remittance transfer will be 
received and not the currency in which it is funded, estimates may also 
be provided for the amounts to be disclosed under 
Sec. Sec. 1005.31(b)(1)(i) through (iii), except as provided in 
paragraph (b)(2)(iii) of this section.
    (ii) Covered third-party fees described in Sec. 1005.31(b)(1)(vi) 
may be estimated under paragraph (b)(2)(i) of this section only if the 
exchange rate is also estimated under paragraph (b)(2)(i) of this 
section and the estimated exchange rate affects the amount of such fees.
    (iii) Fees and taxes described in Sec. 1005.31(b)(1)(ii) may be 
estimated

[[Page 158]]

under paragraph (b)(2)(i) of this section only if the amount that will 
be transferred in the currency in which it is funded is also estimated 
under paragraph (b)(2)(i) of this section, and the estimated amount 
affects the amount of such fees and taxes.
    (3) Permanent exception for optional disclosure of non-covered 
third-party fees and taxes collected by a person other than the 
provider. For disclosures described in Sec. Sec. 1005.31(b)(1) through 
(3) and 1005.36(a)(1) and (2), estimates may be provided for applicable 
non-covered third-party fees and taxes collected on the remittance 
transfer by a person other than the provider, which are permitted to be 
disclosed under Sec. 1005.31(b)(1)(viii), provided such estimates are 
based on reasonable sources of information.
    (c) Bases for estimates generally. Estimates provided pursuant to 
the exceptions in paragraph (a) or (b)(1) of this section must be based 
on the below-listed approach or approaches, except as otherwise 
permitted by this paragraph. If a remittance transfer provider bases an 
estimate on an approach that is not listed in this paragraph, the 
provider is deemed to be in compliance with this paragraph so long as 
the designated recipient receives the same, or greater, amount of funds 
than the remittance transfer provider disclosed under 
Sec. 1005.31(b)(1)(vii).
    (1) Exchange rate. In disclosing the exchange rate as required under 
Sec. 1005.31(b)(1)(iv), an estimate must be based on one of the 
following:
    (i) For remittance transfers sent via international ACH that qualify 
for the exception in paragraph (b)(1)(ii) of this section, the most 
recent exchange rate set by the recipient country's central bank or 
other governmental authority and reported by a Federal Reserve Bank;
    (ii) The most recent publicly available wholesale exchange rate and, 
if applicable, any spread that the remittance transfer provider or its 
correspondent typically applies to such a wholesale rate for remittance 
transfers for that currency; or
    (iii) The most recent exchange rate offered or used by the person 
making funds available directly to the designated recipient or by the 
person setting the exchange rate.
    (2) Transfer amount in the currency in which the funds will be 
received by the designated recipient. In disclosing the transfer amount 
in the currency in which the funds will be received by the designated 
recipient, as required under Sec. 1005.31(b)(1)(v), an estimate must be 
based on the estimated exchange rate provided in accordance with 
paragraph (c)(1) of this section, prior to any rounding of the estimated 
exchange rate.
    (3) Covered third-party fees--(i) Imposed as percentage of amount 
transferred. In disclosing covered third-party fees, as described under 
Sec. 1005.31(b)(1)(vi), that are a percentage of the amount transferred 
to the designated recipient, an estimated exchange rate must be based on 
the estimated exchange rate provided in accordance with paragraph (c)(1) 
of this section, prior to any rounding of the estimated exchange rate.
    (ii) Imposed by the intermediary or final institution. In disclosing 
covered third-party fees pursuant to Sec. 1005.31(b)(1)(vi), an estimate 
must be based on one of the following:
    (A) The remittance transfer provider's most recent remittance 
transfer to the designated recipient's institution, or
    (B) A representative transmittal route identified by the remittance 
transfer provider.
    (4) Amount of currency that will be received by the designated 
recipient. In disclosing the amount of currency that will be received by 
the designated recipient as required under Sec. 1005.31(b)(1)(vii), an 
estimate must be based on the information provided in accordance with 
paragraphs (c)(1) through (3) of this section, as applicable.
    (d) Bases for estimates for transfers scheduled before the date of 
transfer. Estimates provided pursuant to paragraph (b)(2) of this 
section must be based on the exchange rate or, where applicable, the 
estimated exchange rate based on an estimation methodology permitted 
under paragraph (c) of this section that the provider would

[[Page 159]]

have used or did use that day in providing disclosures to a sender 
requesting such a remittance transfer to be made on the same day. If, in 
accordance with this paragraph, a remittance transfer provider uses a 
basis described in paragraph (c) of this section but not listed in 
paragraph (c)(1) of this section, the provider is deemed to be in 
compliance with this paragraph regardless of the amount received by the 
designated recipient, so long as the estimation methodology is the same 
that the provider would have used or did use in providing disclosures to 
a sender requesting such a remittance transfer to be made on the same 
day.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50283, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 79 FR 55991, Sept. 18, 2014]



Sec. 1005.33  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. For purposes of this section, the term error means:
    (i) An incorrect amount paid by a sender in connection with a 
remittance transfer unless the disclosure stated an estimate of the 
amount paid by a sender in accordance with Sec. 1005.32(b)(2) and the 
difference results from application of the actual exchange rate, fees, 
and taxes, rather than any estimated amount;
    (ii) A computational or bookkeeping error made by the remittance 
transfer provider relating to a remittance transfer;
    (iii) The failure to make available to a designated recipient the 
amount of currency disclosed pursuant to Sec. 1005.31(b)(1)(vii) and 
stated in the disclosure provided to the sender under Sec. 1005.31(b)(2) 
or (3) for the remittance transfer, unless:
    (A) The disclosure stated an estimate of the amount to be received 
in accordance with Sec. 1005.32(a), (b)(1) or (b)(2) and the difference 
results from application of the actual exchange rate, fees, and taxes, 
rather than any estimated amounts; or
    (B) The failure resulted from extraordinary circumstances outside 
the remittance transfer provider's control that could not have been 
reasonably anticipated; or
    (C) The difference results from the application of non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider and the provider provided the disclosure 
required by Sec. 1005.31(b)(1)(viii).
    (iv) The failure to make funds available to a designated recipient 
by the date of availability stated in the disclosure provided to the 
sender under Sec. 1005.31(b)(2) or (3) for the remittance transfer, 
unless the failure to make the funds available resulted from:
    (A) Extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated;
    (B) Delays related to a necessary investigation or other special 
action by the remittance transfer provider or a third party as required 
by the provider's fraud screening procedures or in accordance with the 
Bank Secrecy Act, 31 U.S.C. 5311 et seq., Office of Foreign Assets 
Control requirements, or similar laws or requirements;
    (C) The remittance transfer being made with fraudulent intent by the 
sender or any person acting in concert with the sender; or
    (D) The sender having provided the remittance transfer provider an 
incorrect account number or recipient institution identifier for the 
designated recipient's account or institution, provided that the 
remittance transfer provider meets the conditions set forth in paragraph 
(h) of this section;
    (v) The sender's request for documentation required by Sec. 1005.31 
or for additional information or clarification concerning a remittance 
transfer, including a request a sender makes to determine whether an 
error exists under paragraphs (a)(1)(i) through (iv) of this section.
    (2) Types of transfers or inquiries not covered. The term error does 
not include:
    (i) An inquiry about the status of a remittance transfer, except 
where the funds from the transfer were not made available to a 
designated recipient by the disclosed date of availability as described 
in paragraph (a)(1)(iv) of this section;
    (ii) A request for information for tax or other recordkeeping 
purposes;

[[Page 160]]

    (iii) A change requested by the designated recipient; or
    (iv) A change in the amount or type of currency received by the 
designated recipient from the amount or type of currency stated in the 
disclosure provided to the sender under Sec. 1005.31(b)(2) or (3) if the 
remittance transfer provider relied on information provided by the 
sender as permitted under Sec. 1005.31 in making such disclosure.
    (b) Notice of error from sender--(1) Timing; contents. A remittance 
transfer provider shall comply with the requirements of this section 
with respect to any oral or written notice of error from a sender that:
    (i) Is received by the remittance transfer provider no later than 
180 days after the disclosed date of availability of the remittance 
transfer;
    (ii) Enables the provider to identify:
    (A) The sender's name and telephone number or address;
    (B) The recipient's name, and if known, the telephone number or 
address of the recipient; and
    (C) The remittance transfer to which the notice of error applies; 
and
    (iii) Indicates why the sender believes an error exists and includes 
to the extent possible the type, date, and amount of the error, except 
for requests for documentation, additional information, or clarification 
described in paragraph (a)(1)(v) of this section.
    (2) Request for documentation or clarification. When a notice of 
error is based on documentation, additional information, or 
clarification that the sender previously requested under paragraph 
(a)(1)(v) of this section, the sender's notice of error is timely if 
received by the remittance transfer provider the later of 180 days after 
the disclosed date of availability of the remittance transfer or 60 days 
after the provider sent the documentation, information, or clarification 
that had been requested.
    (c) Time limits and extent of investigation--(1) Time limits for 
investigation and report to consumer of error. A remittance transfer 
provider shall investigate promptly and determine whether an error 
occurred within 90 days of receiving a notice of error. The remittance 
transfer provider shall report the results to the sender, including 
notice of any remedies available for correcting any error that the 
provider determines has occurred, within three business days after 
completing its investigation.
    (2) Remedies. Except as provided in paragraph (c)(2)(iii) of this 
section, if, following an assertion of an error by a sender, the 
remittance transfer provider determines an error occurred, the provider 
shall, within one business day of, or as soon as reasonably practicable 
after, receiving the sender's instructions regarding the appropriate 
remedy, correct the error as designated by the sender by:
    (i) In the case of any error under paragraphs (a)(1)(i) through 
(iii) of this section, as applicable, either:
    (A) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (B) Making available to the designated recipient, without additional 
cost to the sender or to the designated recipient, the amount 
appropriate to resolve the error;
    (ii) Except as provided in paragraph (c)(2)(iii) of this section, in 
the case of an error under paragraph (a)(1)(iv) of this section
    (A) As applicable, either:
    (1) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (2) Making available to the designated recipient the amount 
appropriate to resolve the error. Such amount must be made available to 
the designated recipient without additional cost to the sender or to the 
designated recipient; and
    (B) Refunding to the sender any fees imposed and, to the extent not 
prohibited by law, taxes collected on the remittance transfer;
    (iii) In the case of an error under paragraph (a)(1)(iv) of this 
section that occurred because the sender provided incorrect or 
insufficient information in connection with the remittance transfer, the 
remittance transfer provider shall provide the remedies required by 
paragraphs (c)(2)(ii)(A)(1) and (c)(2)(ii)(B) of this section within 
three

[[Page 161]]

business days of providing the report required by paragraph (c)(1) or 
(d)(1) of this section except that the provider may agree to the 
sender's request, upon receiving the results of the error investigation, 
that the funds be applied towards a new remittance transfer, rather than 
be refunded, if the provider has not yet processed a refund. The 
provider may deduct from the amount refunded or applied towards a new 
transfer any fees actually imposed on or, to the extent not prohibited 
by law, taxes actually collected on the remittance transfer as part of 
the first unsuccessful remittance transfer attempt except that the 
provider shall not deduct its own fee.
    (iv) In the case of a request under paragraph (a)(1)(v) of this 
section, providing the requested documentation, information, or 
clarification.
    (d) Procedures if remittance transfer provider determines no error 
or different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the remittance transfer 
provider shall follow the procedures set forth in this paragraph (d) if 
it determines that no error occurred or that an error occurred in a 
manner or amount different from that described by the sender.
    (1) Explanation of results of investigation. The remittance transfer 
provider's report of the results of the investigation shall include a 
written explanation of the provider's findings and shall note the 
sender's right to request the documents on which the provider relied in 
making its determination. The explanation shall also address the 
specific complaint of the sender.
    (2) Copies of documentation. Upon the sender's request, the 
remittance transfer provider shall promptly provide copies of the 
documents on which the provider relied in making its error 
determination.
    (e) Reassertion of error. A remittance transfer provider that has 
fully complied with the error resolution requirements of this section 
has no further responsibilities under this section should the sender 
later reassert the same error, except in the case of an error asserted 
by the sender following receipt of information provided under paragraph 
(a)(1)(v) of this section.
    (f) Relation to other laws--(1) Relation to Regulation E 
Sec. 1005.11 for incorrect EFTs from a sender's account. If an alleged 
error involves an incorrect electronic fund transfer from a sender's 
account in connection with a remittance transfer, and the sender 
provides a notice of error to the account-holding institution, the 
account-holding institution shall comply with the requirements of 
Sec. 1005.11 governing error resolution rather than the requirements of 
this section, provided that the account-holding institution is not also 
the remittance transfer provider. If the remittance transfer provider is 
also the financial institution that holds the consumer's account, then 
the error-resolution provisions of this section apply when the sender 
provides such notice of error.
    (2) Relation to Truth in Lending Act and Regulation Z. If an alleged 
error involves an incorrect extension of credit in connection with a 
remittance transfer, an incorrect amount received by the designated 
recipient under paragraph (a)(1)(iii) of this section that is an 
extension of credit for property or services not delivered as agreed, or 
the failure to make funds available by the disclosed date of 
availability under paragraph (a)(1)(iv) of this section that is an 
extension of credit for property or services not delivered as agreed, 
and the sender provides a notice of error to the creditor extending the 
credit, the provisions of Regulation Z, 12 CFR 1026.13, governing error 
resolution apply to the creditor, rather than the requirements of this 
section, even if the creditor is the remittance transfer provider. 
However, if the creditor is the remittance transfer provider, paragraph 
(b) of this section will apply instead of 12 CFR 1026.13(b). If the 
sender instead provides a notice of error to the remittance transfer 
provider that is not also the creditor, then the error-resolution 
provisions of this section apply to the remittance transfer provider.
    (3) Unauthorized remittance transfers. If an alleged error involves 
an unauthorized electronic fund transfer for payment in connection with 
a remittance transfer, Sec. Sec. 1005.6 and 1005.11

[[Page 162]]

apply with respect to the account-holding institution. If an alleged 
error involves an unauthorized use of a credit account for payment in 
connection with a remittance transfer, the provisions of Regulation Z, 
12 CFR 1026.12(b), if applicable, and Sec. 1026.13, apply with respect 
to the creditor.
    (g) Error resolution standards and recordkeeping requirements--(1) 
Compliance program. A remittance transfer provider shall develop and 
maintain written policies and procedures that are designed to ensure 
compliance with the error resolution requirements applicable to 
remittance transfers under this section.
    (2) Retention of error-related documentation. The remittance 
transfer provider's policies and procedures required under paragraph 
(g)(1) of this section shall include policies and procedures regarding 
the retention of documentation related to error investigations. Such 
policies and procedures must ensure, at a minimum, the retention of any 
notices of error submitted by a sender, documentation provided by the 
sender to the provider with respect to the alleged error, and the 
findings of the remittance transfer provider regarding the investigation 
of the alleged error. Remittance transfer providers are subject to the 
record retention requirements under Sec. 1005.13.
    (h) Incorrect account number or recipient institution identifier 
provided by the sender. The exception in paragraph (a)(1)(iv)(D) of this 
section applies if:
    (1) The remittance transfer provider can demonstrate that the sender 
provided an incorrect account number or recipient institution identifier 
to the provider in connection with the remittance transfer;
    (2) For any instance in which the sender provided the incorrect 
recipient institution identifier, prior to or when sending the transfer, 
the provider used reasonably available means to verify that the 
recipient institution identifier provided by the sender corresponded to 
the recipient institution name provided by the sender;
    (3) The provider provided notice to the sender before the sender 
made payment for the remittance transfer that, in the event the sender 
provided an incorrect account number or recipient institution 
identifier, the sender could lose the transfer amount. For purposes of 
providing this disclosure, Sec. 1005.31(a)(2) applies to this notice 
unless the notice is given at the same time as other disclosures 
required by this subpart for which information is permitted to be 
disclosed orally or via mobile application or text message, in which 
case this disclosure may be given in the same medium as those other 
disclosures;
    (4) The incorrect account number or recipient institution identifier 
resulted in the deposit of the remittance transfer into a customer's 
account that is not the designated recipient's account; and
    (5) The provider promptly used reasonable efforts to recover the 
amount that was to be received by the designated recipient.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50284, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 78 FR 49366, Aug. 14, 2013; 79 FR 55991, Sept. 
18, 2014]



Sec. 1005.34  Procedures for cancellation and refund of remittance 
transfers.

    (a) Sender right of cancellation and refund. Except as provided in 
Sec. 1005.36(c), a remittance transfer provider shall comply with the 
requirements of this section with respect to any oral or written request 
to cancel a remittance transfer from the sender that is received by the 
provider no later than 30 minutes after the sender makes payment in 
connection with the remittance transfer if:
    (1) The request to cancel enables the provider to identify the 
sender's name and address or telephone number and the particular 
transfer to be cancelled; and
    (2) The transferred funds have not been picked up by the designated 
recipient or deposited into an account of the designated recipient.
    (b) Time limits and refund requirements. A remittance transfer 
provider shall refund, at no additional cost to the sender, the total 
amount of funds provided by the sender in connection with a remittance 
transfer, including any fees and, to the extent not prohibited by law, 
taxes imposed in connection with the remittance transfer, within

[[Page 163]]

three business days of receiving a sender's request to cancel the 
remittance transfer.



Sec. 1005.35  Acts of agents.

    A remittance transfer provider is liable for any violation of this 
subpart by an agent when such agent acts for the provider.



Sec. 1005.36  Transfers scheduled before the date of transfer.

    (a) Timing. (1) For a one-time transfer scheduled five or more 
business days before the date of transfer or for the first in a series 
of preauthorized remittance transfers, the remittance transfer provider 
must:
    (i) Provide either the pre-payment disclosure described in 
Sec. 1005.31(b)(1) and the receipt described in Sec. 1005.31(b)(2) or 
the combined disclosure described in Sec. 1005.31(b)(3), in accordance 
with the timing requirements set forth in Sec. 1005.31(e); and
    (ii) If any of the disclosures provided pursuant to paragraph 
(a)(1)(i) of this section contain estimates as permitted by 
Sec. 1005.32(b)(2), mail or deliver to the sender an additional receipt 
meeting the requirements described in Sec. 1005.31(b)(2) no later than 
one business day after the date of the transfer. If the transfer 
involves the transfer of funds from the sender's account held by the 
provider, the receipt required by this paragraph may be provided on or 
with the next periodic statement for that account, or within 30 days 
after the date of the transfer if a periodic statement is not provided.
    (2) For each subsequent preauthorized remittance transfer:
    (i) If any of the information on the most recent receipt provided 
pursuant to paragraph (a)(1)(i) of this section, or by this paragraph 
(a)(2)(i), other than the temporal disclosures required by 
Sec. 1005.31(b)(2)(ii) and (b)(2)(vii), is no longer accurate with 
respect to a subsequent preauthorized remittance transfer for reasons 
other than as permitted by Sec. 1005.32, then the remittance transfer 
provider must provide an updated receipt meeting the requirements 
described in Sec. 1005.31(b)(2) to the sender. The provider must mail or 
deliver this receipt to the sender within a reasonable time prior to the 
scheduled date of the next subsequent preauthorized remittance transfer. 
Such receipt must clearly and conspicuously indicate that it contains 
updated disclosures.
    (ii) Unless a receipt was provided in accordance with paragraph 
(a)(2)(i) of this section that contained no estimates pursuant to 
Sec. 1005.32, the remittance transfer provider must mail or deliver to 
the sender a receipt meeting the requirements described in 
Sec. 1005.31(b)(2) no later than one business day after the date of the 
transfer. If the remittance transfer involves the transfer of funds from 
the sender's account held by the provider, the receipt required by this 
paragraph may be provided on or with the next periodic statement for 
that account, or within 30 days after the date of the transfer if a 
periodic statement is not provided.
    (iii) A remittance transfer provider must provide the disclosures 
required by paragraph (d) of this section in accordance with the timing 
requirements of that section.
    (b) Accuracy. (1) For a one-time transfer scheduled five or more 
business days in advance or for the first in a series of preauthorized 
remittance transfers, disclosures provided pursuant to paragraph 
(a)(1)(i) of this section must comply with Sec. 1005.31(f) by being 
accurate when a sender makes payment except to the extent estimates are 
permitted by Sec. 1005.32.
    (2) For each subsequent preauthorized remittance transfer, the most 
recent receipt provided pursuant to paragraph (a)(1)(i) or (a)(2)(i) of 
this section must be accurate as of when such transfer is made, except:
    (i) The temporal elements required by Sec. 1005.31(b)(2)(ii) and 
(b)(2)(vii) must be accurate only if the transfer is the first transfer 
to occur after the disclosure was provided; and
    (ii) To the extent estimates are permitted by Sec. 1005.32.
    (3) Disclosures provided pursuant to paragraph (a)(1)(ii) or 
(a)(2)(ii) of this section must be accurate as of when the remittance 
transfer to which it pertains is made, except to the extent estimates 
are permitted by Sec. 1005.32(a) or (b)(1).
    (c) Cancellation. For any remittance transfer scheduled by the 
sender at

[[Page 164]]

least three business days before the date of the transfer, a remittance 
transfer provider shall comply with any oral or written request to 
cancel the remittance transfer from the sender if the request to cancel:
    (1) Enables the provider to identify the sender's name and address 
or telephone number and the particular transfer to be cancelled; and
    (2) Is received by the provider at least three business days before 
the scheduled date of the remittance transfer.
    (d) Additional requirements for subsequent preauthorized remittance 
transfers--(1) Disclosure requirement. (i) For any subsequent transfer 
in a series of preauthorized remittance transfers, the remittance 
transfer provider must disclose to the sender:
    (A) The date the provider will make the subsequent transfer, using 
the term ``Future Transfer Date,'' or a substantially similar term;
    (B) A statement about the rights of the sender regarding 
cancellation as described in Sec. 1005.31(b)(2)(iv); and
    (C) The name, telephone number(s), and Web site of the remittance 
transfer provider.
    (ii) If the future date or dates of transfer are described as 
occurring in regular periodic intervals, e.g., the 15th of every month, 
rather than as a specific calendar date or dates, the remittance 
transfer provider must disclose any future date or dates of transfer 
that do not conform to the described interval.
    (2) Notice requirements. (i) Except as described in paragraph 
(d)(2)(ii) of this section, the disclosures required by paragraph (d)(1) 
of this section must be received by the sender no more than 12 months, 
and no less than five business days prior to the date of any subsequent 
transfer to which it pertains. The disclosures required by paragraph 
(d)(1) of this section may be provided in a separate disclosure or may 
be provided on one or more disclosures required by this subpart related 
to the same series of preauthorized transfers, so long as the consumer 
receives the required information for each subsequent preauthorized 
remittance transfer in accordance with the timing requirements of this 
paragraph (d)(2)(i).
    (ii) For any subsequent preauthorized remittance transfer for which 
the date of transfer is four or fewer business days after the date 
payment is made for that transfer, the information required by paragraph 
(d)(1) of this section must be provided on or with the receipt described 
in Sec. 1005.31(b)(2), or disclosed as permitted by Sec. 1005.31(a)(3) 
or (a)(5), for the initial transfer in that series in accordance with 
paragraph (a)(1)(i) of this section.
    (3) Specific format requirement. The information required by 
paragraph (d)(1)(i)(A) of this section generally must be disclosed in 
close proximity to the other information required by paragraph 
(d)(1)(i)(B) of this section.
    (4) Accuracy. Any disclosure required by paragraph (d)(1) of this 
section must be accurate as of the date the preauthorized remittance 
transfer to which it pertains is made.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 50284, Aug. 20, 2012]



    Sec. Appendix A to Part 1005--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))
A-3--Model Forms for Error Resolution Notice (Sec. Sec. 1005.7(b)(10) 
          and 1005.8(b))
A-4--Model Form for Service-Providing Institutions 
          (Sec. 1005.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and (2))
A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
          Using Information From a Check (Sec. 1005.3(b)(2))
A-7--Model Clauses for Financial Institutions Offering Payroll Card 
          Accounts (Sec. 1005.18(c))
A-8--Model Clause for Electronic Collection of Returned Item Fees 
          (Sec. 1005.3(b)(3))
A-9--Model Consent Form for Overdraft Services (Sec. 1005.17)
A-10 through A-30 [Reserved]
A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency including a disclaimer where non-covered 
third-party fees and foreign taxes may apply (Sec. 1005.31(b)(1))
A-30(b) --Model Form for Pre-Payment Disclosures for Remittance 
Transfers Exchanged into Local Currency including a disclaimer with 
estimate for non-covered third-party fees (Sec. 1005.31(b)(1) and 
Sec. 1005.32(b)(3))

[[Page 165]]

A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency including a disclaimer with estimate for 
foreign taxes (Sec. 1005.31(b)(1) and Sec. 1005.32(b)(3))
A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency, including a disclaimer with estimates for 
non-covered third-party fees and foreign taxes (Sec. 1005.31(b)(1) and 
Sec. 1005.32(b)(3))
A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency (Sec. 1005.31(b)(2))
A-32--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(3))
A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
(Sec. 1005.31(b)(2))
A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(3))
A-36--Model Form for Error Resolution and Cancellation Disclosures 
(Long) (Sec. 1005.31(b)(4))
A-37--Model Form for Error Resolution and Cancellation Disclosures 
(Short) (Sec. 1005.31(b)(2)(iv) and (b)(2)(vi))
A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency--Spanish (Sec. 1005.31(b)(2))
A-40--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(3))
A-41--Model Form for Error Resolution and Cancellation Disclosures 
(Long)--Spanish (Sec. 1005.31(b)(4))

     A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))

    (a) Accounts using cards. You cannot use the enclosed card to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the card, please (destroy it at once by 
cutting it in half).
    [Financial institution may add validation instructions here.]
    (b) Accounts using codes. You cannot use the enclosed code to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the code, please (destroy this notice at 
once).
    [Financial institution may add validation instructions here.]

       A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))

    (a) Consumer Liability (Sec. 1005.7(b)(1)).
    (Tell us AT ONCE if you believe your [card] [code] has been lost or 
stolen, or if you believe that an electronic fund transfer has been made 
without your permission using information from your check. Telephoning 
is the best way of keeping your possible losses down. You could lose all 
the money in your account (plus your maximum overdraft line of credit). 
If you tell us within 2 business days after you learn of the loss or 
theft of your [card] [code], you can lose no more than $50 if someone 
used your [card][code] without your permission.)
    If you do NOT tell us within 2 business days after you learn of the 
loss or theft of your [card] [code], and we can prove we could have 
stopped someone from using your [card] [code] without your permission if 
you had told us, you could lose as much as $500.
    Also, if your statement shows transfers that you did not make, 
including those made by card, code or other means, tell us at once. If 
you do not tell us within 60 days after the statement was mailed to you, 
you may not get back any money you lost after the 60 days if we can 
prove that we could have stopped someone from taking the money if you 
had told us in time. If a good reason (such as a long trip or a hospital 
stay) kept you from telling us, we will extend the time periods.
    (b) Contact in event of unauthorized transfer (Sec. 1005.7(b)(2)). 
If you believe your [card] [code] has been lost or stolen, call: 
[Telephone number] or write: [Name of person or office to be notified] 
[Address].
    You should also call the number or write to the address listed above 
if you believe a transfer has been made using the information from your 
check without your permission.
    (c) Business days (Sec. 1005.7(b)(3)). For purposes of these 
disclosures, our business days are (Monday through Friday) (Monday 
through Saturday) (any day including Saturdays and Sundays). Holidays 
are (not) included.
    (d) Transfer types and limitations (Sec. 1005.7(b)(4)) (1) Account 
access. You may use your [card][code] to:
    (i) Withdraw cash from your [checking] [or] [savings] account.
    (ii) Make deposits to your [checking] [or] [savings] account.
    (iii) Transfer funds between your checking and savings accounts 
whenever you request.
    (iv) Pay for purchases at places that have agreed to accept the 
[card] [code].
    (v) Pay bills directly [by telephone] from your [checking] [or] 
[savings] account in the amounts and on the days you request.
    Some of these services may not be available at all terminals.
    (2) Electronic check conversion. You may authorize a merchant or 
other payee to make a one-time electronic payment from your checking 
account using information from your check to:
    (i) Pay for purchases.
    (ii) Pay bills.
    (3) Limitations on frequency of transfers.(i) You may make only 
[insert number, e.g., 3] cash withdrawals from our terminals each 
[insert time period, e.g., week].

[[Page 166]]

    (ii) You can use your telephone bill-payment service to pay [insert 
number] bills each [insert time period] [telephone call].
    (iii) You can use our point-of-sale transfer service for [insert 
number] transactions each [insert time period].
    (iv) For security reasons, there are limits on the number of 
transfers you can make using our [terminals] [telephone bill-payment 
service] [point-of-sale transfer service].
    (4) Limitations on dollar amounts of transfers (i) You may withdraw 
up to [insert dollar amount] from our terminals each [insert time 
period] time you use the [card] [code].
    (ii) You may buy up to [insert dollar amount] worth of goods or 
services each [insert time period] time you use the [card] [code] in our 
point-of-sale transfer service.
    (e) Fees (Sec. 1005.7(b)(5)) (1) Per transfer charge. We will charge 
you [insert dollar amount] for each transfer you make using our 
[automated teller machines] [telephone bill-payment service] [point-of-
sale transfer service].
    (2) Fixed charge. We will charge you [insert dollar amount] each 
[insert time period] for our [automated teller machine service] 
[telephone bill-payment service] [point-of-sale transfer service].
    (3) Average or minimum balance charge. We will only charge you for 
using our [automated teller machines] [telephone bill-payment service] 
[point-of-sale transfer service] if the [average] [minimum] balance in 
your [checking account] [savings account] [accounts] falls below [insert 
dollar amount]. If it does, we will charge you [insert dollar amount] 
each [transfer] [insert time period].
    (f) Confidentiality (Sec. 1005.7(b)(9)). We will disclose 
information to third parties about your account or the transfers you 
make:
    (i) Where it is necessary for completing transfers, or
    (ii) In order to verify the existence and condition of your account 
for a third party, such as a credit bureau or merchant, or
    (iii) In order to comply with government agency or court orders, or
    (iv) If you give us your written permission.
    (g) Documentation (Sec. 1005.7(b)(6)) (1) Terminal transfers. You 
can get a receipt at the time you make any transfer to or from your 
account using one of our [automated teller machines] [or] [point-of-sale 
terminals].
    (2) Preauthorized credits. If you have arranged to have direct 
deposits made to your account at least once every 60 days from the same 
person or company, (we will let you know if the deposit is [not] made.) 
[the person or company making the deposit will tell you every time they 
send us the money] [you can call us at (insert telephone number) to find 
out whether or not the deposit has been made].
    (3) Periodic statements. You will get a [monthly] [quarterly] 
account statement (unless there are no transfers in a particular month. 
In any case you will get the statement at least quarterly).
    (4) Passbook account where the only possible electronic fund 
transfers are preauthorized credits. If you bring your passbook to us, 
we will record any electronic deposits that were made to your account 
since the last time you brought in your passbook.
    (h) Preauthorized payments (Sec. 1005.7(b) (6), (7) and (8); 
Sec. 1005.10(d)) (1) Right to stop payment and procedure for doing so. 
If you have told us in advance to make regular payments out of your 
account, you can stop any of these payments. Here's how:
    Call us at [insert telephone number], or write us at [insert 
address], in time for us to receive your request 3 business days or more 
before the payment is scheduled to be made. If you call, we may also 
require you to put your request in writing and get it to us within 14 
days after you call. (We will charge you [insert amount] for each stop-
payment order you give.)
    (2) Notice of varying amounts. If these regular payments may vary in 
amount, [we] [the person you are going to pay] will tell you, 10 days 
before each payment, when it will be made and how much it will be. (You 
may choose instead to get this notice only when the payment would differ 
by more than a certain amount from the previous payment, or when the 
amount would fall outside certain limits that you set.)
    (3) Liability for failure to stop payment of preauthorized transfer. 
If you order us to stop one of these payments 3 business days or more 
before the transfer is scheduled, and we do not do so, we will be liable 
for your losses or damages.
    (i) Financial institution's liability (Sec. 1005.7(b)(8)). If we do 
not complete a transfer to or from your account on time or in the 
correct amount according to our agreement with you, we will be liable 
for your losses or damages. However, there are some exceptions. We will 
not be liable, for instance:
    (1) If, through no fault of ours, you do not have enough money in 
your account to make the transfer.
    (2) If the transfer would go over the credit limit on your overdraft 
line.
    (3) If the automated teller machine where you are making the 
transfer does not have enough cash.
    (4) If the [terminal] [system] was not working properly and you knew 
about the breakdown when you started the transfer.
    (5) If circumstances beyond our control (such as fire or flood) 
prevent the transfer, despite reasonable precautions that we have taken.
    (6) There may be other exceptions stated in our agreement with you.
    (j) ATM fees (Sec. 1005.7(b)(11)). When you use an ATM not owned by 
us, you may be charged a fee by the ATM operator [or any network used] 
(and you may be charged a fee

[[Page 167]]

for a balance inquiry even if you do not complete a fund transfer).

 A-3--Model Forms for Error Resolution Notice (Sec. Sec. 1005.7(b)(10) 
                             and 1005.8(b))

    (a) Initial and annual error resolution notice 
(Sec. Sec. 1005.7(b)(10) and 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] Write us at [insert address] 
[or email us at [insert email address]] as soon as you can, if you think 
your statement or receipt is wrong or if you need more information about 
a transfer listed on the statement or receipt. We must hear from you no 
later than 60 days after we sent the FIRST statement on which the 
problem or error appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation. You may ask for copies of the 
documents that we used in our investigation.
    (b) Error resolution notice on periodic statements (Sec. 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt is 
wrong or if you need more information about a transfer on the statement 
or receipt. We must hear from you no later than 60 days after we sent 
you the FIRST statement on which the error or problem appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    We will investigate your complaint and will correct any error 
promptly. If we take more than 10 business days to do this, we will 
credit your account for the amount you think is in error, so that you 
will have the use of the money during the time it takes us to complete 
our investigation.

           A-4--Model Form for Service-Providing Institutions 
                        (Sec. 1005.14(b)(1)(ii))

    ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD) CARD 
MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO THE BANK 
OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. We are 
responsible for the [name of service] service and for resolving any 
errors in transactions made with your [name of card] card.
    We will not send you a periodic statement listing transactions that 
you make using your [name of card] card. The transactions will appear 
only on the statement issued by your bank or other financial 
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME OF 
CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU RECEIVE 
FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have any questions 
about one of these transactions, call or write us at [telephone number 
and address] [the telephone number and address indicated below].
    IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE by 
calling or writing to us at [telephone number and address].

  A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and (2))

    (a) Disclosure by government agencies of information about obtaining 
account balances and account histories (Sec. 1005.15(d)(1)(i) and (ii)).
    You may obtain information about the amount of benefits you have 
remaining by calling [telephone number]. That information is also 
available [on the receipt you get when you make a transfer with your 
card at (an ATM)(a POS terminal)][when you make a balance inquiry at an 
ATM][when you make a balance inquiry at specified locations].
    You also have the right to receive a written summary of transactions 
for the 60 days

[[Page 168]]

preceding your request by calling [telephone number]. [Optional: Or you 
may request the summary by contacting your caseworker.]
    (b) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements 
(Sec. 1005.15(d)(1)(iii) and (d)(2)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [telephone number] Write us at [insert address] [or 
email us at [insert email address]] as soon as you can, if you think an 
error has occurred in your [EBT][agency's name for program] account. We 
must hear from you no later than 60 days after you learn of the error. 
You will need to tell us:
     Your name and [case] [file] number.
     Why you believe there is an error, and the dollar 
amount involved.
     Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation. You may ask for copies of the 
documents that we used in our investigation.
    If you need more information about our error resolution procedures, 
call us at [telephone number][the telephone number shown above].

 A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
           Using Information From a Check (Sec. 1005.3(b)(2))

    (a) Notice About Electronic Check Conversion.
    When you provide a check as payment, you authorize us either to use 
information from your check to make a one-time electronic fund transfer 
from your account or to process the payment as a check transaction.
    (b) Alternative Notice About Electronic Check Conversion (Optional).
    When you provide a check as payment, you authorize us to use 
information from your check to make a one-time electronic fund transfer 
from your account. In certain circumstances, such as for technical or 
processing reasons, we may process your payment as a check transaction.
    [Specify other circumstances (at payee's option).]
    (c) Notice For Providing Additional Information About Electronic 
Check Conversion.
    When we use information from your check to make an electronic fund 
transfer, funds may be withdrawn from your account as soon as the same 
day [you make] [we receive] your payment[, and you will not receive your 
check back from your financial institution].

  A-7--Model Clauses for Financial Institutions Offering Payroll Card 
                       Accounts (Sec. 1005.18(c))

    (a) Disclosure by financial institutions of information about 
obtaining account information for payroll card accounts. 
Sec. 1005.18(c)(1).
    You may obtain information about the amount of money you have 
remaining in your payroll card account by calling [telephone number]. 
This information, along with a 60-day history of account transactions, 
is also available online at [internet address].
    You also have the right to obtain a 60-day written history of 
account transactions by calling [telephone number], or by writing us at 
[address].
    (b) Disclosure of error-resolution procedures for financial 
institutions that provide alternative means of obtaining payroll card 
account information (Sec. 1005.18(c)(1)(ii) and (c)(2)).
    In Case of Errors or Questions About Your Payroll Card Account 
Telephone us at [telephone number] or Write us at [address] [or email us 
at [email address]] as soon as you can, if you think an error has 
occurred in your payroll card account. We must allow you to report an 
error until 60 days after the earlier of the date you electronically 
access your account, if the error could be viewed in your electronic 
history, or the date we sent the FIRST written history on which the 
error appeared. You may request a written history of your transactions 
at any time by calling us at [telephone number] or writing us at 
[address]. You will need to tell us:
    Your name and [payroll card account] number.
    Why you believe there is an error, and the dollar amount involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may

[[Page 169]]

take up to 45 days to investigate your complaint or question. If we 
decide to do this, we will credit your account within 10 business days 
for the amount you think is in error, so that you will have the money 
during the time it takes us to complete our investigation. If we ask you 
to put your complaint or question in writing and we do not receive it 
within 10 business days, we may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution procedures, 
call us at [telephone number] [the telephone number shown above] [or 
visit [internet address]].

   A-8--Model Clause for Electronic Collection of Returned Item Fees 
                           (Sec. 1005.3(b)(3))

    If your payment is returned unpaid, you authorize [us/name of person 
collecting the fee electronically] to make a one-time electronic fund 
transfer from your account to collect a fee of [$--------]. [If your 
payment is returned unpaid, you authorize [us/name of person collecting 
the fee electronically] to make a one-time electronic fund transfer from 
your account to collect a fee. The fee will be determined [by]/[as 
follows]:

[[Page 170]]

[GRAPHIC] [TIFF OMITTED] TR27DE11.000

                      A-10 through A-29 [Reserved]

[[Page 171]]

A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.242

A-30(b)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.243


[[Page 172]]


A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.244

A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.245


[[Page 173]]


A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency (Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR18SE14.015


[[Page 174]]


A-32--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.247


[[Page 175]]


[GRAPHIC] [TIFF OMITTED] TR22MY13.248

A-33--Model Form for Pre-Payment Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.249


[[Page 176]]


A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
(Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.250


[[Page 177]]


A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.251


[[Page 178]]


A-36--Model Form for Error Resolution and Cancellation Disclosures 
(Long) (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.252

A-37--Model Form for Error Resolution and Cancellation Disclosures 
(Short) (Sec. 1005.31(b)(2)(iv) and (b)(2)(vi))
[GRAPHIC] [TIFF OMITTED] TR22MY13.253


[[Page 179]]


A-38--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.254


[[Page 180]]


A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency--Spanish (Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.255


[[Page 181]]


[GRAPHIC] [TIFF OMITTED] TR22MY13.256


[[Page 182]]


A-40--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR18SE14.016


[[Page 183]]


A-41--Model Form for Error Resolution and Cancellation Disclosures 
(Long)--Spanish (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.258


[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6290, Feb. 7, 2012; 77 
FR 40459, July 10, 2012; 78 FR 30705, May 22, 2013; 79 FR 55991, Sept. 
18, 2014]



                 Sec. Appendix B to Part 1005 [Reserved]



   Sec. Appendix C to Part 1005--Issuance of Official Interpretations

                        Official Interpretations

    Pursuant to section 916(d) of the Act, the Bureau has designated the 
Associate Director and other officials of the Division of Research, 
Markets, and Regulations as officials ``duly authorized'' to issue, at 
their discretion, official interpretations of this part. Except in 
unusual circumstances, such interpretations will not be issued 
separately but

[[Page 184]]

will be incorporated in an official commentary to this part, which will 
be amended periodically.

            Requests for Issuance of Official Interpretations

    A request for an official interpretation shall be in writing and 
addressed to the Bureau of Consumer Financial Protection, 1700 G Street 
NW., Washington, DC 20006. The request shall contain a complete 
statement of all relevant facts concerning the issue, including copies 
of all pertinent documents.

                        Scope of Interpretations

    No interpretations will be issued approving financial institutions' 
forms or statements. This restriction does not apply to forms or 
statements whose use is required or sanctioned by a government agency.



        Sec. Supplement I to Part 1005--Official Interpretations

                       Section 1005.2 Definitions

                           2(a) Access Device

    1. Examples. The term ``access device'' includes debit cards, 
personal identification numbers (PINs), telephone transfer and telephone 
bill payment codes, and other means that may be used by a consumer to 
initiate an electronic fund transfer (EFT) to or from a consumer 
account. The term does not include magnetic tape or other devices used 
internally by a financial institution to initiate electronic transfers.
    2. Checks used to capture information. The term ``access device'' 
does not include a check or draft used to capture the Magnetic Ink 
Character Recognition (MICR) encoding to initiate a one-time automated 
clearinghouse (ACH) debit. For example, if a consumer authorizes a one-
time ACH debit from the consumer's account using a blank, partially 
completed, or fully completed and signed check for the merchant to 
capture the routing, account, and serial numbers to initiate the debit, 
the check is not an access device. (Although the check is not an access 
device under Regulation E, the transaction is nonetheless covered by the 
regulation. See comment 3(b)(1)-1.v.)

                              2(b) Account

    1. Consumer asset account. The term ``consumer asset account'' 
includes:
    i. Club accounts, such as vacation clubs. In many cases, however, 
these accounts are exempt from the regulation under Sec. 1005.3(c)(5) 
because all electronic transfers to or from the account have been 
preauthorized by the consumer and involve another account of the 
consumer at the same institution.
    ii. A retail repurchase agreement (repo), which is a loan made to a 
financial institution by a consumer that is collateralized by government 
or government-insured securities.
    2. Certain employment-related cards not covered. The term ``payroll 
card account'' does not include a card used solely to disburse 
incentive-based payments (other than commissions which can represent the 
primary means through which a consumer is paid), such as bonuses, which 
are unlikely to be a consumer's primary source of salary or other 
compensation. The term also does not include a card used solely to make 
disbursements unrelated to compensation, such as petty cash 
reimbursements or travel per diem payments. Similarly, a payroll card 
account does not include a card that is used in isolated instances to 
which an employer typically does not make recurring payments, such as 
when providing final payments or in emergency situations when other 
payment methods are unavailable. However, all transactions involving the 
transfer of funds to or from a payroll card account are covered by the 
regulation, even if a particular transaction involves payment of a 
bonus, other incentive-based payment, or reimbursement, or the 
transaction does not represent a transfer of wages, salary, or other 
employee compensation.
    3. Examples of accounts not covered by Regulation E (12 CFR part 
1005) include:
    i. Profit-sharing and pension accounts established under a trust 
agreement, which are exempt under Sec. 1005.2(b)(2).
    ii. Escrow accounts, such as those established to ensure payment of 
items such as real estate taxes, insurance premiums, or completion of 
repairs or improvements.
    iii. Accounts for accumulating funds to purchase U.S. savings bonds.

                            Paragraph 2(b)(2)

    1. Bona fide trust agreements. The term ``bona fide trust 
agreement'' is not defined by the Act or regulation; therefore, 
financial institutions must look to state or other applicable law for 
interpretation.
    2. Custodial agreements. An account held under a custodial agreement 
that qualifies as a trust under the Internal Revenue Code, such as an 
individual retirement account, is considered to be held under a trust 
agreement for purposes of Regulation E.

                            2(d) Business Day

    1. Duration. A business day includes the entire 24-hour period 
ending at midnight, and a notice required by the regulation is effective 
even if given outside normal business hours. The regulation does not 
require, however, that a financial institution make telephone lines 
available on a 24-hour basis.
    2. Substantially all business functions. Substantially all business 
functions include both the public and the back-office operations of

[[Page 185]]

the institution. For example, if the offices of an institution are open 
on Saturdays for handling some consumer transactions (such as deposits, 
withdrawals, and other teller transactions), but not for performing 
internal functions (such as investigating account errors), then Saturday 
is not a business day for that institution. In this case, Saturday does 
not count toward the business-day standard set by the regulation for 
reporting lost or stolen access devices, resolving errors, etc.
    3. Short hours. A financial institution may determine, at its 
election, whether an abbreviated day is a business day. For example, if 
an institution engages in substantially all business functions until 
noon on Saturdays instead of its usual 3 p.m. closing, it may consider 
Saturday a business day.
    4. Telephone line. If a financial institution makes a telephone line 
available on Sundays for reporting the loss or theft of an access 
device, but performs no other business functions, Sunday is not a 
business day under the substantially all business functions standard.

                        2(h) Electronic Terminal

    1. Point-of-sale (POS) payments initiated by telephone. Because the 
term ``electronic terminal'' excludes a telephone operated by a 
consumer, a financial institution need not provide a terminal receipt 
when:
    i. A consumer uses a debit card at a public telephone to pay for the 
call.
    ii. A consumer initiates a transfer by a means analogous in function 
to a telephone, such as by home banking equipment or a facsimile 
machine.
    2. POS terminals. A POS terminal that captures data electronically, 
for debiting or crediting to a consumer's asset account, is an 
electronic terminal for purposes of Regulation E even if no access 
device is used to initiate the transaction. See Sec. 1005.9 for receipt 
requirements.
    3. Teller-operated terminals. A terminal or other computer equipment 
operated by an employee of a financial institution is not an electronic 
terminal for purposes of the regulation. However, transfers initiated at 
such terminals by means of a consumer's access device (using the 
consumer's PIN, for example) are EFTs and are subject to other 
requirements of the regulation. If an access device is used only for 
identification purposes or for determining the account balance, the 
transfers are not EFTs for purposes of the regulation.

               2(k) Preauthorized Electronic Fund Transfer

    1. Advance authorization. A preauthorized electronic fund transfer 
under Regulation E is one authorized by the consumer in advance of a 
transfer that will take place on a recurring basis, at substantially 
regular intervals, and will require no further action by the consumer to 
initiate the transfer. In a bill-payment system, for example, if the 
consumer authorizes a financial institution to make monthly payments to 
a payee by means of EFTs, and the payments take place without further 
action by the consumer, the payments are preauthorized EFTs. In 
contrast, if the consumer must take action each month to initiate a 
payment (such as by entering instructions on a touch-tone telephone or 
home computer), the payments are not preauthorized EFTs.

               2(m) Unauthorized Electronic Fund Transfer

    1. Transfer by institution's employee. A consumer has no liability 
for erroneous or fraudulent transfers initiated by an employee of a 
financial institution.
    2. Authority. If a consumer furnishes an access device and grants 
authority to make transfers to a person (such as a family member or co-
worker) who exceeds the authority given, the consumer is fully liable 
for the transfers unless the consumer has notified the financial 
institution that transfers by that person are no longer authorized.
    3. Access device obtained through robbery or fraud. An unauthorized 
EFT includes a transfer initiated by a person who obtained the access 
device from the consumer through fraud or robbery.
    4. Forced initiation. An EFT at an ATM is an unauthorized transfer 
if the consumer has been induced by force to initiate the transfer.
    5. Reversal of direct deposits. The reversal of a direct deposit 
made in error is not an unauthorized EFT when it involves:
    i. A credit made to the wrong consumer's account;
    ii. A duplicate credit made to a consumer's account; or
    iii. A credit in the wrong amount (for example, when the amount 
credited to the consumer's account differs from the amount in the 
transmittal instructions).

                         Section 1005.3 Coverage

                              3(a) General

    1. Accounts covered. The requirements of the regulation apply only 
to an account for which an agreement for EFT services to or from the 
account has been entered into between:
    i. The consumer and the financial institution (including an account 
for which an access device has been issued to the consumer, for 
example);
    ii. The consumer and a third party (for preauthorized debits or 
credits, for example), when the account-holding institution has received 
notice of the agreement and the fund transfers have begun.
    2. Automated clearing house (ACH) membership. The fact that 
membership in an ACH

[[Page 186]]

requires a financial institution to accept EFTs to accounts at the 
institution does not make every account of that institution subject to 
the regulation.
    3. Foreign applicability. Regulation E applies to all persons 
(including branches and other offices of foreign banks located in the 
United States) that offer EFT services to residents of any state, 
including resident aliens. It covers any account located in the United 
States through which EFTs are offered to a resident of a state. This is 
the case whether or not a particular transfer takes place in the United 
States and whether or not the financial institution is chartered in the 
United States or a foreign country. The regulation does not apply to a 
foreign branch of a U.S. bank unless the EFT services are offered in 
connection with an account in a state as defined in Sec. 1005.2(l).

                      3(b) Electronic Fund Transfer

                           3(b)(1) Definition

    1. Fund transfers covered. The term ``electronic fund transfer'' 
includes:
    i. A deposit made at an ATM or other electronic terminal (including 
a deposit in cash or by check) provided a specific agreement exists 
between the financial institution and the consumer for EFTs to or from 
the account to which the deposit is made.
    ii. A transfer sent via ACH. For example, social security benefits 
under the U.S. Treasury's direct-deposit program are covered, even if 
the listing of payees and payment amounts reaches the account-holding 
institution by means of a computer printout from a correspondent bank.
    iii. A preauthorized transfer credited or debited to an account in 
accordance with instructions contained on magnetic tape, even if the 
financial institution holding the account sends or receives a composite 
check.
    iv. A transfer from the consumer's account resulting from a debit-
card transaction at a merchant location, even if no electronic terminal 
is involved at the time of the transaction, if the consumer's asset 
account is subsequently debited for the amount of the transfer.
    v. A transfer via ACH where a consumer has provided a check to 
enable the merchant or other payee to capture the routing, account, and 
serial numbers to initiate the transfer, whether the check is blank, 
partially completed, or fully completed and signed; whether the check is 
presented at POS or is mailed to a merchant or other payee or lockbox 
and later converted to an EFT; or whether the check is retained by the 
consumer, the merchant or other payee, or the payee's financial 
institution.
    vi. A payment made by a bill payer under a bill-payment service 
available to a consumer via computer or other electronic means, unless 
the terms of the bill-payment service explicitly state that all 
payments, or all payments to a particular payee or payees, will be 
solely by check, draft, or similar paper instrument drawn on the 
consumer's account, and the payee or payees that will be paid in this 
manner are identified to the consumer.
    2. Fund transfers not covered. The term ``electronic fund transfer'' 
does not include:
    i. A payment that does not debit or credit a consumer asset account, 
such as a payroll allotment to a creditor to repay a credit extension 
(which is deducted from salary).
    ii. A payment made in currency by a consumer to another person at an 
electronic terminal.
    iii. A preauthorized check drawn by the financial institution on the 
consumer's account (such as an interest or other recurring payment to 
the consumer or another party), even if the check is computer-generated.
    iv. Transactions arising from the electronic collection, 
presentment, or return of checks through the check collection system, 
such as through transmission of electronic check images.

     3(b)(2) Electronic Fund Transfer Using Information From a Check

    1. Notice at POS not furnished due to inadvertent error. If the copy 
of the notice under section 1005.3(b)(2)(ii) for electronic check 
conversion (ECK) transactions is not provided to the consumer at POS 
because of a bona fide unintentional error, such as when a terminal 
printing mechanism jams, no violation results if the payee maintains 
procedures reasonably adapted to avoid such occurrences.
    2. Authorization to process a transaction as an EFT or as a check. 
In order to process a transaction as an EFT, or alternatively as a 
check, the payee must obtain the consumer's authorization to do so. A 
payee may, at its option, specify the circumstances under which a check 
may not be converted to an EFT. See model clauses in appendix A-6.
    3. Notice for each transfer. Generally, a notice to authorize an 
electronic check conversion transaction must be provided for each 
transaction. For example, a consumer must receive a notice that the 
transaction will be processed as an EFT for each transaction at POS or 
each time a consumer mails a check in an accounts receivable (ARC) 
transaction to pay a bill, such as a utility bill, if the payee intends 
to convert a check received as payment. Similarly, the consumer must 
receive notice if the payee intends to collect a service fee for 
insufficient or uncollected funds via an EFT for each transaction 
whether at POS or if the consumer mails a check to pay a bill. The 
notice about when funds may be debited from a consumer's account and the 
non-return of consumer

[[Page 187]]

checks by the consumer's financial institution must also be provided for 
each transaction. However, if in an ARC transaction, a payee provides a 
coupon book to a consumer, for example, for mortgage loan payments, and 
the payment dates and amounts are set out in the coupon book, the payee 
may provide a single notice on the coupon book stating all of the 
required disclosures under paragraph (b)(2) of this section in order to 
obtain authorization for each conversion of a check and any debits via 
EFT to the consumer's account to collect any service fees imposed by the 
payee for insufficient or uncollected funds in the consumer's account. 
The notice must be placed on a conspicuous location of the coupon book 
that a consumer can retain--for example, on the first page, or inside 
the front cover.
    4. Multiple payments/multiple consumers. If a merchant or other 
payee will use information from a consumer's check to initiate an EFT 
from the consumer's account, notice to a consumer listed on the billing 
account that a check provided as payment during a single billing cycle 
or after receiving an invoice or statement will be processed as a one-
time EFT or as a check transaction constitutes notice for all checks 
provided in payment for the billing cycle or the invoice for which 
notice has been provided, whether the check(s) is submitted by the 
consumer or someone else. The notice applies to all checks provided in 
payment for the billing cycle or invoice until the provision of notice 
on or with the next invoice or statement. Thus, if a merchant or other 
payee receives a check as payment for the consumer listed on the billing 
account after providing notice that the check will be processed as a 
one-time EFT, the authorization from that consumer constitutes 
authorization to convert any other checks provided for that invoice or 
statement. Other notices required under this paragraph (b)(2) (for 
example, to collect a service fee for insufficient or uncollected funds 
via an EFT) provided to the consumer listed on the billing account also 
constitutes notice to any other consumer who may provide a check for the 
billing cycle or invoice.
    5. Additional disclosures about ECK transactions at POS. When a 
payee initiates an EFT at POS using information from the consumer's 
check, and returns the check to the consumer at POS, the payee need not 
provide a notice to the consumer that the check will not be returned by 
the consumer's financial institution.

  3(b)(3) Collection of Returned Item Fees via Electronic Fund Transfer

    1. Fees imposed by account-holding institution. The requirement to 
obtain a consumer's authorization to collect a fee via EFT for the 
return of an EFT or check unpaid applies only to the person that intends 
to initiate an EFT to collect the returned item fee from the consumer's 
account. The authorization requirement does not apply to any fees 
assessed by the consumer's account-holding financial institution when it 
returns the unpaid underlying EFT or check or pays the amount of an 
overdraft.
    2. Accounts receivable transactions. In an ARC transaction where a 
consumer sends in a payment for amounts owed (or makes an in-person 
payment at a biller's physical location, such as when a consumer makes a 
loan payment at a bank branch or places a payment in a drop box), a 
person seeking to electronically collect a fee for items returned unpaid 
must obtain the consumer's authorization to collect the fee in this 
manner. A consumer authorizes a person to electronically collect a 
returned item fee when the consumer receives notice, typically on an 
invoice or statement, that the person may collect the fee through an EFT 
to the consumer's account, and the consumer goes forward with the 
underlying transaction by providing payment. The notice must also state 
the dollar amount of the fee. However, an explanation of how that fee 
will be determined may be provided in place of the dollar amount of the 
fee if the fee may vary due to the amount of the transaction or due to 
other factors, such as the number of days the underlying transaction is 
left outstanding. For example, if a state law permits a maximum fee of 
$30 or 10% of the underlying transaction, whichever is greater, the 
person collecting the fee may explain how the fee is determined, rather 
than state a specific dollar amount for the fee.
    3. Disclosure of dollar amount of fee for POS transactions. The 
notice provided to the consumer in connection with a POS transaction 
under Sec. 1005.3(b)(3)(ii) must state the amount of the fee for a 
returned item if the dollar amount of the fee can be calculated at the 
time the notice is provided or mailed. For example, if notice is 
provided to the consumer at the time of the transaction, if the 
applicable state law sets a maximum fee that may be collected for a 
returned item based on the amount of the underlying transaction (such as 
where the amount of the fee is expressed as a percentage of the 
underlying transaction), the person collecting the fee must state the 
actual dollar amount of the fee on the notice provided to the consumer. 
Alternatively, if the amount of the fee to be collected cannot be 
calculated at the time of the transaction (for example, where the amount 
of the fee will depend on the number of days a debt continues to be 
owed), the person collecting the fee may provide a description of how 
the fee will be determined on both the posted notice as well as on the 
notice provided at the time of the transaction. However, if the person 
collecting the fee elects to send the consumer notice after the person 
has initiated an EFT

[[Page 188]]

to collect the fee, that notice must state the amount of the fee to be 
collected.
    4. Third party providing notice. The person initiating an EFT to a 
consumer's account to electronically collect a fee for an item returned 
unpaid may obtain the authorization and provide the notices required 
under Sec. 1005.3(b)(3) through third parties, such as merchants.

                      3(c) Exclusions From Coverage

                             3(c)(1) Checks

    1. Re-presented checks. The electronic re-presentment of a returned 
check is not covered by Regulation E because the transaction originated 
by check. Regulation E does apply, however, to any fee debited via an 
EFT from a consumer's account by the payee because the check was 
returned for insufficient or uncollected funds. The person debiting the 
fee electronically must obtain the consumer's authorization.
    2. Check used to capture information for a one-time EFT. See comment 
3(b)(1)-1.v.

                3(c)(2) Check Guarantee or Authorization

    1. Memo posting. Under a check guarantee or check authorization 
service, debiting of the consumer's account occurs when the check or 
draft is presented for payment. These services are exempt from coverage, 
even when a temporary hold on the account is memo-posted electronically 
at the time of authorization.

                 3(c)(3) Wire or Other Similar Transfers

    1. Fedwire and ACH. If a financial institution makes a fund transfer 
to a consumer's account after receiving funds through Fedwire or a 
similar network, the transfer by ACH is covered by the regulation even 
though the Fedwire or network transfer is exempt.
    2. Article 4A. Financial institutions that offer telephone-initiated 
Fedwire payments are subject to the requirements of UCC section 4A-202, 
which encourages verification of Fedwire payment orders pursuant to a 
security procedure established by agreement between the consumer and the 
receiving bank. These transfers are not subject to Regulation E and the 
agreement is not considered a telephone plan if the service is offered 
separately from a telephone bill-payment or other prearranged plan 
subject to Regulation E. Regulation J of the Board of Governors of the 
Federal Reserve System (12 CFR part 210) specifies the rules applicable 
to funds handled by Federal Reserve Banks. To ensure that the rules for 
all fund transfers through Fedwire are consistent, the Board of 
Governors used its preemptive authority under UCC section 4A-107 to 
determine that subpart B of the Board's Regulation J, including the 
provisions of Article 4A, applies to all fund transfers through Fedwire, 
even if a portion of the fund transfer is governed by the EFTA. The 
portion of the fund transfer that is governed by the EFTA is not 
governed by subpart B of the Board's Regulation J.
    3. Similar fund transfer systems. Fund transfer systems that are 
similar to Fedwire include the Clearing House Interbank Payments System 
(CHIPS), Society for Worldwide Interbank Financial Telecommunication 
(SWIFT), Telex, and transfers made on the books of correspondent banks.

              3(c)(4) Securities and Commodities Transfers

    1. Coverage. The securities exemption applies to securities and 
commodities that may be sold by a registered broker-dealer or futures 
commission merchant, even when the security or commodity itself is not 
regulated by the Securities and Exchange Commission or the Commodity 
Futures Trading Commission.
    2. Example of exempt transfer. The exemption applies to a transfer 
involving a transfer initiated by a telephone order to a stockbroker to 
buy or sell securities or to exercise a margin call.
    3. Examples of nonexempt transfers. The exemption does not apply to 
a transfer involving:
    i. A debit card or other access device that accesses a securities or 
commodities account such as a money market mutual fund and that the 
consumer uses for purchasing goods or services or for obtaining cash.
    ii. A payment of interest or dividends into the consumer's account 
(for example, from a brokerage firm or from a Federal Reserve Bank for 
government securities).

       3(c)(5) Automatic Transfers by Account-Holding Institution

    1. Automatic transfers exempted. The exemption applies to:
    i. Electronic debits or credits to consumer accounts for check 
charges, stop-payment charges, non-sufficient funds (NSF) charges, 
overdraft charges, provisional credits, error adjustments, and similar 
items that are initiated automatically on the occurrence of certain 
events.
    ii. Debits to consumer accounts for group insurance available only 
through the financial institution and payable only by means of an 
aggregate payment from the institution to the insurer.
    iii. EFTs between a thrift institution and its paired commercial 
bank in the state of Rhode Island, which are deemed under state law to 
be intra-institutional.
    iv. Automatic transfers between a consumer's accounts within the 
same financial institution, even if the account holders on the two 
accounts are not identical.

[[Page 189]]

    2. Automatic transfers not exempted. Transfers between accounts of 
the consumer at affiliated institutions (such as between a bank and its 
subsidiary or within a holding company) are not intra-institutional 
transfers, and thus do not qualify for the exemption.

                  3(c)(6) Telephone-Initiated Transfers

    1. Written plan or agreement. A transfer that the consumer initiates 
by telephone is covered by Regulation E if the transfer is made under a 
written plan or agreement between the consumer and the financial 
institution making the transfer. A written statement available to the 
public or to account holders that describes a service allowing a 
consumer to initiate transfers by telephone constitutes a plan; for 
example, a brochure, or material included with periodic statements. The 
following, however, do not by themselves constitute a written plan or 
agreement:
    i. A hold-harmless agreement on a signature card that protects the 
institution if the consumer requests a transfer.
    ii. A legend on a signature card, periodic statement, or passbook 
that limits the number of telephone-initiated transfers the consumer can 
make from a savings account because of reserve requirements under 
Regulation D of the Board of Governors of the Federal Reserve System (12 
CFR part 204).
    iii. An agreement permitting the consumer to approve by telephone 
the rollover of funds at the maturity of an instrument.
    2. Examples of covered transfers. When a written plan or agreement 
has been entered into, a transfer initiated by a telephone call from a 
consumer is covered even though:
    i. An employee of the financial institution completes the transfer 
manually (for example, by means of a debit memo or deposit slip).
    ii. The consumer is required to make a separate request for each 
transfer.
    iii. The consumer uses the plan infrequently.
    iv. The consumer initiates the transfer via a facsimile machine.
    v. The consumer initiates the transfer using a financial 
institution's audio-response or voice-response telephone system.

                       3(c)(7) Small Institutions

    1. Coverage. This exemption is limited to preauthorized transfers; 
institutions that offer other EFTs must comply with the applicable 
sections of the regulation as to such services. The preauthorized 
transfers remain subject to sections 913, 916, and 917 of the Act and 
Sec. 1005.10(e), and are therefore exempt from UCC Article 4A.

Section 1005.4 General Disclosure Requirements; Jointly Offered Services

                        4(a) Form of Disclosures

    1. General. Although no particular rules govern type size, number of 
pages, or the relative conspicuousness of various terms, the disclosures 
must be in a clear and readily understandable written form that the 
consumer may retain. Numbers or codes are considered readily 
understandable if explained elsewhere on the disclosure form.
    2. Foreign language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

                Section 1005.5 Issuance of Access Devices

    1. Coverage. The provisions of this section limit the circumstances 
under which a financial institution may issue an access device to a 
consumer. Making an additional account accessible through an existing 
access device is equivalent to issuing an access device and is subject 
to the limitations of this section.

                         5(a) Solicited Issuance

                            Paragraph 5(a)(1)

    1. Joint account. For a joint account, a financial institution may 
issue an access device to each account holder if the requesting holder 
specifically authorizes the issuance.
    2. Permissible forms of request. The request for an access device 
may be written or oral (for example, in response to a telephone 
solicitation by a card issuer).

                            Paragraph 5(a)(2)

    1. One-for-one rule. In issuing a renewal or substitute access 
device, only one renewal or substitute device may replace a previously 
issued device. For example, only one new card and PIN may replace a card 
and PIN previously issued. A financial institution may provide 
additional devices at the time it issues the renewal or substitute 
access device, however, provided the institution complies with 
Sec. 1005.5(b). See comment 5(b)-5. If the replacement device or the 
additional device permits either fewer or additional types of electronic 
fund transfer services, a change-in-terms notice or new disclosures are 
required.
    2. Renewal or substitution by a successor institution. A successor 
institution is an entity that replaces the original financial 
institution (for example, following a corporate merger or acquisition) 
or that acquires accounts or assumes the operation of an EFT system.

                        5(b) Unsolicited Issuance

    1. Compliance. A financial institution may issue an unsolicited 
access device (such as the combination of a debit card and PIN) if

[[Page 190]]

the institution's ATM system has been programmed not to accept the 
access device until after the consumer requests and the institution 
validates the device. Merely instructing a consumer not to use an 
unsolicited debit card and PIN until after the institution verifies the 
consumer's identity does not comply with the regulation.
    2. PINs. A financial institution may impose no liability on a 
consumer for unauthorized transfers involving an unsolicited access 
device until the device becomes an ``accepted access device'' under the 
regulation. A card and PIN combination may be treated as an accepted 
access device once the consumer has used it to make a transfer.
    3. Functions of PIN. If an institution issues a PIN at the 
consumer's request, the issuance may constitute both a way of validating 
the debit card and the means to identify the consumer (required as a 
condition of imposing liability for unauthorized transfers).
    4. Verification of identity. To verify the consumer's identity, a 
financial institution may use any reasonable means, such as a 
photograph, fingerprint, personal visit, signature comparison, or 
personal information about the consumer. However, even if reasonable 
means were used, if an institution fails to verify correctly the 
consumer's identity and an imposter succeeds in having the device 
validated, the consumer is not liable for any unauthorized transfers 
from the account.
    5. Additional access devices in a renewal or substitution. A 
financial institution may issue more than one access device in 
connection with the renewal or substitution of a previously issued 
accepted access device, provided that any additional access device 
(beyond the device replacing the accepted access device) is not 
validated at the time it is issued, and the institution complies with 
the other requirements of Sec. 1005.5(b). The institution may, if it 
chooses, set up the validation procedure such that both the device 
replacing the previously issued device and the additional device are not 
validated at the time they are issued, and validation will apply to both 
devices. If the institution sets up the validation procedure in this 
way, the institution should provide a clear and readily understandable 
disclosure to the consumer that both devices are unvalidated and that 
validation will apply to both devices.

     Section 1005.6 Liability of Consumer for Unauthorized Transfers

                      6(a) Conditions for Liability

    1. Means of identification. A financial institution may use various 
means for identifying the consumer to whom the access device is issued, 
including but not limited to:
    i. Electronic or mechanical confirmation (such as a PIN).
    ii. Comparison of the consumer's signature, fingerprint, or 
photograph.
    2. Multiple users. When more than one access device is issued for an 
account, the financial institution may, but need not, provide a separate 
means to identify each user of the account.

                 6(b) Limitations on Amount of Liability

    1. Application of liability provisions. There are three possible 
tiers of consumer liability for unauthorized EFTs depending on the 
situation. A consumer may be liable for: (1) up to $50; (2) up to $500; 
or (3) an unlimited amount depending on when the unauthorized EFT 
occurs. More than one tier may apply to a given situation because each 
corresponds to a different (sometimes overlapping) time period or set of 
conditions.
    2. Consumer negligence. Negligence by the consumer cannot be used as 
the basis for imposing greater liability than is permissible under 
Regulation E. Thus, consumer behavior that may constitute negligence 
under state law, such as writing the PIN on a debit card or on a piece 
of paper kept with the card, does not affect the consumer's liability 
for unauthorized transfers. (However, refer to comment 2(m)-2 regarding 
termination of the authority of given by the consumer to another 
person.)
    3. Limits on liability. The extent of the consumer's liability is 
determined solely by the consumer's promptness in reporting the loss or 
theft of an access device. Similarly, no agreement between the consumer 
and an institution may impose greater liability on the consumer for an 
unauthorized transfer than the limits provided in Regulation E.

                       6(b)(1) Timely Notice Given

    1. $50 limit applies. The basic liability limit is $50. For example, 
the consumer's card is lost or stolen on Monday and the consumer learns 
of the loss or theft on Wednesday. If the consumer notifies the 
financial institution within two business days of learning of the loss 
or theft (by midnight Friday), the consumer's liability is limited to 
$50 or the amount of the unauthorized transfers that occurred before 
notification, whichever is less.
    2. Knowledge of loss or theft of access device. The fact that a 
consumer has received a periodic statement that reflects unauthorized 
transfers may be a factor in determining whether the consumer had 
knowledge of the loss or theft, but cannot be deemed to represent 
conclusive evidence that the consumer had such knowledge.
    3. Two business day rule. The two business day period does not 
include the day the consumer learns of the loss or theft or any day

[[Page 191]]

that is not a business day. The rule is calculated based on two 24-hour 
periods, without regard to the financial institution's business hours or 
the time of day that the consumer learns of the loss or theft. For 
example, a consumer learns of the loss or theft at 6 p.m. on Friday. 
Assuming that Saturday is a business day and Sunday is not, the two 
business day period begins on Saturday and expires at 11:59 p.m. on 
Monday, not at the end of the financial institution's business day on 
Monday.

                     6(b)(2) Timely Notice Not Given

    1. $500 limit applies. The second tier of liability is $500. For 
example, the consumer's card is stolen on Monday and the consumer learns 
of the theft that same day. The consumer reports the theft on Friday. 
The $500 limit applies because the consumer failed to notify the 
financial institution within two business days of learning of the theft 
(which would have been by midnight Wednesday). How much the consumer is 
actually liable for, however, depends on when the unauthorized transfers 
take place. In this example, assume a $100 unauthorized transfer was 
made on Tuesday and a $600 unauthorized transfer on Thursday. Because 
the consumer is liable for the amount of the loss that occurs within the 
first two business days (but no more than $50), plus the amount of the 
unauthorized transfers that occurs after the first two business days and 
before the consumer gives notice, the consumer's total liability is $500 
($50 of the $100 transfer plus $450 of the $600 transfer, in this 
example). But if $600 was taken on Tuesday and $100 on Thursday, the 
consumer's maximum liability would be $150 ($50 of the $600 plus $100).

           6(b)(3) Periodic Statement; Timely Notice Not Given

    1. Unlimited liability applies. The standard of unlimited liability 
applies if unauthorized transfers appear on a periodic statement, and 
may apply in conjunction with the first two tiers of liability. If a 
periodic statement shows an unauthorized transfer made with a lost or 
stolen debit card, the consumer must notify the financial institution 
within 60 calendar days after the periodic statement was sent; 
otherwise, the consumer faces unlimited liability for all unauthorized 
transfers made after the 60-day period. The consumer's liability for 
unauthorized transfers before the statement is sent, and up to 60 days 
following, is determined based on the first two tiers of liability: up 
to $50 if the consumer notifies the financial institution within two 
business days of learning of the loss or theft of the card and up to 
$500 if the consumer notifies the institution after two business days of 
learning of the loss or theft.
    2. Transfers not involving access device. The first two tiers of 
liability do not apply to unauthorized transfers from a consumer's 
account made without an access device. If, however, the consumer fails 
to report such unauthorized transfers within 60 calendar days of the 
financial institution's transmittal of the periodic statement, the 
consumer may be liable for any transfers occurring after the close of 
the 60 days and before notice is given to the institution. For example, 
a consumer's account is electronically debited for $200 without the 
consumer's authorization and by means other than the consumer's access 
device. If the consumer notifies the institution within 60 days of the 
transmittal of the periodic statement that shows the unauthorized 
transfer, the consumer has no liability. However, if in addition to the 
$200, the consumer's account is debited for a $400 unauthorized transfer 
on the 61st day and the consumer fails to notify the institution of the 
first unauthorized transfer until the 62nd day, the consumer may be 
liable for the full $400.

                    6(b)(4) Extension of Time Limits

    1. Extenuating circumstances. Examples of circumstances that require 
extension of the notification periods under this section include the 
consumer's extended travel or hospitalization.

                 6(b)(5) Notice to Financial Institution

    1. Receipt of notice. A financial institution is considered to have 
received notice for purposes of limiting the consumer's liability if 
notice is given in a reasonable manner, even if the consumer notifies 
the institution but uses an address or telephone number other than the 
one specified by the institution.
    2. Notice by third party. Notice to a financial institution by a 
person acting on the consumer's behalf is considered valid under this 
section. For example, if a consumer is hospitalized and unable to report 
the loss or theft of an access device, notice is considered given when 
someone acting on the consumer's behalf notifies the bank of the loss or 
theft. A financial institution may require appropriate documentation 
from the person representing the consumer to establish that the person 
is acting on the consumer's behalf.
    3. Content of notice. Notice to a financial institution is 
considered given when a consumer takes reasonable steps to provide the 
institution with the pertinent account information. Even when the 
consumer is unable to provide the account number or the card number in 
reporting a lost or stolen access device or an unauthorized transfer, 
the notice effectively limits the consumer's liability if the consumer 
otherwise identifies sufficiently the account in question. For example, 
the consumer may identify the account by the name on the account and the 
type of account in question.

[[Page 192]]

                   Section 1005.7 Initial Disclosures

                       7(a) Timing of Disclosures

    1. Early disclosures. Disclosures given by a financial institution 
earlier than the regulation requires (for example, when the consumer 
opens a checking account) need not be repeated when the consumer later 
enters into an agreement with a third party to initiate preauthorized 
transfers to or from the consumer's account, unless the terms and 
conditions differ from those that the institution previously disclosed. 
This interpretation also applies to any notice provided about one-time 
EFTs from a consumer's account initiated using information from the 
consumer's check. On the other hand, if an agreement for EFT services to 
be provided by an account-holding institution is directly between the 
consumer and the account-holding institution, disclosures must be given 
in close proximity to the event requiring disclosure, for example, when 
the consumer contracts for a new service.
    2. Lack of advance notice of a transfer. Where a consumer authorizes 
a third party to debit or credit the consumer's account, an account-
holding institution that has not received advance notice of the transfer 
or transfers must provide the required disclosures as soon as reasonably 
possible after the first debit or credit is made, unless the institution 
has previously given the disclosures.
    3. Addition of new accounts. If a consumer opens a new account 
permitting EFTs at a financial institution, and the consumer already has 
received Regulation E disclosures for another account at that 
institution, the institution need only disclose terms and conditions 
that differ from those previously given.
    4. Addition of service in interchange systems. If a financial 
institution joins an interchange or shared network system (which 
provides access to terminals operated by other institutions), 
disclosures are required for additional EFT services not previously 
available to consumers if the terms and conditions differ from those 
previously disclosed.
    5. Disclosures covering all EFT services offered. An institution may 
provide disclosures covering all EFT services that it offers, even if 
some consumers have not arranged to use all services.

                       7(b) Content of Disclosures

                      7(b)(1) Liability of Consumer

    1. No liability imposed by financial institution. If a financial 
institution chooses to impose zero liability for unauthorized EFTs, it 
need not provide the liability disclosures. If the institution later 
decides to impose liability, however, it must first provide the 
disclosures.
    2. Preauthorized transfers. If the only EFTs from an account are 
preauthorized transfers, liability could arise if the consumer fails to 
report unauthorized transfers reflected on a periodic statement. To 
impose such liability on the consumer, the institution must have 
disclosed the potential liability and the telephone number and address 
for reporting unauthorized transfers.
    3. Additional information. At the institution's option, the summary 
of the consumer's liability may include advice on promptly reporting 
unauthorized transfers or the loss or theft of the access device.

                  7(b)(2) Telephone Number and Address

    1. Disclosure of telephone numbers. An institution may use the same 
or different telephone numbers in the disclosures for the purpose of:
    i. Reporting the loss or theft of an access device or possible 
unauthorized transfers;
    ii. Inquiring about the receipt of a preauthorized credit;
    iii. Stopping payment of a preauthorized debit;
    iv. Giving notice of an error.
    2. Location of telephone number. The telephone number need not be 
incorporated into the text of the disclosure; for example, the 
institution may instead insert a reference to a telephone number that is 
readily available to the consumer, such as ``Call your branch office. 
The number is shown on your periodic statement.'' However, an 
institution must provide a specific telephone number and address, on or 
with the disclosure statement, for reporting a lost or stolen access 
device or a possible unauthorized transfer.

                 7(b)(4) Types of Transfers; Limitations

    1. Security limitations. Information about limitations on the 
frequency and dollar amount of transfers generally must be disclosed in 
detail, even if related to security aspects of the system. If the 
confidentiality of certain details is essential to the security of an 
account or system, these details may be withheld (but the fact that 
limitations exist must still be disclosed). For example, an institution 
limits cash ATM withdrawals to $100 per day. The institution may 
disclose that daily withdrawal limitations apply and need not disclose 
that the limitations may not always be in force (such as during periods 
when its ATMs are off-line).
    2. Restrictions on certain deposit accounts. A limitation on account 
activity that restricts the consumer's ability to make EFTs must be 
disclosed even if the restriction also applies to transfers made by non-
electronic means. For example, Regulation D of the Board of Governors of 
the Federal Reserve System (12 CFR part 204) restricts the number of 
payments to third parties that may be made from a money market deposit 
account;

[[Page 193]]

an institution that does not execute fund transfers in excess of those 
limits must disclose the restriction as a limitation on the frequency of 
EFTs.
    3. Preauthorized transfers. Financial institutions are not required 
to list preauthorized transfers among the types of transfers that a 
consumer can make.
    4. One-time EFTs initiated using information from a check. Financial 
institutions must disclose the fact that one-time EFTs initiated using 
information from a consumer's check are among the types of transfers 
that a consumer can make. See appendix A-2.

                              7(b)(5) Fees

    1. Disclosure of EFT fees. An institution is required to disclose 
all fees for EFTs or the right to make them. Others fees (for example, 
minimum-balance fees, stop-payment fees, or account overdrafts) may, but 
need not, be disclosed. But see Regulation DD, 12 CFR part 1030. An 
institution is not required to disclose fees for inquiries made at an 
ATM since no transfer of funds is involved.
    2. Fees also applicable to non-EFT. A per-item fee for EFTs must be 
disclosed even if the same fee is imposed on non-electronic transfers. 
If a per-item fee is imposed only under certain conditions, such as when 
the transactions in the cycle exceed a certain number, those conditions 
must be disclosed. Itemization of the various fees may be provided on 
the disclosure statement or on an accompanying document that is 
referenced in the statement.
    3. Interchange system fees. Fees paid by the account-holding 
institution to the operator of a shared or interchange ATM system need 
not be disclosed, unless they are imposed on the consumer by the 
account-holding institution. Fees for use of an ATM that are debited 
directly from the consumer's account by an institution other than the 
account-holding institution (for example, fees included in the transfer 
amount) need not be disclosed. See Sec. 1005.7(b)(11) for the general 
notice requirement regarding fees that may be imposed by ATM operators 
and by a network used to complete the transfer.

                         7(b)(9) Confidentiality

    1. Information provided to third parties. An institution must 
describe the circumstances under which any information relating to an 
account to or from which EFTs are permitted will be made available to 
third parties, not just information concerning those EFTs. The term 
``third parties'' includes affiliates such as other subsidiaries of the 
same holding company.

                        7(b)(10) Error Resolution

    1. Substantially similar. The error resolution notice must be 
substantially similar to the model form in appendix A of part 1005. An 
institution may use different wording so long as the substance of the 
notice remains the same, may delete inapplicable provisions (for 
example, the requirement for written confirmation of an oral 
notification), and may substitute substantive state law requirements 
affording greater consumer protection than Regulation E.
    2. Extended time-period for certain transactions. To take advantage 
of the longer time periods for resolving errors under Sec. 1005.11(c)(3) 
(for new accounts as defined in Regulation CC of the Board of Governors 
of the Federal Reserve System (12 CFR part 229), transfers initiated 
outside the United States, or transfers resulting from POS debit-card 
transactions), a financial institution must have disclosed these longer 
time periods. Similarly, an institution that relies on the exception 
from provisional crediting in Sec. 1005.11(c)(2) for accounts subject to 
Regulation T of the Board of Governors of the Federal Reserve System (12 
CFR part 220) must have disclosed accordingly.

           7(c) Addition of Electronic Fund Transfer Services

    1. Addition of electronic check conversion services. One-time EFTs 
initiated using information from a consumer's check are a new type of 
transfer requiring new disclosures, as applicable. See appendix A-2.

     Section 1005.8 Change-in-Terms Notice; Error Resolution Notice

                       8(a) Change-in-Terms Notice

    1. Form of notice. No specific form or wording is required for a 
change-in-terms notice. The notice may appear on a periodic statement, 
or may be given by sending a copy of a revised disclosure statement, 
provided attention is directed to the change (for example, in a cover 
letter referencing the changed term).
    2. Changes not requiring notice. The following changes do not 
require disclosure:
    i. Closing some of an institution's ATMs;
    ii. Cancellation of an access device.
    3. Limitations on transfers. When the initial disclosures omit 
details about limitations because secrecy is essential to the security 
of the account or system, a subsequent increase in those limitations 
need not be disclosed if secrecy is still essential. If, however, an 
institution had no limits in place when the initial disclosures were 
given and now wishes to impose limits for the first time, it must 
disclose at least the fact that limits have been adopted. See also 
Sec. 1005.7(b)(4) and the related commentary.
    4. Change in telephone number or address. When a financial 
institution changes the telephone number or address used for reporting 
possible unauthorized transfers, a change-in-terms notice is required 
only if the institution will impose liability on the

[[Page 194]]

consumer for unauthorized transfers under Sec. 1005.6. See also 
Sec. 1005.6(a) and the related commentary.

                      8(b) Error Resolution Notice

    1. Change between annual and periodic notice. If an institution 
switches from an annual to a periodic notice, or vice versa, the first 
notice under the new method must be sent no later than 12 months after 
the last notice sent under the old method.
    2. Exception for new accounts. For new accounts, disclosure of the 
longer error resolution time periods under Sec. 1005.11(c)(3) is not 
required in the annual error resolution notice or in the notice that may 
be provided with each periodic statement as an alternative to the annual 
notice.

  Section 1005.9 Receipts at Electronic Terminals; Periodic Statements

                  9(a) Receipts at Electronic Terminals

    1. Receipts furnished only on request. The regulation requires that 
a receipt be ``made available.'' A financial institution may program its 
electronic terminals to provide a receipt only to consumers who elect to 
receive one.
    2. Third party providing receipt. An account-holding institution may 
make terminal receipts available through third parties such as merchants 
or other financial institutions.
    3. Inclusion of promotional material. A financial institution may 
include promotional material on receipts if the required information is 
set forth clearly (for example, by separating it from the promotional 
material). In addition, a consumer may not be required to surrender the 
receipt or that portion containing the required disclosures in order to 
take advantage of a promotion.
    4. Transfer not completed. The receipt requirement does not apply to 
a transfer that is initiated but not completed (for example, if the ATM 
is out of currency or the consumer decides not to complete the 
transfer).
    5. Receipts not furnished due to inadvertent error. If a receipt is 
not provided to the consumer because of a bona fide unintentional error, 
such as when a terminal runs out of paper or the mechanism jams, no 
violation results if the financial institution maintains procedures 
reasonably adapted to avoid such occurrences.
    6. Multiple transfers. If the consumer makes multiple transfers at 
the same time, the financial institution may document them on a single 
or on separate receipts.

                             9(a)(1) Amount

    1. Disclosure of transaction fee. The required display of a fee 
amount on or at the terminal may be accomplished by displaying the fee 
on a sign at the terminal or on the terminal screen for a reasonable 
duration. Displaying the fee on a screen provides adequate notice, as 
long as a consumer is given the option to cancel the transaction after 
receiving notice of a fee. See Sec. 1005.16 for the notice requirements 
applicable to ATM operators that impose a fee for providing EFT 
services.
    2. Relationship between Sec. 1005.9(a)(1) and Sec. 1005.16. The 
requirements of Sec. Sec. 1005.9(a)(1) and 1005.16 are similar but not 
identical.
    i. Section 1005.9(a)(1) requires that if the amount of the transfer 
as shown on the receipt will include the fee, then the fee must be 
disclosed either on a sign on or at the terminal, or on the terminal 
screen. Section 1005.16 requires disclosure both on a sign on or at the 
terminal (in a prominent and conspicuous location) and on the terminal 
screen. Section 1005.16 permits disclosure on a paper notice as an 
alternative to the on-screen disclosure.
    ii. The disclosure of the fee on the receipt under Sec. 1005.9(a)(1) 
cannot be used to comply with the alternative paper disclosure procedure 
under Sec. 1005.16, if the receipt is provided at the completion of the 
transaction because, pursuant to the statute, the paper notice must be 
provided before the consumer is committed to paying the fee.
    iii. Section 1005.9(a)(1) applies to any type of electronic terminal 
as defined in Regulation E (for example, to POS terminals as well as to 
ATMs), while Sec. 1005.16 applies only to ATMs.

                              9(a)(2) Date

    1. Calendar date. The receipt must disclose the calendar date on 
which the consumer uses the electronic terminal. An accounting or 
business date may be disclosed in addition if the dates are clearly 
distinguished.

                              9(a)(3) Type

    1. Identifying transfer and account. Examples identifying the type 
of transfer and the type of the consumer's account include ``withdrawal 
from checking,'' ``transfer from savings to checking,'' or ``payment 
from savings.''
    2. Exception. Identification of an account is not required when the 
consumer can access only one asset account at a particular time or 
terminal, even if the access device can normally be used to access more 
than one account. For example, the consumer may be able to access only 
one particular account at terminals not operated by the account-holding 
institution, or may be able to access only one particular account when 
the terminal is off-line. The exception is available even if, in 
addition to accessing one asset account, the consumer also can access a 
credit line.
    3. Access to multiple accounts. If the consumer can use an access 
device to make transfers to or from different accounts of the same type, 
the terminal receipt must specify

[[Page 195]]

which account was accessed, such as ``withdrawal from checking I'' or 
``withdrawal from checking II.'' If only one account besides the primary 
checking account can be debited, the receipt can identify the account as 
``withdrawal from other account.''
    4. Generic descriptions. Generic descriptions may be used for 
accounts that are similar in function, such as share draft or NOW 
accounts and checking accounts. In a shared system, for example, when a 
credit union member initiates transfers to or from a share draft account 
at a terminal owned or operated by a bank, the receipt may identify a 
withdrawal from the account as a ``withdrawal from checking.''
    5. Point-of-sale transactions. There is no prescribed terminology 
for identifying a transfer at a merchant's POS terminal. A transfer may 
be identified, for example, as a purchase, a sale of goods or services, 
or a payment to a third party. When a consumer obtains cash from a POS 
terminal in addition to purchasing goods, or obtains cash only, the 
documentation need not differentiate the transaction from one involving 
the purchase of goods.

                        9(a)(5) Terminal Location

    1. Options for identifying terminal. The institution may provide 
either:
    i. The city, state or foreign country, and the information in 
Sec. 1005.9(a)(5) (i), (ii), or (iii), or
    ii. A number or a code identifying the terminal. If the institution 
chooses the second option, the code or terminal number identifying the 
terminal where the transfer is initiated may be given as part of a 
transaction code.
    2. Omission of city name. The city may be omitted if the generally 
accepted name (such as a branch name) contains the city name.
    3. Omission of a state. A state may be omitted from the location 
information on the receipt if:
    i. All the terminals owned or operated by the financial institution 
providing the statement (or by the system in which it participates) are 
located in that state, or
    ii. All transfers occur at terminals located within 50 miles of the 
financial institution's main office.
    4. Omission of a city and state. A city and state may be omitted if 
all the terminals owned or operated by the financial institution 
providing the statement (or by the system in which it participates) are 
located in the same city.

                          Paragraph 9(a)(5)(i)

    1. Street address. The address should include number and street (or 
intersection); the number (or intersecting street) may be omitted if the 
street alone uniquely identifies the terminal location.

                          Paragraph 9(a)(5)(ii)

    1. Generally accepted name. Examples of a generally accepted name 
for a specific location include a branch of the financial institution, a 
shopping center, or an airport.

                         Paragraph 9(a)(5)(iii)

    1. Name of owner or operator of terminal. Examples of an owner or 
operator of a terminal are a financial institution or a retail merchant.

                      9(a)(6) Third Party Transfer

    1. Omission of third-party name. The receipt need not disclose the 
third-party name if the name is provided by the consumer in a form that 
is not machine readable (for example, if the consumer indicates the 
payee by depositing a payment stub into the ATM). If, on the other hand, 
the consumer keys in the identity of the payee, the receipt must 
identify the payee by name or by using a code that is explained 
elsewhere on the receipt.
    2. Receipt as proof of payment. Documentation required under the 
regulation constitutes prima facie proof of a payment to another person, 
except in the case of a terminal receipt documenting a deposit.

                        9(b) Periodic Statements

    1. Periodic cycles. Periodic statements may be sent on a cycle that 
is shorter than monthly. The statements must correspond to periodic 
cycles that are reasonably equal, that is, do not vary by more than four 
days from the regular cycle. The requirement of reasonably equal cycles 
does not apply when an institution changes cycles for operational or 
other reasons, such as to establish a new statement day or date.
    2. Interim statements. Generally, a financial institution must 
provide periodic statements for each monthly cycle in which an EFT 
occurs, and at least quarterly if a transfer has not occurred. Where 
EFTs occur between regularly-scheduled cycles, interim statements must 
be provided. For example, if an institution issues quarterly statements 
at the end of March, June, September and December, and the consumer 
initiates an EFT in February, an interim statement for February must be 
provided. If an interim statement contains interest or rate information, 
the institution must comply with Regulation DD, 12 CFR 1030.6.
    3. Inactive accounts. A financial institution need not send 
statements to consumers whose accounts are inactive as defined by the 
institution.
    4. Statement pickup. A financial institution may permit, but may not 
require, consumers to pick up their periodic statements at the financial 
institution.
    5. Periodic statements limited to EFT activity. A financial 
institution that uses a passbook as the primary means for displaying 
account

[[Page 196]]

activity, but also allows the account to be debited electronically, may 
provide a periodic statement requirement that reflects only the EFTs and 
other required disclosures (such as charges, account balances, and 
address and telephone number for inquiries). See Sec. 1005.9(c)(1)(i) 
for the exception applicable to preauthorized transfers for passbook 
accounts.
    6. Codes and accompanying documents. To meet the documentation 
requirements for periodic statements, a financial institution may:
    i. Include copies of terminal receipts to reflect transfers 
initiated by the consumer at electronic terminals;
    ii. Enclose posting memos, deposit slips, and other documents that, 
together with the statement, disclose all the required information;
    iii. Use codes for names of third parties or terminal locations and 
explain the information to which the codes relate on an accompanying 
document.

                     9(b)(1) Transaction Information

    1. Information obtained from others. While financial institutions 
must maintain reasonable procedures to ensure the integrity of data 
obtained from another institution, a merchant, or other third parties, 
verification of each transfer that appears on the periodic statement is 
not required.

                          Paragraph 9(b)(1)(i)

    1. Incorrect deposit amount. If a financial institution determines 
that the amount actually deposited at an ATM is different from the 
amount entered by the consumer, the institution need not immediately 
notify the consumer of the discrepancy. The periodic statement 
reflecting the deposit may show either the correct amount of the deposit 
or the amount entered by the consumer along with the institution's 
adjustment.

                         Paragraph 9(b)(1)(iii)

    1. Type of transfer. There is no prescribed terminology for 
describing a type of transfer. Placement of the amount of the transfer 
in the debit or the credit column is sufficient if other information on 
the statement, such as a terminal location or third-party name, enables 
the consumer to identify the type of transfer.

                          Paragraph 9(b)(1)(iv)

    1. Nonproprietary terminal in network. An institution need not 
reflect on the periodic statement the street addresses, identification 
codes, or terminal numbers for transfers initiated in a shared or 
interchange system at a terminal operated by an institution other than 
the account-holding institution. The statement must, however, specify 
the entity that owns or operates the terminal, plus the city and state.

                          Paragraph 9(b)(1)(v)

    1. Recurring payments by government agency. The third-party name for 
recurring payments from Federal, state, or local governments need not 
list the particular agency. For example, ``U.S. gov't'' or ``N.Y. sal'' 
will suffice.
    2. Consumer as third-party payee. If a consumer makes an electronic 
fund transfer to another consumer, the financial institution must 
identify the recipient by name (not just by an account number, for 
example).
    3. Terminal location/third party. A single entry may be used to 
identify both the terminal location and the name of the third party to 
or from whom funds are transferred. For example, if a consumer purchases 
goods from a merchant, the name of the party to whom funds are 
transferred (the merchant) and the location of the terminal where the 
transfer is initiated will be satisfied by a disclosure such as ``XYZ 
Store, Anytown, Ohio.''
    4. Account-holding institution as third party. Transfers to the 
account-holding institution (by ATM, for example) must show the 
institution as the recipient, unless other information on the statement 
(such as, ``loan payment from checking'') clearly indicates that the 
payment was to the account-holding institution.
    5. Consistency in third-party identity. The periodic statement must 
disclose a third-party name as it appeared on the receipt, whether it 
was, for example, the ``dba'' (doing business as) name of the third 
party or the parent corporation's name.
    6. Third-party identity on deposits at electronic terminal. A 
financial institution need not identify third parties whose names appear 
on checks, drafts, or similar paper instruments deposited to the 
consumer's account at an electronic terminal.

                              9(b)(3) Fees

    1. Disclosure of fees. The fees disclosed may include fees for EFTs 
and for other non-electronic services, and both fixed fees and per-item 
fees; they may be given as a total or may be itemized in part or in 
full.
    2. Fees in interchange system. An account-holding institution must 
disclose any fees it imposes on the consumer for EFTs, including fees 
for ATM transactions in an interchange or shared ATM system. Fees for 
use of an ATM imposed on the consumer by an institution other than the 
account-holding institution and included in the amount of the transfer 
by the terminal-operating institution need not be separately disclosed 
on the periodic statement.
    3. Finance charges. The requirement to disclose any fees assessed 
against the account

[[Page 197]]

does not include a finance charge imposed on the account during the 
statement period.

                        9(b)(4) Account Balances

    1. Opening and closing balances. The opening and closing balances 
must reflect both EFTs and other account activity.

           9(b)(5) Address and Telephone Number for Inquiries

    1. Telephone number. A single telephone number, preceded by the 
``direct inquiries to'' language, will satisfy the requirements of 
Sec. Sec. 1005.9(b)(5) and (6).

          9(b)(6) Telephone Number for Preauthorized Transfers

    1. Telephone number. See comment 9(b)(5)-1.

   9(c) Exceptions to the Periodic Statement Requirements for Certain 
                                Accounts

    1. Transfers between accounts. The regulation provides an exception 
from the periodic statement requirement for certain intra-institutional 
transfers between a consumer's accounts. The financial institution must 
still comply with the applicable periodic statement requirements for any 
other EFTs to or from the account. For example, a Regulation E statement 
must be provided quarterly for an account that also receives payroll 
deposits electronically, or for any month in which an account is also 
accessed by a withdrawal at an ATM.

               9(c)(1) Preauthorized Transfers to Accounts

    1. Accounts that may be accessed only by preauthorized transfers to 
the account. The exception for ``accounts that may be accessed only by 
preauthorized transfers to the account'' includes accounts that can be 
accessed by means other than EFTs, such as checks. If, however, an 
account may be accessed by any EFT other than preauthorized credits to 
the account, such as preauthorized debits or ATM transactions, the 
account does not qualify for the exception.
    2. Reversal of direct deposits. For direct-deposit-only accounts, a 
financial institution must send a periodic statement at least quarterly. 
A reversal of a direct deposit to correct an error does not trigger the 
monthly statement requirement when the error represented a credit to the 
wrong consumer's account, a duplicate credit, or a credit in the wrong 
amount. See also comment 2(m)-5.

           9(d) Documentation for Foreign-Initiated Transfers

    1. Foreign-initiated transfers. An institution must make a good 
faith effort to provide all required information for foreign-initiated 
transfers. For example, even if the institution is not able to provide a 
specific terminal location, it should identify the country and city in 
which the transfer was initiated.

                 Section 1005.10 Preauthorized Transfers

           10(a) Preauthorized Transfers to Consumer's Account

                10(a)(1) Notice by Financial Institution

    1. Content. No specific language is required for notice regarding 
receipt of a preauthorized transfer. Identifying the deposit is 
sufficient; however, simply providing the current account balance is 
not.
    2. Notice of credit. A financial institution may use different 
methods of notice for various types or series of preauthorized 
transfers, and the institution need not offer consumers a choice of 
notice methods.
    3. Positive notice. A periodic statement sent within two business 
days of the scheduled transfer, showing the transfer, can serve as 
notice of receipt.
    4. Negative notice. The absence of a deposit entry (on a periodic 
statement sent within two business days of the scheduled transfer date) 
will serve as negative notice.
    5. Telephone notice. If a financial institution uses the telephone 
notice option, the institution should be able in most instances to 
verify during a consumer's initial call whether a transfer was received. 
The institution must respond within two business days to any inquiry not 
answered immediately.
    6. Phone number for passbook accounts. The financial institution may 
use any reasonable means necessary to provide the telephone number to 
consumers with passbook accounts that can only be accessed by 
preauthorized credits and that do not receive periodic statements. For 
example, it may print the telephone number in the passbook, or include 
the number with the annual error resolution notice.
    7. Telephone line availability. To satisfy the readily-available 
standard, the financial institution must provide enough telephone lines 
so that consumers get a reasonably prompt response. The institution need 
only provide telephone service during normal business hours. Within its 
primary service area, an institution must provide a local or toll-free 
telephone number. It need not provide a toll-free number or accept 
collect long-distance calls from outside the area where it normally 
conducts business.

10(b) Written Authorization for Preauthorized Transfers From Consumer's 
                                 Account

    1. Preexisting authorizations. The financial institution need not 
require a new authorization before changing from paper-based to 
electronic debiting when the existing authorization does not specify 
that debiting is to occur electronically or specifies that the debiting 
will occur by paper means. A new authorization also is not required when 
a

[[Page 198]]

successor institution begins collecting payments.
    2. Authorization obtained by third party. The account-holding 
financial institution does not violate the regulation when a third-party 
payee fails to obtain the authorization in writing or fails to give a 
copy to the consumer; rather, it is the third-party payee that is in 
violation of the regulation.
    3. Written authorization for preauthorized transfers. The 
requirement that preauthorized EFTs be authorized by the consumer ``only 
by a writing'' cannot be met by a payee's signing a written 
authorization on the consumer's behalf with only an oral authorization 
from the consumer.
    4. Use of a confirmation form. A financial institution or designated 
payee may comply with the requirements of this section in various ways. 
For example, a payee may provide the consumer with two copies of a 
preauthorization form, and ask the consumer to sign and return one and 
to retain the second copy.
    5. Similarly authenticated. The similarly authenticated standard 
permits signed, written authorizations to be provided electronically. 
The writing and signature requirements of this section are satisfied by 
complying with the Electronic Signatures in Global and National Commerce 
Act, 15 U.S.C. 7001 et seq., which defines electronic records and 
electronic signatures. Examples of electronic signatures include, but 
are not limited to, digital signatures and security codes. A security 
code need not originate with the account-holding institution. The 
authorization process should evidence the consumer's identity and assent 
to the authorization. The person that obtains the authorization must 
provide a copy of the terms of the authorization to the consumer either 
electronically or in paper form. Only the consumer may authorize the 
transfer and not, for example, a third-party merchant on behalf of the 
consumer.
    6. Requirements of an authorization. An authorization is valid if it 
is readily identifiable as such and the terms of the preauthorized 
transfer are clear and readily understandable.
    7. Bona fide error. Consumers sometimes authorize third-party 
payees, by telephone or online, to submit recurring charges against a 
credit card account. If the consumer indicates use of a credit card 
account when in fact a debit card is being used, the payee does not 
violate the requirement to obtain a written authorization if the failure 
to obtain written authorization was not intentional and resulted from a 
bona fide error, and if the payee maintains procedures reasonably 
adapted to avoid any such error. Procedures reasonably adapted to avoid 
error will depend upon the circumstances. Generally, requesting the 
consumer to specify whether the card to be used for the authorization is 
a debit (or check) card or a credit card is a reasonable procedure. 
Where the consumer has indicated that the card is a credit card (or that 
the card is not a debit or check card), the payee may rely on the 
consumer's statement without seeking further information about the type 
of card. If the payee believes, at the time of the authorization, that a 
credit card is involved, and later finds that the card used is a debit 
card (for example, because the consumer later brings the matter to the 
payee's attention), the payee must obtain a written and signed or (where 
appropriate) a similarly authenticated authorization as soon as 
reasonably possible, or cease debiting the consumer's account.

                 10(c) Consumer's Right to Stop Payment

    1. Stop-payment order. The financial institution must honor an oral 
stop-payment order made at least three business days before a scheduled 
debit. If the debit item is resubmitted, the institution must continue 
to honor the stop-payment order (for example, by suspending all 
subsequent payments to the payee-originator until the consumer notifies 
the institution that payments should resume).
    2. Revocation of authorization. Once a financial institution has 
been notified that the consumer's authorization is no longer valid, it 
must block all future payments for the particular debit transmitted by 
the designated payee-originator. But see comment 10(c)-3. The 
institution may not wait for the payee-originator to terminate the 
automatic debits. The institution may confirm that the consumer has 
informed the payee-originator of the revocation (for example, by 
requiring a copy of the consumer's revocation as written confirmation to 
be provided within 14 days of an oral notification). If the institution 
does not receive the required written confirmation within the 14-day 
period, it may honor subsequent debits to the account.
    3. Alternative procedure for processing a stop-payment request. If 
an institution does not have the capability to block a preauthorized 
debit from being posted to the consumer's account--as in the case of a 
preauthorized debit made through a debit card network or other system, 
for example--the institution may instead comply with the stop-payment 
requirements by using a third party to block the transfer(s), as long as 
the consumer's account is not debited for the payment.

               10(d) Notice of Transfers Varying in Amount

                             10(d)(1) Notice

    1. Preexisting authorizations. A financial institution holding the 
consumer's account does not violate the regulation if the designated 
payee fails to provide notice of varying amounts.

[[Page 199]]

                             10(d)(2) Range

    1. Range. A financial institution or designated payee that elects to 
offer the consumer a specified range of amounts for debiting (in lieu of 
providing the notice of transfers varying in amount) must provide an 
acceptable range that could be anticipated by the consumer. For example, 
if the transfer is for payment of a gas bill, an appropriate range might 
be based on the highest bill in winter and the lowest bill in summer.
    2. Transfers to an account of the consumer held at another 
institution. A financial institution need not provide a consumer the 
option of receiving notice with each varying transfer, and may instead 
provide notice only when a debit to an account of the consumer falls 
outside a specified range or differs by more than a specified amount 
from the most recent transfer, if the funds are transferred and credited 
to an account of the consumer held at another financial institution. The 
specified range or amount, however, must be one that reasonably could be 
anticipated by the consumer, and the institution must notify the 
consumer of the range or amount at the time the consumer provides 
authorization for the preauthorized transfers. For example, if the 
transfer is for payment of interest for a fixed-rate certificate of 
deposit account, an appropriate range might be based on a month 
containing 28 days and a month containing 31 days.

                          10(e) Compulsory Use

                             10(e)(1) Credit

    1. Loan payments. Creditors may not require repayment of loans by 
electronic means on a preauthorized, recurring basis. A creditor may 
offer a program with a reduced annual percentage rate or other cost-
related incentive for an automatic repayment feature, provided the 
program with the automatic payment feature is not the only loan program 
offered by the creditor for the type of credit involved. Examples 
include:
    i. Mortgages with graduated payments in which a pledged savings 
account is automatically debited during an initial period to supplement 
the monthly payments made by the borrower.
    ii. Mortgage plans calling for preauthorized biweekly payments that 
are debited electronically to the consumer's account and produce a lower 
total finance charge.
    2. Overdraft. A financial institution may require the automatic 
repayment of an overdraft credit plan even if the overdraft extension is 
charged to an open-end account that may be accessed by the consumer in 
ways other than by overdrafts.

                10(e)(2) Employment or Government Benefit

    1. Payroll. An employer (including a financial institution) may not 
require its employees to receive their salary by direct deposit to any 
particular institution. An employer may require direct deposit of salary 
by electronic means if employees are allowed to choose the institution 
that will receive the direct deposit. Alternatively, an employer may 
give employees the choice of having their salary deposited at a 
particular institution (designated by the employer) or receiving their 
salary by another means, such as by check or cash.

             Section 1005.11 Procedures for Resolving Errors

                        11(a) Definition of Error

    1. Terminal location. With regard to deposits at an ATM, a 
consumer's request for the terminal location or other information 
triggers the error resolution procedures, but the financial institution 
need only provide the ATM location if it has captured that information.
    2. Verifying an account debit or credit. If the consumer contacts 
the financial institution to ascertain whether a payment (for example, 
in a home-banking or bill-payment program) or any other type of EFT was 
debited to the account, or whether a deposit made via ATM, preauthorized 
transfer, or any other type of EFT was credited to the account, without 
asserting an error, the error resolution procedures do not apply.
    3. Loss or theft of access device. A financial institution is 
required to comply with the error resolution procedures when a consumer 
reports the loss or theft of an access device if the consumer also 
alleges possible unauthorized use as a consequence of the loss or theft.
    4. Error asserted after account closed. The financial institution 
must comply with the error resolution procedures when a consumer 
properly asserts an error, even if the account has been closed.
    5. Request for documentation or information. A request for 
documentation or other information must be treated as an error unless it 
is clear that the consumer is requesting a duplicate copy for tax or 
other record-keeping purposes.
    6. Terminal receipts for transfers of $15 or less. The fact that an 
institution does not make a terminal receipt available for a transfer of 
$15 or less in accordance with Sec. 1005.9(e) is not an error for 
purposes of Sec. 1005.11(a)(1)(vi) or (vii).

                   11(b) Notice of Error From Consumer

                        11(b)(1) Timing; Contents

    1. Content of error notice. The notice of error is effective even if 
it does not contain

[[Page 200]]

the consumer's account number, so long as the financial institution is 
able to identify the account in question. For example, the consumer 
could provide a Social Security number or other unique means of 
identification.
    2. Investigation pending receipt of information. While a financial 
institution may request a written, signed statement from the consumer 
relating to a notice of error, it may not delay initiating or completing 
an investigation pending receipt of the statement.
    3. Statement held for consumer. When a consumer has arranged for 
periodic statements to be held until picked up, the statement for a 
particular cycle is deemed to have been transmitted on the date the 
financial institution first makes the statement available to the 
consumer.
    4. Failure to provide statement. When a financial institution fails 
to provide the consumer with a periodic statement, a request for a copy 
is governed by this section if the consumer gives notice within 60 days 
from the date on which the statement should have been transmitted.
    5. Discovery of error by institution. The error resolution 
procedures of this section apply when a notice of error is received from 
the consumer, and not when the financial institution itself discovers 
and corrects an error.
    6. Notice at particular phone number or address. A financial 
institution may require the consumer to give notice only at the 
telephone number or address disclosed by the institution, provided the 
institution maintains reasonable procedures to refer the consumer to the 
specified telephone number or address if the consumer attempts to give 
notice to the institution in a different manner.
    7. Effect of late notice. An institution is not required to comply 
with the requirements of this section for any notice of error from the 
consumer that is received by the institution later than 60 days from the 
date on which the periodic statement first reflecting the error is sent. 
Where the consumer's assertion of error involves an unauthorized EFT, 
however, the institution must comply with Sec. 1005.6 before it may 
impose any liability on the consumer.

                      11(b)(2) Written Confirmation

    1. Written confirmation-of-error notice. If the consumer sends a 
written confirmation of error to the wrong address, the financial 
institution must process the confirmation through normal procedures. But 
the institution need not provisionally credit the consumer's account if 
the written confirmation is delayed beyond 10 business days in getting 
to the right place because it was sent to the wrong address.

              11(c) Time Limits and Extent of Investigation

    1. Notice to consumer. Unless otherwise indicated in this section, 
the financial institution may provide the required notices to the 
consumer either orally or in writing.
    2. Written confirmation of oral notice. A financial institution must 
begin its investigation promptly upon receipt of an oral notice. It may 
not delay until it has received a written confirmation.
    3. Charges for error resolution. If a billing error occurred, 
whether as alleged or in a different amount or manner, the financial 
institution may not impose a charge related to any aspect of the error-
resolution process (including charges for documentation or 
investigation). Since the Act grants the consumer error-resolution 
rights, the institution should avoid any chilling effect on the good-
faith assertion of errors that might result if charges are assessed when 
no billing error has occurred.
    4. Correction without investigation. A financial institution may 
make, without investigation, a final correction to a consumer's account 
in the amount or manner alleged by the consumer to be in error, but must 
comply with all other applicable requirements of Sec. 1005.11.
    5. Correction notice. A financial institution may include the notice 
of correction on a periodic statement that is mailed or delivered within 
the 10-business-day or 45-calendar-day time limits and that clearly 
identifies the correction to the consumer's account. The institution 
must determine whether such a mailing will be prompt enough to satisfy 
the requirements of this section, taking into account the specific facts 
involved.
    6. Correction of an error. If the financial institution determines 
an error occurred, within either the 10-day or 45-day period, it must 
correct the error (subject to the liability provisions of 
Sec. Sec. 1005.6(a) and (b)) including, where applicable, the crediting 
of interest and the refunding of any fees imposed by the institution. In 
a combined credit/EFT transaction, for example, the institution must 
refund any finance charges incurred as a result of the error. The 
institution need not refund fees that would have been imposed whether or 
not the error occurred.
    7. Extent of required investigation. A financial institution 
complies with its duty to investigate, correct, and report its 
determination regarding an error described in Sec. 1005.11(a)(1)(vii) by 
transmitting the requested information, clarification, or documentation 
within the time limits set forth in Sec. 1005.11(c). If the institution 
has provisionally credited the consumer's account in accordance with 
Sec. 1005.11(c)(2), it may debit the amount upon transmitting the 
requested information, clarification, or documentation.

[[Page 201]]

                          Paragraph 11(c)(2)(i)

    1. Compliance with all requirements. Financial institutions exempted 
from provisionally crediting a consumer's account under 
Sec. Sec. 1005.11(c)(2)(i)(A) and (B) must still comply with all other 
requirements of Sec. 1005.11.

                   11(c)(3) Extension of Time Periods

    1. POS debit card transactions. The extended deadlines for 
investigating errors resulting from POS debit card transactions apply to 
all debit card transactions, including those for cash only, at 
merchants' POS terminals, and also including mail and telephone orders. 
The deadlines do not apply to transactions at an ATM, however, even 
though the ATM may be in a merchant location.

                         11(c)(4) Investigation

    1. Third parties. When information or documentation requested by the 
consumer is in the possession of a third party with whom the financial 
institution does not have an agreement, the institution satisfies the 
error resolution requirement by so advising the consumer within the 
specified time period.
    2. Scope of investigation. When an alleged error involves a payment 
to a third party under the financial institution's telephone bill-
payment plan, a review of the institution's own records is sufficient, 
assuming no agreement exists between the institution and the third party 
concerning the bill-payment service.
    3. POS transfers. When a consumer alleges an error involving a 
transfer to a merchant via a POS terminal, the institution must verify 
the information previously transmitted when executing the transfer. For 
example, the financial institution may request a copy of the sales 
receipt to verify that the amount of the transfer correctly corresponds 
to the amount of the consumer's purchase.
    4. Agreement. An agreement that a third party will honor an access 
device is an agreement for purposes of this paragraph. A financial 
institution does not have an agreement for purposes of 
Sec. 1005.11(c)(4)(ii) solely because it participates in transactions 
that occur under the Federal recurring payments programs, or that are 
cleared through an ACH or similar arrangement for the clearing and 
settlement of fund transfers generally, or because the institution 
agrees to be bound by the rules of such an arrangement.
    5. No EFT agreement. When there is no agreement between the 
institution and the third party for the type of EFT involved, the 
financial institution must review any relevant information within the 
institution's own records for the particular account to resolve the 
consumer's claim. The extent of the investigation required may vary 
depending on the facts and circumstances. However, a financial 
institution may not limit its investigation solely to the payment 
instructions where additional information within its own records 
pertaining to the particular account in question could help to resolve a 
consumer's claim. Information that may be reviewed as part of an 
investigation might include:
    i. The ACH transaction records for the transfer;
    ii. The transaction history of the particular account for a 
reasonable period of time immediately preceding the allegation of error;
    iii. Whether the check number of the transaction in question is 
notably out-of-sequence;
    iv. The location of either the transaction or the payee in question 
relative to the consumer's place of residence and habitual transaction 
area;
    v. Information relative to the account in question within the 
control of the institution's third-party service providers if the 
financial institution reasonably believes that it may have records or 
other information that could be dispositive; or
    vi. Any other information appropriate to resolve the claim.

    11(d) Procedures if Financial Institution Determines No Error or 
                        Different Error Occurred

    1. Error different from that alleged. When a financial institution 
determines that an error occurred in a manner or amount different from 
that described by the consumer, it must comply with the requirements of 
both Sec. Sec. 1005.11(c) and (d), as relevant. The institution may give 
the notice of correction and the explanation separately or in a combined 
form.

                      11(d)(1) Written Explanation

    1. Request for documentation. When a consumer requests copies of 
documents, the financial institution must provide the copies in an 
understandable form. If an institution relied on magnetic tape, it must 
convert the applicable data into readable form, for example, by printing 
it and explaining any codes.

                  11(d)(2) Debiting Provisional Credit

    1. Alternative procedure for debiting of credited funds. The 
financial institution may comply with the requirements of this section 
by notifying the consumer that the consumer's account will be debited 
five business days from the transmittal of the notification, specifying 
the calendar date on which the debiting will occur.
    2. Fees for overdrafts. The financial institution may not impose 
fees for items it is required to honor under Sec. 1005.11. It may, 
however, impose any normal transaction or item fee that is unrelated to 
an overdraft resulting from the debiting. If the account is still 
overdrawn after five business days, the institution may impose the fees 
or finance

[[Page 202]]

charges to which it is entitled, if any, under an overdraft credit plan.

                       11(e) Reassertion of Error

    1. Withdrawal of error; right to reassert. The financial institution 
has no further error resolution responsibilities if the consumer 
voluntarily withdraws the notice alleging an error. A consumer who has 
withdrawn an allegation of error has the right to reassert the 
allegation unless the financial institution had already complied with 
all of the error resolution requirements before the allegation was 
withdrawn. The consumer must do so, however, within the original 60-day 
period.

                 Section 1005.12 Relation to Other Laws

                   12(a) Relation to Truth in Lending

    1. Determining applicable regulation. i. For transactions involving 
access devices that also function as credit cards, whether Regulation E 
or Regulation Z (12 CFR part 1026) applies depends on the nature of the 
transaction. For example, if the transaction solely involves an 
extension of credit, and does not include a debit to a checking account 
(or other consumer asset account), the liability limitations and error 
resolution requirements of Regulation Z apply. If the transaction debits 
a checking account only (with no credit extended), the provisions of 
Regulation E apply. If the transaction debits a checking account but 
also draws on an overdraft line of credit attached to the account, 
Regulation E's liability limitations apply, in addition to 
Sec. Sec. 1026.13(d) and (g) of Regulation Z (which apply because of the 
extension of credit associated with the overdraft feature on the 
checking account). If a consumer's access device is also a credit card 
and the device is used to make unauthorized withdrawals from a checking 
account, but also is used to obtain unauthorized cash advances directly 
from a line of credit that is separate from the checking account, both 
Regulation E and Regulation Z apply.
    ii. The following examples illustrate these principles:
    A. A consumer has a card that can be used either as a credit card or 
a debit card. When used as a debit card, the card draws on the 
consumer's checking account. When used as a credit card, the card draws 
only on a separate line of credit. If the card is stolen and used as a 
credit card to make purchases or to get cash advances at an ATM from the 
line of credit, the liability limits and error resolution provisions of 
Regulation Z apply; Regulation E does not apply.
    B. In the same situation, if the card is stolen and is used as a 
debit card to make purchases or to get cash withdrawals at an ATM from 
the checking account, the liability limits and error resolution 
provisions of Regulation E apply; Regulation Z does not apply.
    C. In the same situation, assume the card is stolen and used both as 
a debit card and as a credit card; for example, the thief makes some 
purchases using the card as a debit card, and other purchases using the 
card as a credit card. Here, the liability limits and error resolution 
provisions of Regulation E apply to the unauthorized transactions in 
which the card was used as a debit card, and the corresponding 
provisions of Regulation Z apply to the unauthorized transactions in 
which the card was used as a credit card.
    D. Assume a somewhat different type of card, one that draws on the 
consumer's checking account and can also draw on an overdraft line of 
credit attached to the checking account. There is no separate line of 
credit, only the overdraft line, associated with the card. In this 
situation, if the card is stolen and used, the liability limits and the 
error resolution provisions of Regulation E apply. In addition, if the 
use of the card has resulted in accessing the overdraft line of credit, 
the error resolution provisions of Sec. Sec. 1026.13(d) and (g) of 
Regulation Z also apply, but not the other error resolution provisions 
of Regulation Z.
    2. Issuance rules. For access devices that also constitute credit 
cards, the issuance rules of Regulation E apply if the only credit 
feature is a preexisting credit line attached to the asset account to 
cover overdrafts (or to maintain a specified minimum balance) or an 
overdraft service, as defined in Sec. 1005.17(a). Regulation Z (12 CFR 
part 1026) rules apply if there is another type of credit feature; for 
example, one permitting direct extensions of credit that do not involve 
the asset account.
    3. Overdraft service. The addition of an overdraft service, as that 
term is defined in Sec. 1005.17(a), to an accepted access device does 
not constitute the addition of a credit feature subject to Regulation Z. 
Instead, the provisions of Regulation E apply, including the liability 
limitations (Sec. 1005.6) and the requirement to obtain consumer consent 
to the service before any fees or charges for paying an overdraft may be 
assessed on the account (Sec. 1005.17).

               12(b) Preemption of Inconsistent State Laws

    1. Specific determinations. The regulation prescribes standards for 
determining whether state laws that govern EFTs, and state laws 
regarding gift certificates, store gift cards, or general-use prepaid 
cards that govern dormancy, inactivity, or service fees, or expiration 
dates, are preempted by the Act and the regulation. A state law that is 
inconsistent may be preempted even if the Bureau has not issued a 
determination. However, nothing in Sec. 1005.12(b) provides a financial 
institution with immunity for violations of state law if the institution 
chooses not to make state disclosures and the Bureau later determines 
that the state law is not preempted.

[[Page 203]]

    2. Preemption determination. The Bureau recognizes state law 
preemption determinations made by the Board of Governors of the Federal 
Reserve System prior to July 21, 2011, until and unless the Bureau makes 
and publishes any contrary determination. The Board of Governors 
determined that certain provisions in the state law of Michigan are 
preempted by the Federal law, effective March 30, 1981:
    i. Definition of unauthorized use. Section 5(4) is preempted to the 
extent that it relates to the section of state law governing consumer 
liability for unauthorized use of an access device.
    ii. Consumer liability for unauthorized use of an account. Section 
14 is inconsistent with Sec. 1005.6 and is less protective of the 
consumer than the Federal law. The state law places liability on the 
consumer for the unauthorized use of an account in cases involving the 
consumer's negligence. Under the Federal law, a consumer's liability for 
unauthorized use is not related to the consumer's negligence and depends 
instead on the consumer's promptness in reporting the loss or theft of 
the access device.
    iii. Error resolution. Section 15 is preempted because it is 
inconsistent with Sec. 1005.11 and is less protective of the consumer 
than the Federal law. The state law allows financial institutions up to 
70 days to resolve errors, whereas the Federal law generally requires 
errors to be resolved within 45 days.
    iv. Receipts and periodic statements. Sections 17 and 18 are 
preempted because they are inconsistent with Sec. 1005.9. The state 
provisions require a different disclosure of information than does the 
Federal law. The receipt provision is also preempted because it allows 
the consumer to be charged for receiving a receipt if a machine cannot 
furnish one at the time of a transfer.

      Section 1005.13 Administrative Enforcement; Record Retention

                         13(b) Record Retention

    1. Requirements. A financial institution need not retain records 
that it has given disclosures and documentation to each consumer; it 
need only retain evidence demonstrating that its procedures reasonably 
ensure the consumers' receipt of required disclosures and documentation.

 Section 1005.14 Electronic Fund Transfer Service Provider Not Holding 
                           Consumer's Account

 14(a) Electronic Fund Transfer Service Providers Subject to Regulation

    1. Applicability. This section applies only when a service provider 
issues an access device to a consumer for initiating transfers to or 
from the consumer's account at a financial institution and the two 
entities have no agreement regarding this EFT service. If the service 
provider does not issue an access device to the consumer for accessing 
an account held by another institution, it does not qualify for the 
treatment accorded by Sec. 1005.14. For example, this section does not 
apply to an institution that initiates preauthorized payroll deposits to 
consumer accounts on behalf of an employer. By contrast, Sec. 1005.14 
can apply to an institution that issues a code for initiating telephone 
transfers to be carried out through the ACH from a consumer's account at 
another institution. This is the case even if the consumer has accounts 
at both institutions.
    2. ACH agreements. The ACH rules generally do not constitute an 
agreement for purposes of this section. However, an ACH agreement under 
which members specifically agree to honor each other's debit cards is an 
``agreement,'' and thus this section does not apply.

      14(b) Compliance by Electronic Fund Transfer Service Provider

    1. Liability. The service provider is liable for unauthorized EFTs 
that exceed limits on the consumer's liability under Sec. 1005.6.

                 14(b)(1) Disclosures and Documentation

    1. Periodic statements from electronic fund transfer service 
provider. A service provider that meets the conditions set forth in this 
paragraph does not have to issue periodic statements. A service provider 
that does not meet the conditions need only include on periodic 
statements information about transfers initiated with the access device 
it has issued.

                        14(b)(2) Error Resolution

    1. Error resolution. When a consumer notifies the service provider 
of an error, the EFT service provider must investigate and resolve the 
error in compliance with Sec. 1005.11 as modified by Sec. 1005.14(b)(2). 
If an error occurred, any fees or charges imposed as a result of the 
error, either by the service provider or by the account-holding 
institution (for example, overdraft or dishonor fees) must be reimbursed 
to the consumer by the service provider.

             14(c) Compliance by Account-Holding Institution

                         14(c)(1) Documentation

    1. Periodic statements from account-holding institution. The 
periodic statement provided by the account-holding institution need only 
contain the information required by Sec. 1005.9(b)(1).

[[Page 204]]

           Section 1005.17 Requirements for Overdraft Services

                            17(a) Definition

    1. Exempt securities- and commodities-related lines of credit. The 
definition of ``overdraft service'' does not include the payment of 
transactions in a securities or commodities account pursuant to which 
credit is extended by a broker-dealer registered with the Securities and 
Exchange Commission or the Commodity Futures Trading Commission.

                        17(b) Opt-In Requirement

    1. Scope. i. Account-holding institutions. Section 1005.17(b) 
applies to ATM and one-time debit card transactions made with a debit 
card issued by or on behalf of the account-holding institution. Section 
1005.17(b) does not apply to ATM and one-time debit card transactions 
made with a debit card issued by or through a third party unless the 
debit card is issued on behalf of the account-holding institution.
    ii. Coding of transactions. A financial institution complies with 
the rule if it adapts its systems to identify debit card transactions as 
either one-time or recurring. If it does so, the financial institution 
may rely on the transaction's coding by merchants, other institutions, 
and other third parties as a one-time or a preauthorized or recurring 
debit card transaction.
    iii. One-time debit card transactions. The opt-in applies to any 
one-time debit card transaction, whether the card is used, for example, 
at a point-of-sale, in an online transaction, or in a telephone 
transaction.
    iv. Application of fee prohibition. The prohibition on assessing 
overdraft fees under Sec. 1005.17(b)(1) applies to all institutions. For 
example, the prohibition applies to an institution that has a policy and 
practice of declining to authorize and pay any ATM or one-time debit 
card transactions when the institution has a reasonable belief at the 
time of the authorization request that the consumer does not have 
sufficient funds available to cover the transaction. However, the 
institution is not required to comply with Sec. Sec. 1005.17(b)(1)(i)-
(iv), including the notice and opt-in requirements, if it does not 
assess overdraft fees for paying ATM or one-time debit card transactions 
that overdraw the consumer's account. Assume an institution does not 
provide an opt-in notice, but authorizes an ATM or one-time debit card 
transaction on the reasonable belief that the consumer has sufficient 
funds in the account to cover the transaction. If, at settlement, the 
consumer has insufficient funds in the account (for example, due to 
intervening transactions that post to the consumer's account), the 
institution is not permitted to assess an overdraft fee or charge for 
paying that transaction.
    2. No affirmative consent. A financial institution may pay 
overdrafts for ATM and one-time debit card transactions even if a 
consumer has not affirmatively consented or opted in to the 
institution's overdraft service. If the institution pays such an 
overdraft without the consumer's affirmative consent, however, it may 
not impose a fee or charge for doing so. These provisions do not limit 
the institution's ability to debit the consumer's account for the amount 
overdrawn if the institution is permitted to do so under applicable law.
    3. Overdraft transactions not required to be authorized or paid. 
Section 1005.17 does not require a financial institution to authorize or 
pay an overdraft on an ATM or one-time debit card transaction even if 
the consumer has affirmatively consented to an institution's overdraft 
service for such transactions.
    4. Reasonable opportunity to provide affirmative consent. A 
financial institution provides a consumer with a reasonable opportunity 
to provide affirmative consent when, among other things, it provides 
reasonable methods by which the consumer may affirmatively consent. A 
financial institution provides such reasonable methods, if:
    i. By mail. The institution provides a form for the consumer to fill 
out and mail to affirmatively consent to the service.
    ii. By telephone. The institution provides a readily-available 
telephone line that consumers may call to provide affirmative consent.
    iii. By electronic means. The institution provides an electronic 
means for the consumer to affirmatively consent. For example, the 
institution could provide a form that can be accessed and processed at 
its Web site, where the consumer may click on a check box to provide 
consent and confirm that choice by clicking on a button that affirms the 
consumer's consent.
    iv. In person. The institution provides a form for the consumer to 
complete and present at a branch or office to affirmatively consent to 
the service.
    5. Implementing opt-in at account-opening. A financial institution 
may provide notice regarding the institution's overdraft service prior 
to or at account-opening. A financial institution may require a 
consumer, as a necessary step to opening an account, to choose whether 
or not to opt into the payment of ATM or one-time debit card 
transactions pursuant to the institution's overdraft service. For 
example, the institution could require the consumer, at account opening, 
to sign a signature line or check a box on a form (consistent with 
comment 17(b)-6) indicating whether or not the consumer affirmatively 
consents at account opening. If the consumer does not check any box or 
provide a signature, the institution must assume that the consumer does 
not opt in. Or,

[[Page 205]]

the institution could require the consumer to choose between an account 
that does not permit the payment of ATM or one-time debit card 
transactions pursuant to the institution's overdraft service and an 
account that permits the payment of such overdrafts, provided that the 
accounts comply with Sec. 1005.17(b)(2) and Sec. 1005.17(b)(3).
    6. Affirmative consent required. A consumer's affirmative consent, 
or opt-in, to a financial institution's overdraft service must be 
obtained separately from other consents or acknowledgements obtained by 
the institution, including a consent to receive disclosures 
electronically. An institution may obtain a consumer's affirmative 
consent by providing a blank signature line or check box that the 
consumer could sign or select to affirmatively consent, provided that 
the signature line or check box is used solely for purposes of 
evidencing the consumer's choice whether or not to opt into the 
overdraft service and not for other purposes. An institution does not 
obtain a consumer's affirmative consent by including preprinted language 
about the overdraft service in an account disclosure provided with a 
signature card or contract that the consumer must sign to open the 
account and that acknowledges the consumer's acceptance of the account 
terms. Nor does an institution obtain a consumer's affirmative consent 
by providing a signature card that contains a pre-selected check box 
indicating that the consumer is requesting the service.
    7. Confirmation. A financial institution may comply with the 
requirement in Sec. 1005.17(b)(1)(iv) to provide confirmation of the 
consumer's affirmative consent by mailing or delivering to the consumer 
a copy of the consumer's completed opt-in notice, or by mailing or 
delivering a letter or notice to the consumer acknowledging that the 
consumer has elected to opt into the institution's service. The 
confirmation, which must be provided in writing, or electronically if 
the consumer agrees, must include a statement informing the consumer of 
the right to revoke the opt-in at any time. See Sec. 1005.17(d)(6), 
which permits institutions to include the revocation statement on the 
initial opt-in notice. An institution complies with the confirmation 
requirement if it has adopted reasonable procedures designed to ensure 
that overdraft fees are assessed only in connection with transactions 
paid after the confirmation has been mailed or delivered to the 
consumer.
    8. Outstanding Negative Balance. If a fee or charge is based on the 
amount of the outstanding negative balance, an institution is prohibited 
from assessing any such fee if the negative balance is solely 
attributable to an ATM or one-time debit card transaction, unless the 
consumer has opted into the institution's overdraft service for ATM or 
one-time debit card transactions. However, the rule does not prohibit an 
institution from assessing such a fee if the negative balance is 
attributable in whole or in part to a check, ACH, or other type of 
transaction not subject to the prohibition on assessing overdraft fees 
in Sec. 1005.17(b)(1).
    9. Daily or Sustained Overdraft, Negative Balance, or Similar Fee or 
Charge i. Daily or sustained overdraft, negative balance, or similar 
fees or charges. If a consumer has not opted into the institution's 
overdraft service for ATM or one-time debit card transactions, the fee 
prohibition in Sec. 1005.17(b)(1) applies to all overdraft fees or 
charges for paying those transactions, including but not limited to 
daily or sustained overdraft, negative balance, or similar fees or 
charges. Thus, where a consumer's negative balance is solely 
attributable to an ATM or one-time debit card transaction, the rule 
prohibits the assessment of such fees unless the consumer has opted in. 
However, the rule does not prohibit an institution from assessing daily 
or sustained overdraft, negative balance, or similar fees or charges if 
a negative balance is attributable in whole or in part to a check, ACH, 
or other type of transaction not subject to the fee prohibition. When 
the negative balance is attributable in part to an ATM or one-time debit 
card transaction, and in part to a check, ACH, or other type of 
transaction not subject to the fee prohibition, the date on which such a 
fee may be assessed is based on the date on which the check, ACH, or 
other type of transaction is paid into overdraft.
    ii. Examples. The following examples illustrate how an institution 
complies with the fee prohibition. For each example, assume the 
following: (a) The consumer has not opted into the payment of ATM or 
one-time debit card overdrafts; (b) these transactions are paid into 
overdraft because the amount of the transaction at settlement exceeded 
the amount authorized or the amount was not submitted for authorization; 
(c) under the account agreement, the institution may charge a per-item 
fee of $20 for each overdraft, and a one-time sustained overdraft fee of 
$20 on the fifth consecutive day the consumer's account remains 
overdrawn; (d) the institution posts ATM and debit card transactions 
before other transactions; and (e) the institution allocates deposits to 
account debits in the same order in which it posts debits.
    A. Assume that a consumer has a $50 account balance on March 1. That 
day, the institution posts a one-time debit card transaction of $60 and 
a check transaction of $40. The institution charges an overdraft fee of 
$20 for the check overdraft but cannot assess an overdraft fee for the 
debit card transaction. At the end of the day, the consumer has an 
account balance of negative $70. The consumer does not make any deposits 
to the

[[Page 206]]

account, and no other transactions occur between March 2 and March 6. 
Because the consumer's negative balance is attributable in part to the 
$40 check (and associated overdraft fee), the institution may charge a 
sustained overdraft fee on March 6 in connection with the check.
    B. Same facts as in A., except that on March 3, the consumer 
deposits $40 in the account. The institution allocates the $40 to the 
debit card transaction first, consistent with its posting order policy. 
At the end of the day on March 3, the consumer has an account balance of 
negative $30, which is attributable to the check transaction (and 
associated overdraft fee). The consumer does not make any further 
deposits to the account, and no other transactions occur between March 4 
and March 6. Because the remaining negative balance is attributable to 
the March 1 check transaction, the institution may charge a sustained 
overdraft fee on March 6 in connection with the check.
    C. Assume that a consumer has a $50 account balance on March 1. That 
day, the institution posts a one-time debit card transaction of $60. At 
the end of that day, the consumer has an account balance of negative 
$10. The institution may not assess an overdraft fee for the debit card 
transaction. On March 3, the institution pays a check transaction of 
$100 and charges an overdraft fee of $20. At the end of that day, the 
consumer has an account balance of negative $130. The consumer does not 
make any deposits to the account, and no other transactions occur 
between March 4 and March 8. Because the consumer's negative balance is 
attributable in part to the check, the institution may assess a $20 
sustained overdraft fee. However, because the check was paid on March 3, 
the institution must use March 3 as the start date for determining the 
date on which the sustained overdraft fee may be assessed. Thus, the 
institution may charge a $20 sustained overdraft fee on March 8.
    iii. Alternative approach. For a consumer who does not opt into the 
institution's overdraft service for ATM and one-time debit card 
transactions, an institution may also comply with the fee prohibition in 
Sec. 1005.17(b)(1) by not assessing daily or sustained overdraft, 
negative balance, or similar fees or charges unless a consumer's 
negative balance is attributable solely to check, ACH or other types of 
transactions not subject to the fee prohibition while that negative 
balance remains outstanding. In such case, the institution would not 
have to determine how to allocate subsequent deposits that reduce but do 
not eliminate the negative balance. For example, if a consumer has a 
negative balance of $30, of which $10 is attributable to a one-time 
debit card transaction, an institution complies with the fee prohibition 
if it does not assess a sustained overdraft fee while that negative 
balance remains outstanding.

    17(b)(2) Conditioning Payment of Other Overdrafts on Consumer's 
                           Affirmative Consent

    1. Application of the same criteria. The prohibitions on 
conditioning in Sec. 1005.17(b)(2) generally require an institution to 
apply the same criteria for deciding when to pay overdrafts for checks, 
ACH transactions, and other types of transactions, whether or not the 
consumer has affirmatively consented to the institution's overdraft 
service with respect to ATM and one-time debit card overdrafts. For 
example, if an institution's internal criteria would lead the 
institution to pay a check overdraft if the consumer had affirmatively 
consented to the institution's overdraft service for ATM and one-time 
debit card transactions, it must also apply the same criteria in a 
consistent manner in determining whether to pay the check overdraft if 
the consumer has not opted in.
    2. No requirement to pay overdrafts on checks, ACH transactions, or 
other types of transactions. The prohibition on conditioning in 
Sec. 1005.17(b)(2) does not require an institution to pay overdrafts on 
checks, ACH transactions, or other types of transactions in all 
circumstances. Rather, the rule simply prohibits institutions from 
considering the consumer's decision not to opt in when deciding whether 
to pay overdrafts for checks, ACH transactions, or other types of 
transactions.217(b)(3) Same Account Terms, Conditions, and 
Features
    1. Variations in terms, conditions, or features. A financial 
institution may not vary the terms, conditions, or features of an 
account provided to a consumer who does not affirmatively consent to the 
payment of ATM or one-time debit card transactions pursuant to the 
institution's overdraft service. This includes, but is not limited to:
    i. Interest rates paid and fees assessed;
    ii. The type of ATM or debit card provided to the consumer. For 
instance, an institution may not provide consumers who do not opt in a 
PIN-only card while providing a debit card with both PIN and signature-
debit functionality to consumers who opt in;
    iii. Minimum balance requirements; or
    iv. Account features such as online bill payment services.
    2. Limited-feature bank accounts. Section 1005.17(b)(3) does not 
prohibit institutions from offering deposit account products with 
limited features, provided that a consumer is not required to open such 
an account because the consumer did not opt in. For example, 
Sec. 1005.17(b)(3) does not prohibit an institution from offering a 
checking account designed to comply with state basic banking laws, or 
designed for consumers who are not eligible for a checking account 
because of their credit or checking account history,

[[Page 207]]

which may include features limiting the payment of overdrafts. However, 
a consumer who applies, and is otherwise eligible, for a full-service or 
other particular deposit account product may not be provided instead 
with the account with more limited features because the consumer has 
declined to opt in.

                              17(c) Timing

    1. Permitted fees or charges. Fees or charges for ATM and one-time 
debit card overdrafts may be assessed only for overdrafts paid on or 
after the date the financial institution receives the consumer's 
affirmative consent to the institution's overdraft service. See also 
comment 17(b)-7.

                        17(d) Content and Format

    1. Overdraft service. The description of the institution's overdraft 
service should indicate that the consumer has the right to affirmatively 
consent, or opt into payment of overdrafts for ATM and one-time debit 
card transactions. The description should also disclose the 
institution's policies regarding the payment of overdrafts for other 
transactions, including checks, ACH transactions, and automatic bill 
payments, provided that this content is not more prominent than the 
description of the consumer's right to opt into payment of overdrafts 
for ATM and one-time debit card transactions. As applicable, the 
institution also should indicate that it pays overdrafts at its 
discretion, and should briefly explain that if the institution does not 
authorize and pay an overdraft, it may decline the transaction.
    2. Maximum fee. If the amount of a fee may vary from transaction to 
transaction, the financial institution may indicate that the consumer 
may be assessed a fee ``up to'' the maximum fee. The financial 
institution must disclose all applicable overdraft fees, including but 
not limited to:
    i. Per item or per transaction fees;
    ii. Daily overdraft fees;
    iii. Sustained overdraft fees, where fees are assessed when the 
consumer has not repaid the amount of the overdraft after some period of 
time (for example, if an account remains overdrawn for five or more 
business days); or
    iv. Negative balance fees.
    3. Opt-in methods. The opt-in notice must include the methods by 
which the consumer may consent to the overdraft service for ATM and one-
time debit card transactions. Institutions may tailor Model Form A-9 to 
the methods offered to consumers for affirmatively consenting to the 
service. For example, an institution need not provide the tear-off 
portion of Model Form A-9 if it is only permitting consumers to opt-in 
telephonically or electronically. Institutions may, but are not 
required, to provide a signature line or check box where the consumer 
can indicate that he or she declines to opt in.
    4. Identification of consumer's account. An institution may use any 
reasonable method to identify the account for which the consumer submits 
the opt-in notice. For example, the institution may include a line for a 
printed name and an account number, as shown in Model Form A-9. Or, the 
institution may print a bar code or use other tracking information. See 
also comment 17(b)-6, which describes how an institution obtains a 
consumer's affirmative consent.
    5. Alternative plans for covering overdrafts. If the institution 
offers both a line of credit subject to Regulation Z (12 CFR part 1026) 
and a service that transfers funds from another account of the consumer 
held at the institution to cover overdrafts, the institution must state 
in its opt-in notice that both alternative plans are offered. For 
example, the notice might state ``We also offer overdraft protection 
plans, such as a link to a savings account or to an overdraft line of 
credit, which may be less expensive than our standard overdraft 
practices.'' If the institution offers one, but not the other, it must 
state in its opt-in notice the alternative plan that it offers. If the 
institution does not offer either plan, it should omit the reference to 
the alternative plans.

        17(f) Continuing Right To Opt-In or To Revoke the Opt-In

    1. Fees or charges for overdrafts incurred prior to revocation. 
Section 1005.17(f)(1) provides that a consumer may revoke his or her 
prior consent at any time. If a consumer does so, this provision does 
not require the financial institution to waive or reverse any overdraft 
fees assessed on the consumer's account prior to the institution's 
implementation of the consumer's revocation request.

                        17(g) Duration of Opt-In

    1. Termination of overdraft service. A financial institution may, 
for example, terminate the overdraft service when the consumer makes 
excessive use of the service.

Section 1005.18 Requirements for Financial Institutions Offering Payroll 
                              Card Accounts

                             18(a) Coverage

    1. Issuance of access device. Consistent with Sec. 1005.5(a), a 
financial institution may issue an access device only in response to an 
oral or written request for the device, or as a renewal or substitute 
for an accepted access device. A consumer is deemed to request an access 
device for a payroll card account when the consumer chooses to receive 
salary or other compensation through a payroll card account.

[[Page 208]]

    2. Application to employers and service providers. Typically, 
employers and third-party service providers do not meet the definition 
of a ``financial institution'' subject to the regulation because they 
neither hold payroll card accounts nor issue payroll cards and agree 
with consumers to provide EFT services in connection with payroll card 
accounts. However, to the extent an employer or a service provider 
undertakes either of these functions, it would be deemed a financial 
institution under the regulation.

                18(b) Alternative to Periodic Statements

    1. Posted transactions. A history of transactions provided under 
Sec. Sec. 1005.18(b)(1)(ii) and (iii) shall reflect transfers once they 
have been posted to the account. Thus, an institution does not need to 
include transactions that have been authorized, but that have not yet 
posted to the account.
    2. Electronic history. The electronic history required under 
Sec. 1005.18(b)(1)(ii) must be provided in a form that the consumer may 
keep, as required under Sec. 1005.4(a)(1). Financial institutions may 
satisfy this requirement if they make the electronic history available 
in a format that is capable of being retained. For example, an 
institution satisfies the requirement if it provides a history at a Web 
site in a format that is capable of being printed or stored 
electronically using a web browser.

                       18(c) Modified Requirements

    1. Error resolution safe harbor provision. Institutions that choose 
to investigate notices of error provided up to 120 days from the date a 
transaction has posted to a consumer's account may still disclose the 
error resolution time period required by the regulation (as set forth in 
the Model Form in appendix A-7). Specifically, an institution may 
disclose to payroll card account holders that the institution will 
investigate any notice of error provided within 60 days of the consumer 
electronically accessing an account or receiving a written history upon 
request that reflects the error, even if, for some or all transactions, 
the institution investigates any notice of error provided up to 120 days 
from the date that the transaction alleged to be in error has posted to 
the consumer's account. Similarly, an institution's summary of the 
consumer's liability (as required under Sec. 1005.7(b)(1)) may disclose 
that liability is based on the consumer providing notice of error within 
60 days of the consumer electronically accessing an account or receiving 
a written history reflecting the error, even if, for some or all 
transactions, the institution allows a consumer to assert a notice of 
error up to 120 days from the date of posting of the alleged error.
    2. Electronic access. A consumer is deemed to have accessed a 
payroll card account electronically when the consumer enters a user 
identification code or password or otherwise complies with a security 
procedure used by an institution to verify the consumer's identity. An 
institution is not required to determine whether a consumer has in fact 
accessed information about specific transactions to trigger the 
beginning of the 60-day periods for liability limits and error 
resolution under Sec. Sec. 1005.6 and 1005.11.
    3. Untimely notice of error. An institution that provides a 
transaction history under Sec. 1005.18(b)(1) is not required to comply 
with the requirements of Sec. 1005.11 for any notice of error from the 
consumer pertaining to a transfer that occurred more than 60 days prior 
to the earlier of the date the consumer electronically accesses the 
account or the date the financial institution sends a written history 
upon the consumer's request. (Alternatively, as provided in 
Sec. 1005.18(c)(4)(ii), an institution need not comply with the 
requirements of Sec. 1005.11 with respect to any notice of error 
received from the consumer more than 120 days after the date of posting 
of the transfer allegedly in error.) Where the consumer's assertion of 
error involves an unauthorized EFT, however, the institution must comply 
with Sec. 1005.6 before it may impose any liability on the consumer.

    Section 1005.20 Requirements for Gift Cards and Gift Certificates

                            20(a) Definitions

    1. Form of card, code, or device. Section 1005.20 applies to any 
card, code, or other device that meets one of the definitions in 
Sec. Sec. 1005.20(a)(1) through (a)(3) (and is not otherwise excluded by 
Sec. 1005.20(b)), even if it is not issued in card form. Section 1005.20 
applies, for example, to an account number or bar code that can be used 
to access underlying funds. Similarly, Sec. 1005.20 applies to a device 
with a chip or other embedded mechanism that links the device to stored 
funds, such as a mobile phone or sticker containing a contactless chip 
that enables the consumer to access the stored funds. A card, code, or 
other device that meets the definition in Sec. Sec. 1005.20(a)(1) 
through (a)(3) includes an electronic promise (see comment 20(a)-2) as 
well as a promise that is not electronic. See, however, 
Sec. 1005.20(b)(5). In addition, Sec. 1005.20 applies if a merchant 
issues a code that entitles a consumer to redeem the code for goods or 
services, regardless of the medium in which the code is issued (see, 
however, Sec. 1005.20(b)(5)), and whether or not it may be redeemed 
electronically or in the merchant's store. Thus, for example, if a 
merchant emails a code that a consumer may redeem in a specified amount 
either online or in the merchant's store, that code is covered under 
Sec. 1005.20, unless one of the exclusions in Sec. 1005.20(b) apply.

[[Page 209]]

    2. Electronic promise. The term ``electronic promise'' as used in 
EFTA sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D) means a person's 
commitment or obligation communicated or stored in electronic form made 
to a consumer to provide payment for goods or services for transactions 
initiated by the consumer. The electronic promise is itself represented 
by a card, code or other device that is issued or honored by the person, 
reflecting the person's commitment or obligation to pay. For example, if 
a merchant issues a code that can be given as a gift and that entitles 
the recipient to redeem the code in an online transaction for goods or 
services, that code represents an electronic promise by the merchant and 
is a card, code, or other device covered by Sec. 1005.20.
    3. Cards, codes, or other devices redeemable for specific goods or 
services. Certain cards, codes, or other devices may be redeemable upon 
presentation for a specific good or service, or ``experience,'' such as 
a spa treatment, hotel stay, or airline flight. In other cases, a card, 
code, or other device may entitle the consumer to a certain percentage 
off the purchase of a good or service, such as 20% off of any purchase 
in a store. Such cards, codes, or other devices generally are not 
subject to the requirements of this section because they are not issued 
to a consumer ``in a specified amount'' as required under the 
definitions of ``gift certificate,'' ``store gift card,'' or ``general-
use prepaid card.'' However, if the card, code, or other device is 
issued in a specified or denominated amount that can be applied toward 
the purchase of a specific good or service, such as a certificate or 
card redeemable for a spa treatment up to $50, the card, code, or other 
device is subject to this section, unless one of the exceptions in 
Sec. 1005.20(b) apply. See, e.g., Sec. 1005.20(b)(3). Similarly, if the 
card, code, or other device states a specific monetary value, such as 
``a $50 value,'' the card, code, or other device is subject to this 
section, unless an exclusion in Sec. 1005.20(b) applies.
    4. Issued primarily for personal, family, or household purposes. 
Section 1005.20 only applies to cards, codes, or other devices that are 
sold or issued to a consumer primarily for personal, family, or 
household purposes. A card, code, or other device initially purchased by 
a business is subject to this section if the card, code, or other device 
is purchased for redistribution or resale to consumers primarily for 
personal, family, or household purposes. Moreover, the fact that a card, 
code, or other device may be primarily funded by a business, for 
example, in the case of certain rewards or incentive cards, does not 
mean the card, code, or other device is outside the scope of 
Sec. 1005.20, if the card, code, or other device will be provided to a 
consumer primarily for personal, family, or household purposes. But see 
Sec. 1005.20(b)(3). Whether a card, code, or other device is issued to a 
consumer primarily for personal, family, or household purposes will 
depend on the facts and circumstances. For example, if a program manager 
purchases store gift cards directly from an issuing merchant and sells 
those cards through the program manager's retail outlets, such gift 
cards are subject to the requirements of Sec. 1005.20 because the store 
gift cards are sold to consumers primarily for personal, family, or 
household purposes. In contrast, a card, code, or other device generally 
would not be issued to consumers primarily for personal, family, or 
household purposes, and therefore would fall outside the scope of 
Sec. 1005.20, if the purchaser of the card, code, or device is 
contractually prohibited from reselling or redistributing the card, 
code, or device to consumers primarily for personal, family, or 
household purposes, and reasonable policies and procedures are 
maintained to avoid such sale or distribution for such purposes. 
However, if an entity that has purchased cards, codes, or other devices 
for business purposes sells or distributes such cards, codes, or other 
devices to consumers primarily for personal, family, or household 
purposes, that entity does not comply with Sec. 1005.20 if it has not 
otherwise met the substantive and disclosure requirements of the rule or 
unless an exclusion in Sec. 1005.20(b) applies.
    5. Examples of cards, codes, or other devices issued for business 
purposes. Examples of cards, codes, or other devices that are issued and 
used for business purposes and therefore excluded from the definitions 
of ``gift certificate,'' ``store gift card,'' or ``general-use prepaid 
card'' include:
    i. Cards, codes, or other devices to reimburse employees for travel 
or moving expenses.
    ii. Cards, codes, or other devices for employees to use to purchase 
office supplies and other business-related items.

                        20(a)(2) Store Gift Card

    1. Relationship between ``gift certificate'' and ``store gift 
card.'' The term ``store gift card'' in Sec. 1005.20(a)(2) includes 
``gift certificate'' as defined in Sec. 1005.20(a)(1). For example, a 
numeric or alphanumeric code representing a specified dollar amount or 
value that is electronically sent to a consumer as a gift which can be 
redeemed or exchanged by the recipient to obtain goods or services may 
be both a ``gift certificate'' and a ``store gift card'' if the 
specified amount or value cannot be increased.
    2. Affiliated group of merchants. The term ``affiliated group of 
merchants'' means two or more affiliated merchants or other persons that 
are related by common ownership or common corporate control (see, e.g., 
12 CFR 227.3(b) and 12 CFR 223.2) and that share the same name, mark, or 
logo. For example,

[[Page 210]]

the term includes franchisees that are subject to a common set of 
corporate policies or practices under the terms of their franchise 
licenses. The term also applies to two or more merchants or other 
persons that agree among themselves, by contract or otherwise, to redeem 
cards, codes, or other devices bearing the same name, mark, or logo 
(other than the mark, logo, or brand of a payment network), for the 
purchase of goods or services solely at such merchants or persons. For 
example, assume a movie theatre chain and a restaurant chain jointly 
agree to issue cards that share the same ``Flix and Food'' logo that can 
be redeemed solely towards the purchase of movie tickets or concessions 
at any of the participating movie theatres, or towards the purchase of 
food or beverages at any of the participating restaurants. For purposes 
of Sec. 1005.20, the movie theatre chain and the restaurant chain would 
be considered to be an affiliated group of merchants, and the cards are 
considered to be ``store gift cards.'' However, merchants or other 
persons are not considered to be affiliated merely because they agree to 
accept a card that bears the mark, logo, or brand of a payment network.
    3. Mall gift cards. See comment 20(a)(3)-2.

                    20(a)(3) General-Use Prepaid Card

    1. Redeemable upon presentation at multiple, unaffiliated merchants. 
A card, code, or other device is redeemable upon presentation at 
multiple, unaffiliated merchants if, for example, such merchants agree 
to honor the card, code, or device if it bears the mark, logo, or brand 
of a payment network, pursuant to the rules of the payment network.
    2. Mall gift cards. Mall gift cards that are intended to be used or 
redeemed for goods or services at participating retailers within a 
shopping mall may be considered store gift cards or general-use prepaid 
cards depending on the merchants with which the cards may be redeemed. 
For example, if a mall card may only be redeemed at merchants within the 
mall itself, the card is more likely to be redeemable at an affiliated 
group of merchants and considered a store gift card. However, certain 
mall cards also carry the brand of a payment network and can be used at 
any retailer that accepts that card brand, including retailers located 
outside of the mall. Such cards are considered general-use prepaid 
cards.

            20(a)(4) Loyalty, Award, or Promotional Gift Card

    1. Examples of loyalty, award, or promotional programs. Examples of 
loyalty, award, or promotional programs under Sec. 1005.20(a)(4) 
include, but are not limited to:
    i. Consumer retention programs operated or administered by a 
merchant or other person that provide to consumers cards or coupons 
redeemable for or towards goods or services or other monetary value as a 
reward for purchases made or for visits to the participating merchant.
    ii. Sales promotions operated or administered by a merchant or 
product manufacturer that provide coupons or discounts redeemable for or 
towards goods or services or other monetary value.
    iii. Rebate programs operated or administered by a merchant or 
product manufacturer that provide cards redeemable for or towards goods 
or services or other monetary value to consumers in connection with the 
consumer's purchase of a product or service and the consumer's 
completion of the rebate submission process.
    iv. Sweepstakes or contests that distribute cards redeemable for or 
towards goods or services or other monetary value to consumers as an 
invitation to enter into the promotion for a chance to win a prize.
    v. Referral programs that provide cards redeemable for or towards 
goods or services or other monetary value to consumers in exchange for 
referring other potential consumers to a merchant.
    vi. Incentive programs through which an employer provides cards 
redeemable for or towards goods or services or other monetary value to 
employees, for example, to recognize job performance, such as increased 
sales, or to encourage employee wellness and safety.
    vii. Charitable or community relations programs through which a 
company provides cards redeemable for or towards goods or services or 
other monetary value to a charity or community group for their 
fundraising purposes, for example, as a reward for a donation or as a 
prize in a charitable event.
    2. Issued for loyalty, award, or promotional purposes. To indicate 
that a card, code, or other device is issued for loyalty, award, or 
promotional purposes as required by Sec. 1005.20(a)(4)(iii), it is 
sufficient for the card, code, or other device to state on the front, 
for example, ``Reward'' or ``Promotional.''
    3. Reference to toll-free number and Web site. If a card, code, or 
other device issued in connection with a loyalty, award, or promotional 
program does not have any fees, the disclosure under 
Sec. 1005.20(a)(4)(iii)(D) is not required on the card, code, or other 
device.

                          20(a)(6) Service Fee

    1. Service fees. Under Sec. 1005.20(a)(6), a service fee includes a 
periodic fee for holding or use of a gift certificate, store gift card, 
or general-use prepaid card. A periodic fee includes any fee that may be 
imposed on a gift certificate, store gift card, or general-use prepaid 
card from time to time for holding or using the certificate or card, 
such as a monthly maintenance fee, a transaction fee, an ATM

[[Page 211]]

fee, a reload fee, a foreign currency transaction fee, or a balance 
inquiry fee, whether or not the fee is waived for a certain period of 
time or is only imposed after a certain period of time. A service fee 
does not include a one-time fee or a fee that is unlikely to be imposed 
more than once while the underlying funds are still valid, such as an 
initial issuance fee, a cash-out fee, a supplemental card fee, or a lost 
or stolen certificate or card replacement fee.

                            20(a)(7) Activity

    1. Activity. Under Sec. 1005.20(a)(7), any action that results in an 
increase or decrease of the funds underlying a gift certificate, store 
gift card, or general-use prepaid card, other than the imposition of a 
fee, or an adjustment due to an error or a reversal of a prior 
transaction, constitutes activity for purposes of Sec. 1005.20. For 
example, the purchase and activation of a certificate or card, the use 
of the certificate or card to purchase a good or service, or the 
reloading of funds onto a store gift card or general-use prepaid card 
constitutes activity. However, the imposition of a fee, the replacement 
of an expired, lost, or stolen certificate or card, and a balance 
inquiry do not constitute activity. In addition, if a consumer attempts 
to engage in a transaction with a gift certificate, store gift card, or 
general-use prepaid card, but the transaction cannot be completed due to 
technical or other reasons, such attempt does not constitute activity. 
Furthermore, if the funds underlying a gift certificate, store gift 
card, or general-use prepaid card are adjusted because there was an 
error or the consumer has returned a previously purchased good, the 
adjustment also does not constitute activity with respect to the 
certificate or card.

                            20(b) Exclusions

    1. Application of exclusion. A card, code, or other device is 
excluded from the definition of ``gift certificate,'' ``store gift 
card,'' or ``general-use prepaid card'' if it meets any of the 
exclusions in Sec. 1005.20(b). An excluded card, code, or other device 
generally is not subject to any of the requirements of this section. 
See, however, Sec. 1005.20(a)(4)(iii), requiring certain disclosures for 
loyalty, award, or promotional gift cards.
    2. Eligibility for multiple exclusions. A card, code, or other 
device may qualify for one or more exclusions. For example, a 
corporation may give its employees a gift card that is marketed solely 
to businesses for incentive-related purposes, such as to reward job 
performance or promote employee safety. In this case, the card may 
qualify for the exclusion for loyalty, award, or promotional gift cards 
under Sec. 1005.20(b)(3), or for the exclusion for cards, codes, or 
other devices not marketed to the general public under 
Sec. 1005.20(b)(4). In addition, as long as any one of the exclusions 
applies, a card, code, or other device is not covered by Sec. 1005.20, 
even if other exclusions do not apply. In the above example, the 
corporation may give its employees a type of gift card that can also be 
purchased by a consumer directly from a merchant. Under these 
circumstances, while the card does not qualify for the exclusion for 
cards, codes, or other devices not marketed to the general public under 
Sec. 1005.20(b)(4) because the card can also be obtained through retail 
channels, it is nevertheless exempt from the substantive requirements of 
Sec. 1005.20 because it is a loyalty, award, or promotional gift card. 
See, however, Sec. 1005.20(a)(4)(iii), requiring certain disclosures for 
loyalty, award, or promotional gift cards. Similarly, a person may 
market a reloadable card to teenagers for occasional expenses that 
enables parents to monitor spending. Although the card does not qualify 
for the exclusion for cards, codes, or other devices not marketed to the 
general public under Sec. 1005.20(b)(4), it may nevertheless be exempt 
from the requirements of Sec. 1005.20 under Sec. 1005.20(b)(2) if it is 
reloadable and not marketed or labeled as a gift card or gift 
certificate.

                           Paragraph 20(b)(1)

    1. Examples of excluded products. The exclusion for products usable 
solely for telephone services applies to prepaid cards for long-distance 
telephone service, prepaid cards for wireless telephone service and 
prepaid cards for other services that function similar to telephone 
services, such as prepaid cards for voice over Internet protocol (VoIP) 
access time.

                           Paragraph 20(b)(2)

    1. Reloadable. A card, code, or other device is ``reloadable'' if 
the terms and conditions of the agreement permit funds to be added to 
the card, code, or other device after the initial purchase or issuance. 
A card, code, or other device is not ``reloadable'' merely because the 
issuer or processor is technically able to add functionality that would 
otherwise enable the card, code, or other device to be reloaded.
    2. Marketed or labeled as a gift card or gift certificate. The term 
``marketed or labeled as a gift card or gift certificate'' means 
directly or indirectly offering, advertising, or otherwise suggesting 
the potential use of a card, code or other device, as a gift for another 
person. Whether the exclusion applies generally does not depend on the 
type of entity that makes the promotional message. For example, a card 
may be marketed or labeled as a gift card or gift certificate if anyone 
(other than the purchaser of the card), including the issuer, the 
retailer, the program manager that may distribute the card, or the

[[Page 212]]

payment network on which a card is used, promotes the use of the card as 
a gift card or gift certificate. A card, code, or other device, 
including a general-purpose reloadable card, is marketed or labeled as a 
gift card or gift certificate even if it is only occasionally marketed 
as a gift card or gift certificate. For example, a network-branded 
general purpose reloadable card would be marketed or labeled as a gift 
card or gift certificate if the issuer principally advertises the card 
as a less costly alternative to a bank account but promotes the card in 
a television, radio, newspaper, or Internet advertisement, or on signage 
as ``the perfect gift'' during the holiday season. However, the mere 
mention of the availability of gift cards or gift certificates in an 
advertisement or on a sign that also indicates the availability of other 
excluded prepaid cards does not by itself cause the excluded prepaid 
cards to be marketed as a gift card or a gift certificate. For example, 
the posting of a sign in a store that refers to the availability of gift 
cards does not by itself constitute the marketing of otherwise excluded 
prepaid cards that may also be sold in the store as gift cards or gift 
certificates, provided that a consumer acting reasonably under the 
circumstances would not be led to believe that the sign applies to all 
prepaid cards sold in the store. See, however, comment 20(b)(2)-4.ii.
    3. Examples of marketed or labeled as a gift card or gift 
certificate. i. Examples of marketed or labeled as a gift card or gift 
certificate include:
    A. Using the word ``gift'' or ``present'' on a card, certificate, or 
accompanying material, including documentation, packaging and 
promotional displays.
    B. Representing or suggesting that a certificate or card can be 
given to another person, for example, as a ``token of appreciation'' or 
a ``stocking stuffer,'' or displaying a congratulatory message on the 
card, certificate or accompanying material.
    C. Incorporating gift-giving or celebratory imagery or motifs, such 
as a bow, ribbon, wrapped present, candle, or congratulatory message, on 
a card, certificate, accompanying documentation, or promotional 
material.
    ii. The term does not include:
    A. Representing that a card or certificate can be used as a 
substitute for a checking, savings, or deposit account.
    B. Representing that a card or certificate can be used to pay for a 
consumer's health-related expenses--for example, a card tied to a health 
savings account.
    C. Representing that a card or certificate can be used as a 
substitute for traveler's checks or cash.
    D. Representing that a card or certificate can be used as a 
budgetary tool, for example, by teenagers, or to cover emergency 
expenses.
    4. Reasonable policies and procedures to avoid marketing as a gift 
card. The exclusion for a card, code, or other device that is reloadable 
and not marketed or labeled as a gift card or gift certificate in 
Sec. 1005.20(b)(2) applies if a reloadable card, code, or other device 
is not marketed or labeled as a gift card or gift certificate and if 
persons subject to the rule, including issuers, program managers, and 
retailers, maintain policies and procedures reasonably designed to avoid 
such marketing. Such policies and procedures may include contractual 
provisions prohibiting a reloadable card, code, or other device from 
being marketed or labeled as a gift card or gift certificate, 
merchandising guidelines or plans regarding how the product must be 
displayed in a retail outlet, and controls to regularly monitor or 
otherwise verify that the card, code or other device is not being 
marketed as a gift card. Whether a reloadable card, code, or other 
device has been marketed as a gift card or gift certificate will depend 
on the facts and circumstances, including whether a reasonable consumer 
would be led to believe that the card, code, or other device is a gift 
card or gift certificate. The following examples illustrate the 
application of Sec. 1005.20(b)(2):
    i. An issuer or program manager of prepaid cards agrees to sell 
general-purpose reloadable cards through a retailer. The contract 
between the issuer or program manager and the retailer establishes the 
terms and conditions under which the cards may be sold and marketed at 
the retailer. The terms and conditions prohibit the general-purpose 
reloadable cards from being marketed as a gift card or gift certificate, 
and require policies and procedures to regularly monitor or otherwise 
verify that the cards are not being marketed as such. The issuer or 
program manager sets up one promotional display at the retailer for gift 
cards and another physically separated display for excluded products 
under Sec. 1005.20(b), including general-purpose reloadable cards and 
wireless telephone cards, such that a reasonable consumer would not 
believe that the excluded cards are gift cards. The exclusion in 
Sec. 1005.20(b)(2) applies because policies and procedures reasonably 
designed to avoid the marketing of the general-purpose reloadable cards 
as gift cards or gift certificates are maintained, even if a retail 
clerk inadvertently stocks or a consumer inadvertently places a general-
purpose reloadable card on the gift card display.
    ii. Same facts as in i., except that the issuer or program manager 
sets up a single promotional display at the retailer on which a variety 
of prepaid cards are sold, including store gift cards and general-
purpose reloadable cards. A sign stating ``Gift Cards'' appears 
prominently at the top of the display. The exclusion in 
Sec. 1005.20(b)(2) does not apply with respect to the general-purpose

[[Page 213]]

reloadable cards because policies and procedures reasonably designed to 
avoid the marketing of excluded cards as gift cards or gift certificates 
are not maintained.
    iii. Same facts as in i., except that the issuer or program manager 
sets up a single promotional multi-sided display at the retailer on 
which a variety of prepaid card products, including store gift cards and 
general-purpose reloadable cards are sold. Gift cards are segregated 
from excluded cards, with gift cards on one side of the display and 
excluded cards on a different side of a display. Signs of equal 
prominence at the top of each side of the display clearly differentiate 
between gift cards and the other types of prepaid cards that are 
available for sale. The retailer does not use any more conspicuous 
signage suggesting the general availability of gift cards, such as a 
large sign stating ``Gift Cards'' at the top of the display or located 
near the display. The exclusion in Sec. 1005.20(b)(2) applies because 
policies and procedures reasonably designed to avoid the marketing of 
the general-purpose reloadable cards as gift cards or gift certificates 
are maintained, even if a retail clerk inadvertently stocks or a 
consumer inadvertently places a general-purpose reloadable card on the 
gift card display.
    iv. Same facts as in i., except that the retailer sells a variety of 
prepaid card products, including store gift cards and general-purpose 
reloadable cards, arranged side-by-side in the same checkout lane. The 
retailer does not affirmatively indicate or represent that gift cards 
are available, such as by displaying any signage or other indicia at the 
checkout lane suggesting the general availability of gift cards. The 
exclusion in Sec. 1005.20(b)(2) applies because policies and procedures 
reasonably designed to avoid marketing the general-purpose reloadable 
cards as gift cards or gift certificates are maintained.
    5. Online sales of prepaid cards. Some Web sites may prominently 
advertise or promote the availability of gift cards or gift certificates 
in a manner that suggests to a consumer that the Web site exclusively 
sells gift cards or gift certificates. For example, a Web site may 
display a banner advertisement or a graphic on the home page that 
prominently states ``Gift Cards,'' ``Gift Giving,'' or similar language 
without mention of other available products, or use a web address that 
includes only a reference to gift cards or gift certificates in the 
address. In such a case, a consumer acting reasonably under the 
circumstances could be led to believe that all prepaid products sold on 
the Web site are gift cards or gift certificates. Under these facts, the 
Web site has marketed all such products, including general-purpose 
reloadable cards, as gift cards or gift certificates, and the exclusion 
in Sec. 1005.20(b)(2) does not apply.
    6. Temporary non-reloadable cards issued in connection with a 
general-purpose reloadable card. Certain general-purpose reloadable 
cards that are typically marketed as an account substitute initially may 
be sold or issued in the form of a temporary non-reloadable card. After 
the card is purchased, the cardholder is typically required to call the 
issuer to register the card and to provide identifying information in 
order to obtain a reloadable replacement card. In most cases, the 
temporary non-reloadable card can be used for purchases until the 
replacement reloadable card arrives and is activated by the cardholder. 
Because the temporary non-reloadable card may only be obtained in 
connection with the general-purpose reloadable card, the exclusion in 
Sec. 1005.20(b)(2) applies so long as the card is not marketed as a gift 
card or gift certificate.

                           Paragraph 20(b)(4)

    1. Marketed to the general public. A card, code, or other device is 
marketed to the general public if the potential use of the card, code, 
or other device is directly or indirectly offered, advertised, or 
otherwise promoted to the general public. A card, code, or other device 
may be marketed to the general public through any advertising medium, 
including television, radio, newspaper, the Internet, or signage. 
However, the posting of a company policy that funds may be disbursed by 
prepaid card (such as a sign posted at a cash register or customer 
service center stating that store credit will be issued by prepaid card) 
does not constitute the marketing of a card, code, or other device to 
the general public. In addition, the method of distribution by itself is 
not dispositive in determining whether a card, code, or other device is 
marketed to the general public. Factors that may be considered in 
determining whether the exclusion applies to a particular card, code, or 
other device include the means or channel through which the card, code, 
or device may be obtained by a consumer, the subset of consumers that 
are eligible to obtain the card, code, or device, and whether the 
availability of the card, code, or device is advertised or otherwise 
promoted in the marketplace.
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec. 1005.20(b)(4):
    i. A merchant sells its gift cards at a discount to a business which 
may give them to employees or loyal consumers as incentives or rewards. 
In determining whether the gift card falls within the exclusion in 
Sec. 1005.20(b)(4), the merchant must consider whether the card is of a 
type that is advertised or made available to consumers generally or can 
be obtained elsewhere. If the card can also be purchased through retail 
channels, the exclusion in Sec. 1005.20(b)(4) does

[[Page 214]]

not apply, even if the consumer obtained the card from the business as 
an incentive or reward. See, however, Sec. 1005.20(b)(3).
    ii. A national retail chain decides to market its gift cards only to 
members of its frequent buyer program. Similarly, a bank may decide to 
sell gift cards only to its customers. If a member of the general public 
may become a member of the program or a customer of the bank, the card 
does not fall within the exclusion in Sec. 1005.20(b)(4) because the 
general public has the ability to obtain the cards. See, however, 
Sec. 1005.20(b)(3).
    iii. A card issuer advertises a reloadable card to teenagers and 
their parents promoting the card for use by teenagers for occasional 
expenses, schoolbooks and emergencies and by parents to monitor 
spending. Because the card is marketed to and may be sold to any member 
of the general public, the exclusion in Sec. 1005.20(b)(4) does not 
apply. See, however, Sec. 1005.20(b)(2).
    iv. An insurance company settles a policyholder's claim and 
distributes the insurance proceeds to the consumer by means of a prepaid 
card. Because the prepaid card is simply the means for providing the 
insurance proceeds to the consumer and the availability of the card is 
not advertised to the general public, the exclusion in 
Sec. 1005.20(b)(4) applies.
    v. A merchant provides store credit to a consumer following a 
merchandise return by issuing a prepaid card that clearly indicates that 
the card contains funds for store credit. Because the prepaid card is 
issued for the stated purpose of providing store credit to the consumer 
and the ability to receive refunds by a prepaid card is not advertised 
to the general public, the exclusion in Sec. 1005.20(b)(4) applies.
    vi. A tax preparation company elects to distribute tax refunds to 
its clients by issuing prepaid cards, but does not advertise or 
otherwise promote the ability to receive proceeds in this manner. 
Because the prepaid card is simply the mechanism for providing the tax 
refund to the consumer, and the tax preparer does not advertise the 
ability to obtain tax refunds by a prepaid card, the exclusion in 
Sec. 1005.20(b)(4) applies. However, if the tax preparer promotes the 
ability to receive tax refund proceeds through a prepaid card as a way 
to obtain ``faster'' access to the proceeds, the exclusion in 
Sec. 1005.20(b)(4) does not apply.

                           Paragraph 20(b)(5)

    1. Exclusion explained. To qualify for the exclusion in 
Sec. 1005.20(b)(5), the sole means of issuing the card, code, or other 
device must be in a paper form. Thus, the exclusion generally applies to 
certificates issued in paper form where solely the paper itself may be 
used to purchase goods or services. A card, code or other device is not 
issued solely in paper form simply because it may be reproduced or 
printed on paper. For example, a bar code, card or certificate number, 
or certificate or coupon electronically provided to a consumer and 
redeemable for goods and services is not issued in paper form, even if 
it may be reproduced or otherwise printed on paper by the consumer. In 
this circumstance, although the consumer might hold a paper facsimile of 
the card, code, or other device, the exclusion does not apply because 
the information necessary to redeem the value was initially issued in 
electronic form. A paper certificate is within the exclusion regardless 
of whether it may be redeemed electronically. For example, a paper 
certificate or receipt that bears a bar code, code, or account number 
falls within the exclusion in Sec. 1005.20(b)(5) if the bar code, code, 
or account number is not issued in any form other than on the paper. In 
addition, the exclusion in Sec. 1005.20(b)(5) continues to apply in 
circumstances where an issuer replaces a gift certificate that was 
initially issued in paper form with a card or electronic code (for 
example, to replace a lost paper certificate).
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec. 1005.20(b)(5):
    i. A merchant issues a paper gift certificate that entitles the 
bearer to a specified dollar amount that can be applied towards a future 
meal. The merchant fills in the certificate with the name of the 
certificate holder and the amount of the certificate. The certificate 
falls within the exclusion in Sec. 1005.20(b)(5) because it is issued in 
paper form only.
    ii. A merchant allows a consumer to prepay for a good or service, 
such as a car wash or time at a parking meter, and issues a paper 
receipt bearing a numerical or bar code that the consumer may redeem to 
obtain the good or service. The exclusion in Sec. 1005.20(b)(5) applies 
because the code is issued in paper form only.
    iii. A merchant issues a paper certificate or receipt bearing a bar 
code or certificate number that can later be scanned or entered into the 
merchant's system and redeemed by the certificate or receipt holder 
towards the purchase of goods or services. The bar code or certificate 
number is not issued by the merchant in any form other than paper. The 
exclusion in Sec. 1005.20(b)(5) applies because the bar code or 
certificate number is issued in paper form only.
    iv. An online merchant electronically provides a bar code, card or 
certificate number, or certificate or coupon to a consumer that the 
consumer may print on a home printer and later redeem towards the 
purchase of goods or services. The exclusion in Sec. 1005.20(b)(5) does 
not apply because the bar code or card or certificate number was issued 
to the consumer in electronic form, even though it can be reproduced or 
otherwise printed on paper by the consumer.

[[Page 215]]

                           Paragraph 20(b)(6)

    1. Exclusion explained. The exclusion for cards, codes, or other 
devices that are redeemable solely for admission to events or venues at 
a particular location or group of affiliated locations generally applies 
to cards, codes, or other devices that are not redeemed for a specified 
monetary value, but rather solely for admission or entry to an event or 
venue. The exclusion also covers a card, code, or other device that is 
usable to purchase goods or services in addition to entry into the event 
or the venue, either at the event or venue or at an affiliated location 
or location in geographic proximity to the event or venue.
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec. 1005.20(b)(6):
    i. A consumer purchases a prepaid card that entitles the holder to a 
ticket for entry to an amusement park. The prepaid card may only be used 
for entry to the park. The card qualifies for the exclusion in 
Sec. 1005.20(b)(6) because it is redeemable for admission or entry and 
for goods or services in conjunction with that admission. In addition, 
if the prepaid card does not have a monetary value, and therefore is not 
``issued in a specified amount,'' the card does not meet the definitions 
of ``gift certificate,'' ``store gift card,'' or ``general-use prepaid 
card'' in Sec. 1005.20(a). See comment 20(a)-3.
    ii. Same facts as in i., except that the gift card also entitles the 
holder of the gift card to a dollar amount that can be applied towards 
the purchase of food and beverages or goods or services at the park or 
at nearby affiliated locations. The card qualifies for the exclusion in 
Sec. 1005.20(b)(6) because it is redeemable for admission or entry and 
for goods or services in conjunction with that admission.
    iii. A consumer purchases a $25 gift card that the holder of the 
gift card can use to make purchases at a merchant, or, alternatively, 
can apply towards the cost of admission to the merchant's affiliated 
amusement park. The card is not eligible for the exclusion in 
Sec. 1005.20(b)(6) because it is not redeemable solely for the admission 
or ticket itself (or for goods and services purchased in conjunction 
with such admission). The card meets the definition of ``store gift 
card'' and is therefore subject to Sec. 1005.20, unless a different 
exclusion applies.

                        20(c) Form of Disclosures

                     20(c)(1) Clear and Conspicuous

    1. Clear and conspicuous standard. All disclosures required by this 
section must be clear and conspicuous. Disclosures are clear and 
conspicuous for purposes of this section if they are readily 
understandable and, in the case of written and electronic disclosures, 
the location and type size are readily noticeable to consumers. 
Disclosures need not be located on the front of the certificate or card, 
except where otherwise required, to be considered clear and conspicuous. 
Disclosures are clear and conspicuous for the purposes of this section 
if they are in a print that contrasts with and is otherwise not 
obstructed by the background on which they are printed. For example, 
disclosures on a card or computer screen are not likely to be 
conspicuous if obscured by a logo printed in the background. Similarly, 
disclosures on the back of a card that are printed on top of 
indentations from embossed type on the front of the card are not likely 
to be conspicuous if the indentations obstruct the readability of the 
disclosures. To the extent permitted, oral disclosures meet the standard 
when they are given at a volume and speed sufficient for a consumer to 
hear and comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``mo.'' for month or a ``/'' to indicate ``per.'' Under the clear and 
conspicuous standard, it is sufficient to state, for example, that a 
particular fee is charged ``$2.50/mo. after 12 mos.''

                             20(c)(2) Format

    1. Electronic disclosures. Disclosures provided electronically 
pursuant to this section are not subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
Electronic disclosures must be in a retainable form. For example, a 
person may satisfy the requirement if it provides an online disclosure 
in a format that is capable of being printed. Electronic disclosures may 
not be provided through a hyperlink or in another manner by which the 
purchaser can bypass the disclosure. A person is not required to confirm 
that the consumer has read the electronic disclosures.

                  20(c)(3) Disclosure Prior to Purchase

    1. Method of purchase. The disclosures required by this paragraph 
must be provided before a certificate or card is purchased regardless of 
whether the certificate or card is purchased in person, online, by 
telephone, or by other means.
    2. Electronic disclosures. Section 1005.20(c)(3) provides that the 
disclosures required by this section must be provided to the consumer 
prior to purchase. For certificates or cards purchased electronically, 
disclosures made to the consumer after a consumer has initiated an 
online purchase of a certificate or card, but prior to completing the 
purchase of the certificate or card, would satisfy the prior-to-purchase 
requirement. However,

[[Page 216]]

electronic disclosures made available on a person's Web site that may or 
may not be accessed by the consumer are not provided to the consumer and 
therefore would not satisfy the prior-to-purchase requirement.
    3. Non-physical certificates and cards. If no physical certificate 
or card is issued, the disclosures must be provided to the consumer 
before the certificate or card is purchased. For example, where a gift 
certificate or card is a code that is provided by telephone, the 
required disclosures may be provided orally prior to purchase. See also 
Sec. 1005.20(c)(2).

             20(c)(4) Disclosures on the Certificate or Card

    1. Non-physical certificates and cards. If no physical certificate 
or card is issued, the disclosures required by this paragraph must be 
disclosed on the code, confirmation, or other written or electronic 
document provided to the consumer. For example, where a gift certificate 
or card is a code or confirmation that is provided to a consumer online 
or sent to a consumer's email address, the required disclosures may be 
provided electronically on the same document as the code or 
confirmation.2. No disclosures on a certificate or card. Disclosures 
required by Sec. 1005.20(c)(4) need not be made on a certificate or card 
if it is accompanied by a certificate or card that complies with this 
section. For example, a person may issue or sell a supplemental gift 
card that is smaller than a standard size and that does not bear the 
applicable disclosures if it is accompanied by a fully compliant 
certificate or card. See also comment 20(c)(2)-2.

           20(d) Prohibition on Imposition of Fees or Charges

    1. One-year period. Section 1005.20(d) provides that a person may 
impose a dormancy, inactivity, or service fee only if there has been no 
activity with respect to a certificate or card for one year. The 
following examples illustrate this rule:
    i. A certificate or card is purchased on January 15 of year one. If 
there has been no activity on the certificate or card since the 
certificate or card was purchased, a dormancy, inactivity, or service 
fee may be imposed on the certificate or card on January 15 of year two.
    ii. Same facts as i., and a fee was imposed on January 15 of year 
two. Because no more than one dormancy, inactivity, or service fee may 
be imposed in any given calendar month, the earliest date that another 
dormancy, inactivity, or service fee may be imposed, assuming there 
continues to be no activity on the certificate or card, is February 1 of 
year two. A dormancy, inactivity, or service fee is permitted to be 
imposed on February 1 of year two because there has been no activity on 
the certificate or card for the preceding year (February 1 of year one 
through January 31 of year two), and February is a new calendar month. 
The imposition of a fee on January 15 of year two is not activity for 
purposes of Sec. 1005.20(d). See comment 20(a)(7)-1.
    iii. Same facts as i., and a fee was imposed on January 15 of year 
two. On January 31 of year two, the consumer uses the card to make a 
purchase. Another dormancy, inactivity, or service fee could not be 
imposed until January 31 of year three, assuming there has been no 
activity on the certificate or card since January 31 of year two.
    2. Relationship between Sec. Sec. 1005.20(d)(2) and (c)(3). Sections 
1005.20(d)(2) and (c)(3) contain similar, but not identical, disclosure 
requirements. Section 1005.20(d)(2) requires the disclosure of dormancy, 
inactivity, and service fees on a certificate or card. Section 
1005.20(c)(3) requires that vendor person that issues or sells such 
certificate or card disclose to a consumer any dormancy, inactivity, and 
service fees associated with the certificate or card before such 
certificate or card may be purchased. Depending on the context, a single 
disclosure that meets the clear and conspicuous requirements of both 
Sec. Sec. 1005.20(d)(2) and (c)(3) may be used to disclose a dormancy, 
inactivity, or service fee. For example, if the disclosures on a 
certificate or card, required by Sec. 1005.20(d)(2), are visible to the 
consumer without having to remove packaging or other materials sold with 
the certificate or card, for a purchase made in person, the disclosures 
also meet the requirements of Sec. 1005.20(c)(3). Otherwise, a dormancy, 
inactivity, or service fee may need to be disclosed multiple times to 
satisfy the requirements of Sec. Sec. 1005.20(d)(2) and (c)(3). For 
example, if the disclosures on a certificate or card, required by 
Sec. 1005.20(d)(2), are obstructed by packaging sold with the 
certificate or card, for a purchase made in person, they also must be 
disclosed on the packaging sold with the certificate or card to meet the 
requirements of Sec. 1005.20(c)(3).
    3. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and (f)(2). 
In addition to any disclosures required under Sec. 1005.20(d)(2), any 
applicable disclosures under Sec. Sec. 1005.20(e)(3) and (f)(2) of this 
section must also be provided on the certificate or card.
    4. One fee per month. Under Sec. 1005.20(d)(3), no more than one 
dormancy, inactivity, or service fee may be imposed in any given 
calendar month. For example, if a dormancy fee is imposed on January 1, 
following a year of inactivity, and a consumer makes a balance inquiry 
on January 15, a balance inquiry fee may not be imposed at that time 
because a dormancy fee was already imposed earlier that month and a 
balance inquiry fee is a type of service fee. If, however, the dormancy 
fee could be imposed on January 1, following a year of inactivity, and 
the consumer makes a balance inquiry on the same date, the person 
assessing the fees may

[[Page 217]]

choose whether to impose the dormancy fee or the balance inquiry fee on 
January 1. The restriction in Sec. 1005.20(d)(3) does not apply to any 
fee that is not a dormancy, inactivity, or service fee. For example, 
assume a service fee is imposed on a general-use prepaid card on January 
1, following a year of inactivity. If a consumer cashes out the 
remaining funds by check on January 15, a cash-out fee, to the extent 
such cash-out fee is permitted under Sec. 1005.20(e)(4), may be imposed 
at that time because a cash-out fee is not a dormancy, inactivity, or 
service fee.
    5. Accumulation of fees. Section 1005.20(d) prohibits the 
accumulation of dormancy, inactivity, or service fees for previous 
periods into a single fee because such a practice would circumvent the 
limitation in Sec. 1005.20(d)(3) that only one fee may be charged per 
month. For example, if a consumer purchases and activates a store gift 
card on January 1 but never uses the card, a monthly maintenance fee of 
$2.00 a month may not be accumulated such that a fee of $24 is imposed 
on January 1 the following year.

20(e) Prohibition on Sale of Gift Certificates or Cards With Expiration 
                                  Dates

    1. Reasonable opportunity. Under Sec. 1005.20(e)(1), no person may 
sell or issue a gift certificate, store gift card, or general-use 
prepaid card with an expiration date, unless there are policies and 
procedures in place to provide consumers with a reasonable opportunity 
to purchase a certificate or card with at least five years remaining 
until the certificate or card expiration date. Consumers are deemed to 
have a reasonable opportunity to purchase a certificate or card with at 
least five years remaining until the certificate or card expiration date 
if:
    i. There are policies and procedures established to prevent the sale 
of a certificate or card unless the certificate or card expiration date 
is at least five years after the date the certificate or card was sold 
or initially issued to a consumer; or
    ii. A certificate or card is available to consumers to purchase five 
years and six months before the certificate or card expiration date.
    2. Applicability to replacement certificates or cards. Section 
1005.20(e)(1) applies solely to the purchase of a certificate or card. 
Therefore, Sec. 1005.20(e)(1) does not apply to the replacement of such 
certificates or cards. Certificates or cards issued as a replacement may 
bear a certificate or card expiration date of less than five years from 
the date of issuance of the replacement certificate or card. If the 
certificate or card expiration date for a replacement certificate or 
card is later than the date set forth in Sec. 1005.20(e)(2)(i), then 
pursuant to Sec. 1005.20(e)(2), the expiration date for the underlying 
funds at the time the replacement certificate or card is issued must be 
no earlier than the expiration date for the replacement certificate or 
card. For purposes of Sec. 1005.20(e)(2), funds are not considered to be 
loaded to a store gift card or general-use prepaid card solely because a 
replacement card has been issued or activated for use.
    3. Disclosure of funds expiration--date not required. Section 
1005.20(e)(3)(i) does not require disclosure of the precise date the 
funds will expire. It is sufficient to disclose, for example, ``Funds 
expire 5 years from the date funds last loaded to the card.''; ``Funds 
can be used 5 years from the date money was last added to the card.''; 
or ``Funds do not expire.''
    4. Disclosure not required if no expiration date. If the certificate 
or card and underlying funds do not expire, the disclosure required by 
Sec. 1005.20(e)(3)(i) need not be stated on the certificate or card. If 
the certificate or card and underlying funds expire at the same time, 
only one expiration date need be disclosed on the certificate or card.
    5. Reference to toll-free telephone number and Web site. If a 
certificate or card does not expire, or if the underlying funds are not 
available after the certificate or card expires, the disclosure required 
by Sec. 1005.20(e)(3)(ii) need not be stated on the certificate or card. 
See, however, Sec. 1005.20(f)(2).
    6. Relationship to Sec. 226.20(f)(2). The same toll-free telephone 
number and Web site may be used to comply with 
Sec. Sec. 226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a 
Web site must be maintained or disclosed if no fees are imposed in 
connection with a certificate or card, and the certificate or card and 
the underlying funds do not expire.
    7. Distinguishing between certificate or card expiration and funds 
expiration. If applicable, a disclosure must be made on the certificate 
or card that notifies a consumer that the certificate or card expires, 
but the funds either do not expire or expire later than the certificate 
or card, and that the consumer may contact the issuer for a replacement 
card. The disclosure must be made with equal prominence and in close 
proximity to the certificate or card expiration date. The close 
proximity requirement does not apply to oral disclosures. In the case of 
a certificate or card, close proximity means that the disclosure must be 
on the same side as the certificate or card expiration date. For 
example, if the disclosure is the same type size and is located 
immediately next to or directly above or below the certificate or card 
expiration date, without any intervening text or graphical displays, the 
disclosures would be deemed to be equally prominent and in close 
proximity. The disclosure need not be embossed on the certificate or 
card to be deemed equally prominent, even if the expiration date is 
embossed on the certificate or card. The disclosure may state on the 
front of the card, for example, ``Funds expire

[[Page 218]]

after card. Call for replacement card.'' or ``Funds do not expire. Call 
for new card after 09/2016.'' Disclosures made pursuant to 
Sec. 1005.20(e)(3)(iii)(A) may also fulfill the requirements of 
Sec. 1005.20(e)(3)(i). For example, making a disclosure that ``Funds do 
not expire'' to comply with Sec. 1005.20(e)(3)(iii)(A) also fulfills the 
requirements of Sec. 1005.20(e)(3)(i).
    8. Expiration date safe harbor. A non-reloadable certificate or card 
that bears an expiration date that is at least seven years from the date 
of manufacture need not state the disclosure required by 
Sec. 1005.20(e)(3)(iii). However, Sec. 1005.20(e)(1) still prohibits the 
sale or issuance of such certificate or card unless there are policies 
and procedures in place to provide a consumer with a reasonable 
opportunity to purchase the certificate or card with at least five years 
remaining until the certificate or card expiration date. In addition, 
under Sec. 1005.20(e)(2), the funds may not expire before the 
certificate or card expiration date, even if the expiration date of the 
certificate or card bears an expiration date that is more than five 
years from the date of purchase. For purposes of this safe harbor, the 
date of manufacture is the date on which the certificate or card 
expiration date is printed on the certificate or card.
    9. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and (f)(2). 
In addition to any disclosures required to be made under 
Sec. 1005.20(e)(3), any applicable disclosures under 
Sec. Sec. 1005.20(d)(2) and (f)(2) must also be provided on the 
certificate or card.
    10. Replacement or remaining balance of an expired certificate or 
card. When a certificate or card expires, but the underlying funds have 
not expired, an issuer, at its option in accordance with applicable 
state law, may provide either a replacement certificate or card or 
otherwise provide the certificate or card holder, for example, by check, 
with the remaining balance on the certificate or card. In either case, 
the issuer may not charge a fee for the service.
    11. Replacement of a lost or stolen certificate or card not 
required. Section 1005.20(e)(4) does not require the replacement of a 
certificate or card that has been lost or stolen.
    12. Date of issuance or loading. For purposes of 
Sec. 1005.20(e)(2)(i), a certificate or card is not issued or loaded 
with funds until the certificate or card is activated for use.
    13. Application of expiration date provisions after redemption of 
certificate or card. The requirement that funds underlying a certificate 
or card must not expire for at least five years from the date of 
issuance or date of last load ceases to apply once the certificate or 
card has been fully redeemed, even if the underlying funds are not used 
to contemporaneously purchase a specific good or service. For example, 
some certificates or cards can be used to purchase music, media, or 
virtual goods. Once redeemed by a consumer, the entire balance on the 
certificate or card is debited from the certificate or card and credited 
or transferred to another ``account'' established by the merchant of 
such goods or services. The consumer can then make purchases of songs, 
media, or virtual goods from the merchant using that ``account'' either 
at the time the value is transferred from the certificate or card or at 
a later time. Under these circumstances, once the card has been fully 
redeemed and the ``account'' credited with the amount of the underlying 
funds, the five-year minimum expiration term no longer applies to the 
underlying funds. However, if the consumer only partially redeems the 
value of the certificate or card, the five-year minimum expiration term 
requirement continues to apply to the funds remaining on the certificate 
or card.

 20(f) Additional Disclosure Requirements for Gift Certificates or Cards

    1. Reference to toll-free telephone number and Web site. If a 
certificate or card does not have any fees, the disclosure under 
Sec. 1005.20(f)(2) is not required on the certificate or card. See, 
however, Sec. 1005.20(e)(3)(ii).
    2. Relationship to Sec. 226.20(e)(3)(ii). The same toll-free 
telephone number and Web site may be used to comply with 
Sec. Sec. 226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a 
Web site must be maintained or disclosed if no fees are imposed in 
connection with a certificate or card, and both the certificate or card 
and underlying funds do not expire.
    3. Relationship between Sec. Sec. 1005.20(d)(2), (e)(3), and (f)(2). 
In addition to any disclosures required pursuant to Sec. 1005.20(f)(2), 
any applicable disclosures under Sec. Sec. 1005.20(d)(2) and (e)(3) must 
also be provided on the certificate or card.

                         20(g) Compliance Dates

    1. Period of eligibility for loyalty, award, or promotional 
programs. For purposes of Sec. 1005.20(g)(2), the period of eligibility 
is the time period during which a consumer must engage in a certain 
action or actions to meet the terms of eligibility for a loyalty, award, 
or promotional program and obtain the card, code, or other device. Under 
Sec. 1005.20(g)(2), a gift card issued pursuant to a loyalty, award, or 
promotional program that began prior to August 22, 2010 need not state 
the disclosures in Sec. 1005.20(a)(4)(iii) regardless of whether the 
consumer became eligible to receive the gift card prior to August 22, 
2010, or after that date. For example, a product manufacturer may 
provide a $20 rebate card to a consumer if the consumer purchases a 
particular product and submits a fully completed entry between January 
1, 2010 and December 31, 2010. Similarly, a merchant may provide a $20 
gift card to a consumer if the consumer makes $200 worth of qualifying 
purchases between June 1, 2010 and October 30, 2010. Under both

[[Page 219]]

examples, gift cards provided pursuant to these loyalty, award, or 
promotional programs need not state the disclosures in 
Sec. 1005.20(a)(4)(iii) to qualify for the exclusion in 
Sec. 1005.20(b)(3) for loyalty, award, or promotional gift cards because 
the period of eligibility for each program began prior to August 22, 
2010.

                        20(h) Temporary Exemption

                     20(h)(1) Delayed Effective Date

    1. Application to certificates or cards produced prior to April 1, 
2010. Certificates or cards produced prior to April 1, 2010 may be sold 
to a consumer on or after August 22, 2010 without satisfying the 
requirements of Sec. Sec. 1005.20(c)(3), (d)(2), (e)(1), (e)(3), and (f) 
through January 30, 2011, provided that issuers of such certificates or 
cards comply with the additional substantive and disclosure requirements 
of Sec. Sec. 1005.20(h)(1)(i) through (iv). Issuers of certificates or 
cards produced prior to April 1, 2010 need not satisfy these additional 
requirements if the certificates or cards fully comply with the rule 
(Sec. Sec. 1005.20(a) through (f)). For example, the in-store signage 
and other disclosures required by Sec. 1005.20(h)(2) do not apply to 
gift cards produced prior to April 1, 2010 that do not have fees and do 
not expire, and which otherwise comply with the rule.
    2. Expiration of temporary exemption. Certificates or cards produced 
prior to April 1, 2010 that do not fully comply with 
Sec. Sec. 1005.20(a) through (f) may not be issued or sold to consumers 
on or after January 31, 2011.

                     20(h)(2) Additional Disclosures

    1. Disclosures through third parties. Issuers may make the 
disclosures required by Sec. 1005.20(h)(2) through a third party, such 
as a retailer or merchant. For example, an issuer may have a merchant 
install in-store signage with the disclosures required by 
Sec. 1005.20(h)(2) on the issuer's behalf.
    2. General advertising disclosures. Section 1005.20(h)(2) does not 
impose an obligation on the issuer to advertise gift certificates, store 
gift cards, or general-use prepaid cards.

            Section 1005.30--Remittance Transfer Definitions

    1. Applicability of definitions in subpart A. Except as modified or 
limited by subpart B (which modifications or limitations apply only to 
subpart B), the definitions in Sec. 1005.2 apply to all of Regulation E, 
including subpart B.

                           30(b) Business Day

    1. General. A business day, as defined in Sec. 1005.30(b), includes 
the entire 24-hour period ending at midnight, and a notice given 
pursuant to any section of subpart B is effective even if given outside 
of normal business hours. A remittance transfer provider is not required 
under subpart B to make telephone lines available on a 24-hour basis.
    2. Substantially all business functions. ``Substantially all 
business functions'' include both the public and the back-office 
operations of the provider. For example, if the offices of a provider 
are open on Saturdays for customers to request remittance transfers, but 
not for performing internal functions (such as investigating errors), 
then Saturday is not a business day for that provider. In this case, 
Saturday does not count toward the business-day standard set by subpart 
B for resolving errors, processing refunds, etc.
    3. Short hours. A provider may determine, at its election, whether 
an abbreviated day is a business day. For example, if a provider engages 
in substantially all business functions until noon on Saturdays instead 
of its usual 3 p.m. closing, it may consider Saturday a business day.
    4. Telephone line. If a provider makes a telephone line available on 
Sundays for cancelling the transfer, but performs no other business 
functions, Sunday is not a business day under the ``substantially all 
business functions'' standard.

                       30(c) Designated Recipient

    1. Person. A designated recipient can be either a natural person or 
an organization, such as a corporation. See Sec. 1005.2(j) (definition 
of person). The designated recipient is identified by the name of the 
person provided by the sender to the remittance transfer provider and 
disclosed by the provider to the sender pursuant to 
Sec. 1005.31(b)(1)(iii).
    2. Location in a foreign country. i. A remittance transfer is 
received at a location in a foreign country if funds are to be received 
at a location physically outside of any State, as defined in 
Sec. 1005.2(l). A specific pick-up location need not be designated for 
funds to be received at a location in a foreign country. If it is 
specified that the funds will be transferred to a foreign country to be 
picked up by the designated recipient, the transfer will be received at 
a location in a foreign country, even though a specific pick-up location 
within that country has not been designated. If it is specified that the 
funds will be received at a location on a U.S. military installation 
that is physically located in a foreign country, the transfer will be 
received in a State.
    ii. For transfers to a designated recipient's account, whether funds 
are to be received at a location physically outside of any State depends 
on where the recipient's account is located. If the account is located 
in a State, the funds will not be received at a location in a foreign 
country. Accounts that are located on a U.S. military installation that 
is physically located in a foreign country are located in a State.

[[Page 220]]

    iii. Where the sender does not specify information about a 
designated recipient's account, but instead provides information about 
the recipient, a remittance transfer provider may make the determination 
of whether the funds will be received at a location in a foreign country 
on information that is provided by the sender, and other information the 
provider may have, at the time the transfer is requested. For example, 
if a consumer in a State gives a provider the recipient's email address, 
and the provider has no other information about whether the funds will 
be received by the recipient at a location in a foreign country, then 
the provider may determine that funds are not to be received at a 
location in a foreign country. However, if the provider at the time the 
transfer is requested has additional information indicating that funds 
are to be received in a foreign country, such as if the recipient's 
email address is already registered with the provider and associated 
with a foreign account, then the provider has sufficient information to 
conclude that the remittance transfer will be received at a location in 
a foreign country. Similarly, if a consumer in a State purchases a 
prepaid card, and the provider mails or delivers the card directly to 
the consumer, the provider may conclude that funds are not to be 
received in a foreign country, because the provider does not know 
whether the consumer will subsequently send the prepaid card to a 
recipient in a foreign country. In contrast, the provider has sufficient 
information to conclude that the funds are to be received in a foreign 
country if the remittance transfer provider sends a prepaid card to a 
specified recipient in a foreign country, even if a person located in a 
State, including the sender, retains the ability to access funds on the 
prepaid card.
    3. Sender as designated recipient. A ``sender,'' as defined in 
Sec. 1005.30(g), may also be a designated recipient if the sender meets 
the definition of ``designated recipient'' in Sec. 1005.30(c). For 
example, a sender may request that a provider send an electronic 
transfer of funds from the sender's checking account in a State to the 
sender's checking account located in a foreign country. In this case, 
the sender would also be a designated recipient.

                 30(d) Preauthorized Remittance Transfer

    1. Advance authorization. A preauthorized remittance transfer is a 
remittance transfer authorized in advance of a transfer that will take 
place on a recurring basis, at substantially regular intervals, and will 
require no further action by the consumer to initiate the transfer. In a 
bill-payment system, for example, if the consumer authorizes a 
remittance transfer provider to make monthly payments to a payee by 
means of a remittance transfer, and the payments take place without 
further action by the consumer, the payments are preauthorized 
remittance transfers. In contrast, if the consumer must take action each 
month to initiate a transfer (such as by entering instructions on a 
telephone or home computer), the payments are not preauthorized 
remittance transfers.

                        30(e) Remittance Transfer

    1. Electronic transfer of funds. The definition of ``remittance 
transfer'' requires an electronic transfer of funds. The term electronic 
has the meaning given in section 106(2) of the Electronic Signatures in 
Global and National Commerce Act. There may be an electronic transfer of 
funds if a provider makes an electronic book entry between different 
settlement accounts to effectuate the transfer. However, where a sender 
mails funds directly to a recipient, or provides funds to a courier for 
delivery to a foreign country, there is not an electronic transfer of 
funds. Similarly, generally, where a provider issues a check, draft, or 
other paper instrument to be mailed to a person abroad, there is not an 
electronic transfer of funds. Nonetheless, an electronic transfer of 
funds occurs for a payment made by a provider under a bill-payment 
service available to a consumer via computer or other electronic means, 
unless the terms of the bill-payment service explicitly state that all 
payments, or all payments to a particular payee or payees, will be 
solely by check, draft, or similar paper instrument drawn on the 
consumer's account to be mailed abroad, and the payee or payees that 
will be paid in this manner are identified to the consumer. With respect 
to such a bill-payment service, if a provider provides a check, draft or 
similar paper instrument drawn on a consumer's account to be mailed 
abroad for a payee that is not identified to the consumer as described 
above, this payment by check, draft or similar payment instrument will 
be an electronic transfer of funds.
    2. Sent by a remittance transfer provider. i. The definition of 
``remittance transfer'' requires that a transfer be ``sent by a 
remittance transfer provider.'' This means that there must be an 
intermediary that is directly engaged with the sender to send an 
electronic transfer of funds on behalf of the sender to a designated 
recipient.
    ii. A payment card network or other third party payment service that 
is functionally similar to a payment card network does not send a 
remittance transfer when a consumer provides a debit, credit or prepaid 
card directly to a foreign merchant as payment for goods or services. In 
such a case, the payment card network or third party payment service is 
not directly engaged with the sender to send a transfer of funds to a 
person in a foreign country; rather, the network or

[[Page 221]]

third party payment service is merely providing contemporaneous third-
party payment processing and settlement services on behalf of the 
merchant or the card issuer, rather than on behalf of the sender. In 
such a case, the card issuer also is not directly engaged with the 
sender to send an electronic transfer of funds to the foreign merchant 
when the card issuer provides payment to the merchant. Similarly, where 
a consumer provides a checking or other account number, or a debit, 
credit or prepaid card, directly to a foreign merchant as payment for 
goods or services, the merchant is not acting as an intermediary that 
sends a transfer of funds on behalf of the sender when it submits the 
payment information for processing.
    iii. However, a card issuer or a payment network may offer a service 
to a sender where the card issuer or a payment network is an 
intermediary that is directly engaged with the sender to obtain funds 
using the sender's debit, prepaid or credit card and to send those funds 
to a recipient's checking account located in a foreign country. In this 
case, the card issuer or the payment network is an intermediary that is 
directly engaged with the sender to send an electronic transfer of funds 
on behalf of the sender, and this transfer of funds is a remittance 
transfer because it is made to a designated recipient. See comment 
30(c)-2.ii.
    3. Examples of remittance transfers.
    i. Examples of remittance transfers include:
    A. Transfers where the sender provides cash or another method of 
payment to a money transmitter or financial institution and requests 
that funds be sent to a specified location or account in a foreign 
country.
    B. Consumer wire transfers, where a financial institution executes a 
payment order upon a sender's request to wire money from the sender's 
account to a designated recipient.
    C. An addition of funds to a prepaid card by a participant in a 
prepaid card program, such as a prepaid card issuer or its agent, that 
is directly engaged with the sender to add these funds, where the 
prepaid card is sent or was previously sent by a participant in the 
prepaid card program to a person in a foreign country, even if a person 
located in a State (including a sender) retains the ability to withdraw 
such funds.
    D. International ACH transactions sent by the sender's financial 
institution at the sender's request.
    E. Online bill payments and other electronic transfers that a sender 
schedules in advance, including preauthorized remittance transfers, made 
by the sender's financial institution at the sender's request to a 
designated recipient.
    ii. The term remittance transfer does not include, for example:
    A. A consumer's provision of a debit, credit or prepaid card, 
directly to a foreign merchant as payment for goods or services because 
the issuer is not directly engaged with the sender to send an electronic 
transfer of funds to the foreign merchant when the issuer provides 
payment to the merchant. See comment 30(e)-2.
    B. A consumer's deposit of funds to a checking or savings account 
located in a State, because there has not been a transfer of funds to a 
designated recipient. See comment 30(c)-2.ii.
    C. Online bill payments and other electronic transfers that senders 
can schedule in advance, including preauthorized transfers, made through 
the Web site of a merchant located in a foreign country and via direct 
provision of a checking account, credit card, debit card or prepaid card 
number to the merchant, because the financial institution is not 
directly engaged with the sender to send an electronic transfer of funds 
to the foreign merchant when the institution provides payment to the 
merchant. See comment 30(e)-2.

                   30(f) Remittance Transfer Provider

    1. Agents. A person is not deemed to be acting as a remittance 
transfer provider when it performs activities as an agent on behalf of a 
remittance transfer provider.
    2. Normal course of business. i. General. Whether a person provides 
remittance transfers in the normal course of business depends on the 
facts and circumstances, including the total number and frequency of 
remittance transfers sent by the provider. For example, if a financial 
institution generally does not make remittance transfers available to 
customers, but sends a couple of such transfers in a given year as an 
accommodation for a customer, the institution does not provide 
remittance transfers in the normal course of business. In contrast, if a 
financial institution makes remittance transfers generally available to 
customers (whether described in the institution's deposit account 
agreement, or in practice) and makes transfers many times per month, the 
institution provides remittance transfers in the normal course of 
business.
    ii. Safe harbor. Under Sec. 1005.30(f)(2)(i), a person that provided 
100 or fewer remittance transfers in the previous calendar year and 
provides 100 or fewer remittance transfers in the current calendar year 
is deemed not to be providing remittance transfers in the normal course 
of its business. Accordingly, a person that qualifies for the safe 
harbor in Sec. 1005.30(f)(2)(i) is not a ``remittance transfer 
provider'' and is not subject to the requirements of subpart B. For 
purposes of determining whether a person qualifies for the safe harbor 
under Sec. 1005.30(f)(2)(i), the number of remittance transfers provided 
includes any transfers excluded from the definition of

[[Page 222]]

``remittance transfer'' due simply to the safe harbor. In contrast, the 
number of remittance transfers provided does not include any transfers 
that are excluded from the definition of ``remittance transfer'' for 
reasons other than the safe harbor, such as small value transactions or 
securities and commodities transfers that are excluded from the 
definition of ``remittance transfer'' by Sec. 1005.30(e)(2).
    iii. Transition period. A person may cease to satisfy the 
requirements of the safe harbor described in Sec. 1005.30(f)(2)(i) if 
the person provides in excess of 100 remittance transfers in a calendar 
year. For example, if a person that provided 100 or fewer remittance 
transfers in the previous calendar year provides more than 100 
remittance transfers in the current calendar year, the safe harbor 
applies to the first 100 remittance transfers that the person provides 
in the current calendar year. For any additional remittance transfers 
provided in the current calendar year and for any remittance transfers 
provided in the subsequent calendar year, whether the person provides 
remittance transfers for a consumer in the normal course of its 
business, as defined in Sec. 1005.30(f)(1), and is thus a remittance 
transfer provider for those additional transfers, depends on the facts 
and circumstances. Section 1005.30(f)(2)(ii) provides a reasonable 
period of time, not to exceed six months, for such a person to begin 
complying with subpart B, if that person is then providing remittance 
transfers in the normal course of its business. At the end of that 
reasonable period of time, such person would be required to comply with 
subpart B unless, based on the facts and circumstances, the person is 
not a remittance transfer provider.
    iv. Example of safe harbor and transition period. Assume that a 
person provided 90 remittance transfers in 2012 and 90 such transfers in 
2013. The safe harbor will apply to the person's transfers in 2013, as 
well as the person's first 100 remittance transfers in 2014. However, if 
the person provides a 101st transfer on September 5, the facts and 
circumstances determine whether the person provides remittance transfers 
in the normal course of business and is thus a remittance transfer 
provider for the 101st and any subsequent remittance transfers that it 
provides in 2014. Furthermore, the person would not qualify for the safe 
harbor described in Sec. 1005.30(f)(2)(i) in 2015 because the person did 
not provide 100 or fewer remittance transfers in 2014. However, for the 
101st remittance transfer provided in 2014, as well as additional 
remittance transfers provided thereafter in 2014 and 2015, if that 
person is then providing remittance transfers for a consumer in the 
normal course of business, the person will have a reasonable period of 
time, not to exceed six months, to come into compliance with subpart B. 
Assume that in this case, a reasonable period of time is six months. 
Thus, compliance with subpart B is not required for remittance transfers 
made on or before March 5, 2015 (i.e., six months after September 5, 
2014). After March 5, 2015, the person is required to comply with 
subpart B if, based on the facts and circumstances, the person provides 
remittance transfers in the normal course of business and is thus a 
remittance transfer provider.
    3. Multiple remittance transfer providers. If the remittance 
transfer involves more than one remittance transfer provider, only one 
set of disclosures must be given, and the remittance transfer providers 
must agree among themselves which provider must take the actions 
necessary to comply with the requirements that subpart B imposes on any 
or all of them. Even though the providers must designate one provider to 
take the actions necessary to comply with the requirements that subpart 
B imposes on any or all of them, all remittance transfer providers 
involved in the remittance transfer remain responsible for compliance 
with the applicable provisions of the EFTA and Regulation E.

                              30(g) Sender

    1. Determining whether a consumer is located in a State. Under 
Sec. 1005.30(g), the definition of ``sender'' means a consumer in a 
State who, primarily for personal, family, or household purposes, 
requests a remittance transfer provider to send a remittance transfer to 
a designated recipient. A sender located on a U.S. military installation 
that is physically located in a foreign country is located in a State. 
For transfers from a consumer's account, whether a consumer is located 
in a State depends on where the consumer's account is located. If the 
account is located in a State, the consumer will be located in a State 
for purposes of the definition of ``sender'' in Sec. 1005.30(g), 
notwithstanding comment 3(a)-3. Accounts that are located on a U.S. 
military installation that is physically located in a foreign country 
are located in a State. Where a transfer is requested electronically or 
by telephone and the transfer is not from an account, the provider may 
make the determination of whether a consumer is located in a State based 
on information that is provided by the consumer and on any records 
associated with the consumer that the provider may have, such as an 
address provided by the consumer.
    2. Personal, family, or household purposes. Under Sec. 1005.30(g), a 
consumer is a ``sender'' only where he or she requests a transfer 
primarily for personal, family, or household purposes. A consumer who 
requests a transfer primarily for other purposes, such as business or 
commercial purposes, is not a sender under Sec. 1005.30(g). For 
transfers from an account that was established primarily for personal, 
family, or household purposes,

[[Page 223]]

a remittance transfer provider may generally deem that the transfer is 
requested primarily for personal, family, or household purposes and the 
consumer is therefore a ``sender'' under Sec. 1005.30(g). But if the 
consumer indicates that he or she is requesting the transfer primarily 
for other purposes, such as business or commercial purposes, then the 
consumer is not a sender under Sec. 1005.30(g), even if the consumer is 
requesting the transfer from an account that is used primarily for 
personal, family, or household purposes.
    3. Non-consumer accounts. A provider may deem that a transfer that 
is requested to be sent from an account that was not established 
primarily for personal, family, or household purposes, such as an 
account that was established as a business or commercial account or an 
account held by a business entity such as a corporation, not-for-profit 
corporation, professional corporation, limited liability company, 
partnership, or sole proprietorship, as not being requested primarily 
for personal, family, or household purposes. A consumer requesting a 
transfer from such an account therefore is not a sender under 
Sec. 1005.30(g). Additionally, a transfer that is requested to be sent 
from an account held by a financial institution under a bona fide trust 
agreement pursuant to Sec. 1005.2(b)(3) is not requested primarily for 
personal, family, or household purposes, and a consumer requesting a 
transfer from such an account is therefore not a sender under 
Sec. 1005.30(g).

                         30(h) Third-Party Fees

    1. Fees imposed on the remittance transfer. Fees imposed on the 
remittance transfer by a person other than the remittance transfer 
provider include only those fees that are charged to the designated 
recipient and are specifically related to the remittance transfer. For 
example, overdraft fees that are imposed by a recipient's bank or funds 
that are garnished from the proceeds of a remittance transfer to satisfy 
an unrelated debt are not fees imposed on the remittance transfer 
because these charges are not specifically related to the remittance 
transfer. Account fees are also not specifically related to a remittance 
transfer if such fees are merely assessed based on general account 
activity and not for receiving transfers. Where an incoming remittance 
transfer results in a balance increase that triggers a monthly 
maintenance fee, that fee is not specifically related to a remittance 
transfer. Similarly, fees that banks charge one another for handling a 
remittance transfer or other fees that do not affect the total amount of 
the transaction or the amount that will be received by the designated 
recipient are not fees imposed on the remittance transfer. For example, 
an interchange fee that is charged to a provider when a sender uses a 
credit or debit card to pay for a remittance transfer is not a fee 
imposed upon the remittance transfer. Fees that specifically relate to a 
remittance transfer may be structured on a flat per-transaction basis, 
or may be conditioned on other factors (such as account status or the 
quantity of remittance transfers received) in addition to the remittance 
transfer itself. For example, where an institution charges an incoming 
transfer fee on most customers' accounts, but not on preferred accounts, 
such a fee is nonetheless specifically related to a remittance transfer. 
Similarly, if the institution assesses a fee for every transfer beyond 
the fifth received each month, such a fee would be specifically related 
to the remittance transfer regardless of how many remittance transfers 
preceded it that month.
    2. Covered third-party fees. i. Under Sec. 1005.30(h)(1), a covered 
third-party fee means any fee that is imposed on the remittance transfer 
by a person other than the remittance transfer provider that is not a 
non-covered third-party fee.
    ii. Examples of covered third-party fees include:
    A. Fees imposed on a remittance transfer by intermediary 
institutions in connection with a wire transfer (sometimes referred to 
as ``lifting fees'').
    B. Fees imposed on a remittance transfer by an agent of the provider 
at pick-up for receiving the transfer.
    3. Non-covered third-party fees. Under Sec. 1005.30(h)(2), a non-
covered third-party fee means any fee imposed by the designated 
recipient's institution for receiving a remittance transfer into an 
account except if such institution acts as the agent of the remittance 
transfer provider. For example, a fee imposed by the designated 
recipient's institution for receiving an incoming transfer into an 
account is a non-covered third-party fee, provided such institution is 
not acting as the agent of the remittance transfer provider. See also 
comment 31(b)(1)(viii)-1. Furthermore, designated recipient's account in 
Sec. 1005.30(h)(2) refers to an asset account, regardless of whether it 
is a consumer asset account, established for any purpose and held by a 
bank, savings association, credit union, or equivalent institution. A 
designated recipient's account does not, however, include a credit card, 
prepaid card, or a virtual account held by an Internet-based or mobile 
telephone company that is not a bank, savings association, credit union 
or equivalent institution.

                      Section 1005.31--Disclosures

                    31(a) General Form of Disclosures

                     31(a)(1) Clear and Conspicuous

    1. Clear and conspicuous standard. Disclosures are clear and 
conspicuous for purposes

[[Page 224]]

of subpart B if they are readily understandable and, in the case of 
written and electronic disclosures, the location and type size are 
readily noticeable to senders. Oral disclosures as permitted by 
Sec. 1005.31(a)(3), (4), and (5) are clear and conspicuous when they are 
given at a volume and speed sufficient for a sender to hear and 
comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``USD'' to indicate currency in U.S. dollars or ``MXN'' to indicate 
currency in Mexican pesos.

               31(a)(2) Written and Electronic Disclosures

    1. E-Sign Act requirements. If a sender electronically requests the 
remittance transfer provider to send a remittance transfer, the 
disclosures required by Sec. 1005.31(b)(1) may be provided to the sender 
in electronic form without regard to the consumer consent and other 
applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). If a sender 
electronically requests the provider to send a remittance transfer, the 
disclosures required by Sec. 1005.31(b)(2) may be provided to the sender 
in electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the E-Sign Act. See Sec. 1005.4(a)(1).
    2. Paper size. Written disclosures may be provided on any size 
paper, as long as the disclosures are clear and conspicuous. For 
example, disclosures may be provided on a register receipt or on an 8.5 
inch by 11 inch sheet of paper.
    3. Retainable electronic disclosures. A remittance transfer provider 
may satisfy the requirement to provide electronic disclosures in a 
retainable form if it provides an online disclosure in a format that is 
capable of being printed. Electronic disclosures may not be provided 
through a hyperlink or in another manner by which the sender can bypass 
the disclosure. A provider is not required to confirm that the sender 
has read the electronic disclosures.
    4. Pre-payment disclosures to a mobile telephone. Disclosures 
provided via mobile application or text message, to the extent permitted 
by Sec. 1005.31(a)(5), need not be retainable. However, disclosures 
provided electronically to a mobile telephone that are not provided via 
mobile application or text message must be retainable. For example, 
disclosures provided via email must be retainable, even if a sender 
accesses them by mobile telephone.
    5. Disclosures provided by fax. For purposes of disclosures required 
to be provided pursuant to Sec. 1005.31 or Sec. 1005.36, disclosures 
provided by facsimile transmission (i.e., fax) are considered to be 
provided in writing for purposes of providing disclosures in writing 
pursuant to subpart B and are not subject to the requirements for 
electronic disclosures set forth in Sec. 1005.31(a)(2).

          31(a)(3) Disclosures for Oral Telephone Transactions

    1. Transactions conducted partially by telephone. Except as provided 
in comment 31(a)(3)-2, for transactions conducted partially by 
telephone, providing the information required by Sec. 1005.31(b)(1) to a 
sender orally does not fulfill the requirement to provide the 
disclosures required by Sec. 1005.31(b)(1). For example, a sender may 
begin a remittance transfer at a remittance transfer provider's 
dedicated telephone in a retail store, and then provide payment in 
person to a store clerk to complete the transaction. In such cases, all 
disclosures must be provided in writing. A provider complies with this 
requirement, for example, by providing the written pre-payment 
disclosure in person prior to the sender's payment for the transaction, 
and the written receipt when the sender pays for the transaction.
    2. Oral telephone transactions. Section 1005.31(a)(3) applies to 
transactions conducted orally and entirely by telephone, such as 
transactions conducted orally on a landline or mobile telephone. A 
remittance transfer provider may treat a written or electronic 
communication as an inquiry when it believes that treating the 
communication as a request would be impractical. For example, if a 
sender physically located abroad contacts a U.S. branch of the sender's 
financial institution and attempts to initiate a remittance transfer by 
first sending a mailed letter, further communication with the sender by 
letter may be impractical due to the physical distance and likely mail 
delays. In such circumstances, a provider may conduct the transaction 
orally and entirely by telephone pursuant to Sec. 1005.31(a)(3) when the 
provider treats that initial communication as an inquiry and 
subsequently responds to the consumer's inquiry by calling the consumer 
on a telephone and orally gathering or confirming the information needed 
to identify and understand a request for a remittance transfer and 
otherwise conducts the transaction orally and entirely by telephone.

31(a)(5) Disclosures for Mobile Application or Text Message Transactions

    1. Mobile application and text message transactions. A remittance 
transfer provider may provide the required pre-payment disclosures 
orally or via mobile application or text message if the transaction is 
conducted entirely by telephone via mobile application or text message, 
the remittance transfer provider complies with the requirements of 
Sec. 1005.31(g)(2), and the provider discloses orally or via mobile 
application or text message a statement about the rights of the sender

[[Page 225]]

regarding cancellation required by Sec. 1005.31(b)(2)(iv) pursuant to 
the timing requirements in Sec. 1005.31(e)(1). For example, if a sender 
conducts a transaction via text message on a mobile telephone, the 
remittance transfer provider may call the sender and orally provide the 
required pre-payment disclosures. Alternatively, the provider may 
provide the required pre-payment disclosures via text message. Section 
1005.31(a)(5) applies only to transactions conducted entirely by mobile 
telephone via mobile application or text message.

                      31(b) Disclosure Requirements

    1. Disclosures provided as applicable. Disclosures required by 
Sec. 1005.31(b) need only be provided to the extent applicable. A 
remittance transfer provider may choose to omit an item of information 
required by Sec. 1005.31(b) if it is inapplicable to a particular 
transaction. Alternatively, for disclosures required by 
Sec. 1005.31(b)(1)(i) through (vii), a provider may disclose a term and 
state that an amount or item is ``not applicable,'' ``N/A,'' or 
``None.'' For example, if fees or taxes are not imposed in connection 
with a particular transaction, the provider need not provide the 
disclosures about fees and taxes generally required by 
Sec. 1005.31(b)(1)(ii), the disclosures about covered third-party fees 
generally required by Sec. 1005.31(b)(1)(vi), or the disclaimers about 
non-covered third-party fees and taxes collected by a person other than 
the provider generally required by Sec. 1005.31(b)(1)(viii). Similarly, 
a Web site need not be disclosed if the provider does not maintain a Web 
site. A provider need not provide the exchange rate disclosure required 
by Sec. 1005.31(b)(1)(iv) if a recipient receives funds in the currency 
in which the remittance transfer is funded, or if funds are delivered 
into an account denominated in the currency in which the remittance 
transfer is funded. For example, if a sender in the United States sends 
funds from an account denominated in Euros to an account in France 
denominated in Euros, no exchange rate would need to be provided. 
Similarly, if a sender funds a remittance transfer in U.S. dollars and 
requests that a remittance transfer be delivered to the recipient in 
U.S. dollars, a provider need not disclose an exchange rate.
    2. Substantially similar terms, language, and notices. Certain 
disclosures required by Sec. 1005.31(b) must be described using the 
terms set forth in Sec. 1005.31(b) or substantially similar terms. Terms 
may be more specific than those provided. For example, a remittance 
transfer provider sending funds may describe fees imposed by an agent at 
pick-up as ``Pick-up Fees'' in lieu of describing them as ``Other 
Fees.'' Foreign language disclosures required under Sec. 1005.31(g) must 
contain accurate translations of the terms, language, and notices 
required by Sec. 1005.31(b) or permitted by Sec. 1005.31(b)(1)(viii) and 
Sec. 1005.33(h)(3).

                    31(b)(1) Pre-Payment Disclosures

    1. Fees and taxes. i. Taxes collected on the remittance transfer by 
the remittance transfer provider include taxes collected on the 
remittance transfer by a State or other governmental body. A provider 
need only disclose fees imposed or taxes collected on the remittance 
transfer by the provider in Sec. 1005.31(b)(1)(ii), as applicable. For 
example, if no transfer taxes are imposed on a remittance transfer, a 
provider would only disclose applicable transfer fees. See comment 
31(b)-1. If both fees and taxes are imposed, the fees and taxes must be 
disclosed as separate, itemized disclosures. For example, a provider 
would disclose all transfer fees using the term ``Transfer Fees'' or a 
substantially similar term and would separately disclose all transfer 
taxes using the term ``Transfer Taxes'' or a substantially similar term.
    ii. The fees and taxes required to be disclosed by 
Sec. 1005.31(b)(1)(ii) include all fees imposed and all taxes collected 
on the remittance transfer by the provider. For example, a provider must 
disclose any service fee, any fees imposed by an agent of the provider 
at the time of the transfer, and any State taxes collected on the 
remittance transfer at the time of the transfer. Fees imposed on the 
remittance transfer by the provider required to be disclosed under 
Sec. 1005.31(b)(1)(ii) include only those fees that are charged to the 
sender and are specifically related to the remittance transfer. See also 
comment 30(h)-1. In contrast, the fees required to be disclosed by 
Sec. 1005.31(b)(1)(vi) are any covered third-party fees as defined in 
Sec. 1005.30(h)(1).
    iii. The term used to describe the fees imposed on the remittance 
transfer by the provider in Sec. 1005.31(b)(1)(ii) and the term used to 
describe covered third-party fees under Sec. 1005.31(b)(1)(vi) must 
differentiate between such fees. For example the terms used to describe 
fees disclosed under Sec. 1005.31(b)(1)(ii) and (vi) may not both be 
described solely as ``Fees.''
    2. Transfer amount. Sections 1005.31(b)(1)(i) and (v) require two 
transfer amount disclosures. First, under Sec. 1005.31(b)(1)(i), a 
provider must disclose the transfer amount in the currency in which the 
remittance transfer is funded to show the calculation of the total 
amount of the transaction. Typically, the remittance transfer is funded 
in U.S. dollars, so the transfer amount would be expressed in U.S. 
dollars. However, if the remittance transfer is funded, for example, 
from a Euro-denominated account, the transfer amount would be expressed 
in Euros. Second, under Sec. 1005.31(b)(1)(v), a provider must disclose 
the transfer amount in the currency in which the funds will be made 
available to the designated recipient. For example, if the funds

[[Page 226]]

will be picked up by the designated recipient in Japanese yen, the 
transfer amount would be expressed in Japanese yen. However, this second 
transfer amount need not be disclosed if covered third-party fees as 
described under Sec. 1005.31(b)(1)(vi) are not imposed on the remittance 
transfer. The terms used to describe each transfer amount should be the 
same.
    3. Exchange rate for calculation. The exchange rate used to 
calculate the transfer amount in Sec. 1005.31(b)(1)(v), the covered 
third-party fees in Sec. 1005.31(b)(1)(vi), the amount received in 
Sec. 1005.31(b)(1)(vii), and the optional disclosures of non-covered 
third-party fees and other taxes permitted by Sec. 1005.31(b)(1)(viii) 
is the exchange rate in Sec. 1005.31(b)(1)(iv), including an estimated 
exchange rate to the extent permitted by Sec. 1005.32, prior to any 
rounding of the exchange rate. For example, if one U.S. dollar exchanges 
for 11.9483779 Mexican pesos, a provider must calculate these 
disclosures using this rate, even though the provider may disclose 
pursuant to Sec. 1005.31(b)(1)(iv) that the U.S. dollar exchanges for 
11.9484 Mexican pesos. Similarly, if a provider estimates pursuant to 
Sec. 1005.32 that one U.S. dollar exchanges for 11.9483 Mexican pesos, a 
provider must calculate these disclosures using this rate, even though 
the provider may disclose pursuant to Sec. 1005.31(b)(1)(iv) that the 
U.S. dollar exchanges for 11.95 Mexican pesos (Estimated). If an 
exchange rate need not be rounded, a provider must use that exchange 
rate to calculate these disclosures. For example, if one U.S. dollar 
exchanges for exactly 11.9 Mexican pesos, a provider must calculate 
these disclosures using this exchange rate.

                       31(b)(1)(iv) Exchange Rate

    1. Applicable exchange rate. If the designated recipient will 
receive funds in a currency other than the currency in which the 
remittance transfer is funded, a remittance transfer provider must 
disclose the exchange rate to be used by the provider for the remittance 
transfer. An exchange rate that is estimated must be disclosed pursuant 
to the requirements of Sec. 1005.32. A remittance transfer provider may 
not disclose, for example, that an exchange rate is ``unknown,'' 
``floating,'' or ``to be determined.'' If a provider does not have 
specific knowledge regarding the currency in which the funds will be 
received, the provider may rely on a sender's representation as to the 
currency in which funds will be received for purposes of determining 
whether an exchange rate is applied to the transfer. For example, if a 
sender requests that a remittance transfer be deposited into an account 
in U.S. dollars, the provider need not disclose an exchange rate, even 
if the account is actually denominated in Mexican pesos and the funds 
are converted prior to deposit into the account. If a sender does not 
know the currency in which funds will be received, the provider may 
assume that the currency in which funds will be received is the currency 
in which the remittance transfer is funded.
    2. Rounding. The exchange rate disclosed by the provider for the 
remittance transfer is required to be rounded. The provider may round to 
two, three, or four decimal places, at its option. For example, if one 
U.S. dollar exchanges for 11.9483779 Mexican pesos, a provider may 
disclose that the U.S. dollar exchanges for 11.9484 Mexican pesos. The 
provider may alternatively disclose, for example, that the U.S. dollar 
exchanges for 11.948 pesos or 11.95 pesos. On the other hand, if one 
U.S. dollar exchanges for exactly 11.9 Mexican pesos, the provider may 
disclose that ``US$1 = 11.9 MXN'' in lieu of, for example, ``US$1 = 
11.90 MXN.'' The exchange rate disclosed for the remittance transfer 
must be rounded consistently for each currency. For example, a provider 
may not round to two decimal places for some transactions exchanged into 
Euros and round to four decimal places for other transactions exchanged 
into Euros.
    3. Exchange rate used. The exchange rate used by the provider for 
the remittance transfer need not be set by that provider. For example, 
an exchange rate set by an intermediary institution and applied to the 
remittance transfer would be the exchange rate used for the remittance 
transfer and must be disclosed by the provider.

           31(b)(1)(vi) Disclosure of Covered Third-Party Fees

    1. Fees disclosed in the currency in which the funds will be 
received. Section 1005.31(b)(1)(vi) requires the disclosure of covered 
third-party fees in the currency in which the funds will be received by 
the designated recipient. A covered third-party fee described in 
Sec. 1005.31(b)(1)(vi) may be imposed in one currency, but the funds may 
be received by the designated recipient in another currency. In such 
cases, the remittance transfer provider must calculate the fee to be 
disclosed under Sec. 1005.31(b)(1)(vi) in the currency of receipt using 
the exchange rate in Sec. 1005.31(b)(1)(iv), including an estimated 
exchange rate to the extent permitted by Sec. 1005.32, prior to any 
rounding of the exchange rate. For example, an intermediary institution 
involved in sending an international wire transfer funded in U.S. 
dollars may impose a fee in U.S. dollars, but funds are ultimately 
deposited in the recipient's account in Euros. In this case, the 
provider would disclose the covered third-party fee to the sender 
expressed in Euros, calculated using the exchange rate disclosed under 
Sec. 1005.31(b)(1)(iv), prior to any rounding of the exchange rate. For 
purposes of Sec. 1005.31(b)(1)(v), (vi), and (vii), if a provider

[[Page 227]]

does not have specific knowledge regarding the currency in which the 
funds will be received, the provider may rely on a sender's 
representation as to the currency in which funds will be received. For 
example, if a sender requests that a remittance transfer be deposited 
into an account in U.S. dollars, the provider may provide the 
disclosures required in Sec. 1005.31(b)(1)(v), (vi), and (vii) in U.S. 
dollars, even if the account is actually denominated in Mexican pesos 
and the funds are subsequently converted prior to deposit into the 
account. If a sender does not know the currency in which funds will be 
received, the provider may assume that the currency in which funds will 
be received is the currency in which the remittance transfer is funded.

                      31(b)(1)(vii) Amount Received

    1. Amount received. The remittance transfer provider is required to 
disclose the amount that will be received by the designated recipient in 
the currency in which the funds will be received. The amount received 
must reflect the exchange rate, all fees imposed and all taxes collected 
on the remittance transfer by the remittance transfer provider, as well 
as any covered third-party fees required to be disclosed by 
Sec. 1005.31(b)(1)(vi). The disclosed amount received must be reduced by 
the amount of any fee or tax--except for a non-covered third-party fee 
or tax collected on the remittance transfer by a person other than the 
provider--that is imposed on the remittance transfer that affects the 
amount received even if that amount is imposed or itemized separately 
from the transaction amount.

    31(b)(1)(viii) Statement When Additional Fees and Taxes May Apply

    1. Required disclaimer when non-covered third-party fees and taxes 
collected by a person other than the provider may apply. If non-covered 
third-party fees or taxes collected by a person other than the provider 
apply to a particular remittance transfer or if a provider does not know 
if such fees or taxes may apply to a particular remittance transfer, 
Sec. 1005.31(b)(1)(viii) requires the provider to include the disclaimer 
with respect to such fees and taxes. Required disclosures under 
Sec. 1005.31(b)(1)(viii) may only be provided to the extent applicable. 
For example, if the designated recipient's institution is an agent of 
the provider and thus, non-covered third-party fees cannot apply to the 
transfer, the provider must disclose all fees imposed on the remittance 
transfer and may not provide the disclaimer regarding non-covered third-
party fees. In this scenario, the provider may only provide the 
disclaimer regarding taxes collected on the remittance transfer by a 
person other than the provider, as applicable. See Model Form A-30(c).
    2. Optional disclosure of non-covered third-party fees and taxes 
collected by a person other than the provider. When a remittance 
transfer provider knows the non-covered third-party fees or taxes 
collected on the remittance transfer by a person other than the provider 
that will apply to a particular transaction, Sec. 1005.31(b)(1)(viii) 
permits the provider to disclose the amount of such fees and taxes. 
Section 1005.32(b)(3)-1 additionally permits a provider to disclose an 
estimate of such fees and taxes, provided any estimates are based on 
reasonable source of information. See comment 32(b)(3). For example, a 
provider may know that the designated recipient's institution imposes an 
incoming wire fee for receiving a transfer. Alternatively, a provider 
may know that foreign taxes will be collected on the remittance transfer 
by a person other than the remittance transfer provider. In these 
examples, the provider may choose, at its option, to disclose the 
amounts of the relevant recipient institution fee and tax as part of the 
information disclosed pursuant to Sec. 1005.31(b)(1)(viii). The provider 
must not include that fee or tax in the amount disclosed pursuant to 
Sec. 1005.31(b)(1)(vi) or (b)(1)(vii). Fees and taxes disclosed under 
Sec. 1005.31(b)(1)(viii) must be disclosed in the currency in which the 
funds will be received. See comment 31(b)(1)(vi)-1. Estimates of any 
non-covered third-party fees and any taxes collected on the remittance 
transfer by a person other than the provider must be disclosed in 
accordance with Sec. 1005.32(b)(3).

                            31(b)(2) Receipt

    1. Date funds will be available. A remittance transfer provider does 
not comply with the requirements of Sec. 1005.31(b)(2)(ii) if it 
provides a range of dates that the remittance transfer may be available 
or an estimate of the date on which funds will be available. If a 
provider does not know the exact date on which funds will be available, 
the provider may disclose the latest date on which the funds will be 
available. For example, if funds may be available on January 3, but are 
not certain to be available until January 10, then a provider complies 
with Sec. 1005.31(b)(2)(ii) if it discloses January 10 as the date funds 
will be available. However, a remittance transfer provider may also 
disclose that funds ``may be available sooner'' or use a substantially 
similar term to inform senders that funds may be available to the 
designated recipient on a date earlier than the date disclosed. For 
example, a provider may disclose ``January 10 (may be available 
sooner).''
    2. Agencies required to be disclosed. A remittance transfer provider 
must only disclose information about a State agency that licenses or 
charters the remittance transfer provider with respect to the remittance

[[Page 228]]

transfer as applicable. For example, if a financial institution is 
solely regulated by a Federal agency, and not licensed or chartered by a 
State agency, then the institution need not disclose information about a 
State agency. A remittance transfer provider must disclose information 
about the Consumer Financial Protection Bureau, whether or not the 
Consumer Financial Protection Bureau is the provider's primary Federal 
regulator.
    3. State agency that licenses or charters a provider. A remittance 
transfer provider must only disclose information about one State agency 
that licenses or charters the remittance transfer provider with respect 
to the remittance transfer, even if other State agencies also regulate 
the remittance transfer provider. For example, a provider may disclose 
information about the State agency which granted its license. If a 
provider is licensed in multiple States, and the State agency that 
licenses the provider with respect to the remittance transfer is 
determined by a sender's location, a provider may make the determination 
as to the State in which the sender is located based on information that 
is provided by the sender and on any records associated with the sender. 
For example, if the State agency that licenses the provider with respect 
to an online remittance transfer is determined by a sender's location, a 
provider could rely on the sender's statement regarding the State in 
which the sender is located and disclose the State agency that licenses 
the provider in that State. A State-chartered bank must disclose 
information about the State agency that granted its charter, regardless 
of the location of the sender.
    4. Web site of the Consumer Financial Protection Bureau. Section 
1005.31(b)(2)(vi) requires a remittance transfer provider to disclose 
the name, toll-free telephone number(s), and Web site of the Consumer 
Financial Protection Bureau. Providers may satisfy this requirement by 
disclosing the Web site of the Consumer Financial Protection Bureau's 
homepage, www.consumerfinance.gov, as shown on Model Forms A-32, A-34, 
A-35, and A-39. Alternatively, providers may, but are not required to, 
disclose the Bureau's Web site as the address of a page on the Bureau's 
Web site that provides information for consumers about remittance 
transfers, currently, consumerfinance.gov/sending-money, as shown on 
Model Form A-31. In addition, providers making disclosures in a language 
other than English pursuant to Sec. 1005.31(g) may, but are not required 
to, disclose the Bureau's Web site as a page on the Bureau's Web site 
that provides information for consumers about remittance transfers in 
the relevant language, if such Web site exists. For example, a provider 
that is making disclosures in Spanish under Sec. 1005.31(g) may, but is 
not required to, disclose the Bureau's Web site on Spanish-language 
disclosures as the page on the Bureau's Web site that provides 
information regarding remittance transfers in Spanish, currently 
consumerfinance.gov/envios. This optional disclosure is shown on Model 
A-40. The Bureau will publish a list of any other foreign language Web 
sites that provide information regarding remittance transfers.
    5. Date of transfer on receipt. Where applicable, 
Sec. 1005.31(b)(2)(vii) requires disclosure of the date of transfer for 
the remittance transfer that is the subject of a receipt required by 
Sec. 1005.31(b)(2), including a receipt that is provided in accordance 
with the timing requirements in Sec. 1005.36(a). For any subsequent 
preauthorized remittance transfer subject to Sec. 1005.36(d)(2)(ii), the 
future date of transfer must be provided on any receipt provided for the 
initial transfer in that series of preauthorized remittance transfers, 
or where permitted, or disclosed as permitted by Sec. 1005.31(a)(3) and 
(a)(5), in accordance with Sec. 1005.36(a)(1)(i).
    6. Transfer date disclosures. The following example demonstrates how 
the information required by Sec. 1005.31(b)(2)(vii) and 
Sec. 1005.36(d)(1) should be disclosed on receipts: On July 1, a sender 
instructs the provider to send a preauthorized remittance transfer of 
US$100 each week to a designated recipient. The sender requests that 
first transfer in the series be sent on July 15. On the receipt, the 
remittance transfer provider discloses an estimated exchange rate to the 
sender pursuant to Sec. 1005.32(b)(2). In accordance with 
Sec. 1005.31(b)(2)(vii), the provider should disclose the date of 
transfer for that particular transaction (i.e., July 15) on the receipt 
provided when payment is made for the transfer pursuant to the timing 
requirements in Sec. 1005.36(a)(1)(i). The second receipt, which 
Sec. 1005.36(a)(1)(ii) requires to be provided within one business day 
after the date of the transfer or, for transfers from the sender's 
account held by the provider, on the next regularly scheduled periodic 
statement or within 30 days after payment is made if a periodic 
statement is not provided, is also required to include the date of 
transfer. If the provider discloses on either receipt the cancellation 
period applicable to and dates of subsequent preauthorized remittance 
transfers in accordance with Sec. 1005.36(d)(2), the disclosure must be 
phrased and formatted in such a way that it is clear to the sender which 
cancellation period is applicable to any date of transfer on the 
receipt.
    7. Cancellation disclosure. Remittance transfer providers that offer 
remittance transfers scheduled three or more business days before the 
date of the transfer, as well as remittance transfers scheduled fewer 
than three business days before the date of the transfer, may meet the 
cancellation disclosure requirements in Sec. 1005.31(b)(2)(iv) by 
describing the three-business-day and 30-minute cancellation periods on 
the same disclosure and

[[Page 229]]

using a checkbox or other method to clearly designate the applicable 
cancellation period. The provider may use a number of methods to 
indicate which cancellation period applies to the transaction including, 
but not limited to, a statement to that effect, use of a checkbox, 
highlighting, circling, and the like. For transfers scheduled three 
business days before the date of the transfer, the cancellation 
disclosures provided pursuant to Sec. 1005.31(b)(2)(iv) should be 
phrased and formatted in such a way that it is clear to the sender which 
cancellation period is applicable to the date of transfer disclosed on 
the receipt.

                      31(b)(3) Combined Disclosure

    1. Proof of payment. If a sender initiating a remittance transfer 
receives a combined disclosure provided under Sec. 1005.31(b)(3) and 
then completes the transaction, the remittance transfer provider must 
provide the sender with proof of payment. The proof of payment must be 
clear and conspicuous, provided in writing or electronically, and 
provided in a retainable form. The combined disclosure must be provided 
to the sender when the sender requests the remittance transfer, but 
prior to payment for the transfer, pursuant to Sec. 1005.31(e)(1), and 
the proof of payment must be provided when payment is made for the 
remittance transfer. The proof of payment for the transaction may be 
provided on the same piece of paper as the combined disclosure or on a 
separate piece of paper. For example, a provider may feed a combined 
disclosure through a computer printer when payment is made to add the 
date and time of the transaction, a confirmation code, and an indication 
that the transfer was paid in full. A provider may also provide this 
additional information to a sender on a separate piece of paper when 
payment is made. A remittance transfer provider does not comply with the 
requirements of Sec. 1005.31(b)(3) by providing a combined disclosure 
with no further indication that payment has been received.
    2. Confirmation of scheduling. As discussed in comment 31(e)-2, 
payment is considered to be made when payment is authorized for purposes 
of various timing requirements in subpart B, including with regard to 
the timing requirement for provision of the proof of payment described 
in Sec. 1005.31(b)(3)(i). However, where a transfer (whether a one-time 
remittance transfer or the first in a series of preauthorized remittance 
transfers) is scheduled before the date of transfer and the provider 
does not intend to process payment until at or near the date of 
transfer, the provider may provide a confirmation of scheduling in lieu 
of the proof of payment required by Sec. 1005.31(b)(3)(i). No further 
proof of payment is required when payment is later processed.

                   31(c) Specific Format Requirements

                            31(c)(1) Grouping

    1. Grouping. Information is grouped together for purposes of subpart 
B if multiple disclosures are in close proximity to one another and a 
sender can reasonably calculate the total amount of the transaction and 
the amount that will be received by the designated recipient. Model 
Forms A-30(a)-(d) through A-35 in Appendix A illustrate how information 
may be grouped to comply with the rule, but a remittance transfer 
provider may group the information in another manner. For example, a 
provider could provide the grouped information as a horizontal, rather 
than a vertical, calculation. A provider could also send multiple text 
messages sequentially to provide the full disclosure.

                          31(c)(4) Segregation

    1. Segregation. Disclosures may be segregated from other information 
in a variety of ways. For example, the disclosures may appear on a 
separate sheet of paper or may appear on the front of a page where other 
information appears on the back of that page. The disclosures may be set 
off from other information on a notice by outlining them in a box or 
series of boxes, with bold print dividing lines or a different color 
background, or by using other means.
    2. Directly related. For purposes of Sec. 1005.31(c)(4), the 
following is directly related information:
    i. The date and time of the transaction;
    ii. The sender's name and contact information;
    iii. The location at which the designated recipient may pick up the 
funds;
    iv. The confirmation or other identification code;
    v. A company name and logo;
    vi. An indication that a disclosure is or is not a receipt or other 
indicia of proof of payment;
    vii. A designated area for signatures or initials;
    viii. A statement that funds may be available sooner, as permitted 
by Sec. 1005.31(b)(2)(ii);
    ix. Instructions regarding the retrieval of funds, such as the 
number of days the funds will be available to the recipient before they 
are returned to the sender; and
    x. A statement that the provider makes money from foreign currency 
exchange.
    xi. Disclosure of any non-covered third-party fees and any taxes 
collected by a person other than the provider pursuant to 
Sec. 1005.31(b)(1)(viii).

                             31(d) Estimates

    1. Terms. A remittance transfer provider may provide estimates of 
the amounts required by Sec. 1005.31(b), to the extent permitted by 
Sec. 1005.32. An estimate must be described

[[Page 230]]

using the term ``Estimated'' or a substantially similar term in close 
proximity to the term or terms described. For example, a remittance 
transfer provider could describe an estimated disclosure as ``Estimated 
Transfer Amount,'' ``Other Estimated Fees and Taxes,'' or ``Total to 
Recipient (Est.).''

                              31(e) Timing

    1. Request to send a remittance transfer. Except as provided in 
Sec. 1005.36(a), pre-payment and combined disclosures are required to be 
provided to the sender when the sender requests the remittance transfer, 
but prior to payment for the transfer. Whether a consumer has requested 
a remittance transfer depends on the facts and circumstances. A sender 
that asks a provider to send a remittance transfer, and provides 
transaction-specific information to the provider in order to send funds 
to a designated recipient, has requested a remittance transfer. A sender 
that has sent an email, fax, mailed letter, or similar written or 
electronic communication has not requested a remittance transfer if the 
provider believes that it is impractical for the provider to treat that 
communication as a request and if the provider treats the communication 
as an inquiry and subsequently responds to that inquiry by calling the 
consumer on a telephone and orally gathering or confirming the 
information needed to process a request for a remittance transfer. See 
comment 31(a)(3)-2. Likewise, a consumer who solely inquires about that 
day's rates and fees to send to Mexico has not requested the provider to 
send a remittance transfer. Conversely, a sender who asks the provider 
at an agent location to send money to a recipient in Mexico and provides 
the sender and recipient information to the provider has requested a 
remittance transfer.
    2. When payment is made. Except as provided in Sec. 1005.36(a), a 
receipt required by Sec. 1005.31(b)(2) must be provided to the sender 
when payment is made for the remittance transfer. For example, a 
remittance transfer provider could give the sender the disclosures after 
the sender pays for the remittance transfer, but before the sender 
leaves the counter. A provider could also give the sender the 
disclosures immediately before the sender pays for the transaction. For 
purposes of subpart B, payment is made, for example, when a sender 
provides cash to the remittance transfer provider or when payment is 
authorized.
    3. Telephone transfer from an account. A sender may transfer funds 
from his or her account, as defined by Sec. 1005.2(b), that is held by 
the remittance transfer provider. For example, a financial institution 
may send an international wire transfer for a sender using funds from 
the sender's account with the institution. Except as provided in 
Sec. 1005.36(a), if the sender conducts such a transfer entirely by 
telephone, the institution may provide a receipt required by 
Sec. 1005.31(b)(2) on or with the sender's next regularly scheduled 
periodic statement for that account or within 30 days after payment is 
made for the remittance transfer if a periodic statement is not 
provided.
    4. Mobile application and text message transactions. If a 
transaction is conducted entirely by telephone via mobile application or 
text message, a receipt required by Sec. 1005.31(b)(2) may be mailed or 
delivered to the sender pursuant to the timing requirements in 
Sec. 1005.31(e)(2). For example, if a sender conducts a transfer 
entirely by telephone via mobile application, a remittance transfer 
provider may mail or deliver the disclosures to a sender pursuant to the 
timing requirements in Sec. 1005.31(e)(2).
    5. Statement about cancellation rights. The statement about the 
rights of the sender regarding cancellation required by 
Sec. 1005.31(b)(2)(iv) may, but need not, be disclosed pursuant to the 
timing requirements of Sec. 1005.31(e)(2) if a provider discloses this 
information pursuant to Sec. 1005.31(a)(3)(iii) or (a)(5)(iii). The 
statement about the rights of the sender regarding error resolution 
required by Sec. 1005.31(b)(2)(iv), however, must be disclosed pursuant 
to the timing requirements of Sec. 1005.31(e)(2).

                   31(f) Accurate When Payment Is Made

    1. No guarantee of disclosures provided before payment. Except as 
provided in Sec. 1005.36(b), disclosures required by Sec. 1005.31(b) or 
permitted by Sec. 1005.31(b)(1)(viii) must be accurate when a sender 
makes payment for the remittance transfer. A remittance transfer 
provider is not required to guarantee the terms of the remittance 
transfer in the disclosures required or permitted by Sec. 1005.31(b) for 
any specific period of time. However, if any of the disclosures required 
by Sec. 1005.31(b) or permitted by Sec. 1005.31(b)(1)(viii) are not 
accurate when a sender makes payment for the remittance transfer, a 
provider must give new disclosures before accepting payment.

                   31(g) Foreign Language Disclosures

    1. Number of foreign languages used in written disclosure. Section 
1005.31(g)(1) does not limit the number of languages that may be used on 
a single document, but such disclosures must be clear and conspicuous 
pursuant to Sec. 1005.31(a)(1). Under Sec. 1005.31(g)(1), a remittance 
transfer provider may, but need not, provide the sender with a written 
or electronic disclosure that is in English and, if applicable, in each 
foreign language that the remittance transfer provider principally uses 
to advertise, solicit, or market either orally, in writing, or 
electronically, at the office in which a sender conducts a transaction 
or asserts an error, respectively. Alternatively, the remittance 
transfer provider

[[Page 231]]

may provide the disclosure solely in English and, if applicable, the 
foreign language primarily used by the sender with the remittance 
transfer provider to conduct the transaction or assert an error, 
provided such language is principally used by the remittance transfer 
provider to advertise, solicit, or market either orally, in writing, or 
electronically, at the office in which the sender conducts the 
transaction or asserts the error, respectively. If the remittance 
transfer provider chooses the alternative method, it may provide 
disclosures in a single document with both languages or in two separate 
documents with one document in English and the other document in the 
applicable foreign language. The following examples illustrate this 
concept.
    i. A remittance transfer provider principally uses only Spanish and 
Vietnamese to advertise, solicit, or market remittance transfer services 
at a particular office. The remittance transfer provider may provide all 
senders with disclosures in English, Spanish, and Vietnamese, regardless 
of the language the sender uses with the remittance transfer provider to 
conduct the transaction or assert an error.
    ii. Same facts as i. If a sender primarily uses Spanish with the 
remittance transfer provider to conduct a transaction or assert an 
error, the remittance transfer provider may provide a written or 
electronic disclosure in English and Spanish, whether in a single 
document or two separate documents. If the sender primarily uses English 
with the remittance transfer provider to conduct the transaction or 
assert an error, the remittance transfer provider may provide a written 
or electronic disclosure solely in English. If the sender primarily uses 
a foreign language with the remittance transfer provider to conduct the 
transaction or assert an error that the remittance transfer provider 
does not use to advertise, solicit, or market either orally, in writing, 
or electronically, at the office in which the sender conducts the 
transaction or asserts the error, respectively, the remittance transfer 
provider may provide a written or electronic disclosure solely in 
English.
    2. Primarily used. The language primarily used by the sender with 
the remittance transfer provider to conduct the transaction is the 
primary language used by the sender with the remittance transfer 
provider to convey the information necessary to complete the 
transaction. Similarly, the language primarily used by the sender with 
the remittance transfer provider to assert the error is the primary 
language used by the sender with the remittance transfer provider to 
provide the information required by Sec. 1005.33(b) to assert an error. 
For example:
    i. A sender initiates a conversation with a remittance transfer 
provider with a greeting in English and expresses interest in sending a 
remittance transfer to Mexico in English. If the remittance transfer 
provider thereafter communicates with the sender in Spanish and the 
sender conveys the other information needed to complete the transaction, 
including the designated recipient's information and the amount and 
funding source of the transfer, in Spanish, then Spanish is the language 
primarily used by the sender with the remittance transfer provider to 
conduct the transaction.
    ii. A sender initiates a conversation with the remittance transfer 
provider with a greeting in English and states in English that there was 
a problem with a prior remittance transfer to Vietnam. If the remittance 
transfer provider thereafter communicates with the sender in Vietnamese 
and the sender uses Vietnamese to convey the information required by 
Sec. 1005.33(b) to assert an error, then Vietnamese is the language 
primarily used by the sender with the remittance transfer provider to 
assert the error.
    iii. A sender accesses the Web site of a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors. The Web site is offered in English and French. If the 
sender uses the French version of the Web site to conduct the remittance 
transfer, then French is the language primarily used by the sender with 
the remittance transfer provider to conduct the transaction.

                            31(g)(1) General

    1. Principally used. i. All relevant facts and circumstances 
determine whether a foreign language is principally used by the 
remittance transfer provider to advertise, solicit, or market under 
Sec. 1005.31(g)(1). Generally, whether a foreign language is considered 
to be principally used by the remittance transfer provider to advertise, 
solicit, or market is based on:
    A. The frequency with which the foreign language is used in 
advertising, soliciting, or marketing of remittance transfer services at 
that office;
    B. The prominence of the advertising, soliciting, or marketing of 
remittance transfer services in that foreign language at that office; 
and
    C. The specific foreign language terms used in the advertising 
soliciting, or marketing of remittance transfer service at that office.
    ii. For example, if a remittance transfer provider posts several 
prominent advertisements in a foreign language for remittance transfer 
services, including rate and fee information, on a consistent basis in 
an office, the provider is creating an expectation that a consumer could 
receive information on remittance transfer services in the foreign 
language used in the advertisements. The foreign language used in such 
advertisements would be considered to be principally used at

[[Page 232]]

that office based on the frequency and prominence of the advertising. In 
contrast, an advertisement for remittance transfer services, including 
rate and fee information, that is featured prominently at an office and 
is entirely in English, except for a greeting in a foreign language, 
does not create an expectation that a consumer could receive information 
on remittance transfer services in the foreign language used for such 
greeting. The foreign language used in such an advertisement is not 
considered to be principally used at that office based on the incidental 
specific foreign language term used.
    2. Advertise, solicit, or market. i. Any commercial message in a 
foreign language, appearing in any medium, that promotes directly or 
indirectly the availability of remittance transfer services constitutes 
advertising, soliciting, or marketing in such foreign language for 
purposes of Sec. 1005.31(g)(1). Examples illustrating when a foreign 
language is used to advertise, solicit, or market include:
    A. Messages in a foreign language in a leaflet or promotional flyer 
at an office.
    B. Announcements in a foreign language on a public address system at 
an office.
    C. On-line messages in a foreign language, such as on the internet.
    D. Printed material in a foreign language on any exterior or 
interior sign at an office.
    E. Point-of-sale displays in a foreign language at an office.
    F. Telephone solicitations in a foreign language.
    ii. Examples illustrating use of a foreign language for purposes 
other than to advertise, solicit, or market include:
    A. Communicating in a foreign language (whether by telephone, 
electronically, or otherwise) about remittance transfer services in 
response to a consumer-initiated inquiry.
    B. Making disclosures in a foreign language that are required by 
Federal or other applicable law.
    3. Office. An office includes any physical location, telephone 
number, or Web site of a remittance transfer provider where a sender may 
conduct a remittance transfer or assert an error for a remittance 
transfer. The location need not exclusively offer remittance transfer 
services. For example, if an agent of a remittance transfer provider is 
located in a grocery store, the grocery store is considered an office 
for purposes of Sec. 1005.31(g)(1). Because a consumer must be located 
in a State in order to be considered a ``sender'' under Sec. 1005.30(g), 
a Web site is not an office for purposes of Sec. 1005.31(g)(1), even if 
the Web site can be accessed by consumers that are located in the United 
States, unless a sender may conduct a remittance transfer on the Web 
site or may assert an error for a remittance transfer on the Web site.
    4. At the office. Any advertisement, solicitation, or marketing is 
considered to be made at the office in which a sender conducts a 
transaction or asserts an error if such advertisement, solicitation, or 
marketing is posted, provided, or made: at a physical office of a 
remittance transfer provider; on a Web site of a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors; during a telephone call with a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors; or via mobile application or text message by a remittance 
transfer provider if the mobile application or text message may be used 
by senders to conduct remittance transfers or assert errors. An 
advertisement, solicitation, or marketing that is considered to be made 
at an office does not include general advertisements, solicitations, or 
marketing that are not intended to be made at a particular office. For 
example, if an advertisement for remittance transfers in Chinese appears 
in a Chinese newspaper that is being distributed at a grocery store in 
which the agent of a remittance transfer provider is located, such 
advertisement would not be considered to be made at that office. For 
disclosures provided pursuant to Sec. 1005.31, the relevant office is 
the office in which the sender conducts the transaction. For disclosures 
provided pursuant to Sec. 1005.33 for error resolution purposes, the 
relevant office is the office in which the sender first asserts the 
error, not the office where the transaction was conducted.

                       Section 1005.32--Estimates

    1. Disclosures where estimates can be used. Sections 1005.32(a) and 
(b)(1) permit estimates to be used in certain circumstances for 
disclosures described in Sec. Sec. 1005.31(b)(1) through (3) and 
1005.36(a)(1) and(2). To the extent permitted in Sec. 1005.32(a) and 
(b)(1), estimates may be used in the pre-payment disclosure described in 
Sec. 1005.31(b)(1), the receipt disclosure described in 
Sec. 1005.31(b)(2), the combined disclosure described in 
Sec. 1005.31(b)(3), and the pre-payment disclosures and receipt 
disclosures for both first and subsequent preauthorized remittance 
transfers described in Sec. 1005.36(a)(1) and (a)(2). Section 
1005.32(b)(2) permits estimates to be used for certain information if 
the remittance transfer is scheduled by a sender five or more business 
days before the date of the transfer, for disclosures described in 
Sec. 1005.36(a)(1)(i) and (a)(2)(i).

           32(a) Temporary Exception for Insured Institutions

                            32(a)(1) General

    1. Control. For purposes of this section, an insured institution 
cannot determine exact

[[Page 233]]

amounts ``for reasons beyond its control'' when a person other than the 
insured institution or with which the insured institution has no 
correspondent relationship sets the exchange rate required to be 
disclosed under Sec. 1005.31(b)(1)(iv) or imposes a covered third-party 
fee required to be disclosed under Sec. 1005.31(b)(1)(vi). For example, 
if an insured institution has a correspondent relationship with an 
intermediary financial institution in another country and that 
intermediary institution sets the exchange rate or imposes a fee for 
remittance transfers sent from the insured institution to the 
intermediary institution, then the insured institution must determine 
exact amounts for the disclosures required under Sec. 1005.31(b)(1)(iv) 
or (vi), because the determination of those amounts are not beyond the 
insured institution's control.
    2. Examples of scenarios that qualify for the temporary exception. 
The following examples illustrate when an insured institution cannot 
determine an exact amount ``for reasons beyond its control'' and thus 
would qualify for the temporary exception.
    i. Exchange rate. An insured institution cannot determine the exact 
exchange rate to disclose under Sec. 1005.31(b)(1)(iv) for an 
international wire transfer if the insured institution does not set the 
exchange rate, and the rate is set when the funds are deposited into the 
recipient's account by the designated recipient's institution with which 
the insured institution does not have a correspondent relationship. The 
insured institution will not know the exchange rate that the recipient 
institution will apply when the funds are deposited into the recipient's 
account.
    ii. Covered third-party fees. An insured institution cannot 
determine the exact covered third-party fees to disclose under 
Sec. 1005.31(b)(1)(vi) if an intermediary institution with which the 
insured institution does not have a correspondent relationship, imposes 
a transfer or conversion fee.
    3. Examples of scenarios that do not qualify for the temporary 
exception. The following examples illustrate when an insured institution 
can determine exact amounts and thus would not qualify for the temporary 
exception.
    i. Exchange rate. An insured institution can determine the exact 
exchange rate required to be disclosed under Sec. 1005.31(b)(1)(iv) if 
it converts the funds into the local currency to be received by the 
designated recipient using an exchange rate that it sets. The 
determination of the exchange rate is in the insured institution's 
control even if there is no correspondent relationship with an 
intermediary institution in the transmittal route or the designated 
recipient's institution.
    ii. Covered third-party fees. An insured institution can determine 
the exact covered third-party fees required to be disclosed under 
Sec. 1005.31(b)(1)(vi) if it has agreed upon the specific fees with an 
intermediary correspondent institution, and this correspondent 
institution is the only institution in the transmittal route to the 
designated recipient's institution.

                       32(b) Permanent Exceptions

    32(b)(1) Permanent Exceptions for Transfers to Certain Countries

    1. Laws of the recipient country. The laws of the recipient country 
do not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when a law or regulation of the recipient 
country requires the person making funds directly available to the 
designated recipient to apply an exchange rate that is:
    i. Set by the government of the recipient country after the 
remittance transfer provider sends the remittance transfer or
    ii. Set when the designated recipient receives the funds.
    2. Example illustrating when exact amounts can and cannot be 
determined because of the laws of the recipient country.
    i. The laws of the recipient country do not permit a remittance 
transfer provider to determine the exact exchange rate required to be 
disclosed under Sec. 1005.31(b)(1)(iv) when, for example, the government 
of the recipient country, on a daily basis, sets the exchange rate that 
must, by law, apply to funds received and the funds are made available 
to the designated recipient in the local currency the day after the 
remittance transfer provider sends the remittance transfer.
    ii. In contrast, the laws of the recipient country permit a 
remittance transfer provider to determine the exact exchange rate 
required to be disclosed under Sec. 1005.31(b)(1)(iv) when, for example, 
the government of the recipient country ties the value of its currency 
to the U.S. dollar.
    3. Method by which transactions are made in the recipient country. 
The method by which transactions are made in the recipient country does 
not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when transactions are sent via international 
ACH on terms negotiated between the United States government and the 
recipient country's government, under which the exchange rate is a rate 
set by the recipient country's central bank or other governmental 
authority after the provider sends the remittance transfer.
    4. Example illustrating when exact amounts can and cannot be 
determined because of the method by which transactions are made in the 
recipient country.
    i. The method by which transactions are made in the recipient 
country does not permit a remittance transfer provider to determine the 
exact exchange rate required to be disclosed under 
Sec. 1005.31(b)(1)(iv) when the provider sends a remittance transfer via

[[Page 234]]

international ACH on terms negotiated between the United States 
government and the recipient country's government, under which the 
exchange rate is a rate set by the recipient country's central bank on 
the business day after the provider has sent the remittance transfer.
    ii. In contrast, a remittance transfer provider would not qualify 
for the Sec. 1005.32(b)(1)(i)(B) methods exception if it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and a private-sector entity or entities in 
the recipient country, under which the exchange rate is set by the 
institution acting as the entry point to the recipient country's 
payments system on the next business day. However, a remittance transfer 
provider sending a remittance transfer using such a method may qualify 
for the Sec. 1005.32(a) temporary exception.
    iii. A remittance transfer provider would not qualify for the 
Sec. 1005.32(b)(1)(i)(B) methods exception if, for example, it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and the recipient country's government, 
under which the exchange rate is set by the recipient country's central 
bank or other governmental authority before the sender requests a 
transfer.
    5. Safe harbor list. If a country is included on a safe harbor list 
published by the Bureau under Sec. 1005.32(b)(1)(ii), a remittance 
transfer provider may provide estimates of the amounts to be disclosed 
under Sec. 1005.31(b)(1)(iv) through (b)(1)(vii). If a country does not 
appear on the Bureau's list, a remittance transfer provider may provide 
estimates under Sec. 1005.32(b)(1)(i) if the provider determines that 
the recipient country does not legally permit or method by which 
transactions are conducted in that country does not permit the provider 
to determine exact disclosure amounts.
    6. Reliance on Bureau list of countries. A remittance transfer 
provider may rely on the list of countries published by the Bureau to 
determine whether the laws of a recipient country do not permit the 
remittance transfer provider to determine exact amounts required to be 
disclosed under Sec. 1005.31(b)(1)(iv) through (vii). Thus, if a country 
is on the Bureau's list, the provider may give estimates under this 
section, unless a remittance transfer provider has information that a 
country on the Bureau's list legally permits the provider to determine 
exact disclosure amounts.
    7. Change in laws of recipient country. i. If the laws of a 
recipient country change such that a remittance transfer provider can 
determine exact amounts, the remittance transfer provider must begin 
providing exact amounts for the required disclosures as soon as 
reasonably practicable if the provider has information that the country 
legally permits the provider to determine exact disclosure amounts.
    ii. If the laws of a recipient country change such that a remittance 
transfer provider cannot determine exact disclosure amounts, the 
remittance transfer provider may provide estimates under 
Sec. 1005.32(b)(1)(i), even if that country does not appear on the list 
published by the Bureau.

32(b)(2) Permanent Exceptions for Transfers Scheduled Before the Date of 
                                Transfer

    1. Fixed amount of foreign currency. The following is an example of 
when and how a remittance transfer provider may disclose estimates for 
remittance transfers scheduled five or more business days before the 
date of transfer where the provider agrees to the sender's request to 
fix the amount to be transferred in a currency in which the transfer 
will be received and not the currency in which it was funded. If on 
February 1, a sender schedules a 1000 Euro wire transfer to be sent from 
the sender's bank account denominated in U.S. dollars to a designated 
recipient on February 15, Sec. 1005.32(b)(2) allows the provider to 
estimate the amount that will be transferred to the designated recipient 
(i.e., the amount described in Sec. 1005.31(b)(1)(i)), any fees imposed 
or taxes collected on the remittance transfer by the provider (if based 
on the amount transferred) (i.e., the amount described in 
Sec. 1005.31(b)(1)(ii)), and the total amount of the transaction (i.e., 
the amount described in Sec. 1005.31(b)(1)(iii)). The provider may also 
estimate any covered third-party fees if the exchange rate is also 
estimated and the estimated exchange rate affects the amount of fees (as 
allowed by Sec. 1005.32(b)(2)(ii)).
    2. Relationship to Sec. 1005.10(d). To the extent Sec. 1005.10(d) 
requires, for an electronic fund transfer that is also a remittance 
transfer, notice when a preauthorized electronic fund transfer from the 
consumer's account will vary in amount from the previous transfer under 
the same authorization or from the preauthorized amount, that provision 
applies even if subpart B would not otherwise require notice before the 
date of transfer. However, insofar as Sec. 1005.10(d) does not specify 
the form of such notice, a notice sent pursuant to Sec. 1005.36(a)(2)(i) 
will satisfy Sec. 1005.10(d) as long as the timing requirements of 
Sec. 1005.10(d) are satisfied.

  32(b)(3) Permanent Exception for Optional Disclosure of Non-Covered 
  Third-Party Fees and Taxes Collected on the Remittance Transfer by a 
                     Person Other Than the Provider

    1. Reasonable sources of information. Pursuant to Sec. 1005.32(b)(3) 
a remittance transfer provider may estimate applicable non-covered 
third-party fees and taxes collected on the remittance transfer by a 
person other than the provider using reasonable sources of

[[Page 235]]

information. Reasonable sources of information may include, for example: 
information obtained from recent transfers to the same institution or 
the same country or region; fee schedules from the recipient 
institution; fee schedules from the recipient institution's competitors; 
surveys of recipient institution fees in the same country or region as 
the recipient institution; information provided or surveys of recipient 
institutions' regulators or taxing authorities; commercially or publicly 
available databases, services or sources; and information or resources 
developed by international nongovernmental organizations or 
intergovernmental organizations.

                        32(c) Bases for Estimates

                         32(c)(1) Exchange Rate

    1. Most recent exchange rate for qualifying international ACH 
transfers. If the exchange rate for a remittance transfer sent via 
international ACH that qualifies for the Sec. 1005.32(b)(1)(i)(B) 
exception is set the following business day, the most recent exchange 
rate available for a transfer is the exchange rate set for the day that 
the disclosure is provided, i.e., the current business day's exchange 
rate.
    2. Publicly available. Examples of publicly available sources of 
information containing the most recent wholesale exchange rate for a 
currency include U.S. news services, such as Bloomberg, the Wall Street 
Journal, and the New York Times; a recipient country's national news 
services, and a recipient country's central bank or other government 
agency.
    3. Spread. An estimate for disclosing the exchange rate based on the 
most recent publicly available wholesale exchange rate must also reflect 
any spread the remittance transfer provider typically applies to the 
wholesale exchange rate for remittance transfers for a particular 
currency.
    4. Most recent. For the purposes of Sec. 1005.32(c)(1)(ii) and 
(iii), if the exchange rate with respect to a particular currency is 
published or provided multiple times throughout the day because the 
exchange rate fluctuates throughout the day, a remittance transfer 
provider may use any exchange rate available on that day to determine 
the most recent exchange rate.

                    32(c)(3) Covered Third-Party Fees

    1. Potential transmittal routes. A remittance transfer from the 
sender's account at an insured institution to the designated recipient's 
institution may take several routes, depending on the correspondent 
relationships each institution in the transmittal route has with other 
institutions. In providing an estimate of the fees required to be 
disclosed under Sec. 1005.31(b)(1)(vi) pursuant to the Sec. 1005.32(a) 
temporary exception, an insured institution may rely upon the 
representations of the designated recipient's institution and the 
institutions that act as intermediaries in any one of the potential 
transmittal routes that it reasonably believes a requested remittance 
transfer may travel.

  32(d) Bases for Estimates for Transfers Scheduled Before the Date of 
                                Transfer

    1. In general. When providing an estimate pursuant to 
Sec. 1005.32(b)(2), Sec. 1005.32(d) requires that a remittance transfer 
provider's estimated exchange rate must be the exchange rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use that day in providing disclosures to a sender 
requesting such a remittance transfer to be made on the same day. If, 
for the same-day remittance transfer, the provider could utilize either 
of the other two exceptions permitting the provision of estimates in 
Sec. 1005.32(a) or (b)(1), the provider may provide estimates based on a 
methodology permitted under Sec. 1005.32(c). For example, if, on 
February 1, the sender schedules a remittance transfer to occur on 
February 10, the provider should disclose the exchange rate as if the 
sender was requesting the transfer be sent on February 1. However, if at 
the time payment is made for the requested transfer, the remittance 
transfer provider could not send any remittance transfer until the next 
day (for reasons such as the provider's deadline for the batching of 
transfers), the remittance transfer provider can use the rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use in providing disclosures that day with respect to a 
remittance transfer requested that day that could not be sent until the 
following day.

            Section 1005.33--Procedures for Resolving Errors

                        33(a) Definition of Error

    1. Incorrect amount of currency paid by sender. Section 
1005.33(a)(1)(i) covers circumstances in which a sender pays an amount 
that differs from the total amount of the transaction, including fees 
imposed in connection with the transfer, stated in the receipt or 
combined disclosure provided under Sec. 1005.31(b)(2) or (3). Such error 
may be asserted by a sender regardless of the form or method of payment 
provided, including when a debit, credit, or prepaid card is used to 
fund the transfer and an excess amount is paid. For example, if a 
remittance transfer provider incorrectly charged a sender's credit card 
account for US$150, and US$120 was sent, plus a transfer fee of US$10, 
the sender could assert an error with the remittance transfer provider 
for the incorrect charge under Sec. 1005.33(a)(1)(i).

[[Page 236]]

    2. Incorrect amount of currency received--coverage. Section 
1005.33(a)(1)(iii) covers circumstances in which the designated 
recipient receives an amount of currency that differs from the amount of 
currency identified on the disclosures provided to the sender, except 
where the disclosure stated an estimate of the amount of currency to be 
received in accordance with Sec. 1005.32 and the difference results from 
application of the actual exchange rate, fees, and taxes, rather than 
any estimated amounts, or the failure was caused by circumstances 
outside the remittance transfer provider's control. A designated 
recipient may receive an amount of currency that differs from the amount 
of currency disclosed, for example, if an exchange rate other than the 
disclosed rate is applied to the remittance transfer, or if the provider 
fails to account for fees or taxes that may be imposed by the provider 
or a third party before the transfer is picked up by the designated 
recipient or deposited into the recipient's account in the foreign 
country. However, if the provider rounds the exchange rate used to 
calculate the amount received consistent with Sec. 1005.31(b)(1)(iv) and 
comment 31(b)(1)(iv)-2 for the disclosed rate, there is no error if the 
designated recipient receives an amount of currency that results from 
applying the exchange rate used, prior to any rounding of the exchange 
rate, to calculate fees, taxes, or the amount received rather than the 
disclosed rate. Section 1005.33(a)(1)(iii) also covers circumstances in 
which the remittance transfer provider transmits an amount that differs 
from the amount requested by the sender.
    3. Incorrect amount of currency received--examples. For purposes of 
the following examples illustrating the error for an incorrect amount of 
currency received under Sec. 1005.33(a)(1)(iii), assume that none of the 
circumstances permitting an estimate under Sec. 1005.32 apply (unless 
otherwise stated).
    i. A consumer requests to send funds to a relative in Mexico to be 
received in local currency. Upon receiving the sender's payment, the 
remittance transfer provider provides a receipt indicating that the 
amount of currency that will be received by the designated recipient 
will be 1180 Mexican pesos, after fees and taxes are applied. However, 
when the relative picks up the transfer in Mexico a day later, he only 
receives 1150 Mexican pesos because the exchange rate applied by the 
recipient agent in Mexico was lower than the exchange rate used by the 
provider, prior to any rounding of the exchange rate, to disclose the 
amount of currency to be received by the designated recipient on the 
receipt. Because the designated recipient has received less than the 
amount of currency disclosed on the receipt, an error has occurred.
    ii. A consumer requests to send funds to a relative in Colombia to 
be received in local currency. The remittance transfer provider provides 
the sender a receipt stating an amount of currency that will be received 
by the designated recipient, which does not reflect the additional 
foreign taxes that will be collected in Colombia on the transfer but 
does include the statement required by Sec. 1005.31(b)(1)(viii). If the 
designated recipient will receive less than the amount of currency 
disclosed on the receipt due solely to the additional foreign taxes that 
the provider was not required to disclose, no error has occurred.
    iii. Same facts as in ii., except that the receipt provided by the 
remittance transfer provider does not reflect additional fees that are 
imposed by the receiving agent in Colombia on the transfer. Because the 
designated recipient will receive less than the amount of currency 
disclosed in the receipt due to the additional covered third-party fees, 
an error has occurred.
    iv. A consumer requests to send US$250 to a relative in India to a 
U.S. dollar-denominated account held by the relative at an Indian bank. 
Instead of the US$250 disclosed on the receipt as the amount to be sent, 
the remittance transfer provider sends US$200, resulting in a smaller 
deposit to the designated recipient's account than was disclosed as the 
amount to be received after fees and taxes. Because the designated 
recipient received less than the amount of currency that was disclosed, 
an error has occurred.
    v. A consumer requests to send US$100 to a relative in a foreign 
country to be received in local currency. The remittance transfer 
provider provides the sender a receipt that discloses an estimated 
exchange rate, other taxes, and amount of currency that will be received 
due to the law in the foreign country requiring that the exchange rate 
be set by the foreign country's central bank. When the relative picks up 
the remittance transfer, the relative receives less currency than the 
estimated amount disclosed to the sender on the receipt due to 
application of the actual exchange rate, fees, and taxes, rather than 
any estimated amounts. Because Sec. 1005.32(b) permits the remittance 
transfer provider to disclose an estimate of the amount of currency to 
be received, no error has occurred unless the estimate was not based on 
an approach set forth under Sec. 1005.32(c).
    vi. A sender requests that his bank send US$120 to a designated 
recipient's account at an institution in a foreign country. The foreign 
institution is not an agent of the provider. Only US$100 is deposited 
into the designated recipient's account because the recipient 
institution imposed a US$20 incoming wire fee and deducted the fee from 
the amount transferred. Because this fee is a non-covered third-party 
fee that the provider is not required to disclose under 
Sec. 1005.31(b)(1)(vi), no error has occurred if the

[[Page 237]]

provider provided the disclosure required by Sec. 1005.31(b)(1)(viii).
    4. Incorrect amount of currency received--extraordinary 
circumstances. Under Sec. 1005.33(a)(1)(iii)(B), a remittance transfer 
provider's failure to make available to a designated recipient the 
amount of currency disclosed pursuant to Sec. 1005.31(b)(1)(vii) and 
stated in the disclosure provided pursuant to Sec. 1005.31(b)(2) or (3) 
for the remittance transfer is not an error if such failure was caused 
by extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated. 
Examples of extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated under 
Sec. 1005.33(a)(1)(iii)(B) include circumstances such as war or civil 
unrest, natural disaster, garnishment or attachment of some of the funds 
after the transfer is sent, and government actions or restrictions that 
could not have been reasonably anticipated by the remittance transfer 
provider, such as the imposition of foreign currency controls or foreign 
taxes unknown at the time the receipt or combined disclosure is provided 
under Sec. 1005.31(b)(2) or (3).
    5. Failure to make funds available by disclosed date of 
availability--coverage. Section 1005.33(a)(1)(iv) generally covers 
disputes about the failure to make funds available in connection with a 
remittance transfer to a designated recipient by the disclosed date of 
availability. If only a portion of the funds were made available by the 
disclosed date of availability, then Sec. 1005.33(a)(1)(iv) does not 
apply, but Sec. 1005.33(a)(1)(iii) may apply instead. The following are 
examples of errors for failure to make funds available by the disclosed 
date of availability (assuming that none of the exceptions in 
Sec. 1005.33(a)(1)(iv)(A), (B), or (C) apply).
    i. Late or non-delivery of a remittance transfer;
    ii. Delivery of funds to the wrong account;
    iii. The fraudulent pick-up of a remittance transfer in a foreign 
country by a person other than the designated recipient;
    iv. The recipient agent or institution's retention of the remittance 
transfer, instead of making the funds available to the designated 
recipient.
    6. Failure to make funds available by disclosed date of 
availability--extraordinary circumstances. Under 
Sec. 1005.33(a)(1)(iv)(A), a remittance transfer provider's failure to 
deliver or transmit a remittance transfer by the disclosed date of 
availability is not an error if such failure was caused by extraordinary 
circumstances outside the remittance transfer provider's control that 
could not have been reasonably anticipated. Examples of extraordinary 
circumstances outside the remittance transfer provider's control that 
could not have been reasonably anticipated under 
Sec. 1005.33(a)(1)(iv)(A) include circumstances such as war or civil 
unrest, natural disaster, garnishment or attachment of funds after the 
transfer is sent, and government actions or restrictions that could not 
have been reasonably anticipated by the remittance transfer provider, 
such as the imposition of foreign currency controls.
    7. Failure to make funds available by disclosed date of 
availability--fraud and other screening procedures. Under 
Sec. 1005.33(a)(1)(iv)(B), a remittance transfer provider's failure to 
deliver funds by the disclosed date of availability is not an error if 
such delay is related to the provider's or any third party's 
investigation necessary to address potentially suspicious, blocked or 
prohibited activity, and the provider did not and could not have 
reasonably foreseen the delay so as to enable it to timely disclose an 
accurate date of availability when providing the sender with a receipt 
or combined disclosure. For example, no error occurs if delivery of 
funds is delayed because, after the receipt is provided, the provider's 
fraud screening system flags a remittance transfer because the 
designated recipient has a name similar to the name of a blocked person 
under a sanctions program and further investigation is needed to 
determine that the designated recipient is not actually a blocked 
person. Similarly, no error occurs where, after disclosing a date of 
availability to the sender, a remittance transfer provider receives 
specific law enforcement information indicating that the characteristics 
of a remittance transfer match a pattern of fraudulent activity, and as 
a result, the provider deems it necessary to delay delivery of the funds 
to allow for further investigation. However, if a delay could have been 
reasonably foreseen, the exception in Sec. 1005.33(a)(1)(iv)(B) would 
not apply. For example, if a provider knows in time to make a disclosure 
that all remittance transfers to a certain geographic area must undergo 
screening procedures that routinely delay such transfers by two days, 
the provider's failure to include the additional two days in its 
disclosure of the date of availability constitutes an error if delivery 
of the funds is indeed delayed beyond the disclosed date of 
availability.
    8. Sender account number or recipient institution identifier error. 
The exception in Sec. 1005.33(a)(1)(iv)(D) applies where a sender gives 
the remittance transfer provider an incorrect account number or 
recipient institution identifier and all five conditions in 
Sec. 1005.33(h) are satisfied. The exception does not apply, however, 
where the failure to make funds available is the result of a mistake by 
a provider or a third party or due to incorrect or insufficient 
information provided by the sender other than an incorrect account 
number or recipient institution identifier, such as an incorrect name of 
the recipient institution.

[[Page 238]]

    9. Account number or recipient institution identifier. For purposes 
of the exception in Sec. 1005.33(a)(1)(iv)(D), the terms account number 
and recipient institution identifier refer to alphanumerical account or 
institution identifiers other than names or addresses, such as account 
numbers, routing numbers, Canadian transit numbers, International Bank 
Account Numbers (IBANs), Business Identifier Codes (BICs)) and other 
similar account or institution identifiers used to route a transaction. 
In addition and for purposes of this exception, the term designated 
recipient's account in Sec. 1005.30(h)(2) refers to an asset account, 
regardless of whether it is a consumer asset account, established for 
any purpose and held by a bank, savings association, credit union, or 
equivalent institution. A designated recipient's account does not, 
however, include a credit card, prepaid card, or a virtual account held 
by an Internet-based or mobile telephone company that is not a bank, 
savings association, credit union or equivalent institution.
    10. Recipient-requested changes. Under Sec. 1005.33(a)(2)(iii), a 
change requested by the designated recipient that the remittance 
transfer provider or others involved in the remittance transfer decide 
to accommodate is not considered an error. The exception under 
Sec. 1005.33(a)(2)(iii) is available only if the change is made solely 
because the designated recipient requested the change. For example, if a 
sender requests to send US$100 to a designated recipient at a designated 
location, but the designated recipient requests the amount in a 
different currency (either at the sender-designated location or another 
location requested by the recipient) and the remittance transfer 
provider accommodates the recipient's request, the change does not 
constitute an error.
    11. Change from disclosure made in reliance on sender information. 
Under the commentary accompanying Sec. 1005.31, the remittance transfer 
provider may rely on the sender's representations in making certain 
disclosures. See, e.g., comments 31(b)(1)(iv)-1 and 31(b)(1)(vi)-1. For 
example, suppose a sender requests U.S. dollars to be deposited into an 
account of the designated recipient and represents that the account is 
U.S. dollar-denominated. If the designated recipient's account is 
actually denominated in local currency and the recipient account-holding 
institution must convert the remittance transfer into local currency in 
order to deposit the funds and complete the transfer, the change in 
currency does not constitute an error pursuant to 
Sec. 1005.33(a)(2)(iv).

                    33(b) Notice of Error From Sender

    1. Person asserting or discovering error. The error resolution 
procedures of this section apply only when a notice of error is received 
from the sender, and not when a notice of error is received from the 
designated recipient or when the remittance transfer provider itself 
discovers and corrects an error.
    2. Content of error notice. The notice of error is effective so long 
as the remittance transfer provider is able to identify the elements in 
Sec. 1005.33(b)(1)(ii). For example, the sender could provide the 
confirmation number or code that would be used by the designated 
recipient to pick up the transfer, or other identification number or 
code supplied by the remittance transfer provider in connection with the 
transfer, if such number or code is sufficient for the remittance 
transfer provider to identify the sender (and contact information), 
designated recipient, and the transfer in question. For an account-based 
remittance transfer, the notice of error is effective even if it does 
not contain the sender's account number, so long as the remittance 
transfer provider is able to identify the account and the transfer in 
question.
    3. Address on notice of error. A remittance transfer provider may 
request, or a sender may provide, the sender's or designated recipient's 
email address, as applicable, instead of a physical address, on a notice 
of error.
    4. Effect of late notice. A remittance transfer provider is not 
required to comply with the requirements of this section for any notice 
of error from a sender that is received by the provider more than 180 
days from the disclosed date of availability of the remittance transfer 
to which the notice of error applies or, if applicable, more than 60 
days after a provider sent documentation, additional information, or 
clarification requested by the sender, provided such date is later than 
180 days after the disclosed date of availability.
    5. Notice of error provided to agent. A notice of error provided by 
a sender to an agent of the remittance transfer provider is deemed to be 
received by the provider under Sec. 1005.33(b)(1)(i) when received by 
the agent.
    6. Consumer notice of error resolution rights. Section 1005.31 
requires a remittance transfer provider to include an abbreviated notice 
of the consumer's error resolution rights on the receipt or combined 
notice provided under Sec. 1005.31(b)(2) or (3). In addition, the 
remittance transfer provider must make available to a sender upon 
request, a notice providing a full description of the sender's error 
resolution rights, using language set forth in Appendix A of this part 
(Model Form A-36) or substantially similar language.

              33(c) Time Limits and Extent of Investigation

    1. Notice to sender of finding of error. If the remittance transfer 
provider determines during its investigation that an error occurred as 
described by the sender, the remittance provider may inform the sender 
of its findings either orally or in writing. However, if the provider 
determines that no error or a

[[Page 239]]

different error occurred, the provider must provide a written 
explanation of its findings under Sec. 1005.33(d)(1).
    2. Incorrect or insufficient information provided for transfer. The 
remedy in Sec. 1005.33(c)(2)(iii) applies if a remittance transfer 
provider's failure to make funds in connection with a remittance 
transfer available to a designated recipient by the disclosed date of 
availability occurred because the sender provided incorrect or 
insufficient information in connection with the transfer, such as by 
erroneously identifying the designated recipient's address or by 
providing insufficient information such that the entity distributing the 
funds cannot identify the correct designated recipient. A sender is not 
considered to have provided incorrect or insufficient information for 
purposes of Sec. 1005.33(c)(2)(iii) if the provider discloses the 
incorrect location where the transfer may be picked up, gives the wrong 
confirmation number/code for the transfer, or otherwise miscommunicates 
information necessary for the designated recipient to pick-up the 
transfer. The remedies in Sec. 1005.33(c)(2)(iii) do not apply if the 
sender provided an incorrect account number or recipient institution 
identifier and the provider has met the requirements of Sec. 1005.33(h) 
because under Sec. 1005.33(a)(1)(iv)(D) no error would have occurred. 
See Sec. 1005.33(a)(1)(iv)(D) and comment 33(a)-7.
    3. Designation of requested remedy. Under Sec. 1005.33(c)(2)(ii), 
the sender may generally choose to obtain a refund of funds that were 
not properly transmitted or delivered to the designated recipient or, 
request redelivery of the amount appropriate to correct the error at no 
additional cost unless the error is determined to have occurred because 
the sender provided incorrect or insufficient information. Upon 
receiving the sender's request, the remittance transfer provider shall 
correct the error within one business day, or as soon as reasonably 
practicable, applying the same exchange rate, fees, and taxes stated in 
the disclosure provided under Sec. 1005.31(b)(2) or (3), if the sender 
requests delivery of the amount appropriate to correct the error and the 
error did not occur because the sender provided incorrect or 
insufficient information. The provider may also request that the sender 
indicate the preferred remedy at the time the sender provides notice of 
the error although if provider does so, it should indicate that the if 
the sender chooses a resend at the time, the remedy may be unavailable 
if the error occurred because the sender provided incorrect or 
insufficient information. However, if the sender does not indicate the 
desired remedy at the time of providing notice of error, the remittance 
transfer provider must notify the sender of any available remedies in 
the report provided under Sec. 1005.33(c)(1) or (d)(1) if the provider 
determines an error occurred.
    4. Default remedy. Unless the sender provided incorrect or 
insufficient information and Sec. 1005.33(c)(2)(iii) applies, the 
remittance transfer provider may set a default remedy that the provider 
will provide if the sender does not designate a remedy within a 
reasonable time after the sender receives the report provided under 
Sec. 1005.33(c)(1). A provider that permits a sender to designate a 
remedy within 10 days after the provider has sent the report provided 
under Sec. 1005.33(c)(1) or (d)(1) before imposing the default remedy is 
deemed to have provided the sender with a reasonable time to designate a 
remedy. In the case a default remedy is provided, the provider must 
correct the error within one business day, or as soon as reasonably 
practicable, after the reasonable time for the sender to designate the 
remedy has passed, consistent with Sec. 1005.33(c)(2).
    5. Amount appropriate to resolve the error. For purposes of the 
remedies set forth in Sec. 1005.33(c)(2)(i)(A), (c)(2)(i)(B), 
(c)(2)(ii)(A)(1), and (c)(2)(i)(A)(2) the amount appropriate to resolve 
the error is the specific amount of transferred funds that should have 
been received if the remittance transfer had been effected without 
error. The amount appropriate to resolve the error does not include 
consequential damages. For example, when the amount that was disclosed 
pursuant to Sec. 1005.31(b)(1)(vii) was received by the designated 
recipient before the provider must determine the appropriate remedy for 
an error under Sec. 1005.33(a)(1)(iv), no additional amounts are 
required to resolve the error after the remittance transfer provider 
refunds the appropriate fees and taxes paid by the sender pursuant to 
Sec. 1005.33(c)(2)(ii)(B) or (c)(2)(iii), as applicable.
    6. Form of refund. For a refund provided under 
Sec. 1005.33(c)(2)(i)(A), (c)(2)(ii)(A)(1), (c)(2)(ii)(B), or 
(c)(2)(iii), a remittance transfer provider may generally, at its 
discretion, issue a refund either in cash or in the same form of payment 
that was initially provided by the sender for the remittance transfer. 
For example, if the sender originally provided a credit card as payment 
for the transfer, the remittance transfer provider may issue a credit to 
the sender's credit card account in the appropriate amount. However, if 
a sender initially provided cash for the remittance transfer, a provider 
may issue a refund by check. For example, if the sender originally 
provided cash as payment for the transfer, the provider may mail a check 
to the sender in the amount of the payment.
    7. Remedies for incorrect amount paid. If an error under 
Sec. 1005.33(a)(1)(i) occurred, the sender may request the remittance 
transfer provider refund the amount necessary to resolve the error under 
Sec. 1005.33(c)(2)(i)(A) or that the remittance transfer provider make 
the amount necessary to resolve the error available to the designated 
recipient at no additional cost under Sec. 1005.33(c)(2)(i)(B).

[[Page 240]]

    8. Correction of an error if funds not available by disclosed date. 
If the remittance transfer provider determines an error of failure to 
make funds available by the disclosed date occurred under 
Sec. 1005.33(a)(1)(iv), it must correct the error in accordance with 
Sec. 1005.33(c)(2)(ii)(A), as applicable, and refund any fees imposed 
for the transfer (unless the sender provided incorrect or insufficient 
information to the remittance transfer provider in connection with the 
remittance transfer), whether the fee was imposed by the provider or a 
third party involved in sending the transfer, such as an intermediary 
bank involved in sending a wire transfer or the institution from which 
the funds are picked up in accordance with Sec. 1005.33(c)(2)(ii)(B).
    9. Charges for error resolution. If an error occurred, whether as 
alleged or in a different amount or manner, the remittance transfer 
provider may not impose a charge related to any aspect of the error 
resolution process (including charges for documentation or 
investigation).
    10. Correction without investigation. A remittance transfer provider 
may correct an error, without investigation, in the amount or manner 
alleged by the sender, or otherwise determined, to be in error, but must 
comply with all other applicable requirements of Sec. 1005.33.
    11. Procedure for sending a new remittance transfer after a sender 
provides incorrect or insufficient information. Section 
1005.33(c)(2)(iii) generally requires a remittance transfer provider to 
refund the transfer amount to the sender even if the sender's previously 
designated remedy was a resend or if the provider's default remedy in 
other circumstances is a resend. However, if before the refund is 
processed, the sender receives notice pursuant to Sec. 1005.33(c)(1) or 
(d)(1) that an error occurred because the sender provided incorrect or 
insufficient information and then requests that the provider send the 
remittance transfer again, and the provider agrees to that request, 
Sec. 1005.33(c)(2)(iii) requires that the request be treated as a new 
remittance transfer and the provider must provide new disclosures in 
accordance with Sec. 1005.31 and all other applicable provisions of 
subpart B. However, Sec. 1005.33(c)(2)(iii) does not obligate the 
provider to agree to a sender's request to send a new remittance 
transfer.
    12. Determining amount of refund. Section 1005.33(c)(2)(iii) permits 
the provider to deduct from the amount refunded, or applied towards a 
new transfer, any fees or taxes actually deducted from the transfer 
amount by a person other than the provider as part of the first 
unsuccessful remittance transfer attempt or that were deducted in the 
course of returning the transfer amount to the provider following a 
failed delivery. However, a provider may not deduct those fees and taxes 
that will ultimately be refunded to the provider. When the provider 
deducts fees or taxes from the amount refunded pursuant to 
Sec. 1005.33(c)(2)(iii), the provider must inform the sender of the 
deduction as part of the notice required by either Sec. 1005.33(c)(1) or 
(d)(1) and the reason for the deduction. The following examples 
illustrate these concepts.
    i. A sender instructs a remittance transfer provider to send US$100 
to a designated recipient in local currency, for which the provider 
charges a transfer fee of US$10 (and thus the sender pays the provider 
$110). The provider's correspondent imposes a fee of US$15 that it 
deducts from the amount of the transfer. The sender provides incorrect 
or insufficient information that results in non-delivery of the 
remittance transfer as requested. Once the provider determines that an 
error occurred because the sender provided incorrect or insufficient 
information, the provider must provide the report required by 
Sec. 1005.33(c)(1) or (d)(1) and inform the sender, pursuant to 
Sec. 1005.33(c)(1) or (d)(1), that it will refund US$95 to the sender 
within three business days, unless the sender chooses to apply the US$95 
towards a new remittance transfer and the provider agrees. Of the $95 
that is refunded to the sender, $10 reflects the refund of the 
provider's transfer fee, and $85 reflects the refund of the amount of 
funds provided by the sender in connection with the transfer which was 
not properly transmitted. The provider is not required to refund the 
US$15 fee imposed by the correspondent (unless the $15 will be refunded 
to the provider by the correspondent).
    ii. A sender instructs a remittance transfer provider to send US$100 
to a designated recipient in a foreign country, for which the provider 
charges a transfer fee of US$10 (and thus the sender pays the provider 
US$110) and an intermediary institution charges a lifting fee of US$5, 
such that the designated recipient is expected to receive only US$95, as 
indicated in the receipt. If an error occurs because the sender provides 
incorrect or insufficient information that results in non-delivery of 
the remittance transfer by the date of availability stated in the 
disclosure provided to the sender for the remittance transfer under 
Sec. 1005.31(b)(2) or (3), the provider is required to refund, or 
reapply if requested and the provider agrees, $105 unless the 
intermediary institution refunds to the provider the US$5 fee. If the 
sender requests to have the transfer amount applied to a new remittance 
transfer pursuant to Sec. 1005.33(c)(2)(iii) and provides the corrected 
or additional information, and the remittance transfer provider agrees 
to a resend remedy, the remittance transfer provider may charge the 
sender another transfer fee of US$10 to send the remittance transfer 
again with the corrected or additional information necessary to complete 
the transfer.

[[Page 241]]

Insofar as the resend is an entirely new remittance transfer, the 
provider must provide a prepayment disclosure and receipt or combined 
disclosure in accordance with, among other provisions, the timing 
requirements of Sec. 1005.31(f) and the cancellation provision of 
Sec. 1005.34(a).
    iii. In connection with a remittance transfer, a provider imposes a 
$15 tax that it then remits to a State taxing authority. An error occurs 
because the sender provided incorrect or insufficient information that 
resulted in non-delivery of the transfer to the designated recipient. 
The provider may deduct $15 from the amount it refunds to the sender 
pursuant to Sec. 1005.33(c)(2)(iii) unless the relevant tax law will 
result in the $15 tax being refunded to the provider by the State taxing 
authority because the transfer was not completed.

33(d) Procedures if Remittance Transfer Provider Determines No Error or 
                        Different Error Occurred

    1. Error different from that alleged. When a remittance transfer 
provider determines that an error occurred in a manner or amount 
different from that described by the sender, it must comply with the 
requirements of both Sec. 1005.33(c) and (d), as applicable. The 
provider may give the notice of correction and the explanation 
separately or in a combined form.

                       33(e) Reassertion of Error

    1. Withdrawal of error; right to reassert. The remittance transfer 
provider has no further error resolution responsibilities if the sender 
voluntarily withdraws the notice alleging an error. A sender who has 
withdrawn an allegation of error has the right to reassert the 
allegation unless the remittance transfer provider had already complied 
with all of the error resolution requirements before the allegation was 
withdrawn. The sender must do so, however, within the original 180-day 
period from the disclosed date of availability or, if applicable, the 
60-day period for a notice of error asserted pursuant to 
Sec. 1005.33(b)(2).

                      33(f) Relation to Other Laws

    1. Concurrent error obligations. A financial institution that is 
also the remittance transfer provider may have error obligations under 
both Sec. Sec. 1005.11 and 1005.33. For example, if a sender asserts an 
error under Sec. 1005.11 with a remittance transfer provider that holds 
the sender's account, and the error is not also an error under 
Sec. 1005.33 (such as the omission of an EFT on a periodic statement), 
then the error-resolution provisions of Sec. 1005.11 exclusively apply 
to the error. However, if a sender asserts an error under Sec. 1005.33 
with a remittance transfer provider that holds the sender's account, and 
the error is also an error under Sec. 1005.11 (such as when the amount 
the sender requested to be deducted from the sender's account and sent 
for the remittance transfer differs from the amount that was actually 
deducted from the account and sent), then the error-resolution 
provisions of Sec. 1005.33 exclusively apply to the error.
    2. Holder in due course. Nothing in this section limits a sender's 
rights to assert claims and defenses against a card issuer concerning 
property or services purchased with a credit card under Regulation Z, 12 
CFR 1026.12(c)(1), as applicable.
    3. Assertion of same error with multiple parties. If a sender 
receives credit to correct an error of an incorrect amount paid in 
connection with a remittance transfer from either the remittance 
transfer provider or account-holding institution (or creditor), and 
subsequently asserts the same error with another party, that party has 
no further responsibilities to investigate the error if the error has 
been corrected. For example, assume that a sender initially asserts an 
error with a remittance transfer provider with respect to a remittance 
transfer alleging that US$130 was debited from his checking account, but 
the sender only requested a remittance transfer for US$100, plus a US$10 
transfer fee. If the remittance transfer provider refunds US$20 to the 
sender to correct the error, and the sender subsequently asserts the 
same error with his account-holding institution, the account-holding 
institution has no error resolution responsibilities under Regulation E 
because the error has been fully corrected. In addition, nothing in this 
section prevents an account-holding institution or creditor from 
reversing amounts it has previously credited to correct an error if a 
sender receives more than one credit to correct the same error. For 
example, assume that a sender concurrently asserts an error with his or 
her account-holding institution and remittance transfer provider for the 
same error, and the sender receives credit from the account-holding 
institution for the error within 45 days of the notice of error. If the 
remittance transfer provider subsequently provides a credit of the same 
amount to the sender for the same error, the account-holding institution 
may reverse the amounts it had previously credited to the consumer's 
account, even after the 45-day error resolution period under 
Sec. 1005.11.

     33(g) Error Resolution Standards and Recordkeeping Requirements

    1. Record retention requirements. As noted in Sec. 1005.31(g)(2), 
remittance transfer providers are subject to the record retention 
requirements under Sec. 1005.13. Therefore, remittance transfer 
providers must retain documentation, including documentation related to 
error investigations, for a period of not less

[[Page 242]]

than two years from the date a notice of error was submitted to the 
provider or action was required to be taken by the provider. A 
remittance transfer provider need not maintain records of individual 
disclosures that it has provided to each sender; it need only retain 
evidence demonstrating that its procedures reasonably ensure the 
sender's receipt of required disclosures and documentation.

                 33(h) Incorrect Account Number Supplied

    1. Reasonable methods of verification. When a sender provides an 
incorrect recipient institution identifier, Sec. 1005.33(h)(2) limits 
the exception in Sec. 1005.33(a)(1)(iv)(D) to situations where the 
provider used reasonably available means to verify that the recipient 
institution identifier provided by the sender did correspond to the 
recipient institution name provided by the sender. Reasonably available 
means may include accessing a directory of Business Identifier Codes and 
verifying that the code provided by the sender matches the provided 
institution name, and, if possible, the specific branch or location 
provided by the sender. Providers may also rely on other commercially 
available databases or directories to check other recipient institution 
identifiers. If reasonable verification means fail to identify that the 
recipient institution identifier is incorrect, the exception in 
Sec. 1005.33(a)(1)(iv)(D) will apply, assuming that the provider can 
satisfy the other conditions in Sec. 1005.33(h). Similarly, if no 
reasonably available means exist to verify the accuracy of the recipient 
institution identifier, Sec. 1005.33(h)(2) would be satisfied and thus 
the exception in Sec. 1005.33(a)(1)(iv)(D) also will apply, again 
assuming the provider can satisfy the other conditions in 
Sec. 1005.33(h). However, where a provider does not employ reasonably 
available means to verify a recipient institution identifier, 
Sec. 1005.33(h)(2) is not satisfied and the exception in 
Sec. 1005.33(a)(1)(iv)(D) will not apply.
    2. Reasonable efforts. Section 1005.33(h)(5) requires a remittance 
transfer provider to use reasonable efforts to recover the amount that 
was to be received by the designated recipient. Whether a provider has 
used reasonable efforts does not depend on whether the provider is 
ultimately successful in recovering the amount that was to be received 
by the designated recipient. Under Sec. 1005.33(h)(5), if the remittance 
transfer provider is requested to provide documentation or other 
supporting information in order for the pertinent institution or 
authority to obtain the proper authorization for the return of the 
incorrectly credited amount, reasonable efforts to recover the amount 
include timely providing any such documentation to the extent that it is 
available and permissible under law. The following are examples of 
reasonable efforts:
    i. The remittance transfer provider promptly calls or otherwise 
contacts the institution that received the transfer, either directly or 
indirectly through any correspondent(s) or other intermediaries or 
service providers used for the particular transfer, to request that the 
amount that was to be received by the designated recipient be returned, 
and if required by law or contract, by requesting that the recipient 
institution obtain a debit authorization from the holder of the 
incorrectly credited account.
    ii. The remittance transfer provider promptly uses a messaging 
service through a funds transfer system to contact institution that 
received the transfer, either directly or indirectly through any 
correspondent(s) or other intermediaries or service providers used for 
the particular transfer, to request that the amount that was to be 
received by the designated recipient be returned, in accordance with the 
messaging service's rules and protocol, and if required by law or 
contract, by requesting that the recipient institution obtain a debit 
authorization from the holder of the incorrectly credited account.
    3. Promptness of Reasonable Efforts. Section 1005.33(h)(5) requires 
that a remittance transfer provider act promptly in using reasonable 
efforts to recover the amount that was to be received by the designated 
recipient. Whether a provider acts promptly to use reasonable efforts 
depends on the facts and circumstances. For example, if, before the date 
of availability disclosed pursuant to Sec. 1005.31(b)(2)(ii), the sender 
informs the provider that the sender provided a mistaken account number, 
the provider will have acted promptly if it attempts to contact the 
recipient's institution before the date of availability.

 Section 1005.34--Procedures for Cancellation and Refund of Remittance 
                                Transfers

              34(a) Sender Right of Cancellation and Refund

    1. Content of cancellation request. A request to cancel a remittance 
transfer is valid so long as the remittance transfer provider is able to 
identify the remittance transfer in question. For example, the sender 
could provide the confirmation number or code that would be used by the 
designated recipient to pick up the transfer or other identification 
number or code supplied by the remittance transfer provider in 
connection with the transfer, if such number or code is sufficient for 
the remittance transfer provider to identify the transfer. A remittance 
transfer provider may also request, or the sender may provide, the 
sender's email address instead of a physical address, so long as the 
remittance transfer provider is able to identify the transfer to which 
the request to cancel applies.

[[Page 243]]

    2. Notice of cancellation right. Section 1005.31 requires a 
remittance transfer provider to include an abbreviated notice of the 
sender's right to cancel a remittance transfer on the receipt or 
combined disclosure given under Sec. 1005.31(b)(2) or (3). In addition, 
the remittance transfer provider must make available to a sender upon 
request, a notice providing a full description of the right to cancel a 
remittance transfer using language that is set forth in Model Form A-36 
of Appendix A to this part or substantially similar language.
    3. Thirty-minute cancellation right. A remittance transfer provider 
must comply with the cancellation and refund requirements of 
Sec. 1005.34 if the cancellation request is received by the provider no 
later than 30 minutes after the sender makes payment. The provider may, 
at its option, provide a longer time period for cancellation. A provider 
must provide the 30-minute cancellation right regardless of the 
provider's normal business hours. For example, if an agent closes less 
than 30 minutes after the sender makes payment, the provider could opt 
to take cancellation requests through the telephone number disclosed on 
the receipt. The provider could also set a cutoff time after which the 
provider will not accept requests to send a remittance transfer. For 
example, a financial institution that closes at 5:00 p.m. could stop 
accepting payment for remittance transfers after 4:30 p.m.
    4. Cancellation request provided to agent. A cancellation request 
provided by a sender to an agent of the remittance transfer provider is 
deemed to be received by the provider under Sec. 1005.34(a) when 
received by the agent.
    5. Payment made. For purposes of subpart B, payment is made, for 
example, when a sender provides cash to the remittance transfer provider 
or when payment is authorized.

                34(b) Time Limits and Refund Requirements

    1. Form of refund. At its discretion, a remittance transfer provider 
generally may issue a refund either in cash or in the same form of 
payment that was initially provided by the sender for the remittance 
transfer. For example, if the sender originally provided a credit card 
as payment for the transfer, the remittance transfer provider may issue 
a credit to the sender's credit card account in the amount of the 
payment. However, if a sender initially provided cash for the remittance 
transfer, a provider may issue a refund by check. For example, if the 
sender originally provided cash as payment for the transfer, the 
provider may mail a check to the sender in the amount of the payment.
    2. Fees and taxes refunded. If a sender provides a timely request to 
cancel a remittance transfer, a remittance transfer provider must refund 
all funds provided by the sender in connection with the remittance 
transfer, including any fees and, to the extent not prohibited by law, 
taxes that have been imposed for the transfer, whether the fee or tax 
was assessed by the provider or a third party, such as an intermediary 
institution, the agent or bank in the recipient country, or a State or 
other governmental body.

                     Section 1005.35--Acts of Agents

    1. General. Remittance transfer providers must comply with the 
requirements of subpart B, including, but not limited to, providing the 
disclosures set forth in Sec. 1005.31 and providing any remedies as set 
forth in Sec. 1005.33, even if an agent or other person performs 
functions for the remittance transfer provider, and regardless of 
whether the provider has an agreement with a third party that transfers 
or otherwise makes funds available to a designated recipient.

             Section 1005.36--Transfers Scheduled in Advance

    1. Applicability of subpart B. The requirements set forth in subpart 
B apply to remittance transfers subject to Sec. 1005.36, to the extent 
that Sec. 1005.36 does not modify those requirements. For example, the 
foreign language disclosure requirements in Sec. 1005.31(g) and related 
commentary continue to apply to disclosures provided in accordance with 
Sec. 1005.36(a)(2).

    Section 1005.36--Transfers Scheduled Before the Date of Transfer

                              36(a) Timing

         36(a)(2) Subsequent Preauthorized Remittance Transfers

    1. Changes in Disclosures. When a sender schedules a series of 
preauthorized remittance transfers, the provider is generally not 
required to provide a pre-payment disclosure prior to the date of each 
subsequent transfer. However, Sec. 1005.36(a)(1)(i) requires the 
provider to provide a pre-payment disclosure and receipt for the first 
in the series of preauthorized remittance transfers in accordance with 
the timing requirements set forth in Sec. 1005.31(e). While certain 
information in those disclosures is expressly permitted to be estimated 
(see Sec. 1005.32(b)(2)), other information is not permitted to be 
estimated, or is limited in how it may be estimated. When any of the 
information on the most recent receipt provided pursuant to 
Sec. 1005.36(a)(1)(i) or (a)(2)(i), other than the temporal disclosures 
required by Sec. 1005.31(b)(2)(ii) and (b)(2)(vii), is no longer 
accurate with respect to a subsequent preauthorized remittance transfer 
for reasons other than as permitted by Sec. 1005.32, the provider must 
provide, within a reasonable time prior to the scheduled date of the 
next preauthorized remittance transfer, a receipt that complies with 
Sec. 1005.31(b)(2) and which

[[Page 244]]

discloses, among the other disclosures required by Sec. 1005.31(b)(2), 
the changed terms. For example, if the provider discloses in the pre-
payment disclosure for the first in the series of preauthorized 
remittance transfers that its fee for each remittance transfer is $20 
and, after six preauthorized remittance transfers, the provider 
increases its fee to $30 (to the extent permitted by contract law), the 
provider must provide the sender a receipt that complies with 
Sec. Sec. 1005.31(b)(2) and 1005.36(b)(2) within a reasonable time prior 
to the seventh transfer. Barring a further change, this receipt will 
apply to transfers after the seventh transfer. Or, if, after the sixth 
transfer, a tax collected by the provider increases from 1.5% of the 
amount that will be transferred to the designated recipient to 2.0% of 
the amount that will be transferred to the designated recipient, the 
provider must provide the sender a receipt that complies with 
Sec. Sec. 1005.31(b)(2) and 1005.36(b)(2) within a reasonable time prior 
to the seventh transfer. In contrast, Sec. 1005.36(a)(2)(i) does not 
require an updated receipt where an exchange rate, estimated as 
permitted by Sec. 1005.32(b)(2), changes.
    2. Clearly and conspicuously. In order to indicate clearly and 
conspicuously that the provider's fee has changed as required by 
Sec. 1005.36(a)(2)(i), the provider could, for example, state on the 
receipt: ``Transfer Fees (UPDATED) * * * $30.'' To the extent that other 
figures on the receipt must be revised because of the new fee, the 
receipt should also indicate that those figures are updated.
    3. Reasonable time. If a disclosure required by 
Sec. 1005.36(a)(2)(i) or (d)(1) is mailed, the disclosure would be 
considered to be received by the sender five business days after it is 
posted in the mail. If hand delivered or provided electronically, the 
receipt would be considered to be received by the sender at the time of 
delivery. Thus, if the provider mails a disclosure required by 
Sec. 1005.36(a)(2)(i) or (d)(1) not later than ten business days before 
the scheduled date of the transfer, or hand or electronically delivers a 
disclosure not later than five business days before the scheduled date 
of the transfer, the provider would be deemed to have provided the 
disclosure within a reasonable time prior to the scheduled date of the 
subsequent preauthorized remittance transfer.

                             36(b) Accuracy

    1. Use of estimates. In providing the disclosures described in 
Sec. 1005.36(a)(1)(i) or (a)(2)(i), remittance transfer providers may 
use estimates to the extent permitted by any of the exceptions in 
Sec. 1005.32. When estimates are permitted, however, they must be 
disclosed in accordance with Sec. 1005.31(d).
    2. Subsequent preauthorized remittance transfers. For a subsequent 
transfer in a series of preauthorized remittance transfers, the receipt 
provided pursuant to Sec. 1005.36(a)(1)(i), except for the temporal 
disclosures in that receipt required by Sec. 1005.31(b)(2)(ii) (Date 
Available) and (b)(2)(vii) (Transfer Date), applies to each subsequent 
preauthorized remittance transfer unless and until it is superseded by a 
receipt provided pursuant to Sec. 1005.36(a)(2)(i). For each subsequent 
preauthorized remittance transfer, only the most recent receipt provided 
pursuant to Sec. 1005.36(a)(1)(i) or (a)(2)(i) must be accurate as of 
the date each subsequent transfer is made.
    3. Receipts. A receipt required by Sec. 1005.36(a)(1)(ii) or 
(a)(2)(ii) must accurately reflect the details of the transfer to which 
it pertains and may not contain estimates pursuant to 
Sec. 1005.32(b)(2). However, the remittance transfer provider may 
continue to disclose estimates to the extent permitted by 
Sec. 1005.32(a) or (b)(1). In providing receipts pursuant to 
Sec. 1005.36(a)(1)(ii) or (a)(2)(ii), Sec. 1005.36(b)(2) and (3) do not 
allow a remittance transfer provider to change figures previously 
disclosed on a receipt provided pursuant to Sec. 1005.36(a)(1)(i) or 
(a)(2)(i), unless a figure was an estimate or based on an estimate 
disclosed pursuant to Sec. 1005.32. Thus, for example, if a provider 
disclosed its fee as $10 in a receipt provided pursuant to 
Sec. 1005.36(a)(1)(i) and that receipt contained an estimate of the 
exchange rate pursuant to Sec. 1005.32(b)(2), the second receipt 
provided pursuant to Sec. 1005.36(a)(1)(ii) must also disclose the fee 
as $10.

                           36(c) Cancellation

    1. Scheduled remittance transfer. Section 1005.36(c) applies when a 
remittance transfer is scheduled by the sender at least three business 
days before the date of the transfer, whether the sender schedules a 
preauthorized remittance transfer or a one-time transfer. A remittance 
transfer is scheduled if it will require no further action by the sender 
to send the transfer after the sender requests the transfer. For 
example, a remittance transfer is scheduled at least three business days 
before the date of the transfer, and Sec. 1005.36(c) applies, where a 
sender on March 1 requests a remittance transfer provider to send a wire 
transfer to pay a bill in a foreign country on March 15, if it will 
require no further action by the sender to send the transfer after the 
sender requests the transfer. A remittance transfer is not scheduled, 
and Sec. 1005.36(c) does not apply, where a transfer occurs more than 
three days after the date the sender requests the transfer solely due to 
the provider's processing time. The following are examples of when a 
sender has not scheduled a remittance transfer at least three business 
days before the date of the remittance transfer, such that the 
cancellation rule in Sec. 1005.34 applies.

[[Page 245]]

    i. A sender on March 1 requests a remittance transfer provider to 
send a wire transfer to pay a bill in a foreign country on March 3.
    ii. A sender on March 1 requests that a remittance transfer provider 
send a remittance transfer on March 15, but the provider requires the 
sender to confirm the request on March 14 in order to send the transfer.
    iii. A sender on March 1 requests that a remittance transfer 
provider send an ACH transfer, and that transfer is sent on March 2, but 
due to the time required for processing, funds will not be deducted from 
the sender's account until March 5.
    2. Cancelled preauthorized remittance transfers. For preauthorized 
remittance transfers, the provider must assume the request to cancel 
applies to all future preauthorized remittance transfers, unless the 
sender specifically indicates that it should apply only to the next 
scheduled remittance transfer.
    3. Concurrent cancellation obligations. A financial institution that 
is also a remittance transfer provider may have both stop payment 
obligations under Sec. 1005.10 and cancellation obligations under 
Sec. 1005.36. If a sender cancels a remittance transfer under 
Sec. 1005.36 with a remittance transfer provider that holds the sender's 
account, and the transfer is a preauthorized transfer under 
Sec. 1005.10, then the cancellation provisions of Sec. 1005.36 
exclusively apply.

36(d) Date of Transfer for Subsequent Preauthorized Remittance Transfers

    1. General. Section 1005.36(d)(2)(i) permits remittance transfer 
providers some flexibility in determining how and when the disclosures 
required by Sec. 1005.36(d)(1) may be provided to senders. The 
disclosure described in Sec. 1005.36(d)(1) may be provided as a separate 
disclosure, or on or with any other disclosure required by this subpart 
B related to the same series of preauthorized remittance transfers, 
provided that the disclosure and timing requirements in 
Sec. 1005.36(d)(2) and other applicable provisions in subpart B are 
satisfied. For example, the required disclosures may be made on or with 
a receipt provided pursuant to Sec. 1005.36(a)(1)(i); a receipt provided 
pursuant to Sec. 1005.36(a)(2); or in a separate disclosure created by 
the provider. Thus, for example, a remittance transfer provider complies 
with Sec. 1005.36(d)(1) for a period of one year if it provides in the 
receipt provided to the sender when payment is made for the initial 
preauthorized remittance transfer, a schedule or summary of the dates of 
transfer of all the subsequent preauthorized remittance transfers in the 
series scheduled to occur over the next 12 months (and the applicable 
cancellation requirements and contact information).
    2. Delivery of disclosure. Section 1005.36(d)(2)(i) requires that 
the sender receive disclosure of the date of transfer, applicable 
cancellation requirements, and the provider's contact information no 
more than 12 months, and no less than 5 business days prior to the date 
of transfer of the subsequent preauthorized remittance transfer. For 
purposes of determining when a disclosure required by Sec. 1005.36(d)(1) 
is received by the sender, refer to comment 36(a)(2)-3.
    3. Disclosure of the date of transfer. The date of transfer of a 
subsequent preauthorized remittance transfer may be disclosed as a 
specific date (e.g., July 19, 2013) or by using a method that clearly 
permits identification of the date of the transfer, such as periodic 
intervals (e.g., the third Monday of every month, or the 15th of every 
month). If the future dates of transfer are disclosed as occurring 
periodically and there is a break in the sequence, or the date of 
transfer does not otherwise conform to the described period, e.g., if a 
holiday or weekend causes the provider to deviate from the normal 
schedule, the remittance transfer provider should disclose the specific 
date of transfer for the affected transfer.
    4. Accuracy requirements. Section 1005.36(d)(4) sets forth accuracy 
requirements for disclosures required for subsequent preauthorized 
remittance transfers under Sec. 1005.36(d)(1). If any of the information 
provided in these disclosures change, the provider must provide an 
updated disclosure with the revised information that is accurate as of 
when the transfer is made, pursuant to Sec. 1005.36(d)(2).

             Appendix A--Model Disclosure Clauses and Forms

    1. Review of forms. The Bureau will not review or approve disclosure 
forms or statements for financial institutions. However, the Bureau has 
issued model clauses for institutions to use in designing their 
disclosures. If an institution uses these clauses accurately to reflect 
its service, the institution is protected from liability for failure to 
make disclosures in proper form.
    2. Use of forms. The appendix contains model disclosure clauses for 
optional use by financial institutions and remittance transfer providers 
to facilitate compliance with the disclosure requirements of 
Sec. Sec. 1005.5(b)(2) and (3), 1005.6(a), 1005.7, 1005.8(b), 
1005.14(b)(1)(ii), 1005.15(d)(1) and (2), 1005.18(c)(1) and (2), 
1005.31, 1005.32 and 1005.36. The use of appropriate clauses in making 
disclosures will protect a financial institution and a remittance 
transfer provider from liability under sections 916 and 917 of the act 
provided the clauses accurately reflect the institution's EFT services 
and the provider's remittance transfer services, respectively.
    3. Altering the clauses. Financial institutions may use clauses of 
their own design in conjunction with the Bureau's model clauses. The 
inapplicable words or portions

[[Page 246]]

of phrases in parentheses should be deleted. The catchlines are not part 
of the clauses and need not be used. Financial institutions may make 
alterations, substitutions, or additions in the clauses to reflect the 
services offered, such as technical changes (including the substitution 
of a trade name for the word ``card,'' deletion of inapplicable 
services, or substitution of lesser liability limits). Several of the 
model clauses include references to a telephone number and address. 
Where two or more of these clauses are used in a disclosure, the 
telephone number and address may be referenced and need not be repeated.
    4. Model forms for remittance transfers. The Bureau will not review 
or approve disclosure forms for remittance transfer providers. However, 
this appendix contains 15 model forms for use in connection with 
remittance transfers. These model forms are intended to demonstrate 
several formats a remittance transfer provider may use to comply with 
the requirements of Sec. 1005.31(b). Model Forms A-30 through A-32 
demonstrate how a provider could provide the required disclosures for a 
remittance transfer exchanged into local currency. Model Forms A-30(a), 
(b), (c), and (d) demonstrate four options regarding model language 
related to the required disclaimer, where applicable, of non-covered 
third-party fees and taxes on the remittance transfer collected by a 
person other than the provider under Sec. 1005.31(b)(1)(viii). Model 
forms 30(b) through (d) also include language that may be used if a 
provider elects to estimate either these non-covered third-party fees or 
taxes collected by a person other than the provider as part of the 
disclaimer. Model Forms A-33 through A-35 demonstrate how a provider 
could provide the required disclosures for dollar-to-dollar remittance 
transfers. These forms also demonstrate disclosure of the required 
content, in accordance with the grouping and proximity requirements of 
Sec. 1005.31(c)(1) and (2), in both a register receipt format and an 8.5 
inch by 11 inch format. Model Form A-36 provides long form model error 
resolution and cancellation disclosures required by Sec. 1005.31(b)(4), 
and Model Form A-37 provides short form model error resolution and 
cancellation disclosures required by Sec. 1005.31(b)(2)(iv) and (vi). 
Model Forms A-38 through A-41 provide language for Spanish language 
disclosures.
    i. The model forms contain information that is not required by 
subpart B, including a confirmation code, the sender's name and contact 
information, and the optional disclosure of the estimated amount of 
these non-covered third-party fees and taxes collected by a person other 
than the provider as part of the disclaimer. Additional information not 
required by subpart B may be presented on the model forms as permitted 
by Sec. 1005.31(b)(1)(viii) and (c)(4). Any additional information must 
be presented consistent with a remittance transfer provider's obligation 
to provide required disclosures in a clear and conspicuous manner.
    ii. Use of the model forms is optional. A remittance transfer 
provider may change the forms by rearranging the format or by making 
modifications to the language of the forms, in each case without 
modifying the substance of the disclosures. Any rearrangement or 
modification of the format of the model forms must be consistent with 
the form, grouping, proximity, and other requirements of Sec. 1005.31(a) 
and (c). Providers making revisions that do not comply with this section 
will lose the benefit of the safe harbor for appropriate use of Model 
Forms A-30 to A-41.
    iii. Permissible changes to the language and format of the model 
forms include, for example:
    A. Substituting the information contained in the model forms that is 
intended to demonstrate how to complete the information in the model 
forms--such as names, addresses, and Web sites; dates; numbers; and 
State-specific contact information--with information applicable to the 
remittance transfer. In addition, if the applicable non-covered third-
party fees are imposed by an institution other than a bank, a provider 
could modify the disclaimer accordingly.
    B. Eliminating disclosures that are not applicable to the transfer, 
as described under Sec. 1005.31(b). For example, if only covered third-
party fees are imposed, a provider would not use a disclaimer related to 
additional fees that may apply because all applicable fees are covered 
and included in the disclosure as required under Sec. 1005.31(b)(1)(vi).
    C. Correcting or updating telephone numbers, mailing addresses, or 
Web site addresses that may change over time.
    D. Providing the disclosures on a paper size that is different from 
a register receipt and 8.5 inch by 11 inch formats.
    E. Adding a term substantially similar to ``estimated'' in close 
proximity to the specified terms in Sec. 1005.31(b)(1) and (2), as 
required under Sec. 1005.31(d).
    F. Providing the disclosures in a foreign language, or multiple 
foreign languages, subject to the requirements of Sec. 1005.31(g).
    G. Substituting cancellation language to reflect the right to a 
cancellation made pursuant to the requirements of Sec. 1005.36(c).
    iv. Changes to the model forms that are not permissible include, for 
example, adding information that is not segregated from the required 
disclosures, other than as permitted by Sec. 1005.31(c)(4).

[76 FR 81023, Dec. 27, 2011, as amended at 78 FR 18224, Mar. 26, 2013; 
77 FR 6297, Feb. 7, 2012; 77 FR 50285; 77 FR 50285, Aug. 20, 2012; 78 FR 
30714, May 22, 2013; 78 FR 49366, Aug. 14, 2013; 79 FR 55993, Sept. 18, 
2014]


[[Page 247]]



PART 1006_FAIR DEBT COLLECTION PRACTICES ACT (REGULATION F)--
Table of Contents



   Subpart A_Procedures for State Application for Exemption From the 
                          Provisions of the Act

Sec.
1006.1 Purpose and definitions.
1006.2 Application.
1006.3 Supporting documents.
1006.4 Criteria for determination.
1006.5 Public notice of filing.
1006.6 Exemption from requirements.
1006.7 Adverse determination.
1006.8 Revocation of exemption.

Subpart B [Reserved]

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1692o.

    Source: 76 FR 78124, Dec. 16, 2011, unless otherwise noted.



   Subpart A_Procedures for State Application for Exemption From the 
                          Provisions of the Act



Sec. 1006.1  Purpose and definitions.

    (a) Purpose. This part, known as Regulation F, is issued by the 
Bureau of Consumer Financial Protection (Bureau). This subpart 
establishes procedures and criteria whereby states may apply to the 
Bureau for exemption of a class of debt collection practices within the 
applying state from the provisions of the Fair Debt Collection Practices 
Act (the Act) as provided in section 817 of the Act, 15 U.S.C. 1692o.
    (b) Definitions. For purposes of this subpart:
    Class of debt collection practices includes one or more such classes 
of debt collection practices.
    State law includes any regulations that implement state law and 
formal interpretations thereof by a court of competent jurisdiction or 
duly authorized agency of that state.



Sec. 1006.2  Application.

    Any state may apply to the Bureau pursuant to the terms of this part 
for a determination that, under the laws of that state, any class of 
debt collection practices within that state is subject to requirements 
that are substantially similar to, or provide greater protection for 
consumers than, those imposed under sections 803 through 812 of the Act, 
and that there is adequate provision for state enforcement of such 
requirements. The application shall be in writing, addressed to the 
Bureau, signed by the Governor, Attorney General or state official 
having primary enforcement or responsibility under the state law which 
is applicable to the class of debt collection practices, and shall be 
supported by the documents specified in this subpart.



Sec. 1006.3  Supporting documents.

    The application shall be accompanied by the following, which may be 
submitted in paper or electronic form:
    (a) A copy of the full text of the state law that is claimed to 
contain requirements substantially similar to those imposed under 
sections 803 through 812 of the Act, or to provide greater protection to 
consumers than sections 803 through 812 of the Act, regarding the class 
of debt collection practices within that state.
    (b) A comparison of each provision of sections 803 through 812 of 
the Act with the corresponding provision of the state law, together with 
reasons supporting the claim that the corresponding provisions of the 
state law are substantially similar to or provide greater protection to 
consumers than provisions of sections 803 through 812 of the Act and an 
explanation as to why any differences between the state and Federal law 
are not inconsistent with the provisions of sections 803 through 812 of 
the Act and do not result in a diminution in the protection otherwise 
afforded consumers; and a statement that no other state laws (including 
administrative or judicial interpretations) are related to, or would 
have an effect upon, the state law that is being considered by the 
Bureau in making its determination.
    (c) A copy of the full text of the state law that provides for 
enforcement of the state law referred to in paragraph (a) of this 
section.
    (d) A comparison of the provisions of the state law that provides 
for enforcement with the provisions of section 814 of the Act, together 
with reasons supporting the claim that such state law

[[Page 248]]

provides for administrative enforcement of the state law referred to in 
paragraph (a) of this section that is substantially similar to, or more 
extensive than, the enforcement provided under section 814 of the Act.
    (e) A statement identifying the office designated or to be 
designated to administer the state law referred to in paragraph (a) of 
this section, together with complete information regarding the fiscal 
arrangements for administrative enforcement (including the amount of 
funds available or to be provided), the number and qualifications of 
personnel engaged or to be engaged in enforcement, and a description of 
the procedures under which such state law is to be administratively 
enforced. The statement should also include reasons to support the claim 
that there is adequate provision for enforcement of such state law.



Sec. 1006.4  Criteria for determination.

    The Bureau will consider the criteria set forth below, and any other 
relevant information, in determining whether the law of a state is 
substantially similar to, or provides greater protection to consumers 
than, the provisions of sections 803 through 812 of the Act regarding 
the class of debt collection practices within that state, and whether 
there is adequate provision for state enforcement of such law. In making 
that determination, the Bureau primarily will consider each provision of 
the state law in comparison with each corresponding provision in 
sections 803 through 812 of the Act, and not the state law as a whole in 
comparison with the Act as a whole.
    (a)(1) In order for provisions of state law to be substantially 
similar to, or provide greater protection to consumers than the 
provisions of sections 803 through 812 of the Act, the provisions of 
state law at least shall provide that:
    (i) Definitions and rules of construction, as applicable, import the 
same meaning and have the same application as those prescribed by 
sections 803 through 812 of the Act.
    (ii) Debt collectors provide all of the applicable notifications 
required by the provisions of sections 803 through 812 of the Act, with 
the content and in the terminology, form, and time periods prescribed by 
this part pursuant to sections 803 through 812; however, required 
references to state law may be substituted for the references to Federal 
law required in this part. Notification requirements under state law in 
additional circumstances or with additional detail that do not frustrate 
any of the purposes of the Act may be determined by the Bureau to be 
consistent with sections 803 through 812 of the Act;
    (iii) Debt collectors take all affirmative actions and abide by 
obligations substantially similar to, or more extensive than, those 
prescribed by sections 803 through 812 of the Act under substantially 
similar or more stringent conditions and within the same or more 
stringent time periods as are prescribed in sections 803 through 812 of 
the Act;
    (iv) Debt collectors abide by the same or more stringent 
prohibitions as are prescribed by sections 803 through 812 of the Act;
    (v) Obligations or responsibilities imposed on consumers are no more 
costly, lengthy, or burdensome relative to consumers exercising any of 
the rights or gaining the benefits of the protections provided in the 
state law than corresponding obligations or responsibilities imposed on 
consumers in sections 803 through 812 of the Act.
    (vi) Consumers' rights and protections are substantially similar to, 
or more favorable than, those provided by sections 803 through 812 of 
the Act under conditions or within time periods that are substantially 
similar to, or more favorable to consumers than, those prescribed by 
sections 803 through 812 of the Act.
    (2) Paragraph (a)(1) of this section is not to be construed as 
indicating that the Bureau would consider adversely any additional 
requirements of state law that are not inconsistent with the purpose of 
the Act or the requirements imposed under sections 803 through 812 of 
the Act.
    (b) In determining whether provisions for enforcement of the state 
law referred to in Sec. 1006.3(a) of this part are adequate, 
consideration will be given to the extent to which, under state law, 
provision is made for administrative

[[Page 249]]

enforcement, including necessary facilities, personnel, and funding.



Sec. 1006.5  Public notice of filing.

    In connection with any application that has been filed in accordance 
with the requirements of Sec. Sec. 1006.2 and 1006.3 of this part and 
following initial review of the application, a notice of such filing 
shall be published by the Bureau in the Federal Register, and a copy of 
such application shall be made available for examination by interested 
persons during business hours at the Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006. A period of time 
shall be allowed from the date of such publication for interested 
parties to submit written comments to the Bureau regarding that 
application.



Sec. 1006.6  Exemption from requirements.

    If the Bureau determines on the basis of the information before it 
that, under the law of a state, a class of debt collection practices is 
subject to requirements substantially similar to, or that provide 
greater protection to consumers than, those imposed under sections 803 
through 812 and section 814 of the Act, and that there is adequate 
provision for state enforcement, the Bureau will exempt the class of 
debt collection practices in that state from the requirements of 
sections 803 through 812 and section 814 of the Act in the following 
manner and subject to the following conditions:
    (a) Notice of the exemption shall be published in the Federal 
Register, and the Bureau shall furnish a copy of such notice to the 
state official who made application for such exemption, to each Federal 
authority responsible for administrative enforcement of the requirements 
of sections 803 through 812 of the Act, and to the Attorney General of 
the United States. Any exemption granted shall be effective 90 days 
after the date of publication of such notice in the Federal Register.
    (b) The appropriate official of any state that receives an exemption 
shall inform the Bureau in writing within 30 days of any change in the 
state laws referred to in Sec. 1006.3(a) and (c) of this part. The 
report of any such change shall contain copies of the full text of that 
change, together with statements setting forth the information and 
opinions regarding that change that are specified in Sec. 1006.3(b) and 
(d). The appropriate official of any state that has received such an 
exemption also shall file with the Bureau from time to time such reports 
as the Bureau may require.
    (c) The Bureau shall inform the appropriate official of any state 
that receives such an exemption of any subsequent amendments of the Act 
or this part that might necessitate the amendment of state law for the 
exemption to continue.
    (d) No exemption shall extend to the civil liability provisions of 
section 813 of the Act. After an exemption is granted, the requirements 
of the applicable state law shall constitute the requirements of 
sections 803 through 812 of the Act, except to the extent such state law 
imposes requirements not imposed by the Act or this part.



Sec. 1006.7  Adverse determination.

    (a) If, after publication of a notice in the Federal Register as 
provided under Sec. 1006.5 of this part, the Bureau finds on the basis 
of the information before it that it cannot make a favorable 
determination in connection with the application, the Bureau shall 
notify the appropriate state official of the facts upon which such 
findings are based and shall afford that state authority a reasonable 
opportunity to demonstrate or achieve compliance.
    (b) If, after having afforded the state authority such opportunity 
to demonstrate or achieve compliance, the Bureau finds on the basis of 
the information before it that it still cannot make a favorable 
determination in connection with the application, the Bureau shall 
publish in the Federal Register a notice of its determination regarding 
the application and shall furnish a copy of such notice to the state 
official who made application for such exemption.



Sec. 1006.8  Revocation of exemption.

    (a) The Bureau reserves the right to revoke any exemption granted 
under the provisions of this part, if at any time it determines that the 
state law does not, in fact, impose requirements

[[Page 250]]

that are substantially similar to, or that provide greater protection to 
applicants than, those imposed under sections 803 through 812 of the Act 
or that there is not, in fact, adequate provision for state enforcement.
    (b) Before revoking any such exemption, the Bureau shall notify the 
appropriate state official of the facts or conduct that, in the Bureau's 
opinion, warrant such revocation, and shall afford that state such 
opportunity as the Bureau deems appropriate in the circumstances to 
demonstrate or achieve compliance.
    (c) If, after having been afforded the opportunity to demonstrate or 
achieve compliance, the Bureau determines that the state has not done 
so, notice of the Bureau's intention to revoke such exemption shall be 
published in the Federal Register. A period of time shall be allowed 
from the date of such publication for interested persons to submit 
written comments to the Bureau regarding the intention to revoke.
    (d) If such exemption is revoked, notice of such revocation shall be 
published by the Bureau in the Federal Register, and a copy of such 
notice shall be furnished to the appropriate state official, to the 
Federal authorities responsible for enforcement of the requirements of 
the Act, and to the Attorney General of the United States. The 
revocation shall become effective, and the class of debt collection 
practices affected within that state shall become subject to the 
requirements of sections 803 through 812 of the Act, 90 days after the 
date of publication of the notice in the Federal Register.

Subpart B [Reserved]



PART 1007_S.A.F.E. MORTGAGE LICENSING ACT_FEDERAL REGISTRATION
OF RESIDENTIAL MORTGAGE LOAN ORIGINATORS (REGULATION G)--
Table of Contents



Sec.
1007.101 Authority, purpose, and scope of this part.
1007.102 Definitions applicable to this part.
1007.103 Registration of mortgage loan originators.
1007.104 Policies and procedures.
1007.105 Use of Unique Identifier.

Appendix A to Part 1007--Examples of Mortgage Loan Originator Activities

    Authority: 12 U.S.C. 5101-5116; 15 U.S.C. 1604(a), 1639b; Pub. L. 
111-203, 124 Stat. 1376.

    Source: 76 FR 78487, Dec. 19, 2011, unless otherwise noted.



Sec. 1007.101  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation G, is issued by the 
Bureau of Consumer Financial Protection pursuant to the Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing 
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122 
Stat. 2654, 12 U.S.C. 5101 et seq.,) 12 U.S.C. 5512, 5581, 15 U.S.C. 
1604(a), 1639b.
    (b) Purpose. This part implements the S.A.F.E. Act's Federal 
registration requirement for mortgage loan originators. The S.A.F.E. Act 
provides that the objectives of this registration include aggregating 
and improving the flow of information to and between regulators; 
providing increased accountability and tracking of mortgage loan 
originators; enhancing consumer protections; supporting anti-fraud 
measures; and providing consumers with easily accessible information at 
no charge regarding the employment history of, and publicly adjudicated 
disciplinary and enforcement actions against, mortgage loan originators.
    (c) Scope--(1) In general. This part applies to:
    (i) National banks, Federal branches and agencies of foreign banks, 
their operating subsidiaries (collectively referred to in this part as 
national banks), and their employees who act as mortgage loan 
originators;
    (ii) Member banks of the Federal Reserve System; their respective 
subsidiaries that are not functionally regulated within the meaning of 
section 5(c)(5) of the Bank Holding Company Act, as amended (12 U.S.C. 
1844(c)(5)); branches and agencies of foreign banks; commercial lending 
companies owned or controlled by foreign banks (collectively referred to 
in this part as member banks); and their employees who act as mortgage 
loan originators;
    (iii) Insured state nonmember banks (including state-licensed 
insured

[[Page 251]]

branches of foreign banks), their subsidiaries (except brokers, dealers, 
persons providing insurance, investment companies, and investment 
advisers) (collectively referred to in this part as insured state 
nonmember banks), and employees of such banks or subsidiaries who act as 
mortgage loan originators;
    (iv) Savings associations, their operating subsidiaries 
(collectively referred to in this part as savings associations), and 
their employees who act as mortgage loan originators;
    (v) Farm Credit System lending institutions that actually originate 
residential mortgage loans pursuant to sections 1.9(3), 1.11 or 2.4(a) 
and (b) of the Farm Credit Act of 1971 (collectively referred to in this 
part as Farm Credit System institutions), and their employees who act as 
mortgage loan originators; and
    (vi) Any federally insured credit union and its employees, including 
volunteers, who act as mortgage loan originators. This part also applies 
to non-federally insured credit unions and their employees, including 
volunteers, who act as mortgage loan originators, subject to the 
conditions in paragraph (c)(3) of this section.
    (2) De minimis exception. (i) This part and the requirements of 12 
U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any 
employee of a national bank, member bank, insured state nonmember bank, 
savings association, Farm Credit System institution, or credit union who 
has never been registered or licensed through the Registry as a mortgage 
loan originator if during the past 12 months the employee acted as a 
mortgage loan originator for 5 or fewer residential mortgage loans.
    (ii) Prior to engaging in mortgage loan origination activity that 
exceeds the exception limit in paragraph (c)(2)(i) of this section, an 
employee must register with the Registry pursuant to this part.
    (iii) Evasion. National banks, member banks, insured state nonmember 
banks, savings associations, Farm Credit System institutions, and credit 
unions are prohibited from engaging in any act or practice to evade the 
limits of the de minimis exception set forth in paragraph (c)(2)(i) of 
this section.
    (3) For non-federally insured credit unions. A non-federally insured 
credit union in a state identified on the National Credit Union 
Administration's Web site (NCUA.gov) as one where the appropriate state 
supervisory authority has executed a Memorandum of Understanding (MOU) 
with the National Credit Union Administration may register under this 
rule provided that any Nationwide Mortgage Licensing System and Registry 
listing of the non-federally insured credit union and its employees 
contains a clear and conspicuous statement that the non-federally 
insured credit union is not insured by the National Credit Union Share 
Insurance Fund, and the state supervisory authority where the non-
federally insured credit union is located maintains an agreement with 
the National Credit Union Administration for this registration process 
and oversight. If the state supervisory authority where the non-
federally insured credit union is located fails to maintain such an 
agreement, the non-federally insured credit union and its employees in 
that state may not register or maintain registration under the Federal 
system. They instead must use the appropriate state licensing and 
registration system, or if the state does not have such a system, the 
licensing and registration system established by the Bureau for mortgage 
loan originators and their employees.



Sec. 1007.102  Definitions.

    For purposes of this part, the following definitions apply:
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting of 
a loan in the residential mortgage industry and communication with a 
consumer to obtain information necessary for the processing or 
underwriting of a residential mortgage loan.
    Annual renewal period means November 1 through December 31 of each 
year.
    Bureau means the Bureau of Consumer Financial Protection.

[[Page 252]]

    Covered financial institution means any national bank, member bank, 
insured state nonmember bank, savings association, Farm Credit System 
institution, or federally insured credit union as any such term is 
defined in Sec. 1007.101(c)(1). Covered financial institution also 
includes a non-federally insured credit union that registers subject to 
the conditions of Sec. 1007.101(c)(3).
    Mortgage loan originator means
    (1) An individual who:
    (i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain.
    (2)(i) The term mortgage loan originator does not include:
    (A) An individual who performs purely administrative or clerical 
tasks on behalf of an individual who is described as a mortgage loan 
originator in this section;
    (B) An individual who only performs real estate brokerage activities 
(as defined in 12 U.S.C. 5102(4)(D)) and is licensed or registered as a 
real estate broker in accordance with applicable state law, unless the 
individual is compensated by a lender, a mortgage broker, or other 
mortgage loan originator or by any agent of such lender, mortgage 
broker, or other mortgage loan originator, and meets the definition of 
mortgage loan originator in this section; or
    (C) An individual or entity solely involved in extensions of credit 
related to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D).
    (ii) Examples of activities that would, and would not, result in an 
employee meeting the definition of mortgage loan originator are provided 
in appendix A to this part.
    Nationwide Mortgage Licensing System and Registry or Registry means 
the system developed and maintained by the Conference of State Bank 
Supervisors and the American Association of Residential Mortgage 
Regulators for the state licensing and registration of state-licensed 
mortgage loan originators and the registration of mortgage loan 
originators pursuant to 12 U.S.C. 5107.
    Registered mortgage loan originator or registrant means any 
individual who:
    (1) Meets the definition of mortgage loan originator and is an 
employee of a covered financial institution; and
    (2) Is registered pursuant to this part with, and maintains a unique 
identifier through, the Registry.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(v) of the Truth in Lending Act, 15 U.S.C. 
1602(v)) or residential real estate upon which is constructed or 
intended to be constructed a dwelling, and includes refinancings, 
reverse mortgages, home equity lines of credit and other first and 
additional lien loans that meet the qualifications listed in this 
definition. This definition does not amend or supersede 12 CFR 
613.3030(c) with respect to Farm Credit System institutions.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a registered mortgage loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate:
    (i) Electronic tracking of mortgage loan originators; and
    (ii) Uniform identification of, and public access to, the employment 
history of and the publicly adjudicated disciplinary and enforcement 
actions against mortgage loan originators; and
    (3) Must not be used for purposes other than those set forth under 
the S.A.F.E. Act.



Sec. 1007.103  Registration of mortgage loan originators.

    (a) Registration requirement--(1) Employee registration. Each 
employee of a covered financial institution who acts as a mortgage loan 
originator must register with the Registry, obtain a unique identifier, 
and maintain this registration in accordance with the requirements of 
this part. Any such employee who is not in compliance with the 
registration and unique identifier requirements set forth in this part 
is in violation of the S.A.F.E. Act and this part.

[[Page 253]]

    (2) Covered financial institution requirement--(i) In general. A 
covered financial institution that employs one or more individuals who 
act as a residential mortgage loan originator must require each such 
employee to register with the Registry, maintain this registration, and 
obtain a unique identifier in accordance with the requirements of this 
part.
    (ii) Prohibition. A covered financial institution must not permit an 
employee who is subject to the registration requirements of this part to 
act as a mortgage loan originator for the covered financial institution 
unless such employee is registered with the Registry pursuant to this 
part.
    (3) [Reserved]
    (4) Employees previously registered or licensed through the 
Registry--(i) In general. If an employee of a covered financial 
institution was registered or licensed through, and obtained a unique 
identifier from, the Registry and has maintained this registration or 
license before the employee becomes subject to this part at the current 
covered financial institution, then the registration requirements of the 
S.A.F.E. Act and this part are deemed to be met, provided that:
    (A) The employment information in paragraphs (d)(1)(i)(C) and 
(d)(1)(ii) of this section is updated and the requirements of paragraph 
(d)(2) of this section are met;
    (B) New fingerprints of the employee are submitted to the Registry 
for a background check, as required by paragraph (d)(1)(ix) of this 
section, unless the employee has fingerprints on file with the Registry 
that are less than 3 years old;
    (C) The covered financial institution information required in 
paragraphs (e)(1)(i) (to the extent the covered financial institution 
has not previously met these requirements) and (e)(2)(i) of this section 
is submitted to the Registry; and
    (D) The registration is maintained pursuant to paragraphs (b) and 
(e)(1)(ii) of this section, as of the date that the employee becomes 
subject to this part.
    (ii) Rule for certain acquisitions, mergers, or reorganizations. 
When registered or licensed mortgage loan originators become covered 
financial institution employees as a result of an acquisition, 
consolidation, merger, or reorganization, only the requirements of 
paragraphs (a)(4)(i)(A), (C), and (D) of this section must be met, and 
these requirements must be met within 60 days from the effective date of 
the acquisition, merger, or reorganization.
    (b) Maintaining registration. (1) A mortgage loan originator who is 
registered with the Registry pursuant to paragraph (a) of this section 
must:
    (i) Except as provided in paragraph (b)(3) of this section, renew 
the registration during the annual renewal period, confirming the 
responses set forth in paragraphs (d)(1)(i) through (viii) of this 
section remain accurate and complete, and updating this information, as 
appropriate; and
    (ii) Update the registration within 30 days of any of the following 
events:
    (A) A change in the name of the registrant;
    (B) The registrant ceases to be an employee of the covered financial 
institution; or
    (C) The information required under paragraphs (d)(1)(iii) through 
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
    (2) A registered mortgage loan originator must maintain his or her 
registration, unless the individual is no longer engaged in the activity 
of a mortgage loan originator.
    (3) The annual registration renewal requirement set forth in 
paragraph (b)(1) of this section does not apply to a registered mortgage 
loan originator who has completed his or her registration with the 
Registry pursuant to paragraph (a)(1) of this section less than 6 months 
prior to the end of the annual renewal period.
    (c) Effective dates--(1) Registration. A registration pursuant to 
paragraph (a)(1) of this section is effective on the date the Registry 
transmits notification to the registrant that the registrant is 
registered.
    (2) Renewals or updates. A renewal or update pursuant to paragraph 
(b) of this section is effective on the date the Registry transmits 
notification to the registrant that the registration has been renewed or 
updated.

[[Page 254]]

    (d) Required employee information--(1) In general. For purposes of 
the registration required by this section, a covered financial 
institution must require each employee who is a mortgage loan originator 
to submit to the Registry, or must submit on behalf of the employee, the 
following categories of information, to the extent this information is 
collected by the Registry:
    (i) Identifying information, including the employee's:
    (A) Name and any other names used;
    (B) Home address and contact information;
    (C) Principal business location address and business contact 
information;
    (D) Social security number;
    (E) Gender; and
    (F) Date and place of birth;
    (ii) Financial services-related employment history for the 10 years 
prior to the date of registration or renewal, including the date the 
employee became an employee of the covered financial institution;
    (iii) Convictions of any criminal offense involving dishonesty, 
breach of trust, or money laundering against the employee or 
organizations controlled by the employee, or agreements to enter into a 
pretrial diversion or similar program in connection with the prosecution 
for such offense(s);
    (iv) Civil judicial actions against the employee in connection with 
financial services-related activities, dismissals with settlements, or 
judicial findings that the employee violated financial services-related 
statutes or regulations, except for actions dismissed without a 
settlement agreement;
    (v) Actions or orders by a state or Federal regulatory agency or 
foreign financial regulatory authority that:
    (A) Found the employee to have made a false statement or omission or 
been dishonest, unfair or unethical; to have been involved in a 
violation of a financial services-related regulation or statute; or to 
have been a cause of a financial services-related business having its 
authorization to do business denied, suspended, revoked, or restricted;
    (B) Are entered against the employee in connection with a financial 
services-related activity;
    (C) Denied, suspended, or revoked the employee's registration or 
license to engage in a financial services-related activity; disciplined 
the employee or otherwise by order prevented the employee from 
associating with a financial services-related business or restricted the 
employee's activities; or
    (D) Barred the employee from association with an entity or its 
officers regulated by the agency or authority or from engaging in a 
financial services-related business;
    (vi) Final orders issued by a state or Federal regulatory agency or 
foreign financial regulatory authority based on violations of any law or 
regulation that prohibits fraudulent, manipulative, or deceptive 
conduct;
    (vii) Revocation or suspension of the employee's authorization to 
act as an attorney, accountant, or state or Federal contractor;
    (viii) Customer-initiated financial services-related arbitration or 
civil action against the employee that required action, including 
settlements, or which resulted in a judgment; and
    (ix) Fingerprints of the employee, in digital form if practicable, 
and any appropriate identifying information for submission to the 
Federal Bureau of Investigation and any governmental agency or entity 
authorized to receive such information in connection with a state and 
national criminal history background check; however, fingerprints 
provided to the Registry that are less than 3 years old may be used to 
satisfy this requirement.
    (2) Employee authorizations and attestation. An employee registering 
as a mortgage loan originator or renewing or updating his or her 
registration under this part, and not the employing covered financial 
institution or other employees of the covered financial institution, 
must:
    (i) Authorize the Registry and the employing institution to obtain 
information related to sanctions or findings in any administrative, 
civil, or criminal action, to which the employee is a party, made by any 
governmental jurisdiction;
    (ii) Attest to the correctness of all information required by 
paragraph (d) of this section, whether submitted by

[[Page 255]]

the employee or on behalf of the employee by the employing covered 
financial institution; and
    (iii) Authorize the Registry to make available to the public 
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii) 
through (viii) of this section.
    (3) Submission of information. A covered financial institution may 
identify one or more employees of the covered financial institution who 
may submit the information required by paragraph (d)(1) of this section 
to the Registry on behalf of the covered financial institution's 
employees provided that this individual, and any employee delegated such 
authority, does not act as a mortgage loan originator, consistent with 
paragraph (e)(1)(i)(F) of this section. In addition, a covered financial 
institution may submit to the Registry some or all of the information 
required by paragraphs (d)(1) and (e)(2) of this section for multiple 
employees in bulk through batch processing in a format to be specified 
by the Registry, to the extent such batch processing is made available 
by the Registry.
    (e) Required covered financial institution information. A covered 
financial institution must submit the following categories of 
information to the Registry:
    (1) Covered financial institution record. (i) In connection with the 
registration of one or more mortgage loan originators:
    (A) Name, main office address, and business contact information;
    (B) Internal Revenue Service Employer Tax Identification Number 
(EIN);
    (C) Research Statistics Supervision and Discount (RSSD) number, as 
issued by the Board of Governors of the Federal Reserve System;
    (D) Identification of its primary Federal regulator;
    (E) Name(s) and contact information of the individual(s) with 
authority to act as the covered financial institution's primary point of 
contact for the Registry;
    (F) Name(s) and contact information of the individual(s) with 
authority to enter the information required by paragraphs (d)(1) and (e) 
of this section to the Registry and who may delegate this authority to 
other individuals. For the purpose of providing information required by 
paragraph (e) of this section, this individual and their delegates must 
not act as mortgage loan originators unless the covered financial 
institution has 10 or fewer full time or equivalent employees and is not 
a subsidiary; and
    (G) If a subsidiary of a national bank, member bank, savings 
association, or insured state nonmember bank, indication that it is a 
subsidiary and the RSSD number of the parent institution; if an 
operating subsidiary of an agricultural credit association, indication 
that it is a subsidiary, and the RSSD number of the parent agricultural 
credit association.
    (ii) Attestation. The individual(s) identified in paragraphs 
(e)(1)(i)(E) and (F) of this section must comply with Registry protocols 
to verify their identity and must attest that they have the authority to 
enter data on behalf of the covered financial institution, that the 
information provided to the Registry pursuant to this paragraph (e) is 
correct, and that the covered financial institution will keep the 
information required by this paragraph (e) current and will file 
accurate supplementary information on a timely basis.
    (iii) A covered financial institution must update the information 
required by this paragraph (e) of this section within 30 days of the 
date that this information becomes inaccurate.
    (iv) A covered financial institution must renew the information 
required by paragraph (e) of this section on an annual basis.
    (2) Employee information. In connection with the registration of 
each employee who acts as a mortgage loan originator:
    (i) After the information required by paragraph (d) of this section 
has been submitted to the Registry, confirmation that it employs the 
registrant; and
    (ii) Within 30 days of the date the registrant ceases to be an 
employee of the covered financial institution, notification that it no 
longer employs the registrant and the date the registrant ceased being 
an employee.

[[Page 256]]



Sec. 1007.104  Policies and procedures.

    A covered financial institution that employs one or more mortgage 
loan originators must adopt and follow written policies and procedures 
designed to assure compliance with this part. These policies and 
procedures must be appropriate to the nature, size, complexity, and 
scope of the mortgage lending activities of the covered financial 
institution, and apply only to those employees acting within the scope 
of their employment at the covered financial institution. At a minimum, 
these policies and procedures must:
    (a) Establish a process for identifying which employees of the 
covered financial institution are required to be registered mortgage 
loan originators;
    (b) Require that all employees of the covered financial institution 
who are mortgage loan originators be informed of the registration 
requirements of the S.A.F.E. Act and this part and be instructed on how 
to comply with such requirements and procedures;
    (c) Establish procedures to comply with the unique identifier 
requirements in Sec. 1007.105;
    (d) Establish reasonable procedures for confirming the adequacy and 
accuracy of employee registrations, including updates and renewals, by 
comparisons with its own records;
    (e) Establish reasonable procedures and tracking systems for 
monitoring compliance with registration and renewal requirements and 
procedures;
    (f) Provide for independent testing for compliance with this part to 
be conducted at least annually by covered financial institution 
personnel or by an outside party;
    (g) Provide for appropriate action in the case of any employee who 
fails to comply with the registration requirements of the S.A.F.E. Act, 
this part, or the covered financial institution's related policies and 
procedures, including prohibiting such employees from acting as mortgage 
loan originators or other appropriate disciplinary actions;
    (h) Establish a process for reviewing employee criminal history 
background reports received pursuant to this part, taking appropriate 
action consistent with applicable Federal law, including section 19 of 
the Federal Deposit Insurance Act (12 U.S.C. 1829), section 206 of the 
Federal Credit Union Act (12 U.S.C. 1786(i)), and section 5.65(d) of the 
Farm Credit Act of 1971, as amended (12 U.S.C. 2277a-14(d)), and 
implementing regulations with respect to these reports, and maintaining 
records of these reports and actions taken with respect to applicable 
employees; and
    (i) Establish procedures designed to ensure that any third party 
with which the covered financial institution has arrangements related to 
mortgage loan origination has policies and procedures to comply with the 
S.A.F.E. Act, including appropriate licensing and/or registration of 
individuals acting as mortgage loan originators.



Sec. 1007.105  Use of unique identifier.

    (a) The covered financial institution shall make the unique 
identifier(s) of its registered mortgage loan originator(s) available to 
consumers in a manner and method practicable to the institution.
    (b) A registered mortgage loan originator shall provide his or her 
unique identifier to a consumer:
    (1) Upon request;
    (2) Before acting as a mortgage loan originator; and
    (3) Through the originator's initial written communication with a 
consumer, if any, whether on paper or electronically.



   Sec. Appendix A to Part 1007--Examples of Mortgage Loan Originator 
                               Activities

    This appendix provides examples to aid in the understanding of 
activities that would cause an employee of a covered financial 
institution to fall within or outside the definition of mortgage loan 
originator. The examples in this appendix are not all-inclusive. They 
illustrate only the issue described and do not illustrate any other 
issues that may arise under this part. For purposes of the examples 
below, the term ``loan'' refers to a residential mortgage loan.
    (a) Taking a loan application. The following examples illustrate 
when an employee takes, or does not take, a loan application.
    (1) Taking an application includes: receiving information provided 
in connection with a request for a loan to be used to determine whether 
the consumer qualifies for a loan, even if the employee:

[[Page 257]]

    (i) Has received the consumer's information indirectly in order to 
make an offer or negotiate a loan;
    (ii) Is not responsible for verifying information;
    (iii) Is inputting information into an online application or other 
automated system on behalf of the consumer; or
    (iv) Is not engaged in approval of the loan, including determining 
whether the consumer qualifies for the loan.
    (2) Taking an application does not include any of the following 
activities performed solely or in combination:
    (i) Contacting a consumer to verify the information in the loan 
application by obtaining documentation, such as tax returns or payroll 
receipts;
    (ii) Receiving a loan application through the mail and forwarding 
it, without review, to loan approval personnel;
    (iii) Assisting a consumer who is filling out an application by 
clarifying what type of information is necessary for the application or 
otherwise explaining the qualifications or criteria necessary to obtain 
a loan product;
    (iv) Describing the steps that a consumer would need to take to 
provide information to be used to determine whether the consumer 
qualifies for a loan or otherwise explaining the loan application 
process;
    (v) In response to an inquiry regarding a prequalified offer that a 
consumer has received from a covered financial institution, collecting 
only basic identifying information about the consumer and forwarding the 
consumer to a mortgage loan originator; or
    (vi) Receiving information in connection with a modification to the 
terms of an existing loan to a borrower as part of the covered financial 
institution's loss mitigation efforts when the borrower is reasonably 
likely to default.
    (b) Offering or negotiating terms of a loan. The following examples 
are designed to illustrate when an employee offers or negotiates terms 
of a loan, and conversely, what does not constitute offering or 
negotiating terms of a loan.
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting a loan offer to a consumer for acceptance, either 
verbally or in writing, including, but not limited to, providing a 
disclosure of the loan terms after application under the Truth in 
Lending Act, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process; or
    (D) Only the rate approved by the covered financial institution's 
loan approval mechanism function for a specific loan product is 
communicated without authority to negotiate the rate.
    (ii) Responding to a consumer's request for a lower rate or lower 
points on a pending loan application by presenting to the consumer a 
revised loan offer, either verbally or in writing, that includes a lower 
interest rate or lower points than the original offer.
    (2) Offering or negotiating terms of a loan does not include solely 
or in combination:
    (i) Providing general explanations or descriptions in response to 
consumer queries regarding qualification for a specific loan product, 
such as explaining loan terminology (e.g., debt-to-income ratio); 
lending policies (e.g., the loan-to-value ratio policy of the covered 
financial institution); or product-related services;
    (ii) In response to a consumer's request, informing a consumer of 
the loan rates that are publicly available, such as on the covered 
financial institution's Web site, for specific types of loan products 
without communicating to the consumer whether qualifications are met for 
that loan product;
    (iii) Collecting information about a consumer in order to provide 
the consumer with information on loan products for which the consumer 
generally may qualify, without presenting a specific loan offer to the 
consumer for acceptance, either verbally or in writing;
    (iv) Arranging the loan closing or other aspects of the loan 
process, including communicating with a consumer about those 
arrangements, provided that communication with the consumer only 
verifies loan terms already offered or negotiated;
    (v) Providing a consumer with information unrelated to loan terms, 
such as the best days of the month for scheduling loan closings at the 
covered financial institution;
    (vi) Making an underwriting decision about whether the consumer 
qualifies for a loan;
    (vii) Explaining or describing the steps or process that a consumer 
would need to take in order to obtain a loan offer, including 
qualifications or criteria that would need to be met without providing 
guidance specific to that consumer's circumstances; or
    (viii) Communicating on behalf of a mortgage loan originator that a 
written offer, including disclosures provided pursuant to the Truth in 
Lending Act, has been sent to a consumer without providing any details 
of that offer.
    (c) Offering or negotiating a loan for compensation or gain. The 
following examples illustrate when an employee does or does not offer or 
negotiate terms of a loan ``for compensation or gain.''
    (1) Offering or negotiating terms of a loan for compensation or gain 
includes engaging in any of the activities in paragraph (b)(1) of this 
appendix in the course of carrying out employment duties, even if the 
employee does not receive a referral fee or commission or other special 
compensation for the loan.

[[Page 258]]

    (2) Offering or negotiating terms of a loan for compensation or gain 
does not include engaging in a seller-financed transaction for the 
employee's personal property that does not involve the covered financial 
institution.



PART 1008_S.A.F.E. MORTGAGE LICENSING ACT_STATE COMPLIANCE AND BUREAU
REGISTRATION SYSTEM (REGULATION H)--Table of Contents



Sec.
1008.1 Purpose.
1008.3 Confidentiality of information.

                            Subpart A_General

1008.20 Scope of this subpart.
1008.23 Definitions.

    Subpart B_Determination of State Compliance With the S.A.F.E. Act

1008.101 Scope of this subpart.
1008.103 Individuals required to be licensed by states.
1008.105 Minimum loan originator license requirements.
1008.107 Minimum annual license renewal requirements.
1008.109 Effective date of state requirements imposed on individuals.
1008.111 Other minimum requirements for state licensing systems.
1008.113 Performance standards.
1008.115 Determination of noncompliance.

    Subpart C_Bureau's Loan Originator Licensing System and Bureau's 
            Nationwide Mortgage Licensing and Registry System

1008.201 Scope of this subpart.
1008.203 Bureau's establishment of loan originator licensing system.
1008.205 Bureau's establishment of nationwide mortgage licensing system 
          and registry.

     Subpart D_Minimum Requirements for Administration of the NMLSR

1008.301 Scope of this subpart.
1008.303 Financial reporting.
1008.305 Data security.
1008.307 Fees.
1008.309 Absence of liability for good-faith administration.

            Subpart E_Enforcement of Bureau Licensing System

1008.401 Bureau's authority to examine loan originator records.
1008.403-1008.405 [Reserved]

Appendix A to Part 1008--Examples of Mortgage Loan Originator Activities
Appendix B to Part 1008--Engaging in the Business of a Loan Originator: 
          Commercial Context and Habitualness
Appendix C to Part 1008--Independent Contractors and Loan Processor and 
          Underwriter Activities That Require a State Mortgage Loan 
          Originator License
Appendix D to Part 1008--Attorneys: Circumstances that Require a State 
          Mortgage Loan Originator License

    Authority: 12 U.S.C. 5101-5116; Pub. L. 111-203, 124 Stat. 1376.

    Source: 76 FR 78487, Dec. 19, 2011, unless otherwise noted.



Sec. 1008.1  Purpose.

    (a) Authority. This part, known as Regulation H, is issued by the 
Bureau of Consumer Financial Protection to implement the Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing 
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122 
Stat. 2654, 12 U.S.C. 5101 et seq.).
    (b) Purpose. The purpose of this part is to enhance consumer 
protection and reduce fraud by directing states to adopt minimum uniform 
standards for the licensing and registration of residential mortgage 
loan originators and to participate in a nationwide mortgage licensing 
system and registry database of residential mortgage loan originators. 
Under the S.A.F.E. Act, if the Bureau determines that a state's loan 
origination licensing system does not meet the minimum requirements of 
the S.A.F.E. Act, the Bureau is charged with establishing and 
implementing a system for all loan originators in that state. 
Additionally, if at any time the Bureau determines that the nationwide 
mortgage licensing system and registry is failing to meet the S.A.F.E. 
Act's requirements, the Bureau is charged with establishing and 
maintaining a licensing and registry database for loan originators.
    (c) Organization. The regulation is divided into subparts and 
appendices as follows:
    (1) Subpart A establishes the definitions applicable to this part.
    (2) Subpart B provides the minimum standards that a state must meet 
in licensing loan originators, including

[[Page 259]]

standards for whom a state must require to be licensed, and sets forth 
the Bureau's procedure for determining a state's compliance with the 
minimum standards.
    (3) Subpart C provides the requirements that the Bureau will apply 
in any state that the Bureau determines has not established a licensing 
and registration system in compliance with the minimum standards of the 
S.A.F.E. Act.
    (4) Subpart D provides minimum requirements for the administration 
of the Nationwide Mortgage Licensing System and Registry.
    (5) Subpart E clarifies the Bureau's enforcement authority in states 
in which it operates a state licensing system.
    (6) Appendices A through D set forth examples to aid in the 
understanding and application of the regulations.



Sec. 1008.3  Confidentiality of information.

    (a) Except as otherwise provided in this part, any requirement under 
Federal or state law regarding the privacy or confidentiality of any 
information or material provided to the Nationwide Mortgage Licensing 
System and Registry or a system established by the Director under this 
part, and any privilege arising under Federal or state law (including 
the rules of any Federal or state court) with respect to such 
information or material, shall continue to apply to such information or 
material after the information or material has been disclosed to the 
system. Such information and material may be shared with all state and 
Federal regulatory officials with mortgage industry oversight authority 
without the loss of privilege or the loss of confidentiality protections 
provided by Federal and state laws.
    (b) Information or material that is subject to a privilege or 
confidentiality under paragraph (a) of this section shall not be subject 
to:
    (1) Disclosure under any Federal or state law governing the 
disclosure to the public of information held by an officer or an agency 
of the Federal Government or the respective state; or
    (2) Subpoena or discovery, or admission into evidence, in any 
private civil action or administrative process, unless with respect to 
any privilege held by the Nationwide Mortgage Licensing System and 
Registry or by the Director with respect to such information or 
material, the person to whom such information or material pertains, 
waives, in whole or in part, in the discretion of such person, that 
privilege.
    (c) Any state law, including any state open record law, relating to 
the disclosure of confidential supervisory information or any 
information or material described in paragraph (a) of this section that 
is inconsistent with paragraph (a), shall be superseded by the 
requirements of such provision to the extent that state law provides 
less confidentiality or a weaker privilege.
    (d) This section shall not apply with respect to the information or 
material relating to the employment history of, and any publicly 
adjudicated disciplinary and enforcement action against, any loan 
originator that is included in the Nationwide Mortgage Licensing System 
and Registry for access by the public.



                            Subpart A_General



Sec. 1008.20  Scope of this subpart.

    This subpart provides the definitions applicable to this part, and 
other general requirements applicable to this part.



Sec. 1008.23  Definitions.

    Terms that are defined in the S.A.F.E. Act and used in this part 
have the same meaning as in the S.A.F.E. Act, unless otherwise provided 
in this section.
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting of 
a loan in the mortgage industry and communication with a consumer to 
obtain information necessary for the processing or underwriting of a 
residential mortgage loan.
    American Association of Residential Mortgage Regulators (AARMR) is 
the national association of executives and employees of the various 
states who are charged with the responsibility for administration and 
regulation of residential mortgage lending, servicing, and brokering, 
and dedicated to the goals described at www.aarmr.org.

[[Page 260]]

    Application means a request, in any form, for an offer (or a 
response to a solicitation of an offer) of residential mortgage loan 
terms, and the information about the borrower or prospective borrower 
that is customary or necessary in a decision on whether to make such an 
offer.
    Bureau means the Bureau of Consumer Financial Protection.
    Clerical or support duties:
    (1) Include:
    (i) The receipt, collection, distribution, and analysis of 
information common for the processing or underwriting of a residential 
mortgage loan; and
    (ii) Communicating with a consumer to obtain the information 
necessary for the processing or underwriting of a loan, to the extent 
that such communication does not include offering or negotiating loan 
rates or terms, or counseling consumers about residential mortgage loan 
rates or terms; and
    (2) Does not include:
    (i) Taking a residential mortgage loan application; or
    (ii) Offering or negotiating terms of a residential mortgage loan.
    Conference of State Bank Supervisors (CSBS) is the national 
organization composed of state bank supervisors dedicated to maintaining 
the state banking system and state regulation of financial services in 
accordance with the CSBS statement of principles described at 
www.csbs.org.
    Director means the Director of the Bureau of Consumer Financial 
Protection.
    Employee means an individual:
    (1) Whose manner and means of performance of work are subject to the 
right of control of, or are controlled by, a person, and
    (2) Whose compensation for Federal income tax purposes is reported, 
or required to be reported, on a W-2 form issued by the controlling 
person.
    Farm Credit Administration means the independent Federal agency, 
authorized by the Farm Credit Act of 1971, that examines and regulates 
the Farm Credit System.
    For compensation or gain. See Sec. 1008.103(c)(2)(ii).
    Independent contractor means an individual who performs his or her 
duties other than at the direction of and subject to the supervision and 
instruction of an individual who is licensed and registered in 
accordance with Sec. 1008.103(a), or is not required to be licensed, in 
accordance with Sec. 1008.103(e)(5), (6), or (7).
    Loan originator. See Sec. 1008.103.
    Loan processor or underwriter, for purposes of this part, means an 
individual who, with respect to the origination of a residential 
mortgage loan, performs clerical or support duties at the direction of 
and subject to the supervision and instruction of:
    (1) A state-licensed loan originator; or
    (2) A registered loan originator.
    Nationwide Mortgage Licensing System and Registry or NMLSR means the 
mortgage licensing system developed and maintained by the Conference of 
State Bank Supervisors and the American Association of Residential 
Mortgage Regulators for the licensing and registration of loan 
originators and the registration of registered loan originators or any 
system established by the Director, as provided in subpart D of this 
part.
    Nontraditional mortgage product means any mortgage product other 
than a 30-year fixed-rate mortgage.
    Origination of a residential mortgage loan, for purposes of the 
definition of loan processor or underwriter, means all residential 
mortgage loan-related activities from the taking of a residential 
mortgage loan application through the completion of all required loan 
closing documents and funding of the residential mortgage loan.
    Real estate brokerage activities mean any activity that involves 
offering or providing real estate brokerage services to the public 
including--
    (1) Acting as a real estate agent or real estate broker for a buyer, 
seller, lessor, or lessee of real property;
    (2) Bringing together parties interested in the sale, purchase, 
lease, rental, or exchange of real property;
    (3) Negotiating, on behalf of any party, any portion of a contract 
relating to the sale, purchase, lease, rental, or exchange of real 
property (other than in connection with providing financing with respect 
to any such transaction);

[[Page 261]]

    (4) Engaging in any activity for which a person engaged in the 
activity is required to be registered as a real estate agent or real 
estate broker under any applicable law; and
    (5) Offering to engage in any activity, or act in any capacity, 
described in paragraphs (1), (2), (3), or (4) of this definition.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(w) of the Truth in Lending Act) or residential 
real estate upon which is constructed or intended to be constructed a 
dwelling (as so defined).
    State means any state of the United States, the District of 
Columbia, any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Virgin Islands, and the Commonwealth of the Northern 
Mariana Islands.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate electronic 
tracking of loan originators and uniform identification of, and public 
access to, the employment history of and the publicly adjudicated 
disciplinary and enforcement actions against loan originators; and
    (3) Shall not be used for purposes other than those set forth under 
the S.A.F.E. Act.



    Subpart B_Determination of State Compliance With the S.A.F.E. Act



Sec. 1008.101  Scope of this subpart.

    This subpart describes the minimum standards of the S.A.F.E. Act 
that apply to a state's licensing and registering of loan originators. 
This subpart also provides the procedures that the Bureau follows to 
determine that a state does not have in place a system for licensing and 
registering mortgage loan originators that complies with the minimum 
standards. Upon making such a determination, the Bureau will impose the 
requirements and exercise the enforcement authorities described in 
subparts C and E of this part.



Sec. 1008.103  Individuals required to be licensed by states.

    (a) Except as provided in paragraph (e) of this section, in order to 
operate a S.A.F.E.-compliant program, a state must prohibit an 
individual from engaging in the business of a loan originator with 
respect to any dwelling or residential real estate in the state, unless 
the individual first:
    (1) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (2) Obtains and maintains a valid loan originator license from the 
state.
    (b) An individual engages in the business of a loan originator if 
the individual, in a commercial context and habitually or repeatedly:
    (1)(i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain; or
    (2) Represents to the public, through advertising or other means of 
communicating or providing information (including the use of business 
cards, stationery, brochures, signs, rate lists, or other promotional 
items), that such individual can or will perform the activities 
described in paragraph (b)(1) of this section.
    (c)(1) An individual ``takes a residential mortgage loan 
application'' if the individual receives a residential mortgage loan 
application for the purpose of facilitating a decision whether to extend 
an offer of residential mortgage loan terms to a borrower or prospective 
borrower (or to accept the terms offered by a borrower or prospective 
borrower in response to a solicitation), whether the application is 
received directly or indirectly from the borrower or prospective 
borrower.
    (2) An individual ``offers or negotiates terms of a residential 
mortgage loan for compensation or gain'' if the individual:
    (i)(A) Presents for consideration by a borrower or prospective 
borrower particular residential mortgage loan terms;
    (B) Communicates directly or indirectly with a borrower, or 
prospective

[[Page 262]]

borrower for the purpose of reaching a mutual understanding about 
prospective residential mortgage loan terms; or
    (C) Recommends, refers, or steers a borrower or prospective borrower 
to a particular lender or set of residential mortgage loan terms, in 
accordance with a duty to or incentive from any person other than the 
borrower or prospective borrower; and
    (ii) Receives or expects to receive payment of money or anything of 
value in connection with the activities described in paragraph (c)(2)(i) 
of this section or as a result of any residential mortgage loan terms 
entered into as a result of such activities.
    (d)(1) Except as provided in paragraph (e) of this section, a state 
must prohibit an individual who is an independent contractor from 
engaging in residential mortgage loan origination activities as a loan 
processor or underwriter with respect to any dwelling or residential 
real estate in the state, unless the individual first:
    (i) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (ii) Obtains and maintains a valid loan originator license from the 
state.
    (2) An individual ``engage[s] in residential mortgage loan 
origination activities as a loan processor or underwriter'' if, with 
respect to a residential mortgage loan application, the individual 
performs clerical or support duties.
    (e) A state is not required to impose the prohibitions required 
under paragraphs (a) and (d) of this section on the following 
individuals:
    (1) An individual who performs only real estate brokerage activities 
and is licensed or registered in accordance with applicable state law, 
unless the individual is compensated directly or indirectly by a lender, 
mortgage broker, or other loan originator or by an agent of such lender, 
mortgage broker, or other loan originator;
    (2) An individual who is involved only in extensions of credit 
relating to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D);
    (3) An individual who performs only clerical or support duties and:
    (i) Who does so at the direction of and subject to the supervision 
and instruction of an individual who:
    (A) Is licensed and registered in accordance with paragraph (a) of 
this section, or
    (B) Is not required to be licensed in accordance with paragraph 
(e)(5); or
    (ii) Who performs such duties solely with respect to transactions 
for which the individual who acts as a loan originator is not required 
to be licensed, in accordance with paragraph (e)(2), (6), or (7) of this 
section;
    (4) An individual who performs only purely administrative or 
clerical tasks on behalf of a loan originator;
    (5) An individual who is lawfully registered with, and maintains a 
unique identifier through, the Nationwide Mortgage Licensing System and 
Registry, and who is an employee of a covered financial institution, as 
that term is defined in 12 CFR part 1007.
    (6)(i) An individual who is an employee of a Federal, state, or 
local government agency or housing finance agency and who acts as a loan 
originator only pursuant to his or her official duties as an employee of 
the Federal, state, or local government agency or housing finance 
agency.
    (ii) For purposes of this paragraph (e)(6), the term employee has 
the meaning provided in paragraph (1) of the definition of employee in 
Sec. 1008.23 and excludes the meaning provided in paragraph (2) of the 
definition.
    (iii) For purposes of this paragraph (e)(6), the term housing 
finance agency means any authority:
    (A) That is chartered by a state to help meet the affordable housing 
needs of the residents of the state;
    (B) That is supervised directly or indirectly by the state 
government;
    (C) That is subject to audit and review by the state in which it 
operates; and
    (D) Whose activities make it eligible to be a member of the National 
Council of State Housing Agencies.
    (7)(i) An employee of a bona fide nonprofit organization who acts as 
a loan originator only with respect to his or her work duties to the 
bona fide nonprofit organization, and who acts as a loan originator only 
with respect to

[[Page 263]]

residential mortgage loans with terms that are favorable to the 
borrower.
    (ii) For an organization to be considered a bona fide nonprofit 
organization under this paragraph, a state supervisory authority that 
opts not to require licensing of the employee must determine, under 
criteria and pursuant to processes established by the state, that the 
organization:
    (A) Has the status of a tax-exempt organization under section 
501(c)(3) of the Internal Revenue Code of 1986;
    (B) Promotes affordable housing or provides homeownership education, 
or similar services;
    (C) Conducts its activities in a manner that serves public or 
charitable purposes, rather than commercial purposes;
    (D) Receives funding and revenue and charges fees in a manner that 
does not incentivize it or its employees to act other than in the best 
interests of its clients;
    (E) Compensates its employees in a manner that does not incentivize 
employees to act other than in the best interests of its clients;
    (F) Provides or identifies for the borrower residential mortgage 
loans with terms favorable to the borrower and comparable to mortgage 
loans and housing assistance provided under government housing 
assistance programs; and
    (G) Meets other standards that the state determines are appropriate.
    (iii) A state must periodically examine the books and activities of 
an organization it determines is a bona fide nonprofit organization and 
revoke its status as a bona fide nonprofit organization if it does not 
continue to meet the criteria under paragraph (e)(7)(ii) of this 
section;
    (iv) For residential mortgage loans to have terms that are favorable 
to the borrower, a state must determine that the terms are consistent 
with loan origination in a public or charitable context, rather than a 
commercial context.
    (f) A state must require an individual licensed in accordance with 
paragraphs (a) or (d) of this section to renew the loan originator 
license no less often than annually.



Sec. 1008.105  Minimum loan originator license requirements.

    For an individual to be eligible for a loan originator license 
required under Sec. 1008.103(a) and (d), a state must require and find, 
at a minimum, that an individual:
    (a) Has never had a loan originator license revoked in any 
governmental jurisdiction, except that a formally vacated revocation 
shall not be deemed a revocation;
    (b)(1) Has never been convicted of, or pled guilty or nolo 
contendere to, a felony in a domestic, foreign, or military court:
    (i) During the 7-year period preceding the date of the application 
for licensing; or
    (ii) At any time preceding such date of application, if such felony 
involved an act of fraud, dishonesty, a breach of trust, or money 
laundering.
    (2) For purposes of this paragraph (b):
    (i) Expunged convictions and pardoned convictions do not, in 
themselves, affect the eligibility of the individual; and
    (ii) Whether a particular crime is classified as a felony is 
determined by the law of the jurisdiction in which an individual is 
convicted.
    (c) Has demonstrated financial responsibility, character, and 
general fitness, such as to command the confidence of the community and 
to warrant a determination that the loan originator will operate 
honestly, fairly, and efficiently, under reasonable standards 
established by the individual state.
    (d) Completed at least 20 hours of pre-licensing education that has 
been reviewed and approved by the Nationwide Mortgage Licensing System 
and Registry. The pre-licensing education completed by the individual 
must include at least:
    (1) 3 hours of Federal law and regulations;
    (2) 3 hours of ethics, which must include instruction on fraud, 
consumer protection, and fair lending issues; and
    (3) 2 hours of training on lending standards for the nontraditional 
mortgage product marketplace.
    (e)(1) Achieved a test score of not less than 75 percent correct 
answers on a

[[Page 264]]

written test developed by the NMLSR in accordance with 12 U.S.C. 
5105(d).
    (2) To satisfy the requirement under paragraph (e)(1) of this 
section, an individual may take a test three consecutive times, with 
each retest occurring at least 30 days after the preceding test. If an 
individual fails three consecutive tests, the individual must wait at 
least 6 months before taking the test again.
    (3) If a formerly state-licensed loan originator fails to maintain a 
valid license for 5 years or longer, not taking into account any time 
during which such individual is a registered loan originator, the 
individual must retake the test and achieve a test score of not less 
than 75 percent correct answers.
    (f) Be covered by either a net worth or surety bond requirement, or 
pays into a state fund, as required by the state loan originator 
supervisory authority.
    (g) Has submitted to the NMLSR fingerprints for submission to the 
Federal Bureau of Investigation and to any government agency for a state 
and national criminal history background check; and
    (h) Has submitted to the NMLSR personal history and experience, 
which must include authorization for the NMLSR to obtain:
    (1) Information related to any administrative, civil, or criminal 
findings by any governmental jurisdiction; and
    (2) An independent credit report.



Sec. 1008.107  Minimum annual license renewal requirements.

    (a) For an individual to be eligible to renew a loan originator 
license as required under Sec. 1008.103(f), a state must require the 
individual:
    (1) To continue to meet the minimum standards for license issuance 
provided in Sec. 1008.105; and
    (2) To satisfy annual continuing education requirements, which must 
include at least 8 hours of education approved by the NMLSR. The 8 hours 
of annual continuing education must include at least:
    (i) 3 hours of Federal law and regulations;
    (ii) 2 hours of ethics (including instruction on fraud, consumer 
protection, and fair lending issues); and
    (iii) 2 hours of training related to lending standards for the 
nontraditional mortgage product marketplace.
    (b) A state must provide that a state-licensed loan originator may 
only receive credit for a continuing education course in the year in 
which the course is taken, and that a state-licensed loan originator may 
not apply credits for education courses taken in one year to meet the 
continuing education requirements of subsequent years. A state must 
provide that an individual may not meet the annual requirements for 
continuing education by taking an approved course more than one time in 
the same year or in successive years.
    (c) An individual who is an instructor of an approved continuing 
education course may receive credit for the individual's own annual 
continuing education requirement at the rate of 2 hours credit for every 
one hour taught.



Sec. 1008.109  Effective date of state requirements imposed on individuals.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
state must provide that the effective date for requirements it imposes 
in accordance with Sec. Sec. 1008.103, 1008.105, and 1008.107 is no 
later than August 29, 2011.
    (b) For an individual who was permitted to perform residential 
mortgage loan originations under state legislation or regulations 
enacted or promulgated prior to the state's enactment or promulgation of 
a licensing system that complies with this subpart, a state may delay 
the effective date for requirements it imposes in accordance with 
Sec. Sec. 1008.103, 1008.105, and 1008.107 to no later than August 29, 
2011. For purposes of this paragraph (b), an individual was permitted to 
perform residential mortgage loan originations only if prior state law 
required the individual to be licensed, authorized, registered, or 
otherwise granted a form of affirmative and revocable government 
permission for individuals as a condition of performing residential 
mortgage loan originations.
    (c) The Bureau may approve a later effective date only upon a 
state's demonstration that substantial numbers of loan originators (or 
of a class of loan originators) who require a state license face unusual 
hardship, through no fault

[[Page 265]]

of their own or of the state government, in complying with the standards 
required by the S.A.F.E. Act and in obtaining state licenses within one 
year.



Sec. 1008.111  Other minimum requirements for state licensing systems.

    (a) General. A state must maintain a loan originator licensing, 
supervisory, and oversight authority (supervisory authority) that 
provides effective supervision and enforcement, in accordance with the 
minimum standards provided in this section and in Sec. 1008.113.
    (b) Authorities. A supervisory authority must have the legal 
authority and mechanisms:
    (1) To examine any books, papers, records, or other data of any loan 
originator operating in the state;
    (2) To summon any loan originator operating in the state, or any 
person having possession, custody, or care of the reports and records 
relating to such a loan originator, to appear before the supervisory 
authority at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act;
    (3) To administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the affairs 
of any such loan originator;
    (4) To enter an order requiring any individual or person that is, 
was, or would be a cause of a violation of the S.A.F.E. Act as 
implemented by the state, due to an act or omission the person knew or 
should have known would contribute to such violation, to cease and 
desist from committing or causing such violation and any future 
violation of the same requirement;
    (5) To suspend, terminate, and refuse renewal of a loan originator 
license for violation of state or Federal law; and
    (6) To impose civil money penalties for individuals acting as loan 
originators, or representing themselves to the public as loan 
originators, in the state without a valid license or registration.
    (c) A supervisory authority must have established processes in place 
to verify that individuals subject to the requirement described in 
Sec. 1008.103(a)(1) and (d)(1) are registered with the NMLSR.
    (d) The supervisory authority must be required under state law to 
regularly report violations of such law, as well as enforcement actions 
and other relevant information, to the NMLSR.
    (e) The supervisory authority must have a process in place for 
challenging information contained in the NMLSR.
    (f) The supervisory authority must require a loan originator to 
ensure that all residential mortgage loans that close as a result of the 
loan originator engaging in activities described in Sec. 1008.103(b)(1) 
are included in reports of condition submitted to the NMLSR. Such 
reports of condition shall be in such form, shall contain such 
information, and shall be submitted with such frequency and by such 
dates as the NMLSR may reasonably require.



Sec. 1008.113  Performance standards.

    (a) For the Bureau to determine that a state is providing effective 
supervision and enforcement, a supervisory authority must meet the 
following performance standards:
    (1) The supervisory authority must participate in the NMLSR;
    (2) The supervisory authority must approve or deny loan originator 
license applications and must renew or refuse to renew existing loan 
originator licenses for violations of state or Federal law;
    (3) The supervisory authority must discipline loan originator 
licensees with appropriate enforcement actions, such as license 
suspensions or revocations, cease-and-desist orders, civil money 
penalties, and consumer refunds for violations of state or Federal law;
    (4) The supervisory authority must examine or investigate loan 
originator licensees in a systematic manner based on identified risk 
factors or on a periodic schedule.
    (b) A supervisory authority that is accredited under the Conference 
of State Bank Supervisors-American Association of Residential Mortgage 
Regulators Mortgage Accreditation Program will be presumed by the Bureau 
to be compliant with the requirements of this section.

[[Page 266]]



Sec. 1008.115  Determination of noncompliance.

    (a) Evidence of compliance. Any time a state enacts legislation that 
affects its compliance with the S.A.F.E. Act, it must notify the Bureau. 
Upon request from the Bureau, a state must provide evidence that it is 
in compliance with the requirements of the S.A.F.E. Act and this part, 
including citations to applicable state law and regulations; 
descriptions of processes followed by the state's supervisory authority; 
and data concerning examination, investigation, and enforcement actions.
    (b) Initial determination of noncompliance. If the Bureau makes an 
initial determination that a state is not in compliance with the 
S.A.F.E. Act, the Bureau will notify the state and will publish, in the 
Federal Register, a notice providing the Bureau's initial determination 
and presenting the opportunity for public comment for a period of no 
less than 30 days. This public comment period will allow the residents 
of the state and other interested members of the public to comment on 
the Bureau's initial determination.
    (c) Final determination of noncompliance. In making a final 
determination of noncompliance, the Bureau will review additional 
information that may be offered by a state and the comments submitted 
during the public comment period described in paragraph (b) of this 
section. If the Bureau makes a final determination that a state does not 
have in place by law or regulation a system that complies with the 
minimum requirements of the S.A.F.E. Act, as described in this part, the 
Bureau will publish that final determination in the Federal Register.
    (d) Good-faith effort to comply. If the Bureau makes the final 
determination described in paragraph (c) of this section, but the Bureau 
finds that the state is making a good-faith effort to meet the 
requirements of 12 U.S.C. 5104, 5105, 5107(d), and this subpart, the 
Bureau may grant the state a period of not more than 24 months to comply 
with these requirements. If an extension is granted to the state in 
accordance with this paragraph (d), then the Bureau will provide an 
additional initial and final determination process before it determines 
that the state is not in compliance and is subject to subparts C and E 
of this part.
    (e) Effective date of subparts C and E. The provisions of subparts C 
and E of this part will become effective with respect to a state for 
which a final determination of noncompliance has been made upon:
    (1) The effective date of the Bureau's final determination with 
respect to the state, pursuant to paragraph (c) of this section, unless 
an extension had been granted to the state in accordance with paragraph 
(d) of this section; or
    (2) If an extension had been granted to the state in accordance with 
paragraph (d) of this section, the effective date of the Bureau's 
subsequent final determination with respect to the state following the 
expiration of the period of time granted pursuant to paragraph (d) of 
this section.



 Subpart C_The Bureau's Loan Originator Licensing System and Nationwide 
                 Mortgage Licensing and Registry System



Sec. 1008.201  Scope of this subpart.

    The S.A.F.E. Act provides the Bureau with ``backup authority'' to 
establish a loan originator licensing system for any state that is 
determined by the Bureau not to be in compliance with the minimum 
standards of the S.A.F.E. Act. The provisions of this subpart become 
applicable to individuals in a state as provided in Sec. 1008.115(e). 
The S.A.F.E. Act also authorizes the Bureau to establish and maintain a 
nationwide mortgage licensing system and registry if the Bureau 
determines that the NMLSR is failing to meet the purposes and 
requirements of the S.A.F.E. Act for a comprehensive licensing, 
supervisory, and tracking system for loan originators.



Sec. 1008.203  The Bureau's establishment of loan originator licensing system.

    If the Bureau determines, in accordance with Sec. 1008.115(e), that 
a state has not established a licensing and registration system in 
compliance with the minimum standards of the S.A.F.E. Act, the Bureau 
shall apply to individuals in that state the minimum standards of the 
S.A.F.E. Act, as specified in

[[Page 267]]

subpart B, which provides the minimum requirements that a state must 
meet to be in compliance with the S.A.F.E. Act, and as may be further 
specified in this part.



Sec. 1008.205  The Bureau's establishment of nationwide mortgage
licensing system and registry.

    If the Bureau determines that the NMLSR established by CSBS and 
AARMR does not meet the minimum requirements of subpart D of this part, 
the Bureau will establish and maintain a nationwide mortgage licensing 
system and registry.



     Subpart D_Minimum Requirements for Administration of the NMLSR



Sec. 1008.301  Scope of this subpart.

    This subpart establishes minimum requirements that apply to 
administration of the NMLSR by the Conference of State Bank Supervisors 
or by the Bureau. The NMLSR must accomplish the following objectives:
    (a) Provide uniform license applications and reporting requirements 
for state-licensed loan originators.
    (b) Provide a comprehensive licensing and supervisory database.
    (c) Aggregate and improve the flow of information to and between 
regulators.
    (d) Provide increased accountability and tracking of loan 
originators.
    (e) Streamline the licensing process and reduce the regulatory 
burden.
    (f) Enhance consumer protections and support anti-fraud measures.
    (g) Provide consumers with easily accessible information, offered at 
no charge, utilizing electronic media, including the Internet, regarding 
the employment history of, and publicly adjudicated disciplinary and 
enforcement actions against, loan originators.
    (h) Establish a means by which residential mortgage loan originators 
would, to the greatest extent possible, be required to act in the best 
interests of the consumer.
    (i) Facilitate responsible behavior in the mortgage marketplace and 
provide comprehensive training and examination requirements related to 
mortgage lending.
    (j) Facilitate the collection and disbursement of consumer 
complaints on behalf of state and Federal mortgage regulators.



Sec. 1008.303  Financial reporting.

    To the extent that CSBS maintains the NMLSR, CSBS must annually 
provide to the Bureau, and the Bureau will annually collect and make 
available to the public, NMLSR financial statements, audited in 
accordance with Generally Accepted Accounting Principles (GAAP) 
promulgated by the Federal Accounting Standards Advisory Board, and 
other data. These financial statements and other data shall include, but 
not be limited to, the level and categories of funds received in 
relation to the NMLSR and how such funds are spent, including the 
aggregate total of funds paid for system development and improvements, 
the aggregate total of salaries and bonuses paid, the aggregate total of 
other administrative costs, and detail on other money spent, including 
money and interest paid to reimburse system investors or lenders, and a 
report of each state's activity with respect to the NMLSR, including the 
number of licensees, the state's financial commitment to the system, and 
the fees collected by the state through the NMLSR.



Sec. 1008.305  Data security.

    (a) To the extent that CSBS, AARMR, or their successors maintain the 
NMLSR, CSBS, AARMR, and their successors, as applicable, must complete a 
background check on their employees, contractors, or other persons who 
have access to loan originators' Social Security Numbers, fingerprints, 
or any credit reports collected by the system.
    (b) To the extent that CSBS, AARMR, or their successors maintain the 
NMLSR, CSBS, AARMR, and their successors as applicable, must keep and 
adhere to an appropriate information security and privacy policy. If the 
NMLSR forms a reasonable belief that a security breach has occurred, it 
shall notify affected parties, as soon as practicable, including the 
Bureau, any loan originator or registrant whose data may have been 
compromised, and the

[[Page 268]]

employer of the loan originator or registrant, if such employer is also 
licensed through the system.



Sec. 1008.307  Fees.

    CSBS, AARMR, or the Bureau, as applicable, may charge reasonable 
fees to cover the costs of maintaining and providing access to 
information from the Nationwide Mortgage Licensing System and Registry. 
Fees shall not be charged to consumers for access to such system and 
registry. If the Bureau determines to charge fees, the fees to be 
charged shall be issued by notice with the opportunity for comment prior 
to any fees being charged.



Sec. 1008.309  Absence of liability for good-faith administration.

    The Bureau or any organization serving as the administrator of the 
Nationwide Mortgage Licensing System and Registry or a system 
established by the Bureau under 12 U.S.C. 5108 and in accordance with 
subpart C, or any officer or employee of the Bureau or the Bureau's 
designee, shall not be subject to any civil action or proceeding for 
monetary damages by reason of the good-faith action or omission of any 
officer or employee of any such entity, while acting within the scope of 
office or employment, relating to the collection, furnishing, or 
dissemination of information concerning persons who are loan originators 
or are applying for licensing or registration as loan originators.



         Subpart E_Enforcement of the Bureau's Licensing System



Sec. 1008.401  The Bureau's authority to examine loan originator records.

    (a) Summons authority. The Bureau may:
    (1) Examine any books, papers, records, or other data of any loan 
originator operating in any state which is subject to a licensing system 
established by the Bureau under subpart C of this part; and
    (2) Summon any loan originator referred to in paragraph (a)(1) of 
this section or any person having possession, custody, or care of the 
reports and records relating to such loan originator, to appear before 
the Bureau at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act.
    (b) Examination authority--(1) In general. If the Bureau establishes 
a licensing system under 12 U.S.C. 5107 and in accordance with subpart C 
of this part for any state, the Bureau shall appoint examiners for the 
purposes of ensuring the appropriate administration of the Bureau's 
licensing system.
    (2) Power to examine. Any examiner appointed under paragraph (b)(1) 
of this section shall have power, on behalf of the Bureau, to make any 
examination of any loan originator operating in any state which is 
subject to a licensing system established by the Bureau under 12 U.S.C. 
5107 and in accordance with subpart C of this part, whenever the Bureau 
determines that an examination of any loan originator is necessary to 
determine the compliance by the originator with minimum requirements of 
the S.A.F.E. Act.
    (3) Report of examination. Each Bureau examiner appointed under 
paragraph (b)(1) of this section shall make a full and detailed report 
to the Bureau of examination of any loan originator examined under this 
section.
    (4) Administration of oaths and affirmations; evidence. In 
connection with examinations of loan originators operating in any state 
which is subject to a licensing system established by the Bureau under 
12 U.S.C. 5107, and in accordance with subpart C of this part, or with 
other types of investigations to determine compliance with applicable 
law and regulations, the Bureau and the examiners appointed by the 
Bureau may administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the affairs 
of any such loan originator.
    (5) Assessments. The cost of conducting any examination of any loan 
originator operating in any state which is subject to a licensing system 
established by the Bureau under 12 U.S.C 5107 and in accordance with 
subpart C of this part shall be assessed by the Bureau against the loan 
originator to

[[Page 269]]

meet the Director's expenses in carrying out such examination.



Sec. Sec. 1008.403-1008.405  [Reserved]



   Sec. Appendix A to Part 1008--Examples of Mortgage Loan Originator 
                               Activities

    This appendix provides examples to aid in the understanding of 
activities that would cause an individual to fall within or outside the 
definition of a mortgage loan originator under part 1008. The examples 
in this appendix are not all-inclusive. They illustrate only the issue 
described and do not illustrate any other issues that may arise. For 
purposes of the examples below, the term ``loan'' refers to a 
residential mortgage loan as defined in Sec. 1008.23 of this part.
    (a) Taking a Loan Application. Taking a residential mortgage loan 
application within the meaning of Sec. 1008.103(c)(1) means receipt by 
an individual, for the purpose of facilitating a decision whether to 
extend an offer of loan terms to a borrower or prospective borrower, of 
an application as defined in Sec. 1008.23 (a request in any form for an 
offer, or a response to a solicitation of an offer, of residential 
mortgage loan terms, and the information about the borrower or 
prospective borrower that is customary or necessary in a decision 
whether to make such an offer).
    (1) The following are examples to illustrate when an individual 
takes, or does not take, a loan application:
    (i) An individual ``takes a residential mortgage loan application'' 
even if the individual:
    (A) Has received the borrower or prospective borrower's request or 
information indirectly. Section 1008.103(c)(1) provides that an 
individual takes an application, whether he or she receives it 
``directly or indirectly'' from the borrower or prospective borrower. 
This means that an individual who offers or negotiates residential 
mortgage loan terms for compensation or gain cannot avoid licensing 
requirements simply by having another person physically receive the 
application from the prospective borrower and then pass the application 
to the individual;
    (B) Is not responsible for verifying information. The fact that an 
individual who takes application information from a borrower or 
prospective borrower is not responsible for verifying that information--
for example, the individual is a mortgage broker who collects and sends 
that information to a lender--does not mean that the individual is not 
taking an application;
    (C) Only inputs the information into an online application or other 
automated system; or
    (D) Is not involved in approval of the loan, including determining 
whether the consumer qualifies for the loan. Similar to an individual 
who is not responsible for verification, an individual can still ``take 
a residential mortgage loan application'' even if he or she is not 
ultimately responsible for approving the loan. A mortgage broker, for 
example, can take a residential mortgage loan application even though it 
is passed on to a lender for a decision on whether the borrower 
qualifies for the loan and for the ultimate loan approval.
    (ii) An individual does not take a loan application merely because 
the individual performs any of the following actions:
    (A) Receives a loan application through the mail and forwards it, 
without review, to loan approval personnel. The Bureau interprets the 
term ``takes a residential mortgage loan application'' to exclude an 
individual whose only role with respect to the application is physically 
handling a completed application form or transmitting a completed form 
to a lender on behalf of a borrower or prospective borrower. This 
interpretation is consistent with the definition of ``loan originator'' 
in section 1503(3) of the S.A.F.E. Act.
    (B) Assists a borrower or prospective borrower who is filling out an 
application by explaining the contents of the application and where 
particular borrower information is to be provided on the application;
    (C) Generally describes for a borrower or prospective borrower the 
loan application process without a discussion of particular loan 
products; or
    (D) In response to an inquiry regarding a prequalified offer that a 
borrower or prospective borrower has received from a lender, collects 
only basic identifying information about the borrower or prospective 
borrower on behalf of that lender.
    (b) Offering or Negotiating Terms of a Loan. The following examples 
are designed to illustrate when an individual offers or negotiates terms 
of a loan within the meaning of Sec. 1008.103(c)(2) and, conversely, 
what does not constitute offering or negotiating terms of a loan:
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting for consideration by a borrower or prospective 
borrower particular loan terms, whether verbally, in writing, or 
otherwise, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process;
    (D) The individual lacks authority to negotiate the interest rate or 
other loan terms; or
    (E) The individual lacks authority to bind the person that is the 
source of the prospective financing.
    (ii) Communicating directly or indirectly with a borrower or 
prospective borrower for

[[Page 270]]

the purpose of reaching a mutual understanding about prospective 
residential mortgage loan terms, including responding to a borrower or 
prospective borrower's request for a different rate or different fees on 
a pending loan application by presenting to the borrower or prospective 
borrower a revised loan offer, even if a mutual understanding is not 
subsequently achieved.
    (2) Offering or negotiating terms of a loan does not include any of 
the following activities:
    (i) Providing general explanations or descriptions in response to 
consumer queries, such as explaining loan terminology (e.g., debt-to-
income ratio) or lending policies (e.g., the loan-to-value ratio policy 
of the lender), or describing product-related services;
    (ii) Arranging the loan closing or other aspects of the loan 
process, including by communicating with a borrower or prospective 
borrower about those arrangements, provided that any communication that 
includes a discussion about loan terms only verifies terms already 
agreed to by the borrower or prospective borrower;
    (iii) Providing a borrower or prospective borrower with information 
unrelated to loan terms, such as the best days of the month for 
scheduling loan closings at the bank;
    (iv) Making an underwriting decision about whether the borrower or 
prospective borrower qualifies for a loan;
    (v) Explaining or describing the steps that a borrower or 
prospective borrower would need to take in order to obtain a loan offer, 
including providing general guidance about qualifications or criteria 
that would need to be met that is not specific to that borrower or 
prospective borrower's circumstances;
    (vi) Communicating on behalf of a mortgage loan originator that a 
written offer has been sent to a borrower or prospective borrower 
without providing any details of that offer; or
    (vii) Offering or negotiating loan terms solely through a third-
party licensed loan originator, so long as the nonlicensed individual 
does not represent to the public that he or she can or will perform 
covered activities and does not communicate with the borrower or 
potential borrower. For example:
    (A) A seller who provides financing to a purchaser of a dwelling 
owned by that seller in which the offer and negotiation of loan terms 
with the borrower or prospective borrower is conducted exclusively by a 
third-party licensed loan originator;
    (B) An individual who works solely for a lender, when the individual 
offers loan terms exclusively to third-party licensed loan originators 
and not to borrowers or potential borrowers.
    (c) For Compensation or Gain. (1) An individual acts ``for 
compensation or gain'' within the meaning of Sec. 1008.103(c)(2)(ii) if 
the individual receives or expects to receive in connection with the 
individual's activities anything of value, including, but not limited 
to, payment of a salary, bonus, or commission. The concept ``anything of 
value'' is interpreted broadly and is not limited only to payments that 
are contingent upon the closing of a loan.
    (2) An individual does not act ``for compensation or gain'' if the 
individual acts as a volunteer without receiving or expecting to receive 
anything of value in connection with the individual's activities.



    Sec. Appendix B to Part 1008--Engaging in the Business of a Loan 
             Originator: Commercial Context and Habitualness

    An individual who acts (or holds himself or herself out as acting) 
as a loan originator in a commercial context and with some degree of 
habitualness or repetition is considered to be ``engage[d] in the 
business of a loan originator[.]'' An individual who acts as a loan 
originator does so in a commercial context if the individual acts for 
the purpose of obtaining anything of value for himself or herself, or 
for an entity or individual for which the individual acts, rather than 
exclusively for public, charitable, or family purposes. The habitualness 
or repetition of the origination activities that is needed to ``engage 
in the business of a loan originator'' may be met either if the 
individual who acts as a loan originator does so with a degree of 
habitualness or repetition, or if the source of the prospective 
financing provides mortgage financing or performs other origination 
activities with a degree of habitualness or repetition. This appendix 
provides examples to aid in the understanding of activities that would 
not constitute engaging in the business of a loan originator, such that 
an individual is not required to obtain and maintain a state mortgage 
loan originator license. The examples in this appendix are not all-
inclusive. They illustrate only the issue described and do not 
illustrate any other issues that may arise under part 1008. For purposes 
of the examples below, the term ``loan'' refers to a ``residential 
mortgage loan'' as defined in Sec. 1008.23 of this part.
    (a) Not Engaged in the Business of a Mortgage Loan Originator. The 
following examples illustrate when an individual generally does not 
``engage in the business of a loan originator'':
    (1) An individual who acts as a loan originator in providing 
financing for the sale of that individual's own residence, provided that 
the individual does not act as a loan originator or provide financing 
for such sales so frequently and under such circumstances that it 
constitutes a habitual and commercial activity.

[[Page 271]]

    (2) An individual who acts as a loan originator in providing 
financing for the sale of a property owned by that individual, provided 
that such individual does not engage in such activity with habitualness.
    (3) A parent who acts as a loan originator in providing loan 
financing to his or her child.
    (4) An employee of a government entity who acts as a loan originator 
only pursuant to his or her official duties as an employee of that 
government entity, if all applicable conditions in Sec. 1008.103(e)(6) 
of this part are met.
    (5) If all applicable conditions in Sec. 1008.103(e)(7) of this part 
are met, an employee of a nonprofit organization that has been 
determined to be a bona fide nonprofit organization by the state 
supervisory authority, when the employee acts as a loan originator 
pursuant to his or her duties as an employee of that organization.
    (6) An individual who does not act as a loan originator habitually 
or repeatedly, provided that the source of prospective financing does 
not provide mortgage financing or perform other loan origination 
activities habitually or repeatedly.



Sec. Appendix C to Part 1008--Independent Contractors and Loan Processor 
and Underwriter Activities That Require a State Mortgage Loan Originator 
                                 License

    The examples below are designed to aid in the understanding of loan 
processing or underwriting activities for which an individual is 
required to obtain a S.A.F.E. Act-compliant mortgage loan originator 
license. The examples in this appendix are not all-inclusive. They 
illustrate only the issue described and do not illustrate any other 
issues that may arise under part 1008. For purposes of the examples 
below, the term ``loan'' refers to a residential mortgage loan as 
defined in Sec. 1008.23 of this part.
    (a) An individual who is a loan processor or underwriter who must 
obtain and maintain a state loan originator license includes:
    (1) Any individual who engages in the business of a loan originator, 
as defined in Sec. 1008.103 of this part;
    (2) Any individual who performs clerical or support duties and who 
is an independent contractor, as those terms are defined in 
Sec. 1008.23;
    (3) Any individual who collects, receives, distributes, or analyzes 
information in connection with the making of a credit decision and who 
is an independent contractor, as that term is defined in Sec. 1008.23; 
and
    (4) Any individual who communicates with a consumer to obtain 
information necessary for making a credit decision and who is an 
independent contractor, as that term is defined in Sec. 1008.23.
    (b) A state is not required to impose S.A.F.E. Act licensing 
requirements on any individual loan processor or underwriter who, for 
example:
    (1) Performs only clerical or support duties (i.e., the loan 
processor's or underwriter's activities do not include, e.g., offering 
or negotiating loan rates or terms, or counseling borrowers or 
prospective borrowers about loan rates or terms), and who performs those 
clerical or support duties at the direction of and subject to the 
supervision and instruction of an individual who either: Is licensed and 
registered in accordance with Sec. 1008.103(a) (state licensing of loan 
originators); or is not required to be licensed because he or she is 
excluded from the licensing requirement pursuant to Sec. 1008.103(e)(2) 
(time-share exclusion), (e)(5)(federally registered loan originator), 
(e)(6) (government employees exclusion), or (e)(7) (nonprofit 
exclusion).
    (2) Performs only clerical or support duties as an employee of a 
mortgage lender or mortgage brokerage firm, and who performs those 
duties at the direction of and subject to the supervision and 
instruction of an individual who is employed by the same employer and 
who is licensed in accordance with Sec. 1008.103(a) (state licensing of 
loan originators).
    (3) Is an employee of a loan processing or underwriting company that 
provides loan processing or underwriting services to one or more 
mortgage lenders or mortgage brokerage firms under a contract between 
the loan processing or underwriting company and the mortgage lenders or 
mortgage brokerage firms, provided the employee performs only clerical 
or support duties and performs those duties only at the direction of and 
subject to the supervision and instruction of a licensed loan originator 
employee of the same loan processing and underwriting company.
    (4) Is an individual who does not otherwise perform the activities 
of a loan originator and is not involved in the receipt, collection, 
distribution, or analysis of information common for the processing or 
underwriting of a residential mortgage loan, nor is in communication 
with the consumer to obtain such information.
    (c) In order to conclude that an individual who performs clerical or 
support duties is doing so at the direction of and subject to the 
supervision and instruction of a loan originator who is licensed or 
registered in accordance with Sec. 1008.103 (or, as applicable, an 
individual who is excluded from the licensing and registration 
requirements under Sec. 1008.103(e)(2), (e)(6), or (e)(7)), there must 
be an actual nexus between the licensed or registered loan originator's 
(or excluded individual's) direction, supervision, and instruction and 
the loan processor or underwriter's activities. This actual nexus must 
be more

[[Page 272]]

than a nominal relationship on an organizational chart. For example, 
there is an actual nexus when:
    (1) The supervisory licensed or registered loan originator assigns, 
authorizes, and monitors the loan processor or underwriter employee's 
performance of clerical and support duties.
    (2) The supervisory licensed or registered loan originator exercises 
traditional supervisory responsibilities, including, but not limited to, 
the training, mentoring, and evaluation of the loan processor or 
underwriter employee.



 Sec. Appendix D to Part 1008--Attorneys: Circumstances That Require a 
                 State Mortgage Loan Originator License

    This appendix D clarifies the circumstances in which the S.A.F.E. 
Act requires a licensed attorney who engages in loan origination 
activities to obtain a state loan originator license and registration. 
This special category recognizes limited, heavily regulated activities 
that meet strict criteria that are different from the criteria for 
specific exemptions from the S.A.F.E. Act requirements and the 
exclusions set forth in the regulations and illustrated in other 
appendices of part 1008.
    (a) S.A.F.E. Act-compliant licensing required. An individual who is 
a licensed attorney is required to be licensed if the individual is 
engaged in the business of a loan originator as defined in Sec. 1008.103 
and such loan origination activities are not all of the following:
    (1) Considered by the state's court of last resort (or other state 
governing body responsible for regulating the practice of law) to be 
part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all applicable 
laws, rules, ethics, and standards.
    (b) S.A.F.E. Act-compliant licensing not required. A licensed 
attorney performing activities that come within the definition of a loan 
originator is not required to be licensed, provided that such activities 
are:
    (1) Considered by the state's court of last resort (or other state 
governing body responsible for regulating the practice of law) to be 
part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all applicable 
laws, rules, ethics, and standards.




PART 1009_DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS LACKING
FEDERAL DEPOSIT INSURANCE (REGULATION I)--Table of Contents



Sec.
1009.1 Scope.
1009.2 Definitions.
1009.3 Disclosures in periodic statements and account records.
1009.4 Disclosures in advertising and on the premises.
1009.5 Disclosure acknowledgment.
1009.6 Exception for certain depository institutions.
1009.7 Enforcement.

    Authority: 12 U.S.C. 1831t, 5512, 5581.

    Source: 76 FR 78129, Dec. 16, 2011, unless otherwise noted.



Sec. 1009.1  Scope.

    This part, known as Regulation I, is issued by the Bureau of 
Consumer Financial Protection. This part applies to all depository 
institutions lacking Federal deposit insurance. It requires the 
disclosure of certain insurance-related information in periodic 
statements, account records, locations where deposits are normally 
received, and advertising. This part also requires such depository 
institutions to obtain a written acknowledgment from depositors 
regarding the institution's lack of Federal deposit insurance.



Sec. 1009.2  Definitions.

    For purposes of this part:
    Depository institution means any bank or savings association as 
defined under 12 U.S.C. 1813, or any credit union organized and operated 
according to the laws of any state, the District of Columbia, the 
several territories and possessions of the United States, the Panama 
Canal Zone, or the Commonwealth of Puerto Rico, which laws provide for 
the organization of credit unions similar in principle and objectives to 
Federal credit unions.
    Lacking Federal deposit insurance means the depository institution 
is neither an insured depository institution as defined in 12 U.S.C. 
1813(c)(2), nor an insured credit union as defined in section 101 of the 
Federal Credit Union Act, 12 U.S.C. 1752.

[[Page 273]]

    Standard maximum deposit insurance amount means the maximum amount 
of deposit insurance as determined under section 11(a)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(a)(1)).



Sec. 1009.3  Disclosures in periodic statements and account records.

    Depository institutions lacking Federal deposit insurance must 
include a notice disclosing clearly and conspicuously that the 
institution is not federally insured, and that if the institution fails, 
the Federal Government does not guarantee that depositors will get back 
their money, in all periodic statements of account, on each signature 
card, and on each passbook, certificate of deposit, or share 
certificate. For example, a notice would comply with the requirement if 
it conspicuously stated: ``[Institution's name] is not federally 
insured. If it fails, the Federal Government does not guarantee that you 
will get your money back.'' The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.



Sec. 1009.4  Disclosures in advertising and on the premises.

    (a) Required disclosures. Each depository institution lacking 
Federal deposit insurance must include a clear and conspicuous notice 
disclosing that the institution is not federally insured:
    (1) At each station or window where deposits are normally received, 
its principal place of business and all its branches where it accepts 
deposits or opens accounts (excluding automated teller machines or point 
of sale terminals), and on its main internet page; and
    (2) In all advertisements except as provided in paragraph (c) of 
this section.
    (b) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.
    (c) Exceptions. The following need not include a notice that the 
institution is not federally insured:
    (1) Any sign, document, or other item that contains the name of the 
depository institution, its logo, or its contact information, but only 
if the sign, document, or item does not include any information about 
the institution's products or services or information otherwise 
promoting the institution; and
    (2) Small utilitarian items that do not mention deposit products or 
insurance, if inclusion of the notice would be impractical.



Sec. 1009.5  Disclosure acknowledgment.

    (a) New depositors obtained other than through a conversion or 
merger. With respect to any depositor who was not a depositor at the 
depository institution on or before October 13, 2006, and who is not a 
depositor as described in paragraph (b) of this section, a depository 
institution lacking Federal deposit insurance may receive a deposit for 
the account of such depositor only if the institution has obtained the 
depositor's signed written acknowledgement that:
    (1) The institution is not federally insured; and
    (2) If the institution fails, the Federal Government does not 
guarantee that the depositor will get back the depositor's money.
    (b) New depositors obtained through a conversion or merger. With 
respect to a depositor at a federally insured depository institution 
that converts to, or merges into, a depository institution lacking 
Federal insurance after October 13, 2006, a depository institution 
lacking Federal deposit insurance may receive a deposit for the account 
of such depositor only if:
    (1) The institution has obtained the depositor's signed written 
acknowledgement described in paragraph (a) of this section; or
    (2) The institution makes an attempt, sent by mail no later than 45 
days after the effective date of the conversion or merger, to obtain the 
acknowledgment. In making such an attempt, the institution must transmit 
to each depositor who has not signed and returned a written 
acknowledgement described in paragraph (a) of this section:
    (i) A conspicuous card containing the information described in 
paragraphs (a)(1) and (2) of this section, and a line for the signature 
of the depositor; and
    (ii) Accompanying materials requesting the depositor to sign the 
card, and

[[Page 274]]

return the signed card to the institution.
    (c) Depositors obtained on or before October 13, 2006. (1) Any 
depository institution lacking Federal deposit insurance may receive any 
deposit after October 13, 2006, for the account of a depositor who was a 
depositor on or before that date only if:
    (i) The depositor has signed a written acknowledgement described in 
paragraph (a) of this section; or
    (ii) The institution has transmitted to the depositor:
    (A) A conspicuous card containing the information described in 
paragraphs (a)(1) and (2) of this section, and a line for the signature 
of the depositor; and
    (B) Accompanying materials requesting that the depositor sign the 
card, and return the signed card to the institution.
    (2) An institution described in paragraph (c)(1) of this section 
must have made the transmission described in paragraph (c)(1)(ii) of 
this section via mail not later than three months after October 13, 
2006. The institution must have made a second identical transmission via 
mail not less than 30 days, and not more than three months, after the 
first transmission to the depositor in accordance with paragraph 
(c)(1)(ii) of this section, if the institution has not, by the date of 
such mailing, received from the depositor a card referred to in 
paragraph (c)(1)(i) of this section which has been signed by the 
depositor.
    (d) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.



Sec. 1009.6  Exception for certain depository institutions.

    The requirements of this part do not apply to any depository 
institution lacking Federal deposit insurance and located within the 
United States that does not receive initial deposits of less than an 
amount equal to the standard maximum deposit insurance amount from 
individuals who are citizens or residents of the United States, other 
than money received in connection with any draft or similar instrument 
issued to transmit money.



Sec. 1009.7  Enforcement.

    Compliance with the requirements of this part shall be enforced 
under the Consumer Financial Protection Act of 2010, Public Law 111-203, 
title X, 124 Stat. 1955, by the Bureau of Consumer Financial Protection, 
subject to subtitle B of the Consumer Financial Protection Act of 2010, 
and under the Federal Trade Commission Act, 15 U.S.C. 41 et seq, by the 
Federal Trade Commission.



PART 1010_LAND REGISTRATION (REGULATION J)--Table of Contents



                     Subpart A_General Requirements

Sec.
1010.1 Definitions.
1010.2 [Reserved]
1010.3 General applicability.
1010.4 Exemptions--general.
1010.5 Statutory exemptions.
1010.6 One hundred lot exemption.
1010.7 Twelve lot exemption.
1010.8 Scattered site subdivisions.
1010.9 Twenty acre lots.
1010.10 Single-family residence exemption.
1010.11 Manufactured home exemption.
1010.12 Intrastate exemption.
1010.13 Metropolitan Statistical Area (MSA) exemption.
1010.14 Regulatory exemptions.
1010.15 Regulatory exemption--multiple site subdivision--determination 
          required.
1010.16 Regulatory exemption--determination required.
1010.17 Advisory opinion.
1010.18 No action letter.
1010.19 [Reserved]
1010.20 Requirements for registering a subdivision--Statement of 
          Record--filing and form.
1010.21 Effective dates.
1010.22 Statement of record--initial or consolidated.
1010.23 Amendment--filing and form.
1010.24-1010.28 [Reserved]
1010.29 Use of property report--misstatements, omissions or 
          representation of Bureau approval prohibited.
1010.35 Payment of fees.
1010.45 Suspensions.

                    Subpart B_Reporting Requirements

1010.100 Statement of Record--format.
1010.101 [Reserved]
1010.102 General instructions for completing the Statement of Record.

[[Page 275]]

1010.103 Developer obligated improvements.
1010.104 [Reserved]
1010.105 Cover page.
1010.106 Table of contents.
1010.107 Risks of buying land.
1010.108 General information.
1010.109 Title to the property and land use.
1010.110 Roads.
1010.111 Utilities.
1010.112 Financial information.
1010.113 Local services.
1010.114 Recreational facilities.
1010.115 Subdivision characteristics and climate.
1010.116 Additional information.
1010.117 Cost sheet, signature of Senior Executive Officer
1010.118 Receipt, agent certification and cancellation page.
1010.200 Instructions for Statement of Record, Additional Information 
          and Documentation.
1010.201-1010.207 [Reserved]
1010.208 General information.
1010.209 Title and land use.
1010.210 Roads.
1010.211 Utilities.
1010.212 Financial information.
1010.214 Recreational facilities.
1010.215 Subdivision characteristics and climate.
1010.216 Additional information.
1010.219 Affirmation.
1010.310 Annual report of activity.

      Subpart C_Certification of Substantially Equivalent State Law

1010.500 General.
1010.503 Notice of certification.
1010.504 Cooperation among certified states and between certified states 
          and the Director.
1010.505 Withdrawal of state certification.
1010.506 State/Federal filing requirements.
1010.507 Effect of suspension or withdrawal of certification granted 
          under Sec. 1010.501(a): Full disclosure requirement.
1010.508 Effect of suspension of certification granted under 
          Sec. 1010.501(b): Sufficient protection requirement.
1010.552 Previously accepted state filings.
1010.556 Previously accepted state filings--amendments and 
          consolidations.
1010.558 Previously accepted state filings--notice of revocation rights 
          on property report cover page.
1010.559 Previously accepted state filings--notice of revocation rights 
          in contracts and agreements.

Appendix A to Part 1010: Standard and Model Forms and Clauses

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79489, Dec. 21, 2011, unless otherwise noted.



                     Subpart A_General Requirements



Sec. 1010.1  Definitions.

    (a) Statutory terms. All terms are used in accordance with their 
statutory meaning in 15 U.S.C. 1702, unless otherwise defined in 
paragraph (b) of this section or elsewhere in this part.
    (b) Other terms. As used in this part:
    Act means the Interstate Land Sales Full Disclosure Act, 15 U.S.C. 
1701.
    Advisory opinion means the formal written opinion of the Director as 
to jurisdiction in a particular case or the applicability of an 
exemption under Sec. Sec. 1010.5 through 1010.15, based on facts 
submitted to the Director.
    Available for use means that in addition to being constructed, the 
subject facility is fully operative and supplied with any materials and 
staff necessary for its intended purpose.
    Beneficial property restrictions means restrictions that are 
enforceable by the lot owners and are designed to control the use of the 
lot and to preserve or enhance the environment and the aesthetic and 
economic value of the subdivision.
    Date of filing means the date a Statement of Record, amendment, or 
consolidation, accompanied by the applicable fee, is received by the 
Director.
    Good faith estimate means an estimate based on documentary evidence. 
In the case of cost estimates, the documentation may be obtained from 
the suppliers of the services. In the case of estimates of completion 
dates, the documentation may be actual contracts let, engineering 
schedules, or other evidence of commitments to complete the amenities.
    ILSRP means the Interstate Land Sales Registration Program.
    Lot means any portion, piece, division, unit, or undivided interest 
in land located in any state or foreign country, if the interest 
includes the right to the exclusive use of a specific portion of the 
land.
    Owner means the person or entity who holds the fee title to the land 
and has the power to convey that title to others.
    Parent corporation means that entity which ultimately controls the 
subsidiary, even though the control may

[[Page 276]]

arise through any series or chain of other subsidiaries or entities.
    Principal means any person or entity holding at least a 10 percent 
financial or ownership interest in the developer or owner, directly or 
through any series or chain of subsidiaries or other entities.
    Rules means all rules adopted pursuant to the Act, including the 
general requirements published in this part.
    Sale means any obligation or arrangement for consideration to 
purchase or lease a lot directly or indirectly. The terms ``sale'' or 
``seller'' include in their meanings the terms ``lease'' and ``lessor''.
    Senior Executive Officer means the individual of highest rank 
responsible for the day-to-day operations of the developer and who has 
the authority to bind or commit the developing entity to contractual 
obligations.
    Site means a group of contiguous lots, whether such lots are 
actually divided or proposed to be divided. Lots are considered to be 
contiguous even though contiguity may be interrupted by a road, park, 
small body of water, recreational facility, or any similar object.
    Start of construction means breaking ground for building a facility, 
followed by diligent action to complete the facility.



Sec. 1010.2  [Reserved]



Sec. 1010.3  General applicability.

    Except in the case of an exempt transaction, a developer may not 
sell or lease lots in a subdivision, making use of any means or 
instruments of transportation or communication in interstate commerce, 
or of the mails, unless a Statement of Record is in effect in accordance 
with the provisions of this part. In non-exempt transactions, the 
developer must give each purchaser a printed Property Report, meeting 
the requirements of this part, in advance of the purchaser's signing of 
any contract or agreement for sale or lease. Information collection 
requirements contained in this part have been approved by the Office of 
Management and Budget under the provisions of 44 U.S.C. 3501 et seq. and 
have been assigned OMB Control No. 3170-0012.



Sec. 1010.4  Exemptions--general.

    (a) The exemptions available under Sec. Sec. 1010.5 through 1010.16 
are not applicable when the method of sale, lease or other disposition 
of land or an interest in land is adopted for the purpose of evasion of 
the Act.
    (b) With the exception of the sales or leases which are exempt under 
Sec. 1010.5, the anti-fraud provisions of the Act (15 U.S.C. 1703(a)(2)) 
apply to exempt transactions. The anti-fraud provisions make it unlawful 
for a developer or agent to employ any device, scheme, or artifice to:
    (1) Defraud;
    (2) To obtain money or property by means of any untrue statement of 
a material fact, or
    (3) To omit to state a material fact necessary in order to make the 
statements made not misleading, with respect to any information 
pertinent to the lot or subdivision; or
    (4) To engage in any transaction, practice, or course of business 
which operates or would operate as a fraud or deceit upon a purchaser.
    (c) The anti-fraud provisions of the Act require that certain 
representations be included in the contract in transactions which are 
not exempt under Sec. 1010.5. Specifically, the Act requires that if a 
developer or agent represents that roads, sewers, water, gas or electric 
service or recreational amenities will be provided or completed by the 
developer, the contract must stipulate that the services or amenities 
will be provided or completed. See Sec. 1011.15(f).
    (d) Eligibility for exemptions available under Sec. Sec. 1010.5 
through 1010.14 is self-determining. With the exception of the 
exemptions available under Sec. Sec. 1010.15 and 1010.16, a developer is 
not required to file notice with or obtain the approval of the Director 
in order to take advantage of an exemption. If a developer elects to 
take advantage of an exemption, the developer is responsible for 
maintaining records to demonstrate that the requirements of the 
exemption have been met.
    (e) A developer may present evidence, or otherwise discuss, in an 
informal hearing before the Office of Nonbank Supervision, the Bureau's 
position on

[[Page 277]]

the jurisdiction or non-exempt status of a particular subdivision.



Sec. 1010.5  Statutory exemptions.

    A listing of the statutory exemptions is contained in 15 U.S.C. 
1703. In accordance with 15 U.S.C. 1703(a)(2), if the sale involves a 
condominium or multi-unit construction, a presale clause conditioning 
the sale of a unit on a certain percentage of sales of other units is 
permissible if it is legally binding on the parties and is for a period 
not to exceed 180 days. However, the 180-day provision cannot extend the 
2-year period for performance. The permissible 180 days is calculated 
from the date the first purchaser signs a sales contract in the project 
or, if a phased project, from the date the first purchaser signs the 
first sales contract in each phase.



Sec. 1010.6  One hundred lot exemption.

    The sale of lots in a subdivision is exempt from the registration 
requirements of the Act if, since April 28, 1969, the subdivision has 
contained fewer than 100 lots, exclusive of lots which are exempt from 
jurisdiction under Sec. 1010.5. In the sale of lots in the subdivision 
that are not exempt under Sec. 1010.5, the developer must comply with 
the Act's anti-fraud provisions, set forth in Sec. 1010.4(b) and (c).



Sec. 1010.7  Twelve lot exemption.

    (a) The sale of lots is exempt from the registration requirements of 
the Act if, beginning with the first sale after June 20, 1980, no more 
than twelve lots in the subdivision are sold in the subsequent twelve-
month period. Thereafter, the sale of the first twelve lots is exempt 
from the registration requirements if no more than twelve lots were sold 
in each previous twelve month period which began with the anniversary 
date of the first sale after June 20, 1980.
    (b) A developer may apply to the Director to establish a different 
twelve month period for use in determining eligibility for the exemption 
and the Director may allow the change if it is for good cause and 
consistent with the purpose of this section.
    (c) In determining eligibility for this exemption, all lots sold or 
leased in the subdivision after June 20, 1980, are counted, whether or 
not the transactions are otherwise exempt. Sales or leases made prior to 
June 21, 1980, are not considered in determining eligibility for the 
exemption.
    (d) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.8  Scattered site subdivisions.

    (a) The sale of lots in a subdivision consisting of noncontiguous 
parts is exempt from the registration requirements of the Act if:
    (1) Each noncontiguous part of the subdivision contains twenty or 
fewer lots; and
    (2) Each purchaser or purchaser's spouse makes a personal, on-the-
lot inspection of the lot purchased prior to signing a contract.
    (b) For purposes of this exemption, interruptions such as roads, 
parks, small bodies of water or recreational facilities do not serve to 
break the contiguity of parts of a subdivision.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.9  Twenty acre lots.

    (a) The sale of lots in a subdivision is exempt from the 
registration requirements of the Act if, since April 28, 1969, each lot 
in the subdivision has contained at least twenty acres. In determining 
eligibility for the exemption, easements for ingress and egress or 
public utilities are considered part of the total acreage of the lot if 
the purchaser retains ownership of the property affected by the 
easement.
    (b) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.10  Single-family residence exemption.

    (a) General. The sale of a lot which meets the requirements 
specified under paragraphs (b) and (c) of this section is exempt from 
the registration requirements of the Act.
    (b) Subdivision requirements. (1) The subdivision must meet all 
local codes and standards.
    (2) In the promotion of the subdivision there must be no offers, by 
direct mail or telephone solicitation, of gifts,

[[Page 278]]

trips, dinners or use of similar promotional techniques to induce 
prospective purchasers to visit the subdivision or to purchase a lot.
    (c) Lot requirements. (1) The lot must be located within a 
municipality or county where a unit of local government or the state 
specifies minimum standards in the following areas for the development 
of subdivision lots taking place within its boundaries:
    (i) Lot dimensions.
    (ii) Plat approval and recordation.
    (iii) Roads and access.
    (iv) Drainage.
    (v) Flooding.
    (vi) Water supply.
    (vii) Sewage disposal.
    (2) Each lot sold under the exemption must be either zoned for 
single-family residences or, in the absence of a zoning ordinance, 
limited exclusively by enforceable covenants or restrictions to single-
family residences. Manufactured homes, townhouses, and residences for 
one-to-four family use are considered single-family residences for 
purposes of this exemption provision.
    (3) The lot must be situated on a paved street or highway which has 
been built to standards established by the state or the unit of local 
government in which the subdivision is located. If the roads are to be 
public roads they must be acceptable to the unit of local government 
that will be responsible for maintenance. If the street or highway is 
not complete, the developer must post a bond or other surety acceptable 
to the municipality or county in the full amount of the cost of 
completing the street or highway to assure completion to local 
standards. For purposes of this exemption, paved means concrete or 
pavement with a bituminous surface that is impervious to water, protects 
the base and is durable under the traffic load and maintenance 
contemplated.
    (4) The unit of local government or a homeowners association must 
have accepted or be obligated to accept the responsibility for 
maintaining the street or highway upon which the lot is situated. In any 
case in which a homeowners association has accepted or is obligated to 
accept maintenance responsibility, the developer must, prior to signing 
of a contract or agreement to purchase, provide the purchaser with a 
good faith written estimate of the cost of carrying out the 
responsibility over the first ten years of ownership.
    (5) At the time of closing, potable water, sanitary sewage disposal, 
and electricity must be extended to the lot or the unit of local 
government must be obligated to install the facilities within 180 days 
following closing. For subdivisions which will not have a central water 
or sewage disposal system, there must be assurances that an adequate 
potable water supply is available year-round and that the lot is 
approved for the installation of a septic tank.
    (6) The contract of sale must require delivery within 180 days after 
the signing of the sales contract of a warranty deed, which at the time 
of delivery is free from monetary liens and encumbrances. If a warranty 
deed is not commonly used in the jurisdiction where the lot is located, 
a deed or grant which warrants that the seller has not conveyed the lot 
to another person may be delivered in lieu of a warranty deed. The deed 
or grant used must warrant that the lot is free from encumbrances made 
by the seller or any other person claiming by, through, or under the 
seller.
    (7) At the time of closing, a title insurance binder or title 
opinion reflecting the condition of title must be in existence and 
issued or presented to the purchaser showing that, subject only to 
exceptions which are approved in writing by the purchaser at the time of 
closing, marketable title to the lot is vested in the seller.
    (8) The purchaser or purchaser's spouse must make a personal, on-
the-lot inspection of the lot purchased prior to signing a contract or 
agreement to purchase.
    (d) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.11  Manufactured home exemption.

    (a) The sale of a lot is exempt from the registration requirements 
of the Act when the following eligibility requirements are met:
    (1) The lot is sold as a homesite by one party and a manufactured 
home is

[[Page 279]]

sold by another party and the contracts of sale:
    (i) Obligate the sellers to perform, contingent upon the other 
seller carrying out its obligations so that a completed manufactured 
home will be erected on a completed homesite within two years after the 
date the purchaser signed the contract to purchase the lot;
    (ii) Provide that all funds received by the sellers are to be 
deposited in escrow accounts independent of the sellers until the 
transactions are completed;
    (iii) Provide that funds received by the sellers will be released to 
the buyer upon demand if the lot on which the manufactured home has been 
erected is not conveyed within two years; and
    (iv) Contain no provisions which restrict the purchaser's remedy of 
bringing suit for specific performance.
    (2) The homesite is developed in conformance with all local codes 
and standards, if any, for manufactured home subdivisions.
    (3) At the time of closing:
    (i) Potable water and sanitary sewage disposal are available to the 
homesite and electricity has been extended to the lot line;
    (ii) The homesite is accessible by roads;
    (iii) The purchaser receives marketable title to the lot; and
    (iv) Other common facilities represented in any manner by the 
developer or agent to be provided are completed or there are letters of 
credit, cash escrows or surety bonds in the form acceptable to the local 
government in an amount equal to 100 percent of the estimated cost of 
completion. Corporate bonds are not acceptable for purposes of the 
exemption.
    (4) For purposes of this section, a manufactured home is a unit 
receiving a label in conformance with U.S. Department of Housing and 
Urban Development (HUD) regulations implementing the National 
Manufactured Housing Construction and Safety Standards Act of 1974 (42 
U.S.C. 5401).
    (b) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.12  Intrastate exemption.

    (a) Eligibility requirements. The sale of a lot is exempt from the 
registration requirements of the Act if the following requirements are 
met:
    (1) The sale of lots in the subdivision after December 20, 1979, is 
restricted solely to residents of the state in which the subdivision is 
located unless the sale is exempt under Sec. 1010.5, Sec. 1010.11, or 
Sec. 1010.13.
    (2) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (3) Each contract:
    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed; and
    (iii) Contains a non-waivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract. If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (4) The lot being sold is free and clear of all liens, encumbrances 
and adverse claims except the following:
    (i) Mortgages or deeds of trust which contain release provisions for 
the individual lot purchased if:
    (A) The contract of sale obligates the developer to deliver, within 
180 days, a warranty deed (or its equivalent under local law), which at 
the time of delivery is free from any monetary liens or encumbrances; 
and
    (B) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (ii) Liens which are subordinate to the leasehold interest and do 
not affect the lessee's right to use or enjoy the lot.

[[Page 280]]

    (iii) Property reservations which are for the purpose of bringing 
public services to the land being developed, such as easements for water 
and sewer lines.
    (iv) Taxes or assessments which constitute liens before they are due 
and payable if imposed by a state or other public body having authority 
to assess and tax property or by a property owners' association.
    (v) Beneficial property restrictions that are mutually enforceable 
by the lot owners in the subdivision. Restrictions, whether separately 
recorded or incorporated into individual deeds, must be applied 
uniformly to every lot or group of lots. To be considered beneficial and 
enforceable, any restriction or covenant that imposes an assessment on 
lot owners must apply to the developer on the same basis as other lot 
owners. Developers who maintain control of a subdivision through a 
Property Owners' Association, Architectural Control Committee, 
restrictive covenant or otherwise, shall transfer such control to the 
lot owners no later than when the developer ceases to own a majority of 
total lots in, or planned for, the subdivision. Relinquishment of 
developer control shall require affirmative action, usually in the form 
of an election based upon one vote per lot.
    (vi) Reservations contained in United States land patents and 
similar Federal grants or reservations.
    (5) Prior to the sale the developer discloses in a written statement 
to the purchaser all qualifying liens, reservations, taxes, assessments 
and restrictions applicable to the lot purchased. The developer must 
obtain a written receipt from the purchaser acknowledging that the 
statement required by this subparagraph was delivered to the purchaser.
    (6) Prior to the sale the developer provides in a written statement 
good faith estimates of the cost to the purchaser of providing electric, 
water, sewer, gas and telephone service to the lot. The estimates for 
unsold lots must be updated every two years or more frequently if the 
developer has reason to believe that significant cost increases have 
occurred. The dates on which the estimates were made must be included in 
the statement. The developer must obtain a written receipt from the 
purchaser acknowledging that the statement required by this subparagraph 
was delivered to the purchaser.
    (b) Intrastate Exemption Statement. To satisfy the requirements of 
paragraphs (a)(5) and (6) of this section, an Intrastate Exemption 
Statement containing the information prescribed in each such paragraph 
shall be given to each purchaser. A State-approved disclosure document 
may be used to satisfy this requirement if all the information required 
by paragraphs (a)(5) and (6) of this section is included in this 
disclosure. In such a case, the developer must obtain a written receipt 
from the purchaser and comply with all other requirements of the 
exemption. To be acceptable for purposes of the exemption, the 
statement(s) given to purchasers must contain neither advertising nor 
promotion on behalf of the developer or subdivision nor references to 
the Bureau of Consumer Financial Protection or the Consumer Financial 
Protection Bureau. A sample Intrastate Exemption Statement is included 
in the exemption guidelines.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.13  Metropolitan Statistical Area (MSA) exemption.

    (a) Eligibility requirements. The sale of a lot which meets the 
following requirements is exempt from registration requirements of the 
Act:
    (1) The lot is in a subdivision which contains fewer than 300 lots 
and has contained fewer than 300 lots since April 28, 1969.
    (2) The lot is located within a Metropolitan Statistical Area (MSA) 
as defined by the Office of Management and Budget and characterized in 
paragraph (b) of this section.
    (3) The principal residence of the purchaser is within the same MSA 
as the subdivision.
    (4) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased prior to signing a contract or 
agreement.
    (5) Each contract:

[[Page 281]]

    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed;
    (iii) Contains a nonwaivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract, or, if the purchaser is entitled to a longer revocation period 
by operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (6) The lot being sold must be free and clear of liens such as 
mortgages, deeds of trust, tax liens, mechanics' liens, or judgments. 
For purposes of this exemption, the term liens does not include the 
following:
    (i) Mortgages or deeds of trust which contain release provisions for 
the individual lot purchased if:
    (A) The contract of sale obligates the developer to deliver, within 
180 days, a warranty deed (or its equivalent under local law), which at 
the time of delivery is free from any monetary liens or encumbrances; 
and
    (B) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (ii) Liens which are subordinate to the leasehold interest and do 
not affect the lessee's right to use or enjoy the lot.
    (iii) Property reservations which are for the purpose of bringing 
public services to the land being developed, such as easements for water 
and sewer lines.
    (iv) Taxes or assessments which constitute liens before they are due 
and payable if imposed by a state or other public body having authority 
to assess and tax property or by a property owners' association.
    (v) Beneficial property restrictions that are mutually enforceable 
by the lot owners in the subdivision. Restrictions, whether separately 
recorded or incorporated into individual deeds, must be applied 
uniformly to every lot or group of lots. To be considered beneficial and 
enforceable, any restriction or covenant that imposes an assessment on 
lot owners must apply to the developer on the same basis as other lot 
owners. Developers who maintain control of a subdivision through a 
Property Owners' Association, Architectural Control Committee, 
restrictive covenants, or otherwise, shall transfer such control to the 
lot owners no later than when the developer ceases to own a majority of 
total lots in, or planned for, the subdivision. Relinquishment of 
developer control shall require affirmative action, usually in the form 
of an election based upon one vote per lot.
    (vi) Reservations contained in United States land patents and 
similar Federal grants or reservations.
    (7) Before the sale the developer gives a written MSA Exemption 
Statement to the purchaser and obtains a written receipt acknowledging 
that the statement was received. A sample MSA Exemption Statement is 
included in the exemption guidelines. A State-approved disclosure 
document may be used to satisfy this requirement if all of the 
information required by this section is included. The statement(s) given 
to purchasers must contain neither advertising nor promotion on behalf 
of the developer or the subdivision nor references to the Bureau of 
Consumer Financial Protection or the Consumer Financial Protection 
Bureau. In descriptive and concise terms, the statement that the 
developer must give the purchaser shall disclose the following:
    (i) All liens, reservations, taxes, assessments, beneficial property 
restrictions which are enforceable by other lot owners in the 
subdivision, and adverse claims which are applicable to the lot to be 
purchased.
    (ii) Good faith estimates of the cost to the purchaser of providing 
electric, water, sewer, gas and telephone service to the lot. The 
estimates for unsold lots must be updated every two years, or more 
frequently if the developer has reason to believe that significant cost 
increases have occurred. The dates on which the estimates were made must 
be included in the statement.

[[Page 282]]

    (8) The developer executes and gives to the purchaser a written 
instrument designating a person within the state of residence of the 
purchaser as the developer's agent for service of process. The developer 
must also acknowledge in writing that it submits to the legal 
jurisdiction of the state in which the purchaser or lessee resides.
    (9) The developer executes a written affirmation for each sale made 
under this exemption. By January 31 of each year, the developer submits 
to the Director a copy of the executed affirmation for each sale made 
during the preceding calendar year or a master affirmation in which are 
listed all purchasers' names and addresses and the identity of the lots 
purchased. Individual affirmations must be available for the Director's 
review at all times during the year. The affirmation must be in the form 
provided in section I of the appendix to this part: Form for Developer's 
Affirmation for Land Sale.
    (b) Metropolitan Statistical Area. Metropolitan Statistical Areas 
are defined by the Office of Management and Budget generally on the 
basis of population statistics reported in a census. To determine 
whether a subdivision is located within an MSA and the boundaries of an 
MSA, contact the Office of Information and Regulatory Affairs, Office of 
Management and Budget, 726 Jackson Place NW., Washington, DC 20503.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c).



Sec. 1010.14  Regulatory exemptions.

    (a) Eligibility requirements. The following transactions are exempt 
from the registration requirements of the Act unless the Director has 
terminated the exemption in accordance with paragraph (b) of this 
section.
    (1) The sale of lots, each of which will be sold for less than $100, 
including closing costs, if the purchaser will not be required to 
purchase more than one lot.
    (2) The lease of lots for a term not to exceed five years if the 
terms of the lease do not obligate the lessee to renew.
    (3) The sale of lots to a person who is engaged in a bona fide land 
sales business.
    (4) The sale of a lot to a person who owns the contiguous lot which 
has a residential, commercial or industrial building on it.
    (5) The sale of real estate to a government or government agency.
    (6) The sale of a lot to a person who has leased and resided 
primarily on the lot for at least the year preceding the sale.
    (b) Termination. If the Director has reasonable grounds to believe 
that exemption from the registration requirements in a particular case 
is not in the public interest, the Director may, after issuing a notice 
and giving the respondent an opportunity to request a hearing within 
fifteen days of receipt of the notice, terminate eligibility for 
exemption. The basis for issuing a notice may be the conduct of the 
developer or agent, such as unlawful conduct or insolvency, or adverse 
information about the lots or real estate that should be disclosed to 
the purchasers. Proceedings will be governed by Sec. 1012.238.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.



Sec. 1010.15  Regulatory exemption--multiple site subdivision-
-determination required.

    (a) General. (1) The sale of lots contained in multiple sites of 
fewer than 100 lots each, offered pursuant to a single common 
promotional plan, is exempt from the registration requirements.
    (2) For purposes of this exemption, the sale of lots in an 
individual site that exceeds 99 lots is not exempt from registration. 
Likewise, the sale of lots in a site containing fewer than 100 lots, 
where the developer either owns contiguous land or holds an option or 
other evidence of intent to acquire contiguous land which, when taken 
cumulatively, would or could result in one site of 100 or more lots, is 
not exempt from registration. Furthermore, the sale of lots that are 
within a subdivision established by a separate developer is not exempt 
from registration by this provision.

[[Page 283]]

    (b) Eligibility requirements. The sale of each lot must meet the 
following requirements to be eligible for this exemption.
    (1) The lot is sold ``as is'' with all advertised improvements and 
amenities completed and in the condition advertised.
    (2) The lot is in conformance with all local codes and standards.
    (3) The lot is accessible, both legally and physically. For lots 
which are advertised or otherwise represented as ``residential,'' either 
primary or secondary, with any inference that a permanent or temporary 
dwelling unit of any description (excluding collapsible tents) can be 
built or installed, physical access must be available by automobile, 
pick-up truck or equivalent ``on-road'' vehicle.
    (4) At the time of closing, a title insurance binder or title 
opinion reflecting the condition of title must be issued to the 
purchaser showing that, subject only to exceptions approved in writing 
by the purchaser at the time of closing, marketable title is vested in 
the seller.
    (5) Each contract or agreement and any promissory notes:
    (i) Contain the non-waivable provision found in section II of the 
appendix to this part: Language Notifying Buyer of Option to Cancel 
Contract in bold face type (which must be distinguished from the type 
used for the rest of the document) on the face or signature page above 
all signatures. If the purchaser is entitled to a longer revocation 
period by operation of state or local law, that period becomes the 
Federal revocation period and the contract must reflect the requirement 
of the longer period rather than the seven days. The revocation 
provisions may not be limited or qualified in the contract or other 
document by requiring a specific type of notice or by requiring that 
notice be given at a specified place.
    (ii) Obligate the developer to deliver, within 180 days, a warranty 
deed (or its equivalent under local law) for the lot which at the time 
of delivery is free from any monetary liens or encumbrances.
    (6) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (7) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (8) Prior to the purchaser signing a contract or agreement of sale, 
the developer discloses in a written Lot Information Statement all 
liens, reservations, taxes, assessments, easements and restrictions 
applicable to the lot purchased (see paragraph (b)(11) of this section).
    (9) Prior to the purchaser signing a contract or agreement of sale, 
the developer discloses in a written Lot Information Statement the name, 
address and telephone number of the local governmental agency or 
agencies from which information on permits or other requirements for 
water, sewer and electrical installations can be obtained. This 
Statement will also contain the name, address and telephone number of 
the suppliers which would or could provide the foregoing services.
    (10) The lot sale must comply with the anti-fraud provisions of 12 
CFR 1010.4(b) and (c) and the sales practices and standards in 
Sec. Sec. 1011.10 through 1011.28.
    (11) A written Lot Information Statement must be delivered to, and 
acknowledged by, each purchaser prior to his or her signing a contract 
or agreement of sale, and must contain the information shown in the 
format below. The Statement must be typed or printed in at least 10 
point font. A copy of the acknowledgement will be maintained by the 
developer for three years and will be made available to ILSRP upon 
request. If the Statement is not delivered as required, the contract or 
agreement of sale may be revoked and a full refund paid, at the option 
of the purchaser, within two years of the signing date and the contract 
or agreement of sale will clearly provide this right. A sample format 
for the Statement is provided in section III of the appendix to this 
part: Sample Lot Information Statement and Sample Receipt.
    (c) Request for Multiple Site Subdivision Exemption. (1) The 
developer must file a request for the Multiple Site Subdivision 
Exemption. The request must be

[[Page 284]]

accompanied by a filing fee of $500 (prepared in accordance with 
Sec. 1010.35(a)) and a sample Lot Information Statement, substantially 
in the form set forth in section IV of the appendix to this part: 
Request for Multiple Site Subdivision Exemption.
    (2) This exemption will become effective upon issuance of an 
Exemption Order by the Director.
    (d) Annual Report. (1) By January 31 of each year the developer will 
send a report to the Director listing each site and its location 
available for a sale pursuant to the exemption during the preceding year 
and indicate the number of lot sales made in each site. The report will 
describe any changes in the information provided in the Request for the 
Multiple Site Subdivision Exemption or contain a statement that there 
are no changes.
    (2) The Annual Report must be accompanied by a filing fee of $100.
    (3) The Annual Report must be signed and dated by the developer, 
attesting to its completeness and accuracy.
    (4) Failure to submit the Annual Report within ten days after the 
receipt of notice from the Director will automatically terminate 
eligibility for the exemption as of the Report due date.
    (e) Termination. If, subsequent to the issuance of an Exemption 
Order, the Director has reasonable grounds to believe that exemption 
from the registration requirements in the particular case is not in the 
public interest, the Director may, after issuing a notice and giving the 
respondent an opportunity to request a hearing within fifteen days of 
receipt of the notice, terminate the exemption order. The basis for 
issuing a notice may be apparent omissions or misrepresentations in the 
documents submitted to the Director, the conduct of the developer or 
agent, such as unlawful conduct or insolvency, or adverse information 
about the real estate that should be disclosed to purchasers. 
Proceedings will be governed by Sec. 1012.238.



Sec. 1010.16  Regulatory exemption--determination required.

    (a) General. The Director may exempt from the registration 
requirements of the Act any subdivision or lots in a subdivision by 
issuing an order in writing if it is determined that registration is not 
necessary in the public interest and for the protection of purchasers on 
the basis of the small amount or limited character of the offering and 
the requirements contained in paragraph (b) of this section.
    (b) Eligibility requirements. An exemption order may be issued at 
the discretion of the Director on the basis of the small amount or 
limited character of the offering if the following requirements are met:
    (1) The subdivision or sales substantially meet the requirements of 
one of the exemptions available under this chapter.
    (2) Each contract:
    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed;
    (iii) Contains a non-waivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract. If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (iv) Contains a provision that obligates the developer to deliver to 
the purchaser within 180 days of the date the purchaser signed the sales 
contract, a warranty deed, or its equivalent under local law, which at 
the time of delivery is free from any monetary liens or encumbrances.
    (3) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (4) The developer files a request for an exemption order and 
supporting documentation in accordance with paragraphs (c) and (d) of 
this section and submits a filing fee of $500.00 in accordance with 
Sec. 1010.35(a) of this part. This fee is not refundable.
    (c) Request. The request for an Exemption Order must be 
substantially in

[[Page 285]]

the format set forth in section V of the appendix to this part: Request 
for Regulatory Exemption Order.
    (d) Supporting documentation. A request for an exemption order must 
be accompanied by the following documentation:
    (1) A plat of the entire subdivision with the lots subject to the 
exemption request delineated thereon.
    (2) A copy of the contract to be used.
    (3) A clear and specific statement detailing how the proposed sales 
of lots subject to the exemption request substantially complies with one 
of the available exemption provisions.
    (4) A description of the method by which the lots have been and will 
be promoted and to which population centers the promotion has been and 
will be directed.
    (e) The sale must also comply with the anti-fraud provisions of 
Sec. 1010.4(b) and (c) of this part.
    (f) Termination. If, subsequent to the issuance of an exemption 
order, the Director has reasonable grounds to believe that exemption 
from the registration requirements in the particular case is not in the 
public interest, the Director may, after issuing a notice and giving the 
respondent an opportunity to request a hearing within fifteen days of 
receipt of the notice, terminate the exemption order. The basis for 
issuing a notice may be apparent omissions or misrepresentations in the 
documents submitted to the Director, the conduct of the developer or 
agent, such as unlawful conduct or insolvency, or adverse information 
about the real estate that should be disclosed to purchasers. 
Proceedings will be governed by Sec. 1012.238.



Sec. 1010.17  Advisory opinion.

    (a) General. A developer may request an opinion from the Director as 
to whether an offering qualifies for an exemption or is subject to the 
jurisdiction of the Act.
    (b) Requirements. All requests for Advisory Opinions must be 
accompanied by the following:
    (1) A $500.00 filing fee submitted in accordance with 
Sec. 1010.35(a). This fee is not refundable.
    (2) A comprehensive description of the conditions and operations of 
the offering. There is no prescribed format for submitting this 
information, but the developer should at least cite the applicable 
statutory or regulatory basis for the exemption or lack of jurisdiction 
and thoroughly explain how the offering either satisfies the 
requirements for exemption or falls outside the purview of the Act.
    (3) An affirmation as set forth in section VI of the appendix to 
this part: Developer's Affirmation for Advisory Opinion.



Sec. 1010.18  No Action Letter.

    (a) If the sale of lots is subject to the registration requirements 
of the Act but the circumstances of the sale are such that no 
affirmative action to enforce the registration requirements is needed to 
protect the public interest or prospective purchasers, the Director may 
issue a No Action Letter.
    (b) To obtain a No Action Letter a developer must submit a request 
which includes a thorough description of the proposed transaction, the 
property involved, and the circumstances surrounding the sale.
    (c) The issuance of a No Action Letter will not affect any right 
which a purchaser has under the Act, and it will not limit future action 
by the Director if there is evidence to show that affirmative action is 
necessary to protect the public interest or prospective purchasers. In 
no event will a No Action Letter be issued after the sale has occurred.



Sec. 1010.19  [Reserved]



Sec. 1010.20  Requirements for registering a subdivision--Statement
of Record--filing and form.

    (a) Filing. In order to register a subdivision and receive an 
effective date, the developer or owner of the subdivision must file a 
Statement of Record with the Director. The official address to be used 
is: CFPB Interstate Land Sales, c/o: Armedia LLC, 8221 Old Courthouse 
Road, Suite 206, Vienna, VA 22182. When the Statement of Record is 
filed, a fee in the amount set out in Sec. 1010.35(b) must be paid in 
accordance with Sec. 1010.35(a).
    (b) Form. The Statement of Record shall be in the format specified 
in

[[Page 286]]

Sec. 1010.100 and shall be completed in accordance with the instructions 
in Sec. Sec. 1010.102, 1010.105 through 1010.118, 1010.200, 1010.208 
through 1010.216 and 1010.219. It shall be supported by the documents 
required by Sec. Sec. 1010.208 through 1010.216 and 1010.219. It shall 
include any other information or documents which the Director may 
require as being necessary or appropriate for the protection of 
purchasers.
    (c) State filings. A Statement of Record submitted under the 
provisions of 12 CFR part 1010, subpart C--Certification of 
Substantially Equivalent State Law, shall consist of the materials 
designated by the Certification Agreement between the Director and the 
certified state in which the subdivision is located.



Sec. 1010.21  Effective dates.

    (a) General. The effective date of an initial, consolidated or 
amended Statement of Record is the 30th day after the filing of the 
latest amendatory material unless the Director notifies the developer in 
writing prior to such 30th day that:
    (1) The effective date has been suspended in accordance with 
Sec. 1010.45(a), or
    (2) An earlier effective date has been determined.
    (b) Suspension of effective date by developer. (1) A developer, or 
owner, may request that the effective date of its Statement of Record be 
suspended, provided there are no administrative proceedings pending 
against either of them at the time the request is submitted. The request 
must include any consolidations or amendments which have been made to 
the initial Statement of Record. Forms for this purpose will be 
furnished by the Director upon request.
    (2) Upon acceptance by the Director, the effectiveness of the 
Statement of Record shall be suspended as of the date the request was 
executed by the developer or owner.
    (3) The suspension shall continue until the developer, or owner, 
submits all amendments necessary to bring the registration into full 
compliance with the Regulations which are in effect on the date of the 
amendments and the Director allows those amendments to become effective.



Sec. 1010.22  Statement of record--initial or consolidated.

    (a) Initial Statement of Record. (1) Except in the case of exempt 
transactions, an initial Statement of Record shall be filed, and an 
effective date issued, prior to selling or leasing any lot in a 
subdivision.
    (2) If a developer buys from another developer 100 or more lots from 
an existing registration, the new developer, or owner, may have to 
submit a new initial Statement of Record and receive an effective date 
covering the acquired lots prior to selling or leasing any of those 
lots.
    (3) Changes in principals due to a sale of stock in a corporation or 
changes in partners or joint venturers which are accomplished in 
accordance with the partnership or joint venture agreement but which do 
not cause a change in the title to the land in the subdivision may be 
submitted as an amendment.
    (4) Any initial Statement of Record must be accompanied by a fee, as 
specified in Sec. 1010.35(b), based upon the number of lots sought to be 
registered.
    (b) Consolidated Statement of Record. (1) If the developer intends 
to sell or lease additional lots as part of the same common promotional 
plan with lots already registered, a consolidated Statement of Record 
may be submitted for the additional lots. A fee, as specified in 
Sec. 1010.35(b) and based on the number of additional lots, must 
accompany the submission. The additional lots may not be sold or leased 
until a new effective date is issued.
    (2) If the additional lots are simply the result of a replatting of 
lots previously registered and enumerated in the Property Report and do 
not include any additional land, the change may be made by an amendment. 
However, the amendment must be accompanied by a fee, as specified in 
Sec. 1010.35(b), based on the number of additional lots.
    (c) Consolidated Statement of Record--Form. A consolidated Statement 
of Record shall contain the elements listed in paragraphs (c)(1) through 
(4) of this section. Pages having no changes and documents in previous 
submissions which apply equally to the additional

[[Page 287]]

lots may be included by reference. However, the developer may, at its 
option, submit the entire format for an initial filing, including copies 
of previously submitted documents, to expedite the examination process.
    (1) Those pages of the Property Report portion and Additional 
Information and Documentation portion which contain changes which have 
occurred since the last effective submission, and
    (2) A recapitulation or listing of each of the section headings, and 
subheadings if necessary, of the Additional Information and 
Documentation portion. Each item of the listing shall contain a 
statement as to whether or not any change is made in the section; 
whether any new or additional information is being submitted and, if 
documentation is added by cross reference, the previous submission in 
which that documentation may be found, and
    (3) Documentation to support the additional lots (e.g., plat maps, 
topographic maps and general plan to reflect new lots, title 
information, permits for additional facilities, financial assurances of 
completion of additional facilities, financial statements) or updated or 
expanded documents in support of previous submissions, and
    (4) The affirmation required by Sec. 1010.219.
    (d) Consolidated Statement of Record amends prior Statement of 
Record. A Consolidated Statement of Record shall contain all applicable 
information for all registered lots in the subdivision except those 
deleted pursuant to other provisions in these regulations. The resulting 
Property Report shall be used for all sales in the subdivision, except 
for those transactions which are exempt from the provisions of the Act 
or which have been granted an exempt status by the Director, unless the 
Director has specifically authorized the use of multiple Property 
Reports.
    (e) Initial Statement of Record--when prior approval to submit is 
required. In those subdivisions where there is a disparity between the 
lots already registered and those sought to be registered because of 
location, terrain, proposed use of the lots or the amenities to be 
furnished or available, the developer may present a resume of the 
differences and request the Director's permission to file a separate 
initial Statement of Record for the additional lots. Upon consideration 
of the facts submitted, the Director may allow such a procedure.
    (f) Lots which have been deleted from registration. Should the 
developer, for any reason, delete by amendment any registered lots from 
an effective Statement of Record, those lots must be reregistered by a 
consolidation and a new effective date issued, before they can be sold 
or leased. An appropriate fee must accompany the submission.
    (g) Lots sold to individual purchasers. It is not necessary to 
delete from the registration those lots which have been sold to 
individual purchasers for their own use.



Sec. 1010.23  Amendment--filing and form.

    (a) Filing. If any change occurs in any representation of material 
fact required to be stated in an effective Statement of Record, an 
amendment shall be filed. The amendment shall be filed within 15 days of 
the date on which the developer knows, or should have known, that there 
has been a change in material fact.
    (b) Form. An amendment shall include by reference the prior 
Statement of Record except for any changes in material fact. A change in 
material fact shall be specifically described and supported by the same 
documentation which would be required for an initial submission. Any 
amendment shall be accompanied by:
    (1) A letter from the developer giving a clear and concise 
description of the purpose and significance of the amendment and 
referring to the section and page of the Statement of Record which is 
being amended, and
    (2) All pages of the Statement of Record, which have been amended, 
retyped in the required format to reflect the changes. The ILSRP number 
of the Statement of Record shall appear at the top of each page of the 
material submitted.
    (c) Amendments to suspended filings. Developers wishing to 
reactivate a suspended filing shall file the following:
    (1) Any amendments necessary to bring the filing into compliance, 
submitted in accordance with paragraphs (a) and (b) of this section;

[[Page 288]]

    (2) An activity report in the form prescribed by Sec. 1010.310; and
    (3) An amendment fee, if required under Sec. 1010.35(d)(2).



Sec. Sec. 1010.24-1010.28  [Reserved]



Sec. 1010.29  Use of property report--misstatements, omissions,
or representation of Bureau approval prohibited.

    Nothing in these regulations shall be construed to authorize or 
approve the use of a property report containing any untrue statement of 
a material fact or omitting to state a material fact required to be 
stated therein. Nor shall anything in these regulations be construed to 
authorize or permit any representation that the Property Report is 
prepared or approved by the Director, ILSRP or the Bureau of Consumer 
Financial Protection.



Sec. 1010.35  Payment of fees.

    (a) Method of payment. (1) Each fee must be paid by:
    (i) Certified check, cashier's check, or postal money order made 
payable to the Treasurer of the United States, with the registration 
number, when known, and the name, of the subdivision on the face of the 
check, and mailed to an address specified by the Director; or
    (ii) Electronic payment in a manner specified by the Director.
    (2) Information regarding the current mailing address or electronic 
payment procedures is available from: Office of Nonbank Supervision, 
Bureau of Consumer Financial Protection,1700 G Street NW., Washington, 
DC 20006.
    (b) Fees for registration. The fee for each initial and consolidated 
registration is set forth in section VII of the appendix to this part: 
Initial and Consolidated Registration Fee Schedule.
    (c) Fee for Exemption Order or Advisory Opinion. The filing fee for 
an Exemption Order or an Advisory Opinion (Sec. 1010.16 or Sec. 1010.17) 
is $500. This fee is not refundable.
    (d) Amendment fee. (1) A fee of $800 is charged when an Annual 
Activity Report reflects an annual ending inventory of 101 or more 
unsold registered lots.
    (2) A fee of $800 is charged for an amendment to reactivate a 
Statement of Record subsequent to its suspension, unless the developer 
has 100 or fewer unsold lots included in the Statement of Record.



Sec. 1010.45  Suspensions.

    (a) Suspension notice--prior to effective date. (1) If it appears to 
the Director that a Statement of Record or an amendment is on its face 
incomplete or inaccurate in any material respect, the Director shall so 
advise the developer, by issuing a suspension notice, within a 
reasonable time after the filing of such materials but prior to the time 
the materials would otherwise be effective.
    (2) A suspension notice issued pursuant to this subsection shall 
suspend the effective date of the Statement of Record or the amendment. 
It shall continue in effect until 30 days, or such earlier date as the 
Director may determine, after the necessary amendments are submitted 
which correct all deficiencies cited in the notice.
    (3) Upon receipt of a suspension notice, the developer has 15 days 
in which to request a hearing. If a hearing is requested, it shall be 
held within 20 days of the receipt of the request by the Director.
    (b) Suspension orders--subsequent to effective date. (1) A notice of 
proceedings to suspend an effective Statement of Record may be issued to 
a developer if the Director has reasonable grounds to believe that an 
effective Statement of Record includes an untrue statement of a material 
fact, or omits a material fact required by the Act or rules and 
regulations, or omits a material fact which is necessary to make the 
statements therein not misleading. The Director may, after notice, and 
after opportunity for a hearing requested pursuant to Sec. 1012.220 
within 15 days of receipt of such notice, issue an order suspending the 
Statement of Record. In the event that a suspension order is issued, 
such order shall remain in effect until the developer has amended the 
Statement of Record or otherwise complied with the requirements of the 
order. When the developer has complied with the requirements of the 
order, the Director shall so declare and thereupon the suspension order 
shall cease to be effective.

[[Page 289]]

    (2) If the Director undertakes an examination of a developer or its 
records to determine whether a suspension order should be issued, and 
the developer fails to cooperate with the Director or obstructs, or 
refuses to permit the Director to make such examination, the Director 
may issue an order suspending the Statement of Record. Such order shall 
remain in effect until the developer has complied with the requirements 
of the order. When the developer has complied with the requirements of 
the order, the Director shall so declare and thereupon the suspension 
order shall cease to be effective. In accordance with the procedure 
described in Sec. 1012.235, a hearing may be requested.
    (3) Upon receipt of an amendment to an effective Statement of 
Record, the Director may issue an order suspending the Statement of 
Record until the amendment becomes effective if the Director has 
reasonable grounds to believe that such action is necessary or 
appropriate in the public interest or for the protection of purchasers. 
In accordance with the procedure described in Sec. 1012.235, a hearing 
may be requested.
    (4) Suspension orders issued pursuant to this subsection shall 
operate to suspend the Statement of Record as of the date the order is 
either served on the developer or its registered agent or is delivered 
by certified or registered mail to the address of the developer or its 
authorized agent.



                    Subpart B_Reporting Requirements



Sec. 1010.100  Statement of Record--format.

    (a) The Statement of Record consists of two portions; the Property 
Report portion and the Additional Information and Documentation portion.
    (b) General format. The Statement of Record shall be prepared in 
accordance with the format set forth in section VIII of the appendix to 
this part: Property Report:



Sec. 1010.101  [Reserved]



Sec. 1010.102  General instructions for completing the Statement
of Record.

    (a) Paper and type. The Statement of Record shall be on good 
quality, unglazed white or pastel paper. Letter size paper, 
approximately 8\1/2\ x 11 inches in size, will be used for the Property 
Report portion and legal size paper, approximately 8\1/2\ x 14 inches in 
size, will be used for the Additional Information and Documentation 
portion. Side margins shall be no less than 1 inch and no greater than 
1\1/2\ inches. Top and bottom margins shall be no less than 1 inch. In 
the preparation of the charts to be included in the Property Report, the 
developer may vary from the above margin requirements or print the 
charts lengthwise on the required size paper if such measures are 
necessary to make the charts readable. The Statement of Record shall be 
prepared in an easily readable, uniform font.
    (b) Numbering and dating. Each page of the Statement of Record as 
submitted to ILSRP shall be numbered and shall include the date of 
typing or preparation in the lower right hand corner, except in the 
final printed version of the Property Report portion.
    (c) Signing. The Statement of Record shall be signed by the senior 
executive officer of the developer or a designated agent.
    (d) Printing. The Statement of Record and, insofar as practical, all 
papers and documents filed as a part thereof, shall be printed, 
lithographed, photocopied, typewritten or prepared by any similar 
process which, in the opinion of the Director, produces copies suitable 
for a permanent record. Irrespective of the process used, all copies of 
any such materials shall be clear and easily readable.
    (e) Headings, subheadings, captions, introductory paragraphs, 
warnings. Property Report subject ``headings'' are those descriptive 
introductory words which appear immediately after section numbers 
1010.106 through 1010.116 (e.g. Sec. 1010.108 has ``General 
Information'' and Sec. 1010.111 has ``Utilities''). Each such heading 
shall be printed in

[[Page 290]]

the Property Report in underlined capital letters and centered at the 
top of a new page. Section numbers shall not be printed in the Property 
Report. Property Report subheadings are those descriptive introductory 
words which appear in italics in the regulations at the beginning of 
paragraphs designated by paragraph letters (a), (b), (c) etc. An example 
of a subheading is ``water'' found immediately after the paragraph 
letter (a) in Sec. 1010.111. These subheadings will be printed in the 
Property Report only if they are relevant to the subject subdivision. If 
printed these subheadings shall be capitalized and shall begin at the 
left hand margin of the page. Property Report ``captions'' are those 
descriptive introductory words which appear in italics in the 
Regulations at the beginning of subparagraphs designated by numbers (1), 
(2), (3), etc. An example of such captions is ``Sales Contract and 
Delivery of Deed'' found immediately after the subparagraph number 
``(1)'' in Sec. 1010.109(b). These captions are to be printed in the 
Property Report only if they are applicable to the subject subdivision. 
If printed, these captions shall be centered on the page from the side 
margins, and shall have only the first letter of each word capitalized. 
Headings and subheadings will be used in the Property Report in 
accordance with the sample page appearing in Sec. 1010.102. Introductory 
paragraphs will follow headings if they are applicable and necessary for 
a readable entry into the subject matters, but note, the introductory 
paragraphs for ``Title to the Property and Land Use'' are to be used in 
every case as provided in Sec. 1010.109(a)(1). Subheadings and captions 
which do not apply to the subdivision should be omitted from the 
Property Report portion and answered ``not applicable'' in the 
Additional Information and Documentation portion, unless specifically 
required to be included elsewhere in these instructions. Warnings shall 
be printed substantially as they appear in the instructions in 
Sec. Sec. 1010.105 through 1010.118. They shall be printed in capital 
letters and enclosed in a box as shown on the sample page in 
Sec. 1010.102. The paragraphs in the Property Report portion need not be 
numbered. A sample page is set forth in section IX of the appendix to 
this part: Sample Page for Statement of Record.
    (f) Language style. All information given in the Property Report 
portion shall be stated in narrative form using plain, concise, everyday 
language which can be readily understood by purchasers who are 
unfamiliar with real estate transactions. Excessively long paragraphs 
should be avoided. Keep them as brief as possible. Use separate 
paragraphs for different points discussed. Disclose all pertinent facts. 
Potential consequences to a purchaser must be made clear even though not 
specifically asked for in the format and the instructions. In the 
Property Report the pronouns ``you'' and ``your'' shall generally be 
used in referring to the prospective purchaser and the pronouns ``we,'' 
``us,'' and ``our'' shall generally be used in referring to the 
developer. The Director specifically reserves the right to require 
modification of the text when the narrative does not meet the standards 
of this section.
    (g) Format of the Additional Information and Documentation portion 
of the Statement of Record. The supporting information and documentation 
required by these regulations shall be identified by affixing a tab on 
the right side of the cover sheet of the required information or 
documentation and by identifying on the tab the section number of the 
Statement of Record instructions to which the information or 
documentation corresponds. This information or documentation shall then 
be placed immediately after the page(s) on which the section number and 
answers for that section appear. If the data in a document is applicable 
to more than one section of instructions, the developer may substitute 
as a document in the second case a statement incorporating the earlier 
document. Deeds, title policies, subdivision plats or maps and other 
documentary information required to be contained in the Additional 
Information and Documentation portion of the Statement of Record need 
not be on the same size paper as the Statement of Record but, if larger, 
shall be folded to a size no larger than 8\1/2\ x 14 inches. Supporting 
documents shall be inserted into the binding in such a manner as to 
permit

[[Page 291]]

them to be examined without the necessity of removing them from the 
binding. This may be accomplished by proper folding or through the use 
of envelopes.
    (h) Binding. The Statement of Record shall be bound with the 
Property Report portion on top, including any documents which may be 
required to be attached when delivered to the purchaser, followed by the 
Additional Information and Documentation portion.
    (i) Advertising and promotional material. No advertising, or 
promotional material or statements which are self-serving on behalf of 
the developer or owner may be included in the Statement of Record or 
resulting Property Report.
    (j) Additional information. (1) In addition to the information 
expressly required to be stated in the Statement of Record, there shall 
be added, and the Director may require, such further material 
information, documentation and certification as may be necessary in the 
public interest and for the protection of purchasers or necessary in 
order to make the statements not misleading in the light of 
circumstances under which they are made.
    (2) The instructions are not all inclusive. The developer shall 
include any other facts which would have a bearing upon the use by the 
purchaser of any of the facilities, services or amenities; which would 
cause or result in additional expenses to the purchaser; which would 
have an effect upon the use and enjoyment of the lot by the purchaser 
for the purpose for which it is sold or which would adversely affect the 
value of the lot.
    (k) Modification of format or content. The Director may require or 
permit modification to the content and format of the Property Report to 
include additional information, to modify or omit required information, 
or to change the sequence or position of information when such changes 
are deemed to be in the public interest or for the protection of 
purchasers.
    (l) Required documentation. Where the documentation required by the 
Statement of Record cannot be obtained, the Director may permit the best 
available alternative documentation to be substituted.
    (m) Final version of property report. On the date that a Statement 
of Record becomes effective, the Property Report portion shall become 
the Property Report for the subject subdivision. The version of the 
Property Report delivered to prospective lot purchasers shall be 
verbatim to that found effective by the Director and shall have no 
covers, pictures, emblems, logograms or identifying insignia other than 
as required by these regulations. It shall meet the same standards as to 
grade of paper, type size, margins, style and color of print as those 
set herein for the Statement of Record, except where required otherwise 
by these regulations. However, the date of typing or preparation of the 
pages and the ILSRP number shall not appear in the final version. If the 
final version of the Property Report is commercially printed, or 
photocopied by a process which results in a commercial printing quality, 
and is bound on the left side, both sides of the pages may be used for 
printed material. If it is typed or photocopied by a process which does 
not result in a clear and legible product on both sides of the page or 
is bound at the top, printing shall be done on only one side of the 
page. Three copies of the final version of the Property Report, in the 
exact form in which it is delivered to prospective lot purchasers, shall 
be sent to ILSRP Office within 20 days of the date on which the 
Statement of Record, amendment, or consolidation is allowed to become 
effective by the Director. If a Property Report in a foreign language is 
used as required by Sec. 1011.25(g), three copies of that Property 
Report together with copies of the translated documents shall be 
furnished the Director within 20 days of the date on which the 
advertising is first used. A Property Report prepared pursuant to these 
regulations shall not be distributed to potential lot purchasers until 
after the Statement of Record of which it is a part or any amendment to 
that Statement of Record has been made effective by the Director.



Sec. 1010.103  Developer obligated improvements.

    (a) If the developer represents either orally or in writing that it 
will provide

[[Page 292]]

or complete roads or facilities for water, sewer, gas, electricity or 
recreational amenities, it must be contractually obligated to do so (see 
Sec. 1011.15(f)), and the obligation shall be clearly stated in the 
Property Report. While the developer may disclose relevant facts about 
completion, the obligation to complete cannot be conditioned, other than 
as provided for in Sec. 1011.15(f), and an estimated completion date 
(month and year) must be stated in the Property Report. However, a 
developer that has only tentative plans to complete may so state in the 
Property Report, provided that the statement clearly identifies 
conditions to which the completion of the facilities are subject and 
states that there are no guarantees the facilities will be completed.
    (b) If a party other than the developer is responsible for providing 
or completing roads or facilities for water, sewer, gas, electricity or 
recreational amenities, that entity shall be clearly identified in the 
Property Report under the categories described in Sec. 1010.110, 
Sec. 1010.111 or Sec. 1010.114, as applicable. A statement shall be 
included in the proper section of the Property Report that the developer 
is not responsible for providing or completing the facility or amenity 
and can give no assurance that it will be completed or available for 
use.



Sec. 1010.104  [Reserved]



Sec. 1010.105  Cover page.

    The cover page of the Property Report shall be prepared in 
accordance with the following directions:
    (a) The margins shall be at least 1 inch.
    (b) The next 3 inches shall contain a warning, centered, in \1/2\ 
inch capital letters in red type with \1/4\ inch space between the lines 
which reads as follows: ``READ THIS PROPERTY REPORT BEFORE SIGNING 
ANYTHING''.
    (c) The remainder of the page shall contain the language set forth 
in section X of the appendix to this part: Language for Warning on Cover 
Page of Property Report beginning \1/4\-inch below the last line of the 
warning.
    (d)(1) If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the Cover Page must reflect the requirements of the longer 
period, rather than the seven days.
    (2)(i) If a deed is not delivered within 180 days of the signing of 
the contract or agreement of sale or unless certain provisions are 
included in the contract or agreement, the purchaser is entitled to 
cancel the contract within two years from the date of signing the 
contract or agreement.
    (ii) The deed must be a warranty deed, or where such a deed is not 
commonly used, a similar deed legally acceptable in the jurisdiction 
where the lot is located. The deed must be free and clear of liens and 
encumbrances.
    (iii) The contract provisions are:
    (A) A legally sufficient and recordable lot description; and
    (B) A provision that the seller will give the purchaser written 
notification of purchaser's default or breach of contract and the 
opportunity to have at least 20 days from the receipt of notice to 
correct the default or breach; and
    (C) A provision that, if the purchaser loses rights and interest in 
the lot because of the purchaser's default or breach of contract after 
15% of the purchase price, exclusive of interest, has been paid, the 
seller shall refund to the purchaser any amount which remains from the 
payments made after subtracting 15% of the purchase price, exclusive of 
interest, or the amount of the seller's actual damages, whichever is the 
greater.
    (iv) If a deed is not delivered within 180 days of the signing of 
the contract or if the necessary provisions are not included in the 
contract, the following statement shall be used in place of any other 
rescission language: ``Under Federal law you may cancel your contract or 
agreement of sale any time within two years from the date of signing.''
    (e) At the time of submission, the developer may indicate its 
intention to comply with the red printing by an illustration or by a 
statement to that effect.

[[Page 293]]

    (f) The ``Date of This Report'' shall be the date on which the 
Director allows the Statement of Record to become effective and shall 
not be entered until the submission has become effective.



Sec. 1010.106  Table of contents.

    (a) The second page(s) shall consist of a Table of Contents which 
lists the headings in the Property Report, the major subheadings, if 
any, and the page on which they appear. An example is set forth in 
section XI of the appendix to this part: Sample Entry in Table of 
Contents for Statement of Record.
    (b) Use of ``You'' and ``We.'' At the end of the Table of Contents 
insert the following remark: ``In this Property Report, the words 
``you'' and ``your'' refer to the buyer. The words ``we,'' ``us'' and 
``our'' refer to the developer.''



Sec. 1010.107  Risks of buying land.

    (a) The next page shall be headed ``Risks of Buying Land'' and shall 
contain the paragraphs listed in section XII of the appendix to this 
part: Required Paragraphs for Risks of Buying Land.
    (b) Warnings. If the instructions of the Director require any 
warnings to be included in the Property Report portion, the following 
statement shall be added beneath the ``Risks of Buying Land'' under a 
heading ``Warnings'': ``Throughout this Property Report there are 
specific warnings concerning the developer, the subdivision or 
individual lots. Be sure to read all warnings carefully before signing 
any contract or agreement.'' Both the heading, ``Warnings,'' and the 
statement shall be printed in capital letters and enclosed in a box.



Sec. 1010.108  General information.

    Insert and complete the format set forth in section XIII of the 
appendix to this part: Format for General Information.



Sec. 1010.109  Title to the property and land use.

    (a) General instructions.(1) Below the heading ``Title to the 
Property and Land Use'' insert the introductory paragraphs set forth in 
section XIV of the appendix to this part: Paragraphs to be included in 
the General Report--Title to the Property and Land Use.
    (2) Information to be provided. After the above introductory 
paragraphs provide the information required by the following 
instructions and questions. Follow a general form identical to the 
sample page set forth in section IX of the appendix to this part: Sample 
Page for Statement of Record.
    (b) Method of sale:
    (1) Sales contract and delivery of deed. (i) Will the buyer sign a 
purchase money or installment contract or similar instrument in 
connection with the purchase of the lot? When will a deed be delivered?
    (ii) If an installment contract is used, include the following, or 
substantially the same, language in the disclosure narrative under 
``Method of Sale'': ``If you fail to make your payments required by the 
contract, you may lose your lot and all monies paid.''
    (iii) If, at the time of a credit sale, the developer gives the 
buyer a deed to the lot, what type of security must the buyer give the 
seller?
    (iv) If the lots are to be sold on the basis of an installment 
contract, can the developer or the owner of the subdivision or their 
creditors encumber the lots under contract? If so, include the following 
warning in the disclosure narrative under the caption ``Sales contract 
and delivery of deed'': ``The (indicate subdivision developer, owner, or 
their creditors) can place a mortgage on or encumber the lots in this 
subdivision after they are under contract. This may cause you to lose 
your lot and any monies paid on it.''
    (2) Type of deed. What type of deed will be used to convey title to 
lots in the subdivision?
    (3) Quitclaim deeds. If a quitclaim deed is to be given to lot 
purchasers insert the below warning, or a warning which is substantially 
the same, in the disclosure narrative below the caption ``Quitclaim 
Deeds.'' This particular warning may be deleted at the direction of the 
Director if an acceptable attorney's opinion is submitted with the 
Statement of Record which indicates that a quitclaim deed has a meaning 
in the jurisdiction where the subdivision is located which is 
substantially contrary to the effect of this warning. This

[[Page 294]]

warning shall be phrased substantially as follows: ``The Quitclaim deed 
used to transfer title to lots in this subdivision gives you no 
assurance of ownership of your lot.''
    (4) Oil, gas, and mineral rights. If oil, gas or mineral rights have 
been reserved, insert the following statement or one substantially the 
same in the narrative answer under the caption ``oil, gas, and mineral 
rights'': ``The (indicate oil, gas, or mineral rights) to (state which 
lots) in this subdivision will not belong to the purchaser of those 
lots. The exercise of these rights could affect the use, enjoyment and 
value of your lot.''
    (c) Encumbrances, mortgages and liens--(1) In general. State whether 
any of the lots or common facilities which serve the subdivision, other 
than recreation facilities, are subject to a blanket encumbrance, 
mortgage or lien. If yes, identify the type of encumbrance (e.g., deed 
of trust, mortgage, mechanics liens), the holder of the lien, and the 
lots covered by the lien. If any blanket encumbrance, mortgage, or lien 
is not current in accordance with its terms, so indicate.
    (2) Release provisions. (i) Explain the effect of any release 
provisions of any blanket encumbrance, mortgage or lien and include the 
one of the following statements that pertains.
    (A) If the release clauses are not included in a recorded 
instrument, insert the statement set forth in section XV of the appendix 
to this part: Statement on Release Provisions, or one substantially the 
same in the disclosure narrative below under the caption ``Release 
Provisions.''
    (B) If the developer or subdivision owner states that the release 
provisions are recorded and that the lot purchaser may pay the release 
price of the mortgage, the statement shall be supported by documentation 
supplied in Sec. 1010.209. If the purchaser may pay the release fee, 
state the amount of the release fee and inform the purchaser that the 
amount may be in addition to the contract payments unless there is a 
bona fide trust or escrow arrangement in which the purchaser's payments 
are set aside to pay the release price before any payments are made to 
the developer.
    (C)(1) If there are no provisions in the blanket encumbrance for 
release of an individual purchaser's lot from a blanket encumbrance, 
include the warning set forth in section XVI of the appendix to this 
part: Warning for Release Provisions or a warning substantially the 
same, in the disclosure narrative under the ``Release Provisions'' 
caption.
    (2) If the provisions for release of individual lots from the 
blanket encumbrance may be exercised only by the developer insert the 
following statement, or one substantially the same, in the disclosure 
narrative under the ``Release Provisions'' caption: ``The release 
provisions in the (state the type of encumbrance) on (indicate all or 
particular lots) in this subdivision may be exercised only by us. 
Therefore, if we default on the (state type of encumbrance) before 
obtaining a release of your lot, you may lose your lot and any money you 
have paid for it.''
    (d) Recording the contract and deed--(1) Method or purpose of 
recording. (i) State what protection, if any, recording of deeds and 
contracts gives a lot purchaser in your jurisdiction.
    (ii) If the sales contract or deed may be recorded, so state. Also 
state whose responsibility it is to record the contract or deed.
    (iii) If the developer or subdivision owner will not have the sales 
contract officially acknowledged or if the applicable jurisdiction will 
not record sales contracts, state that sales contracts will not be 
recorded and why they will not be recorded.
    (iv) If at, or immediately after, the signing of a contract, the 
contract or a deed transfer to the buyer is not recorded by the 
developer or owner or if title to the lot is not otherwise transferred 
of record to a trust, or if other sufficient notice of transfer or sale 
is not placed of record, then the developer shall include the warning 
set forth in section XVII of the appendix to this part: Method and 
Purpose of Recording Warning, or substantially the same warning in the 
disclosure narrative under the caption ``Method and Purpose of 
Recording.'' The reference to contracts shall be deleted from the above 
warning if the answer to paragraph (d)(1)(i) of this section indicates

[[Page 295]]

that recording of a contract in the subject jurisdiction does not 
protect the purchaser from claims of later purchasers or creditors of 
anyone having an interest in the land.
    (2) Title insurance. If the developer does not deliver a title 
insurance policy to the buyer, state that the purchaser should obtain an 
attorney's opinion of title or a title insurance policy which will 
describe the rights of ownership which are being acquired in the lot. 
Recommend that an appropriate professional should interpret the opinion 
or policy.
    (e) Payments--(1) Escrow. If purchasers' deposits, down payments, or 
installment payments are to be placed in a third party controlled escrow 
or similar account, describe the arrangement including the name and 
address of the escrow holder or similar person. If there is no such 
arrangement, insert the statement set forth in section XVIII of the 
appendix to this part: Escrow Statement. The questions regarding an 
escrow agreement or similar protection may be answered affirmatively 
only if the money is under the control of an independent third party, 
allowing a purchaser to receive a return of all money paid in the event 
of the developer's failure to convey title or the developer's default on 
any obligation which would otherwise result in the purchaser's loss of 
that money.
    (2) Prepayments. Explain any prepayment penalties or privileges in 
everyday language.
    (3) Default. What are the developer's or subdivision owners' 
remedies against a defaulted purchaser?
    (f) Restrictions on the use of your lot--(1) Restrictive covenants. 
(i) Have any restrictive covenants been recorded against the land in the 
subdivision? If so, do they contain items which require the purchaser to 
secure permissions, approvals or take any other action prior to using or 
disposing of his lot (e.g., architectural control, developer's right of 
first refusal, building deadlines, etc.)? If any of these or similar 
items are included, explain their meaning and effect upon the purchaser.
    (ii) If any restrictive covenants are to be used and if they have 
not been recorded, how will they be imposed? Include a statement to the 
effect that the restrictive covenants have not been recorded; that there 
is no assurance they will be applied uniformly; that they may be changed 
and that they may be difficult to enforce. If no restrictive covenants 
will be imposed, include a statement to the effect that, since there are 
no restrictive covenants on the use of the lots, they may be used for 
purposes which could adversely affect the use and enjoyment of 
surrounding lots.
    (iii) If there are restrictive covenants, whether recorded or 
unrecorded, the following statement shall be made: ``A complete copy of 
these restrictions is available upon request.''
    (2) Easements. (i) Are there easements which may have an effect on 
the purchaser's building or lot use plans (e.g., large drainage 
easements along lot lines, high voltage electric transmission lines, 
pipe lines or drainage easements which encroach upon the building area 
of the lot or inhibit its use)?
    (ii) Is the subdivision subject to any type of flood control or 
flowage easements?
    (iii) If the answer to either (2)(i) or (2)(ii) is in the 
affirmative, identify the affected lots and state the effect upon the 
use of the lots.
    (g) Plats, zoning, surveying, permits and environment--(1) Plats. 
(i) Have the subdivision plans and plats of specific units been approved 
by the regulatory authorities? If the approvals have not been obtained, 
include a warning to the effect that regulatory authorities have not 
approved the proposed plats; that they may require significant 
alterations before they will approve them and they may not allow the 
land to be used for the purpose for which it is being sold.
    (ii) Have plats covering the lots in this Report been recorded? If 
so, where are they recorded? If they have not been recorded, is the 
description of the lots given in this Report legally adequate for the 
conveyance of land in the jurisdiction where the subdivision is located? 
If it is not, include a statement to the effect that the description of 
the lots is not legally adequate for the conveyance of the lots and that 
it will not be until the plat is recorded.

[[Page 296]]

    (2) Zoning. For what purpose may the lots be used (e.g., single 
family homes, camping, commercial)? Does this use conform to local 
zoning requirements and the restrictive covenants?
    (3) Surveying. Has each lot been surveyed and is each lot marked for 
identification? If not, and the purchaser is responsible for the 
expense, state the estimated cost.
    (4) Permits. Must the purchaser obtain a building permit before 
beginning construction on his lot? Where is the permit obtained? Are any 
other permits necessary to use the lot for the purpose for which it is 
sold or for construction in connection with its use?
    (5) Environment. Has there been any environmental impact study 
prepared which considers the effect of the subdivision on the 
environment? If a study has been prepared, summarize any adverse 
conclusions and refer the lot buyer to the proper State Clearinghouse 
for complete information. If a study has not been prepared, include a 
statement that ``No determination has been made as to the possible 
adverse effects the subdivision may have upon the environment and 
surrounding area.'' If the developer does not know whether an 
environmental impact study has been prepared, or the name and location 
of the Office where any study made can be found, inquiry should be made 
to the State or Area Clearinghouse established under the authority of 
title IV of the Intergovernmental Cooperation Act of 1968.



Sec. 1010.110  Roads.

    (a) Access to the subdivision. (1) Is access to the subdivision 
provided by public or private roads? What type of surface do they have? 
How many lanes? What is the width of the wearing surface?
    (2) Who is responsible for their maintenance? What is the cost to 
the purchaser, if any? Are any improvements contemplated? If so, when 
will they begin and when will they be completed? At whose expense?
    (b) Access within the subdivision. (1) How have legal and physical 
access by conventional automobile been or will they be, provided to the 
lots (e.g., road on recorded easement; right of way dedicated to the 
public; right of way dedicated to use of lot owners)?
    (2) Who is responsible for the road construction? Is there any 
construction cost to the purchaser? Is there any financial assurance of 
completion? If there is no financial assurance of completion, enter a 
warning to the effect that no funds have been set aside in an escrow or 
trust account and there are no other financial arrangements to assure 
completion of the roads.
    (3) How many lanes do the interior roads have? What is the estimated 
starting date of construction (month and year); the present percentage 
of construction now complete; the present surface; the estimated 
completion date (month and year) and what is the final surface to be? If 
there are separate units or sections in the subdivision which will have 
different completion dates or different surfaces, the chart in section 
XIX of the appendix to this part: Road Chart shall be used rather than a 
narrative paragraph.
    (4) Who is responsible for road maintenance? If the roads are to be 
maintained by a public authority, a property owners' association or some 
other entity at some time in the future, who is responsible for their 
maintenance during the interim period? What is the cost to the purchaser 
during the interim period and after acceptance for permanent 
maintenance? Will they be maintained so as to provide access to the lots 
on a year round basis? If not, include a warning which informs the 
purchaser that access may not be available year round. Identify the 
months when access may not be available to lots. If there are no 
arrangements for maintenance, include a warning to the effect that 
purchasers are responsible for maintaining the roads and that, if 
maintenance is not performed, the roads may soon deteriorate and access 
may become difficult or impossible.
    (5) If estimated completion dates given in prior Statements of 
Record have not been met, state that previous dates have not been met 
and give the previous dates. Underline the answer. If the roads are 100 
percent completed, no dates are needed.
    (6) Complete the chart in section XX of the appendix to this part: 
Nearby

[[Page 297]]

Communities Chart by listing the county seat (identify) and at least two 
nearby communities. Include at least one community of significant size 
which offers general services.
    (7) If the purchasers will be individually responsible for providing 
access to their lots and for maintaining that access, what is the 
estimated cost of construction and maintenance?



Sec. 1010.111  Utilities.

    (a) Water. (1) How is water to be supplied to the individual lots 
(e.g., central system or individual wells)? Of the following items only 
those which apply to the subdivision need be included.
    (i) Individual system. (A) If water is to be supplied by an 
individual private well, cistern or other individual system, what are 
the total estimated costs of the system, including but not limited to, 
the costs of installation, storage, any treatment facilities and other 
necessary equipment?
    (B) If individual cisterns or similar storage tanks are to be used, 
state where water to fill them can be secured; the cost of the water, 
and its delivery costs for a supply sufficient to serve the monthly 
needs of a family of four living in a house on a year-round basis. 
Include a statement to the effect that water stored for extended periods 
tends to become stale and may acquire an unpleasant taste or odor.
    (C) If individual wells are to be used and if the sales contract 
contains no provisions for refund or exchange in the event a productive 
well cannot be installed, include a statement to the effect that there 
is no assurance a productive well can be installed and, if it cannot, no 
refund of the purchase price of the lot will be made.
    (D) If individual wells or individual cisterns are to be used, 
include a brief statement to the effect that the purity and chemical 
content of the water cannot be determined until each individual well or 
source of water is completed and tested.
    (E) If there have been no hydrological surveys in connection with 
the use of individual wells or sources of hauled water for cisterns, 
include a warning to the effect that there is no assurance of a 
sufficient supply of water for the anticipated population.
    (F) Is a permit required to install the individual system to be 
used? If so, from whom and where is the permit secured? State the cost 
of a permit.
    (ii) Central system. (A) If water is to be provided by a central 
system, who is the supplier? What is the supplier's address?
    (B) Will the water mains be extended in front of, or adjacent to, 
each lot? When will construction begin? What is the present percentage 
of completion of the water mains and central supply plant? When will 
service be available to the individual lots? If the central system is 
not complete and there are separate units or sections of the subdivision 
included in the Statement of Record which have different completion 
dates, then the starting date for construction (month and year), the 
percentage of construction now complete and the estimated service 
availability date (month and year) shall be set forth in the chart in 
section XXI of the appendix to this part: Water Chart Form rather than 
in a narrative paragraph.
    (C) What is the present capacity of the central plant (i.e., how 
many connections can be supplied)? If the capacity is not sufficient to 
serve all lots in the Statement of Record and is to be expanded in 
phases, what is the time-table for each phase to be in service and what 
will trigger the beginning of the expansion for each phase? If an entity 
other than the developer or an affiliate or subsidiary of the developer 
will supply the water for the central system; if the operation of that 
entity is supervised by a governmental agency and if that entity states 
it can supply the anticipated population of the development, then 
information as to the capacity of the plant and a hydrological survey is 
not necessary. If the entity does not indicate it can supply enough 
water for the anticipated population or if the capacity of any central 
system is not sufficient to serve all lots in the Statement of Record, 
include a warning which describes the limitations and sets forth the 
number of lots which can now be served.
    (D) Have there been any hydrological surveys to determine that a 
sufficient source of water is available to serve

[[Page 298]]

the anticipated population of the subdivision? Has the water in the 
central system been tested for purity and chemical content? If so, did 
the results show that the water meets all standards for a public water 
supply? If there have been no hydrological surveys showing a sufficient 
supply of water or no tests for purity and chemical content for the 
central system, include a warning to the effect that there is no 
assurance of a sufficient supply or that the water is drinkable.
    (E) Is there any financial assurance of completion of the central 
system and any future expansion? If not, include a warning to the effect 
that no funds have been set aside in an escrow or trust account nor have 
any other financial arrangements been made to assure completion of the 
water system.
    (F) If the developer or an affiliate or subsidiary of the developer 
operates the central system, have all permits been obtained from the 
proper agencies for the construction, use and operation of the central 
system? If not, include a warning to the effect that the required 
permits, approvals or licenses for construction, operation or use of the 
water system have not been obtained, therefore there is no assurance the 
system can be constructed or used.
    (G) If previous completion dates given in prior Statements of Record 
have not been met, state that previous completion dates have not been 
met and give the previous dates. Underline the answer. If the central 
water system is 100 percent completed, no dates are needed.
    (H) Is the purchaser to pay any construction costs, one-time 
connection fees, availability fees, special assessments or deposits for 
the central system? If so, what are the amounts? If not, state that 
there are no charges other than use fees. If the purchaser will be 
responsible for construction costs of the water mains, state the cost to 
install the mains to the most remote lot covered by this report.
    (I) If a purchaser wishes to use a lot prior to the date central 
water is available to it, may the purchaser install an individual 
system? If so, include the information required for individual systems 
in Sec. 1010.111(a)(1)(i). Will the purchaser be required to discontinue 
use of any individual system and connect to the central system when 
service is available to the lot? If the purchaser is not required to 
connect to the central system, must any construction costs, connection 
fees, availability fees, special assessments or deposits in connection 
with the central system still be paid? If an individual system may not 
be installed, so state and indicate water will not be available until 
the central system is extended to the lot.
    (J) If connection to the system is voluntary and not all purchasers 
elect to use the system, will the cost to those who do use the system be 
increased? If so, include a statement to the effect that connection to 
the central system is voluntary and those who use the system may have to 
pay a disproportionate share of the cost of the system and its 
operation.
    (K) If the developer is to construct the system and will later turn 
it over to a property owners' association for operation and maintenance, 
state the estimated date and conditions of the conveyance and if it will 
be conveyed free and clear of any encumbrance. If there is a charge or 
if the association must assume an encumbrance, state the estimated 
amount of either and the terms for retirement of either obligation.
    (L) If the supplier of water is other than a governmental agency or 
an entity which is regulated and supervised by a governmental agency, 
state that neither the operation of the water system nor the rates are 
regulated by a public authority.
    (M) The warning ``We do not own or operate the central water system 
so we cannot assure its continued availability for your use'' shall be 
included unless:
    (1) The central water system is owned and operated by the developer, 
or an affiliate or subsidiary of the developer, or
    (2) The central water system is owned and operated by a governmental 
agency or by an entity which is regulated and supervised by a 
governmental agency.
    (b) Sewer. (1) What methods of sewage disposal are to be used (e.g., 
central system, comfort stations or individual on-site systems such as 
septic tanks,

[[Page 299]]

holding tanks, etc.) in the subdivision? Of the following items, only 
those which apply to the subdivision need be included.
    (i) Individual systems. (A) If individual systems are to be used, 
have the local authorities given general approval to the use of these 
systems in the subdivision or have they given specific approval for each 
lot? Are permits necessary? From whom and where are they obtained? Must 
testing of the lot be done prior to the issuance of a permit? State the 
cost of a permit and the estimated costs of the system and any necessary 
tests.
    (B) If holding tanks are to be used, state whether pumping and 
hauling service is available and the estimated monthly costs of that 
service for a family of four living in a house on a year-round basis.
    (C) If each and every lot has not been approved for the use of an 
individual on-site system, include a warning to the effect that there is 
no assurance permits can be obtained for the installation and use of 
individual on-site systems. If the sales contract contains no provisions 
for refund or exchange in the event a permit cannot be obtained, include 
a statement to the effect that there is no assurance an individual on-
site system can be installed and, if it cannot, no refund of the 
purchase price of the lot will be made.
    (D) If no permit is required for the installation and use of 
individual on-site systems, explain whether this may have an effect upon 
the purchaser or the availability of construction or permanent 
financing.
    (E) If the developer has knowledge that permits for the installation 
of individual on-site systems have been denied; that there have been 
unsatisfactory percolation tests or that systems have not operated 
satisfactory in the subdivision, state the number of these rejections, 
unsatisfactory tests or operations.
    (ii) Comfort stations. (A) If comfort stations are to be used, how 
many lots will be served by each station? When will construction be 
started? When will the station or stations be completed and ready for 
use? Have the necessary permits been obtained for the construction and 
use of comfort stations? If the necessary permits have not been 
obtained, include a warning that the necessary permits, approvals or 
licenses have not been obtained for the construction and use of the 
comfort stations; therefore there is no assurance they can be 
constructed or used. If there are comfort stations located in different 
units and having different completion dates, the chart found in section 
XXII of the appendix to this part: Comfort Station Chart shall be used 
to show the estimated construction starting date (month and year), the 
present percentage of completion and the date on which they will be used 
rather than a narrative paragraph.
    (B) Who is to construct the comfort stations? Is there any financial 
assurance of their completion? If not, include a warning to the effect 
that no funds have been set aside in an escrow or trust account nor have 
any other financial arrangements been made to assure completion of the 
comfort stations and there is no assurance the facilities will be 
completed.
    (C) Who will be responsible for maintenance of the comfort stations? 
Is there any cost to the purchaser for construction, use or maintenance?
    (iii) Central system. (A) If a central sewage treatment and 
collection system is being installed, who is responsible for 
construction of the system? Will the sewer mains be installed in front 
of, or adjacent to, each lot? When will construction be started (month 
and year)? When will service be available (month and year)? Who will own 
and operate the system? Give the name and address of the entity.
    (B) What is the present percentage of completion and the present 
capacity of the system (i.e., number of connections which can be 
served)? If the present capacity is not sufficient to serve all lots in 
the Statement of Record and it is to be expanded in phases, what is the 
time-table for expansion and what will trigger that expansion? If the 
central system is not complete and there are separate units or sections 
of the subdivision which have different service availability dates, the 
chart found in section XXIII of the appendix to this part: Sewer Chart 
shall be used to show the construction starting date (month

[[Page 300]]

and year); the percentage of completion and service availability date 
(month and year) in each unit or section rather than a narrative 
paragraph. If sewage treatment facilities are to be supplied by an 
entity which is regulated by a governmental agency and which is not the 
developer or an affiliate or subsidiary of the developer and the entity 
has stated it can serve the anticipated population of the development, 
then information on capacity need not appear.
    (C) If the developer or an affiliate or subsidiary of the developer 
operates the central system, have all necessary permits been obtained 
for the construction, operation and use of the central system? Do these 
permits limit the number of connections or homes which the system may 
serve? If the permits have not been obtained, enter a warning to the 
effect that the necessary permits, approvals or licenses have not been 
obtained for the central sewage system; therefore there is no assurance 
that the system can be completed, operated or used.
    (D) If the system cannot now serve all lots included in the 
Statement of Record, either because the supplier of the service has not 
stated it can and will serve all lots or if construction has not reached 
a stage where all lots can be served or permits to serve all lots have 
not been obtained, include a warning which states that all lots cannot 
now be served; the number which can be served and the reason for the 
lack of capacity.
    (E) Will the purchaser pay any construction costs, special 
assessments, one time connection fees or availability fees? What are the 
amounts of these charges? If the purchaser is to pay construction costs 
of the sewer mains, state the cost of installation of the mains to the 
most remote lot in this Report.
    (F) If the purchaser wishes to use the lot prior to the date central 
sewer service is available, may the purchaser install an individual 
system? If so, include the information on individual systems required by 
Sec. 1010.111(b)(1)(i). Will the purchaser be required to discontinue 
use of the individual system and connect to the central system when 
service is available? If the purchaser is not required to connect to the 
central system, must the purchaser still pay any construction costs, 
connection fees, availability fees, or special assessments? If the 
purchaser may not install an individual system, so state and indicate 
service will not be available until the central system reaches the lot.
    (G) If connection to the system is voluntary and not all purchasers 
elect to use the system, will the cost to those who do use the system be 
increased? If so, include a statement to the effect that connection to 
the central system is voluntary and those who use the system may have to 
pay a disproportionate share of the cost of the system and its 
operation.
    (H) Is there any financial assurance of completion of the central 
system and any future expansion? If not, include a warning that no funds 
have been set aside in an escrow or trust account nor have any other 
financial arrangements been made to assure the completion of the central 
system; therefore there is no assurance that it will be completed.
    (I) If previous completion dates given in prior Statements of Record 
have not been met, state that previous dates have not been met and give 
the previous dates. Underline the answer. If the central sewage 
treatment and collection system are 100 percent completed, no dates are 
needed.
    (J) If the developer is to construct the system and will later turn 
it over to a property owners' association for operation and maintenance, 
state the date of the transfer and whether there will be any charge for 
the conveyance and if it will be conveyed free and clear of any 
encumbrance. If there is a charge or if the association must assume an 
encumbrance, state the estimated amount of either and the terms for 
retirement of either obligation.
    (K) If the owner or operator of the central sewer system is other 
than a governmental agency or an entity which is regulated and 
supervised by a governmental agency, state that neither the operation of 
the sewer system nor the rates are regulated by a public authority.
    (L) The warning ``We do not own or operate the central sewer system 
so we

[[Page 301]]

cannot assure its continued availability for your use.'' shall be 
included unless:
    (1) The central sewer system is owned and operated by the developer, 
or an affiliate or subsidiary of the developer, or
    (2) The central sewer system is owned and operated by a governmental 
agency or by an entity which is regulated and supervised by a 
governmental agency.
    (c) Electricity. (1) Who will provide electrical services to the 
subdivision?
    (2) Have primary electrical service lines been extended in front of, 
or adjacent to, all of the lots? If not, when (month and year) or under 
what conditions will construction begin and when will service be 
available? If they have not been installed, who is responsible for their 
construction? If electrical service lines have not been extended in 
front of, or adjacent to, all lots and there are separate units or 
sections having different service availability dates, the chart found in 
section XXIV of the appendix to this part: Electric Service Chart shall 
be used rather than a narrative paragraph.
    (3) If construction of the lines or service to the ultimate consumer 
is provided by an entity other than a publicly regulated utility, who 
provides, or will provide, the service? Who will be responsible for 
maintenance? What is the assurance of completion? If service is not 
provided by a publicly regulated utility, what charges or assessments 
will the purchaser pay?
    (4) If the primary service lines have not been extended in front of, 
or adjacent to each lot, will the purchaser be responsible for any 
construction costs? If so, what is the utility company's policy and 
charges for extension of primary lines? Based on that policy, what would 
be the cost to the purchaser for extending primary service to the most 
remote lot in this Report?
    (5) If electrical service will not be provided, what is an alternate 
source (e.g., generators, etc.) and what are the estimated costs?
    (6) If the lines are to be installed by some entity other than a 
publicly regulated utility and if there is no financial assurance of 
completion, include a warning to the effect that no funds have been set 
aside in an escrow or trust account nor have any other financial 
arrangements been made to assure construction of the electric lines.
    (d) Telephone. (1) Is telephone service now, or will it be, 
available? Who will furnish the service?
    (2) Have the service lines been extended in front of, or adjacent 
to, each of the lots? If not, when, and under what conditions, will 
construction be started and when will service be available (month and 
year)?
    (3) If the service lines have not been extended in front of, or 
adjacent to, each lot, will the purchaser be responsible for any 
construction costs? If so, what is the utility company's policy and 
charges for extension of service lines? Based on that policy, what would 
be the cost to the purchaser of extending service lines to the most 
remote lot in this Report?
    (e) Fuel or other energy source. (1) What fuel, or other energy 
source, will be available for heating, cooking, etc. in the subdivision? 
If other than electricity is to be used, describe the availability of 
the fuel or other energy source. Give the name and address of the 
supplier. If the fuel is natural gas, when will the mains be installed 
to the lots? What is the cost to the purchaser for installation fees and 
connection fees? If oil or propane gas will be used, include the cost of 
a storage tank.
    (2) [Reserved]



Sec. 1010.112  Financial information.

    (a) The information required by paragraphs (b) and (c) of this 
section need appear only if the answer to the question is an affirmative 
one.
    (b) Has the developer had a deficit in retained earnings or 
experienced an operating loss during the last fiscal year or, if less 
than a year old, since its formation? If so, include a statement to the 
effect that this may affect the developer's ability to complete promised 
facilities and to discharge financial obligations. This statement may be 
omitted if:
    (1) All facilities, utilities and amenities proposed to be completed 
by the developer in the Property Report and sales contract have been 
completed so that the lots included in the Statement of Record are 
immediately usable for

[[Page 302]]

the purpose for which they are sold, or if:
    (2) The developer is contractually obligated to the purchaser to 
complete all facilities, utilities and amenities promised by it in the 
Statement of Record, and:
    (i) The developer has made financial arrangements, such as the 
posting of surety bonds (corporate or individual notes or bonds are not 
acceptable), irrevocable letters of credit, escrow or trust accounts, to 
assure that the facilities, utilities and amenities will be completed by 
the dates set out in the Property Report or contract;
    (ii) The sales contract provides for delivery of a deed within 180 
days of the signing of the contract which conveys title free of any 
mortgage or lien, or the developer has filed an assurance of title 
agreement with ILSRP as outlined in Sec. 1010.212(e); and
    (iii) Any down payments or deposits are held in an escrow or trust 
account.
    (c) If the developer's financial statements have been audited, did 
the accountant qualify the opinion or decline to give an opinion? If so, 
why was the opinion qualified or declined?
    (d) The following statement shall appear: ``A copy of our financial 
statements for the period ending ------------------ is available from us 
upon request.''
    (e) The information furnished in Sec. 1010.212(b) may necessitate a 
warning as to costs and/or feasibility of the completion of the 
subdivision.



Sec. 1010.113  Local services.

    (a) Fire protection. Describe the availability of fire protection 
and indicate whether it is available year round.
    (b) Police protection. Describe the availability of police 
protection.
    (c) Schools. State whether elementary, junior high and senior high 
schools are available to residents of the subdivision. Is school bus 
transportation available from within the subdivision?
    (d) Hospital. Give the name and location of the nearest hospital and 
state whether ambulance service is available.
    (e) Physicians and dentists. State the location of the nearest 
physicians' and dentists' offices.
    (f) Shopping facilities. State the location of the nearest shopping 
facilities.
    (g) Mail service. If there is no mail service to the subdivision, 
describe the arrangements the purchasers must make to receive mail 
service.
    (h) Public transportation. Is there public transportation available 
in the subdivision or to nearby towns? If not, give the location of the 
nearest public transportation and the distance from the subdivision.



Sec. 1010.114  Recreational facilities.

    (a) Recreational facilities to be covered. Unless otherwise 
indicated, all information required by paragraphs (b) and (c) of this 
section shall be provided for only those recreational facilities which
    (1) The developer is contractually responsible to provide or 
complete and which are:
    (i) Within, adjacent or contiguous to the subdivision, and
    (ii) Maintained substantially for the use of lot owners; or
    (2) For which a third party is responsible and which are:
    (i) Within, adjacent or contiguous to the subdivision, and
    (ii) Maintained substantially for the use of lot owners.
    (b) Recreational facility chart. Complete the chart found in section 
XXV of the appendix to this part: Recreational Facility Chart in 
accordance with the instructions which follow it. This chart shall 
immediately follow the Sec. 1010.114 heading. Limit the chart to 
facilities provided essentially for use of lot buyers.
    (1) Facility. Identify each recreational facility. Identify closely 
related facilities (e.g., swimming pool and bathhouse) separately only 
if their availability dates differ. If any recreational facility is not 
owned by the developer, insert a warning below the chart phrased 
substantially as follows: ``We do not own the (name of facility or 
facilities) so we can not assure its (their) continued availability.''
    (2) Percent complete. State the present percentage of completion of 
construction for each recreational facility.
    (3) Estimated date of start of construction. Insert the estimated 
date of the start of construction for the facility (month and year).

[[Page 303]]

    (4) Estimated date available for use. If the construction of the 
facility is not complete or if it is not available to lot owners for its 
intended use, indicate the estimated date (month and year) that the 
facility will be available for use. If the ``estimated date available 
for use'' for any facility has been amended to delay it to a later date, 
indicate such delay in a statement immediately below the chart. 
Underline the response. This statement shall include the name of the 
facility and the prior estimated availability date, and it shall be 
referenced to the appropriate facility listed on the chart by use of an 
asterisk or other appropriate symbol. If a facility is 100 percent 
completed and in use, no date is needed.
    (5) Financial assurance of completion. If the construction of the 
facility is not complete, state whether there is any financial assurance 
of completion. If none, state ``none.'' If such exists, state the type 
of assurance (i.e., bond, escrow, or trust). If no documentation for 
such assurance has been provided in Sec. 1010.214 of the Statement of 
Record, then do not indicate such assurance on the chart, but in place 
of such assurance on the chart state ``none.''
    (6) Buyer's annual cost or assessments. State the lot buyer's annual 
cost or assessments for using the facility. These costs should include 
any applicable property owners' association assessment, and the 
developer's maintenance assessment. If the cost information is lengthy, 
you may use an asterisk or other appropriate symbol and include the cost 
information in a paragraph below the chart.
    (c) Information to be provided below the recreational facility chart 
and related warnings.
    (1) Constructing the facilities. If the facilities are not complete, 
indicate who is responsible for the construction of the facilities. 
Indicate whether the purchaser will be required to pay any of the cost 
of construction of these facilities (estimate and disclose such cost, if 
any).
    (2) Maintaining the facilities. Indicate who is responsible for the 
operation and maintenance of these facilities.
    (3) Facilities which will be leased to lot purchasers. If no 
facilities covered here will be leased to a Property Owners' Association 
or other lot owners in the subject subdivision, omit this caption and 
any information requested under it from the Property Report. If such 
leases exist or are anticipated, state which facilities are or will be 
leased and indicate the term of the lease. Also, state whether the lot 
owners will have an opportunity to terminate or ratify the lease after 
control of the Property Owners' Association is turned over to them. 
Indicate whether the owner of a recreational facility leased to the 
Property Owners' Association or other lot owners may encumber it and 
whether the holders of such encumbrances may acquire the leased 
facilities and not honor the lease. Indicate whether the lease payments 
may be increased on an escalating or other basis and what costs or 
expenses, if any, will be borne by the owner. State whether the lease 
can be assigned or sublet. State how the lease can be terminated.
    (4) Transfer of the facilities. If there are presently any liens or 
mortgages on any of these recreational facilities, describe such liens 
or mortgages. If the developer, or owner of the subdivision, their 
principals, or subsidiaries, intend to transfer the title of a listed 
recreational facility in the future, explain at what time, by what type 
of conveyance, and to whom such transfer will be made. Disclose any 
adverse effects on, or cost to, lot purchasers which may be caused by 
such transfer. If any facility is to be transferred to lot owners as a 
Property Owners' Association or otherwise, state whether the facility 
will be transferred free and clear of all liens and encumbrances. If 
not, state the amount of the encumbrance to be assumed and disclose any 
contractual conditions on such transfer which relate to lot purchasers.
    (5) Permits. If the necessary permits have not been obtained for the 
construction and/or use of the facilities, identify the facilities for 
which such permits have not been obtained and include the following 
statement, or one substantially the same, in the narrative under the 
caption ``Permits'': ``The (identify the permit or license) has not been 
obtained and therefore there is no assurance that the lot owners will be 
able to use the (identify the facility).''

[[Page 304]]

    (6) Who may use the facilities. Indicate who will be permitted to 
use the recreational facilities (e.g., lot owners, their guests, 
employees of developer, general public). If the general public will be 
permitted to use the facilities include the following statement in the 
narrative under the caption ``Who may use the facilities'': ``The 
(identify the facility) is open to use by the general public and their 
use of the facility may limit use of it by lot owners.''



Sec. 1010.115  Subdivision characteristics and climate.

    (a) General topography. What is the general topography and the major 
physical characteristics of the land in the subdivision? State the 
percentage of the subdivision which is to remain as natural open space 
and as developed parkland. Are there any steep slopes, rock 
outcroppings, unstable or expansive soil conditions, etc., which will 
necessitate the use of special construction techniques to build on, or 
use, any lot in the subdivision? If so, identify the lots affected, and 
describe the techniques recommended. If any lots in the subdivision have 
a slope of 20%, or more, include a warning that ``Some lots in this 
subdivision have a slope of 20%, or more. This may affect the type and 
cost of construction.''
    (b) Water coverage. Are any lots, or portions of any lots, covered 
by water at any time? What lots are affected? When are they covered by 
water? How does this affect their use for the purpose for which they are 
sold? Can the condition be corrected? At what cost to the purchaser?
    (c) Drainage and fill. Identify the lots which require draining or 
fill prior to being used for the purpose for which they are being sold. 
Who will be responsible for any corrective action? If the purchaser is 
responsible, what are the estimated costs?
    (d) Flood plain. Is the subdivision located within a flood plain or 
an area designated by any Federal, state or local agency as being flood 
prone? What lots are affected? Is flood insurance available? Is it 
required in connection with the financing of any improvements to the 
lot? What is the estimated cost of the flood insurance?
    (e) Flooding and soil erosion. (1) Does the developer have a program 
which provides, or will provide, at least minimum controls for soil 
erosion, sedimentation or periodic flooding throughout the subdivision?
    (2) If there is a program, describe it. Include in the description 
information as to whether the program has been approved by the 
appropriate government officials; when it is to start; when it is to be 
completed (month and year); whether the developer is obligated to comply 
with the program and whether there is any financial assurance of 
completion.
    (3) If there is no program or if the program has not been approved 
by the appropriate officials or if the program does not provide minimum 
protection, include a statement to the effect that the measures being 
taken may not be sufficient to prevent property damage or health and 
safety hazards. A minimum program will usually provide for:
    (i) Temporary measures such as mulching and seeding of exposed areas 
and silt basins to trap sediments in runoff water, and
    (ii) Permanent measures such as sodding and seeding in areas of 
heavy grading or cut and fill along with the construction of diversion 
channels, ditches, outlet channels, waterway stabilizers and sediment 
control basins.
    (f) Nuisances. Are there any land uses which may adversely affect 
the subdivision (e.g., unusual or unpleasant noises or odors, pollutants 
or nuisances such as existing or proposed industrial activity, military 
installations, airports, railroads, truck terminals, race tracks, animal 
pens, noxious smoke, chemical fumes, stagnant ponds, marshes, 
slaughterhouses and sewage treatment facilities)? If any nuisances 
exist, describe them. If there are none, state there are no nuisances 
which affect the subdivision.
    (g) Hazards. (1) Are there any unusual safety factors which affect 
the subdivision (e.g., dilapidated buildings, abandoned mines or wells, 
air or vehicular traffic hazards, danger from fire or explosion or 
radiation hazards)? Is the developer aware of any proposed plans for 
construction which may create a nuisance or safety hazard or adversely 
affect the subdivision? If there are any

[[Page 305]]

existing hazards or if there is any proposed construction which will 
create a nuisance or hazard, describe the hazard or nuisance. If there 
are no existing or possible future hazards, state that there are none.
    (2) Is the area subject to natural hazards or has it been formally 
identified by any Federal, state or local agency as an area subject to 
the frequent occurrence of natural hazards (e.g., tornadoes, hurricanes, 
earthquakes, mudslides, forest fires, brush fires, avalanches, flash 
flooding)? If the jurisdiction in which the subdivision is located has a 
rating system for fire hazard, state the rating assigned to the land in 
the subdivision and explain its meaning.
    (h) Climate. What are the average temperature ranges, summer and 
winter, for the area in which the subdivision is located (i.e., high, 
low and mean)? What is the average annual rainfall and snowfall?
    (i) Occupancy. How many homes are occupied on a full- or part-time 
basis as of (date of submission)?



Sec. 1010.116  Additional information.

    (a) Property Owners' Association. (1) Will there be a property 
owners' association for the subdivision? Has it been formed? What is its 
name? Is it operating? If not yet formed, when will it be formed? Who is 
responsible for its formation?
    (2) Does the developer exercise, or have the right to exercise, any 
control over the Association because of voting rights or placement of 
officers or directors? For how long will this control last?
    (3) Is membership in the association voluntary? Will non-member lot 
owners be subject to the payment of dues or assessments? What are the 
association dues? Can they be increased? Are members subject to special 
assessments? For what purpose? If membership in the association is 
voluntary and if the association is responsible for operating or 
maintaining facilities which serve all lot owners, include the following 
statement: ``Since membership in the association is voluntary, you may 
be required to pay a disproportionate share of the association costs or 
it may not be able to carry out its responsibilities.''
    (4) What are the functions and responsibilities of the association? 
Will the association hold architectural control over the subdivision?
    (5) Are there any functions or services that the developer now 
provides at no charge for which the association may be required to 
assume responsibility in the future? If so, will an increase in 
assessments or fees be necessary to continue these functions or 
services?
    (6) Does the current level of assessments, fees, charges or other 
income provide the capability for the association to meet its present, 
or planned, financial obligations including operating costs, maintenance 
and repair costs and reserves for replacement? If not, how will any 
deficit be made up?
    (b) Taxes. (1) When will the purchaser's obligation to pay taxes 
begin? To whom are the taxes paid? What are the annual taxes on an 
unimproved lot after the sale to a purchaser? If the taxes are to paid 
to the developer, include a statement that ``Should we not forward the 
tax funds to the proper authorities, a tax lien may be placed against 
your lot.''
    (2) If the subdivision is encompassed within a special improvement 
district or if a special district is proposed, describe the purpose of 
the district and state the amount of assessments. Describe the 
purchaser's obligation to retire the debt.
    (c) Violations and litigations. This information need appear only if 
any of the questions are answered in the affirmative. Unless the 
Director gives prior approval for it to be omitted, a brief description 
of the action and its present status or disposition shall be given.
    (1) With respect to activities relating to or in violation of a 
Federal, state or local law concerned with the environment, land sales, 
securities sales, construction or sale of homes or home improvements, 
consumer fraud or similar activity, has the developer, the owner of the 
land or any of their principals, officers, directors, parent 
corporation, subsidiaries or an entity in which any of them hold a 10% 
or more financial interest, been:

[[Page 306]]

    (i) Disciplined, debarred or suspended by any governmental agency, 
or is there now pending against them an action which could result in 
their being disciplined, debarred or suspended or,
    (ii) Convicted by any court, or is there now pending against them 
any criminal proceedings in any court? ILSRP suspension notices on pre-
effective Statements of Record and amendments need not be listed.
    (2) Has the developer, the owner of the land, any principal, any 
person holding a 10% or more financial or ownership interest in either, 
or any officer or director of either, filed a petition in bankruptcy? 
Has an involuntary petition in bankruptcy been filed against it or them 
or have they been an officer or director of a company which became 
insolvent or was involved, as a debtor, in any proceedings under the 
Bankruptcy Act during the last 13 years?
    (3) Is the developer or any of its principals, any parent 
corporation or subsidiary, any officer or director a party to any 
litigation which may have a material adverse impact upon its financial 
condition or its ability to transfer title to a purchaser or to complete 
promised facilities? If so, include a warning which describes the 
possible effects which the action may have upon the subdivision.
    (d) Resale or exchange program. (1) Are there restrictions which 
might hinder lot owners in the resale of their lots (e.g., a prohibition 
against posting signs, limitations on access to the subdivision by 
outside brokers or prospective buyers; the developer's right of first 
refusal; membership requirements)? If so, briefly explain the 
restrictions.
    (2) Does the developer have an active resale program? If the answer 
is ``no,'' include the following statement: ``We have no program to 
assist you in the sale of your lot.''
    (3) Does the developer have a lot exchange program? If the answer is 
``yes,'' describe the program; state any conditions and indicate if the 
program reserves a sufficient number of lots to accommodate all those 
wishing to participate. If there is no program or if sufficient lots are 
not reserved, include one of the following statements as applicable: 
``We do not have any provision to allow you to exchange one lot for 
another'' or ``We do not have a program which assures that you will be 
able to exchange your lot for another.''
    (e) Unusual situations. This topic need appear only if one or more 
of the following cases apply to the subdivision, then only the 
applicable subject, or subjects, will appear.
    (1) Leases. What is the term of the lease? Is it renewable? Is it 
recordable? Can creditors of the developer, or owner, acquire title to 
the property without any obligation to honor the terms of the lease? Are 
the lease payments a flat sum or are they graduated? Can the lessee 
mortgage or otherwise encumber the leasehold? Will the lessee be 
permitted to remove any improvements which have been installed when the 
lease expires or is terminated?
    (2) Foreign subdivision. (i) Is the owner or developer of the 
subdivision a foreign country corporation? If legal action is necessary 
to enforce the contract, must it be taken in the courts of the country 
where the subdivision is located?(ii) Does the country in which the 
subdivision is located have any laws which restrict, in any way, the 
ownership of land by aliens? If so, what are the restrictions?
    (iii) Must an alien obtain a permit or license to own land, build a 
home, live, work or do business in the country where the subdivision is 
located? If so, where is such permit or license secured; for how long is 
it valid and what is its cost?
    (3) Time sharing. (i) How is title to be conveyed? How many shares 
will be sold in each lot? How is use time allocated? How are taxes, 
maintenance and utility expenses divided and billed? How are voting 
rights in any Association apportioned? Are there management fees? If so, 
what are their amounts and how are they apportioned?
    (ii) Is conveyance of any portion of the lot contingent upon the 
sale of the remaining portions? Is the initial buyer responsible for any 
greater portion of the expense than his normal share until the remaining 
interests are sold? If the purchase of any of the portions is financed, 
will the default of

[[Page 307]]

one owner have any effect upon the remaining owners?
    (4) Memberships. (i) Does the purchaser receive any interest in 
title to the land? What is the term of the membership? Is it renewable? 
What disposition is made of the membership in the event of the death of 
the member? Are the lots individually surveyed and the corners marked? 
If not, how does the member identify the area which the member is 
entitled to use? What is the approximate square footage the member is 
entitled to use? Are there different classes of membership? How are the 
different classes identified and what are the differences between them?
    (ii) If the member does not receive any interest in the title to the 
land, include a warning to the effect that ``you receive no interest in 
the title to the land but only the right to use it for a certain period 
of time.''
    (f) Equal opportunity in lot sales. State whether or not the 
developer is in compliance with title VIII of the Civil Rights Act of 
1968 by not directly or indirectly discriminating on the basis of race, 
color, religion, sex, national origin, familial status, and handicap in 
any of the following general areas: Lot marketing and advertising, 
rendering of lot services, and in requiring terms and conditions on lot 
sales and leases. An affirmative answer cannot be given if the 
developer, directly or indirectly, because of race, color, religion, 
sex, national origin, familial status, or handicap is:
    (1) Refusing to sell or lease lots after the making of a bona fide 
offer or to negotiate for the sale or lease of lots or is otherwise 
making unavailable or denying a lot to any person, or
    (2) Discriminating against any person in the terms, conditions or 
privileges in the sale or leasing of lots or in providing services or 
facilities in connection therewith, or
    (3) Making, printing, publishing or causing to be made, printed or 
published any notice, statement or advertisement with respect to the 
sale or leasing of lots that indicates any preference, limitation or 
discrimination against any person, or
    (4) Representing to any person that any lot is not available for 
inspection, sale or lease when such lot is in fact available, or
    (5) For profit, inducing or attempting to induce any person to sell 
or lease any lot by representations regarding the entry or non-entry 
into the neighborhood of a person or persons of a particular race, 
color, religion, sex, national origin, familial status, or handicap.
    (g) Listing of lots. Provide a listing of lots which shall consist 
of a description of the lots included in the Statement of Record by the 
names or number of the section or unit, if any; the block number, if 
any; and the lot numbers. The lots shall be listed in the most efficient 
and concise manner. If the filing is a consolidation, the listing shall 
include all lots registered to date in the subdivision, except any which 
have been deleted by amendment.



Sec. 1010.117  Cost sheet, signature of Senior Executive Officer.

    (a) Cost sheet--Format. (1) The cost sheet shall be prepared in 
accordance with the format found in section XXVI of the appendix to this 
part: Cost Sheet Format and paragraph (a)(2) of this section.
    (2) Cost sheet instructions. (i) All amounts for cost sheet items 
will be entered before the purchaser signs the receipt. However, any 
costs that are identical for all lots may be pre-printed.
    (ii) If a central water or sewer system will be used in all or part 
of the subdivision and a private system in all or other parts, then the 
portion that does not apply to the purchaser's lot shall be crossed out.
    (iii) If individual private systems may be used prior to the 
availability of service from any central system and the purchaser is not 
required to connect to any central system, both figures may be entered 
or only the highest cost figures may be used with a parenthetical 
explanation or footnote. If the purchaser is required to connect to any 
central system and discontinue the use of his private system when 
central service is available, both cost figures shall be given, together 
with an explanation or footnote.
    (iv) If there is a one time, lump sum ``availability fee'' which is 
assessed to

[[Page 308]]

the purchaser in connection with a central utility, include under 
``other'' and identify.
    (v) Dues and assessments need be included only if they are 
involuntary regardless of use.
    (vi) At the discretion of the Director, where there is extreme 
diversity in the figures for different areas of the subdivision, 
variations may be permitted as to whether the figures will be printed, 
entered manually, or a range of costs used or any combination of these 
features.
    (vii) The estimated annual taxes shall be based upon the projected 
valuation of the lot after sale to a purchaser.
    (b) Signature of the Senior Executive Officer. The Senior Executive 
Officer or a duly authorized agent shall sign the property report. 
Facsimile signatures may be used for purposes of reproduction of the 
property report.



Sec. 1010.118  Receipt, agent certification, and cancellation page.

    (a) Format. The receipt, agent certification and cancellation page 
shall be prepared in accordance with the sample found in section XXVII 
of the appendix to this part: Sample Receipt, Agent Certification and 
Cancellation Page.
    (b) The original and one copy of this executed page shall be 
attached to the Property Report delivered to prospective purchasers. 
After the purchaser has signed the receipt and the salesman has signed 
the certification, the copies can be retained by the developer for a 
period of three years from the date of execution or the term of the 
contract, whichever is the longer. Upon demand by the Director, the 
developer shall, without delay, make the copies of these receipts and 
certifications available for inspection by the Director or the developer 
shall forward to the Director any of the receipts and certifications, or 
copies thereof, as the Director may specify.
    (c) If the transaction takes place through the mails, the cost 
figures shall be entered and the person most active in dealing with the 
prospective purchaser shall sign the certification prior to mailing the 
Property Report to the purchaser. Otherwise, the certification shall be 
executed in the presence of the purchaser.
    (d) The date of Report appearing on the receipt shall be the same as 
that appearing on the cover sheet of the Property Report.
    (e) Notification of cancellation by mail shall be considered given 
at the time post-marked.



Sec. 1010.200  Instructions for Statement of Record, Additional
Information and Documentation.

    The Additional Information and Documentation portion of the 
Statement of Record shall contain the statements and documents required 
in Sec. Sec. 1010.208 through 1010.219. Each section number and its 
associated heading and each paragraph letter or number and their 
associated subheadings or captions must appear in this portion. 
Following each heading, subheading, or caption printed in this portion, 
the registrant shall insert an appropriate response. If a heading, 
subheading, or caption does not apply to the subdivision, it shall be 
followed by the words ``not applicable''. Immediately after the page(s) 
on which the section number and answers for that section appear, insert 
the information or documents which support that section. In addition to 
the statements and documentation expressly required there shall be added 
any further material, information, documentation and certifications as 
may be necessary in the public interest and for the protection of 
purchasers or to cause the statements made to be not misleading in the 
light of the circumstances under which they are made.



Sec. Sec. 1010.201-1010.207  [Reserved]



Sec. 1010.208  General information.

    (a) Administrative information. (1) State whether the material 
represents an initial Statement of Record or a consolidated Statement of 
Record. If it is a consolidated Statement of Record, identify the 
original ILSRP number assigned to the initial Statement of Record. State 
whether subsequent Statements of Record will be submitted for additional 
lots in the subdivision.

[[Page 309]]

    (2) Has the developer submitted a request for an exemption for the 
subdivision?
    (3) List the states in which registration has been made by the 
developer for the sale of lots in the subdivision.
    (4) If any state listed in paragraph (a)(3) of this section has not 
permitted a registration to become effective or has suspended the 
registration or prohibited sales, name the state involved and give the 
reasons cited by the state for their action.
    (5) State whether the developer has made, or intends to make, a 
filing with the U.S. Securities and Exchange Commission (SEC) which is 
related in any way to the subdivision. If a filing has been made with 
the SEC, give the SEC identification number; identify the prospectus by 
name; date of filing and state the page number of the prospectus upon 
which specific reference to the subdivision is made. Any disciplinary 
action taken against the developer by the SEC should be disclosed in 
Sec. Sec. 1010.116 and 1010.216.
    (b) Subdivision information. (1) If this is a consolidated Statement 
of Record, state the number of lots being added, the number of lots in 
prior Statements of Record and the new total number of lots. The 
Director must be able to reconcile the numbers stated here with the 
title evidence; the plat maps and the disclosure in Sec. 1010.108.
    (2) State the number of acres represented by the lots in this 
Statement of Record. If this is a consolidated Statement of Record, 
state the number of acres being added, the number of acres in prior 
Statements of Record and the new total number of acres. State the total 
acreage owned in the subdivision, the number of acres under option or 
similar arrangement for acquisition of title to the land and the total 
acreage to be offered pursuant to the same common promotional plan.
    (3) State whether any lots have been sold in this subdivision since 
April 28, 1969, and prior to registration with ILSRP. If they were sold 
pursuant to an exemption, identify the exemption provision and state 
whether an advisory opinion, exemption order or exemption determination 
was obtained with respect to those lots sales. Give the ILSRP number 
assigned to the exemption, if any.
    (c) Developer information. (1) State the name, address, Internal 
Revenue Service number and telephone number of the owner of the land. If 
the owner is other than an individual, name the type of legal entity and 
list the interest, and extent thereof, of each principal. Identify the 
officers and directors.
    (2) If the developer is not the owner of the land, state the 
developer's name, address, Internal Revenue Service number and telephone 
number. If the developer is other than an individual, name the type of 
legal entity and list the interest, and the extent thereof, of each 
principal. Identify the officers and directors.
    (3) If you wish to appoint an authorized agent, state the agent's 
name, address and telephone number and scope of responsibility. This 
shall be the party designated by the developer to receive 
correspondence, service of process and notice of any action taken by 
ILSRP. In all Statements of Record, including those for foreign 
subdivisions, the authorized agent shall be a resident of the United 
States. A change of the authorized agent will require an appropriate 
amendment.
    (4) State whether the owner of the land, the developer, its parent, 
subsidiaries or any of the principals, officers or directors of any of 
them are directly or indirectly involved in any other subdivision 
containing 100 or more lots. If so, identify the subdivision by name, 
location, and ILSRP number, if any.
    (5) State whether the owner or developer is a subsidiary 
corporation. If either the owner or developer is a subsidiary 
corporation or if any of the principals of the owner or developer are 
corporate entities, name the parent and/or corporate entity and state 
the principals of each to the ultimate parent entity.
    (d) Documentation . (1) Submit a copy of the property report, 
subdivision report, offering statement or similar document filed with 
the state or states with which the subdivision has been registered.
    (2) Submit a copy of a general plan of the subdivision. This general 
plan must consist of a map, prepared to scale, and

[[Page 310]]

it must identify the various proposed sections or blocks within the 
subdivision, the existing or proposed roads or streets, and the location 
of the existing or proposed recreational and/or common facilities. In an 
initial filing, this map must at least show the area included in the 
Statement of Record. In a consolidated Statement of Record, show areas 
being added, as well as the areas previously registered. If a map of the 
entire subdivision is submitted with the initial Statement of Record, 
and if no substantial changes are made when material for a consolidated 
Statement of Record is submitted, the original map may be included by 
reference.
    (3)(i) If the developer is a corporation, submit a copy of the 
articles of incorporation, with all amendments; a copy of the 
certificate of incorporation or a certificate of a corporation in good 
standing and, if the subdivision is located in a state other than the 
one in which the original certificate of corporation was issued, a 
certificate of registration as a foreign corporation with the state 
where the subdivision is located.
    (ii) If the developer is a partnership, unincorporated association, 
joint stock company, joint venture or other form of organization, submit 
a copy of the articles of partnership or association and all other 
documents relating to its organization.
    (iii) If the developer is not the owner of the land, submit copies 
of the above documents for the owner.



Sec. 1010.209  Title and land use.

    (a) General information. (1) State whether the developer has 
reserved the right to exchange or withdraw lots after a purchaser has 
signed a sales contract (e.g., for prior sales, failure to pass credit 
check). If yes, indicate this authority and make reference to the 
applicable paragraph in the sales contract or other document.
    (2) State whether there is a provision giving purchasers an option 
to exchange lots. If yes, indicate this and make reference to the 
applicable paragraph in the sales contract or other document.
    (3) State whether the developer knows of any instruments not of 
record which, if recorded, would affect title to the subdivision. If 
yes, copies of these instruments shall be submitted, except that copies 
of unrecorded contracts for sales of lots in the subdivision need not be 
submitted.
    (4)(i) Identify the Federal, State, and local agencies or similar 
organizations which have the authority to regulate or issue permits, 
approvals or licenses which may have a material effect on the 
developer's plans with respect to the proposed division of the land, and 
any existing or proposed facilities, common areas or improvements to the 
subdivision.
    (ii) Describe or identify the land or facilities affected; the 
permit, approval or license required; and indicate whether the permit, 
approval or license has been obtained by the developer.
    (iii) If no agency regulates the division of the land or issues any 
permits, approvals or licenses with respect to improvements, so state.
    (iv) Answers must specifically cover the areas of environmental 
protection; environmental impact statements; and construction, dredging, 
bulkheading, etc. that affect bodies of water within or around the 
subdivision. Also include licenses or permits required by water 
resources boards, pollution control boards, river basin commissions, 
conservation agencies or similar organizations.
    (5) State whether it is unlawful to sell lots prior to the final 
approval and recording of a plat map in the jurisdiction where the 
subdivision is located.
    (b) Title evidence. (1) Submit title evidence that specifically 
states the status of the legal and equitable title to the land 
comprising the lots covered by the Statement of Record and any common 
areas or facilities disclosed in the Property Report. Title evidence 
need not be submitted for those common areas and facilities which are 
not owned by the developer.
    (2) Acceptable title evidence shall be dated no earlier than 20 
business days preceding the date of the filing of the Statement of 
Record with the Director. Previously issued title evidence may be 
updated to the date referred to in the preceding sentence by 
endorsements or attorneys' opinions of title.

[[Page 311]]

    (3) The developer shall amend the title evidence to reflect the 
change in status of title of any previously registered, reacquired lots 
unless their status is at least as marketable as they were when first 
offered for sale by the developer as registered lots.
    (c) Forms of acceptable title evidence. (1) An original or a copy of 
a signed owner's or mortgagee's policy of title insurance, title 
commitment, certificate of title or similar instrument issued by a title 
company authorized by law to issue such instruments in the state in 
which the subdivision is located. Title evidence that limits insurance 
or negligence liability to amounts less than the market value of the 
subject land at the time of its acquisition by the subdivision owner is 
not acceptable;
    (2) A legal opinion stating the condition of title, prepared and 
signed by an attorney at law experienced in the examination of titles 
and a member of the Bar in the state in which the property is located. 
The title opinion may be based on a Torrens land registration system 
certificate of title, or similar instrument, provided it meets all 
general title evidence requirements of this section and a copy of the 
registration certificate of title is submitted. Title opinions that 
limit negligence liability to amounts less than the market value of the 
subject land at the time of its acquisition by the subdivision owner are 
not acceptable.
    (d) Title searches. The required evidence of the status of title 
shall be based on a search of all public records which may contain 
documents affecting title to the land or the developer's ability to 
deliver marketable title. The search must cover a period which is 
required or generally considered adequate for insuring marketability of 
title in the jurisdiction in which the subdivision is located. Such 
search shall include an examination of at least the documents listed in 
paragraphs (d)(1) through (5) of this section. This search may be 
accomplished through the use of a title insurance company title plant, 
the information in which is based on current searches of the appropriate 
and necessary documents, including as a minimum those listed immediately 
above. For any attorney's title opinion based on Torrens certificates of 
title, the title search need only go beyond the original time of 
registration of the certificate of title for those types of encumbrances 
which were not conclusively settled by the proceedings at the time of 
such registration. In such cases, the required statement shall clearly 
reflect the documents and periods searched.
    (1) The records of the recorder of deeds or similar authority;
    (2) U.S. Internal Revenue Liens;
    (3) The records of the circuit, probate, or other courts including 
Federal courts and bankruptcy or reorganization proceedings which have 
jurisdiction to affect the title to the land;
    (4) The tax records;
    (5) Financing statements filed pursuant to the Uniform Commercial 
Code or similar law. If it is held that the financing statements do not 
affect the title of the land, include a statement of the legal authority 
for that opinion.
    (e) Items to be included in the title evidence. The acceptable title 
evidence must include the following information, instruments and 
statements and need not be repeated or duplicated elsewhere in the 
Statement of Record.
    (1) A legal description of the land on which the lots, common areas, 
and facilities covered by the title evidence are located. This legal 
description shall be adequate for conveying land in the jurisdiction in 
which the subdivision is located. If this legal description is based on 
a recorded plat, the lot numbers, recording place, book name, book 
number, and page number shall be stated in the description. If this 
legal description is given by metes and bounds, the title evidence shall 
include or be accompanied by a certified statement of the preparer of 
the title evidence, a licensed attorney, or an engineer or surveyor, 
indicating that all subject lots, common areas, and common facilities 
are encompassed within the metes and bounds description in the evidence. 
If at any time after the submission of the legal description required 
above, the description of the subject land is changed or found to be in 
error, a correcting amendment shall be made to the Statement of Record.

[[Page 312]]

    (2) The name of the person(s) or other legal entity(ies) holding fee 
title to the property described.
    (3) The name of any person(s) or other legal entity(ies) holding a 
leasehold estate or other interest of record in the property described.
    (4) A listing of any and all exceptions or objections to the title, 
estate or interest of the person(s) or legal entity(ies) referred to in 
paragraph (e)(2) or (3) of this section, including any encumbrances, 
easements, covenants, conditions, reservations, limitations or 
restrictions of record. Any reference to exceptions or objections to 
title shall include specific references to the instruments in the public 
records upon which they are based. When an objection or exception to 
title affects less than all of the property covered by this Statement of 
Record, the title evidence shall specifically note what portion of the 
property is so affected.
    (5) Copies of all instruments in the public records specifically 
referred to in paragraph (e)(4) of this section. Abstracts of such 
instruments are acceptable if prepared by an attorney or professional or 
official abstractor qualified and authorized by law to prepare and 
certify such abstracts and if the abstracts contain a material portion 
of the recorded instruments sufficient to determine the nature and 
effect of such instruments. Also include copies of any release 
provisions, relating to encumbrances on the property described, which 
are not included in the documents otherwise required by this section.
    (6) If an attorney's title opinion has been submitted pursuant to 
this section which has been based on a Torrens land registration 
certificate of title, submit a copy of such certificate.
    (f) Supplemental title information. (1) If there is a holder of an 
ownership interest in the land other than the developer, submit a copy 
of any documentation which evidences the developers' authorization to 
develop and/or sell the land.
    (2) Submit copies of any trust deeds, deeds in trust, escrow 
agreements or other instruments which purport to protect the purchaser 
in the event of default or bankruptcy by the developer on any instrument 
or instruments which create a blanket encumbrance upon the property 
unless they have been previously provided as part of ``title evidence'' 
submitted pursuant to paragraph (e) of this section.
    (3)(i) Submit copies of all forms of contracts or agreements and 
notes to be used in selling or leasing lots. The contracts or 
agreements, including promissory notes, must contain the following 
language in boldface type (which must be distinguished from the type 
used for the rest of the contract) on the face or signature page above 
all signatures: ``You have the option to cancel your contract or 
agreement of sale by notice to the seller until midnight of the seventh 
day following the signing of the contract or agreement. If you did not 
receive a Property Report prepared pursuant to the rules and regulations 
of the Bureau of Consumer Financial Protection, in advance of your 
signing the contract or agreement, the contract or agreement of sale may 
be cancelled at your option for two years from the date of signing.''
    (ii) If the purchaser is entitled to a longer revocation period by 
operation of state law or the Act, that period becomes the Federal 
revocation period and the contract or agreement must reflect the 
requirements of the longer period, rather than the seven days. This 
language shall be consistent with that shown on the cover page (see 
Sec. 1010.105).
    (iii) The revocation provisions may not be limited or qualified in 
the contract or other document by requiring a specific type of notice or 
by requiring that notice be given at a specified place.
    (iv) If it is represented that the developer will provide or 
complete roads or facilities for waters, sewer, gas, electric service or 
recreational amenities, the contract must contain a provision that the 
developer is obligated to provide or complete such roads, facilities and 
amenities (see Sec. 1011.15(f)).
    (4) Submit copies of deeds and leases by which the developer will 
lease or convey title to the lots to purchasers or lessees.
    (g) Plat maps, environmental studies and restrictions--(1) Plat 
maps. (i) In those jurisdictions where it is unlawful to sell lots prior 
to final approval and recording of the plat, and in those

[[Page 313]]

cases where a plat has been recorded, submit a copy of the recorded 
plat. This plat should be an exact copy of the recorded document. It 
should reflect the signatures of the approving authorities and bear a 
stamp or notation by the recorder of deeds, or similarly constituted 
officer, as to the recording data.
    (ii) If the plat has not been approved by the local authorities nor 
recorded, and if it is not unlawful to sell lots prior to final approval 
and recording, submit a map which has been prepared to scale and which 
shows the proposed division of the land, the lot dimensions and their 
relation to proposed or existing streets and roads. The map shall 
contain sufficient engineering data to enable a surveyor to locate the 
lots.
    (iii) Whether recorded or unrecorded, the plat or map should show:
    (A) The dimensions of each lot, stated in the standard unit of 
measure acceptable for such purposes in the political subdivision where 
the land is located.
    (B) A clear delineation of each of the lots and any common areas or 
facilities.
    (C) Any encroachments or rights-of-way on, over, or under the land, 
or a notation of these items together with the identity of the lots 
affected.
    (D) The courses, distances and monuments, natural or otherwise, of 
the land's boundaries; contiguous boundaries and identification or 
ownership of adjoining land and names of abutting streets, ways, etc.
    (E) The location of the section or unit encompassing the lots in 
relationship to the larger tract, or tracts, in the subdivision.
    (F) The delineation of any flood plains or flood control easements 
affecting any of the lots.
    (iv) The plat, or map shall be prepared by a licensed surveyor or 
engineer.
    (v) If all lots on each page of the plat are not included in the 
Statement of Record with which the plat or map is submitted, then the 
lots which are to be included in the Statement of Record shall be 
identified on the plat or map; a legend describing the method of 
identification shall be entered on the face of the plat or map and the 
number of lots so identified entered in the lower right hand corner of 
the plat map. The Director must be able to reconcile the totals of these 
numbers with the information given in Sec. Sec. 1010.108 and 1010.208 of 
the Statement of Record and the title evidence.
    (2) Environmental impact study. If the developer is aware of any 
environmental impact study which considers the effect of the subdivision 
on the environment, submit a summary of that study.
    (3) Restrictions or covenants. Submit a copy of any recorded or 
proposed restrictions or covenants for the subdivision if not submitted 
elsewhere in this Statement of Record. A copy of these restrictions or 
covenants shall be delivered to a prospective purchaser upon request. A 
supply shall be maintained at whatever place or places as will be 
necessary to allow immediate delivery upon request.



Sec. 1010.210  Roads.

    (a) State the estimated cost to the developer of the proposed road 
system.
    (b) If the developer is to complete any roads providing access to 
the subdivision, submit copies of any bonds or escrow agreements which 
have been posted to guarantee completion thereof.
    (c) Submit copies of any bonds or escrow agreements which have been 
posted to assure completion of the roads within the subdivision.
    (d) If the interior roads are to be maintained by a public 
authority, submit a copy of a letter from that authority which states 
that the roads have been, or the conditions upon which they will be, 
accepted for maintenance and when.



Sec. 1010.211  Utilities.

    (a) Water. (1) State the estimated cost to the developer of the 
central water system.
    (2) If water is to be supplied by a central system, furnish a letter 
from the supplier that it will supply the water. If the system is 
operated by a governmental division or by an entity whose operations are 
regulated by a governmental agency but which is not affiliated with or 
under the control of the developer, the letter shall include a

[[Page 314]]

statement that the supply of water will be sufficient to serve the 
anticipated population of the subdivision or how many homes or 
connections it can and will serve and that the water is tested at 
regular intervals and has been found to meet all standards for a public 
water supply.
    (3) If the water is to be supplied by individual wells, by an entity 
which is not regulated by a governmental agency, by the developer or by 
an entity which is affiliated with or controlled by the developer, 
submit a copy of any engineers' reports or hydrological surveys which 
indicate there is a sufficient supply of water to serve the anticipated 
population of the subdivision.
    (4) If the supplier of water is not in one of the categories in 
paragraph (a)(2) of this section, submit a copy of a letter or report 
from a cognizant health officer, or from a private laboratory licensed 
by the state to perform tests and issue reports on water, to the effect 
that the water was found to meet all drinking water standards required 
by the state for a public water system.
    (5) If any bond, escrow agreement or other financial assurance of 
the completion of the central system, including any phases which are to 
be constructed in the future, has been posted by the developer or an 
entity not regulated by a government agency, furnish a copy of the 
document.
    (6) Furnish a copy of any permits which have been obtained by the 
developer or any entity affiliated with or under the control of the 
developer in connection with the construction and operation of the 
central system. If a permit is required to install individual wells, 
submit a letter from the proper authority which states the requirements 
for obtaining the permit and that there is no objection to the use of 
individual wells in the subdivision.
    (7) Furnish a copy of any membership agreement or contract which 
allows or requires lot owners to use the central water system. If this 
document is furnished elsewhere in the Statement of Record, reference to 
it may be made here.
    (b) Sewer. (1) State the estimated cost to the developer of the 
central sewer system.
    (2) If sewage disposal is to be by individual on-site systems, 
furnish a letter from the local health authorities giving general 
approval to the use of these systems in the subdivision or giving 
specific approval for each and every lot.
    (3) If sewage disposal is to be through a central system which is 
owned and operated by a governmental division, or by an entity whose 
operations are regulated by a governmental agency but which is not 
affiliated with, or under the control of, the developer, furnish a 
letter from the entity that it will provide this service and that its 
treatment facilities have the capacity to serve the anticipated 
population of the subdivision or how many homes or connections it can 
and will serve.
    (4) Furnish a copy of any permits obtained by the developer or any 
entity affiliated with or under the control of the developer, for the 
construction and operation of the central sewer system or construction 
and use of any other method of sewage disposal contemplated for the 
subdivision except those to be obtained by individual lot owners at a 
later date.
    (5) If any bond, escrow agreement or other financial assurance of 
the completion of the central system or other system for which the 
developer is responsible, and any future expansion, has been posted, 
furnish a copy of the document.
    (6) Furnish a copy of any membership agreement of contract which 
allows, or requires, the lot owners to use the central system. If this 
document is furnished elsewhere in the Statement of Record, it may be 
included here by reference.
    (c) Electricity. Give an estimate of the total construction cost to 
be expended by the developer and submit any instrument providing 
financial assurance of completion of the facilities which has been 
posted by the developer.
    (d) Telephone. Give an estimate of the total construction cost to be 
expended by the developer and submit a copy of any instrument providing 
financial assurance of the completion of the facilities which has been 
posted by the developer.

[[Page 315]]



Sec. 1010.212  Financial information.

    (a) Financing of improvements. Describe the financing plan that is 
to be used in financing on-site or off-site improvements proposed in the 
Statement of Record.
    (b) Complete the following format (If the subdivision or common 
promotional plan contains, or will contain, 1000 or more lots, furnish 
this information in its entirety. If the subdivision or common 
promotional plan contains, or will contain, less than 1,000 lots, only 
paragraphs (b)(3)(iii) and (iv) of this section need be completed.)
    (1) Estimated date for full completion of amenities
    (2) Projected date for complete sell out of subdivision
    (3) Cost and expense recap for lots included in this Statement of 
Record:
    (i) Land acquisition cost or current fair market value of land.
    (ii) Development and improvement costs (include the estimated cost 
of such items as roads, utilities, and amenities which the developer 
will incur).
    (iii) Estimated marketing and advertising costs.
    (iv) Estimated sales commission.
    (v) Interest (include cost in financing the land purchase, 
improvements, or other borrowings).
    (vi) Estimated other expenses (include general costs, administrative 
costs, profit, etc.).
    (vii) Total.
    (4) Total land sales revenue:
    (i) Estimated total land sales income.
    (ii) Estimated other income.
    (iii) Total income.
    (c) Financial statements. (1) Submit a copy of the developer's 
financial statements for the last full fiscal year. These statements 
shall be prepared in accordance with generally accepted accounting 
principles as prescribed by the Financial Accounting Standards Board and 
generally accepted auditing standards as prescribed by the American 
Institute of Certified Public Accountants, and shall be audited by an 
independent licensed public accountant. They shall include a balance 
sheet, a statement of profit and loss, a statement of changes in 
financial condition and a certified opinion by the accountant. The 
statements shall be no more than six months old on the date the 
Statement of Record is submitted.
    (2) If the audited statements are more than six months old at the 
date of submission of the Statement of Record, or if the last full 
fiscal year has ended within the last 90 days and audited Statements are 
not yet available, the developer may submit a copy of the audited 
statements for the previous full fiscal year and supplement them with 
unaudited, interim statements so that the financial information is no 
more than six months old on the date that the Statement of Record is 
submitted. The interim statements may be prepared by company personnel 
but must contain a balance sheet, a statement of profit and loss and a 
statement of changes in financial condition and be prepared in 
accordance with generally accepted accounting principles.
    (d) Annual report. (1) Each year after the initial effective date, 
the developer shall submit a copy of its latest financial statements. 
These statements must meet the standards set out in Sec. 1010.212(c)(1), 
unless the developer has qualified for an exception under 
Sec. 1010.212(e), and must be submitted within 120 days after the close 
of the developer's fiscal year.
    (2) If a developer has submitted its latest statements with a 
consolidated filing since the close of its fiscal year and prior to the 
end of the 120 day period, a second submission of the statements to 
comply with this section is not necessary.
    (3) If the developer no longer has an active sales program on the 
date this report is due, the information set forth in 
Sec. 1010.310(c)(7)(iii) may be furnished in lieu of this report.
    (e) Exceptions. (1) If the developer does not have audited financial 
statements and the criteria in one of the following exceptions are met, 
statements need not be audited and certified but must meet all of the 
other requirements set forth in paragraphs (c)(1) and (2) of this 
section.
    (2) The term ``conveys title free of any mortgage or lien'' in these 
exceptions is not intended to prohibit the taking of an instrument as 
security for

[[Page 316]]

the lot purchase price after title is conveyed. For the purposes of 
these exceptions, these definitions shall apply:
    (i) Deed shall mean a warranty deed, or its equivalent, which 
conveys title free and clear of liens and encumbrances.
    (ii) Assurance of Title Agreement shall mean a legal arrangement 
whereby the purchaser is guaranteed a deed upon payment of no more than 
the full purchase price of the lot (e.g. subdivision trust). In addition 
to a copy of any Assurance of Title Agreement, the Director may require 
additional documentation such as an attorney's opinion letter to assure 
that the purchaser's title is fully protected.
    (iii) Date of contract shall mean the date on which the contract or 
agreement is signed by the purchaser.
    (iv) Escrow or trust account as to down payments and deposits shall 
mean an account, established in accordance with local real estate laws 
or regulations, which assures the return to the purchaser of any monies 
paid in the event title is not delivered to the purchaser in accordance 
with the terms of the contract.
    (3) The exceptions are:
    (i) The aggregate sales price of all lots offered pursuant to a 
common promotional plan equals $500,000.00 or less; or
    (ii) Each of the following conditions of paragraphs (e)(3)(ii)(A) 
and (B) of this section are met, plus the conditions of one of 
paragraphs (e)(3)(ii)(C), (D), or (E) of this section:
    (A) Down payments and deposits are held in an escrow or trust 
account.
    (B) The contract provides for delivery of a deed which conveys title 
free of any mortgage or lien within 180 days of the signing of the 
contract. (In lieu of delivery of a deed, the developer may submit to 
ILSRP an Assurance of Title Agreement.)
    (C) The aggregate sales prices of all lots offered pursuant to a 
common promotional plan is at least $500,000 but less than $1,500,000.
    (D) All facilities, utilities and amenities proposed by the 
developer in the Property Report or sales contract have been completed 
so that the lots in the Statement of Record are immediately usable for 
the purpose for which they are sold.
    (E) (1) The developer is contractually obligated to the purchaser to 
complete all facilities, utilities and amenities proposed by the 
developer in the Property Report and sales contract so that all lots 
included in the Statement of Record will be usable for the purpose for 
which they are sold by the dates set out in the Property Report, and;
    (2) The developer has made financial arrangements, such as the 
posting of surety bonds (corporate bonds or individual notes or bonds 
are not acceptable), irrevocable letters of credit or the establishment 
of escrow or trust accounts, which assure completion of all facilities, 
utilities and amenities proposed by the developer in the Property Report 
or contract.
    (f) Newly-formed entity. If the developer is newly formed or has not 
had any significant operating experience, an audited or unaudited 
balance sheet and statements of receipts and disbursements of funds may 
be submitted.
    (g) Use of parent company statements. (1) If the developer is a 
subsidiary company and does not have audited financial statements, the 
Director may permit the use of the audited and certified statements of 
the parent company: Provided, That those statements are accompanied by 
an unconditional guaranty that the parent shall perform and fulfill the 
obligations of the subsidiary. If this procedure is adopted, the 
developer shall submit the following:
    (i) The audited and certified financial statements of the parent 
company, together with interim statements if necessary, which comply 
with Sec. 1010.212(c).
    (ii) A properly executed guaranty in a form acceptable to the 
Director.
    (2) In cases described in paragraph (g)(1) of this section, the 
disclosure information required in Sec. 1010.112 shall be appropriately 
amended to reference the parent company and not the developer and must 
include a statement to the effect that the developer's parent company 
(insert name) has entered into an unconditional guaranty to perform and 
fulfill the obligations of the developer.
    (h) Opinions. If the accountant qualifies or disclaims his opinion, 
the Director may accept the statements and require such additional 
disclosure as the

[[Page 317]]

Director deems necessary in the public interest or for the protection of 
purchasers.
    (i) Copies for prospective purchasers. Copies of the financial 
statements filed with the Statement of Record shall be made available to 
prospective purchasers upon request. A supply of the latest submitted 
statements shall be maintained at whatever place, or places, as is 
necessary to allow immediate delivery upon request by a prospective 
purchaser. These statements shall contain financial information only and 
shall not include any promotional material such as that usually set 
forth in annual reports.
    (j) Change from audited to unaudited statements. (1) Developers who 
file audited statements must continue with audited statements throughout 
the duration of the registration unless, at a later date, the developer 
submits amendments which demonstrate to the satisfaction of the Director 
that it then qualifies for an exception from audited statements under 
paragraph (e)(3)(ii) of this section. For purposes of paragraph 
(e)(3)(ii)(C) of this section, the Director will consider the aggregate 
sales prices of only the lots yet to be sold, and may consider whether 
any additions to the subdivisions or reacquisitions of lots already sold 
would be likely to cause the dollar limits to be exceeded.
    (i) The aggregate sales prices of the lots yet to be sold in the 
subdivision has been reduced to less than $1,500,000.00, and that it 
will not exceed this amount through further additions to the 
subdivision, or through the reacquisition of lots already sold, and;
    (ii) The sales contract provides for delivery of a deed within 120 
days of the date of the contract which conveys title free and clear of 
any mortgage or lien or the developer files an Assurance of Title 
Agreement with ILSRP, and;
    (iii) Any down payments or deposits are held in an escrow or trust 
account, or;
    (iv) The developer then qualifies for exception (e)(3)(iii) or (iv) 
of this section.
    (2) The Director may allow a developer, who has made sales prior to 
registration, to submit unaudited statements under the provisions of 
paragraph (j)(1)(i) of this section. The developer must demonstrate to 
the satisfaction of the Director that the acceptance of unaudited 
statements would not be a detriment to the public interest or to the 
protection of purchasers.



Sec. 1010.214  Recreational facilities.

    (a) Submit a synopsis of the proposed plans and estimated cost of 
any proposed or partially constructed recreational facility disclosed in 
Sec. 1010.114. This item should include the general dimensions and a 
brief description of the facility but it should not include blueprints 
or similar technical materials.
    (b) Submit a copy of any bond or escrow arrangements to assure 
completion of the recreational facilities disclosed in Sec. 1010.114 
which are not structurally complete.
    (c) Submit a copy of the lease for any leased recreational facility.



Sec. 1010.215  Subdivision characteristics and climate.

    (a) Submit two copies of a current geological survey topographic 
map, or maps, of the largest scale available from the U.S. Geological 
Survey with an outline of the entire subdivision and the area included 
in this Statement of Record clearly indicated. Photo copies made by the 
developer are not acceptable. Do not shade the areas on the maps which 
have been outlined.
    (b) If drainage facilities are proposed but not yet completed, 
submit a synopsis of the developer's proposed plans that includes a 
description of the system of collecting surface waters; a description of 
the steps to be taken to control erosion and sedimentation and the 
estimated cost of the drainage facilities.
    (c) Submit copies of any bonds, escrow or trust accounts or other 
financial assurance of completion of the drainage facilities.
    (d) State whether the jurisdiction in which the subdivision is 
located has a system for rating the land for fire hazards.



Sec. 1010.216  Additional information.

    (a) Property Owners' Association. (1) If the association has been 
formed as a

[[Page 318]]

legal entity, submit a copy of the articles of association, bylaws or 
similar documents, and a copy of the charter or certificate of 
incorporation.
    (2) If the developer exercises any control over the association, 
state whether any contracts have been executed between the association 
and the developer or any affiliate or principal of the developer. If 
there have been, briefly summarize the terms of the contracts, their 
purpose, their duration and the method and rate of payment required by 
the contract. State whether the association may modify or terminate the 
contracts after the owners assume control of the association.
    (3) State whether there is any agreement which would require the 
association to reimburse the developer, its affiliates or successors for 
any attorney's fees or costs arising from an action brought against them 
by the association or individual property owners regardless of the 
outcome of the action.
    (4) If the answer to paragraph (a)(2) or (a)(3) of this section is 
in the affirmative, disclosure may be required in Sec. 1010.116(a) at 
the discretion of the Director.
    (5) Submit a copy of any membership agreement or similar document.
    (b) Price range, type of sales and marketing. (1) State the price 
range of lots in the subdivision.
    (2) State the type of sales to be made, i.e., contract for deed, 
cash, deed with security instrument, etc.
    (3) Describe the methods of advertising and marketing to be used for 
the subdivision. The description should include, but need not be limited 
to, information on such matters as to:
    (i) Whether the developer will employ his own sales force or will 
contract with an outside group;
    (ii) Whether wide area telephone solicitation will be employed;
    (iii) Whether presentations will be made away from the immediate 
vicinity of the subdivision and/or if prospective purchasers will be 
furnished transportation from distant cities to the subdivision;
    (iv) Whether mass mailing techniques will be used and gifts offered 
to those who respond.
    (4) For any subdivision that meets any of the criteria in paragraphs 
(b)(4)(i) through (iii) of this section, submit a copy of any 
advertising or promotional material that is, or has been, used for the 
subdivision. Amendments to reflect changes in advertising or promotional 
material need be filed only when there is a material change related to 
one of the above factors. Depending upon the content of the material 
submitted, the Director may require additional warnings in the Property 
Report portion. This requirement applies to any subdivision that:
    (i) Mentions or refers to recreational facilities which are not 
disclosed in Sec. 1010.114, or;
    (ii) Promotes the sale of lots based on the investment potential or 
expected profits, or;
    (iii) Contains information which is in conflict with that disclosed 
in this Statement of Record.
    (c) Violations and litigation. (1) Submit a copy of the 
complaint(s), the answer(s) and the decision(s) for any litigation 
listed in Sec. 1010.116(c).
    (2) If it is indicated in Sec. 1010.116(c) that the developer or any 
of the parties involved in the subdivision are, or have been, the 
subject of any bankruptcy proceedings, furnish a copy of the schedules 
of liabilities and assets (or a recap of those schedules); the petition 
number; the date of the filing of the petition; names and addresses of 
the petitioners, trustee and counsel; the name and location of the court 
where the proceedings took place and the status or disposition of the 
petition. Explain, briefly, the cause of the action.
    (3) Furnish a copy of any orders issued in connection with any 
violations listed in Sec. 1010.116(c).
    (d) Resale or exchange program. (1) If it is stated in 
Sec. 1010.116(d)(3) that there is an exchange program which provides 
sufficient lots to satisfy all requests for exchange, describe the 
method used to determine the number of lots required; state whether 
these lots have been reserved or set aside; whether additional lots will 
be provided if the lots available for exchange are exhausted and the 
source of any additional lots.
    (e) Unusual situations--(1) Foreign subdivisions. If the subdivision 
is located outside the several States, the District of Columbia, the 
Commonwealth of

[[Page 319]]

Puerto Rico or the territories or possession of the United States, the 
Statement of Record shall be submitted in the English language and all 
supporting documents, including copies of any laws which restrict the 
ownership of land by aliens, shall be submitted in their original 
language and shall be accompanied by a translation into English.



Sec. 1010.219  Affirmation.

    The affirmation set forth in section XXVIII of the appendix to this 
part: Affirmation of Senior Executive Officer shall be executed by the 
senior executive officer or a duly authorized agent:



Sec. 1010.310  Annual report of activity.

    (a) As an integral part of the Statement of Record, the developer 
shall file with the Director an Annual Report of Activity on any initial 
or consolidated registration not under suspension. For this purpose, 
only one Annual Report of Activity will be expected for subdivisions on 
which developers have filed consolidations. For registrations certified 
by a state as provided for in Sec. 1010.500, a developer need file only 
one Annual Report of Activity for any registration for which the ILSRP 
number is the same (alphabetic designators indicate that the 
registration has been treated as a consolidation).
    (b) The report shall be submitted within 30 days of the annual 
anniversary of the effective date of the initial Statement of Record.
    (c) The report shall contain the following information:
    (1) Subdivision name and address.
    (2) Developer's name, address and telephone number.
    (3) Agent's name, address and telephone number.
    (4) Interstate Land Sales Registration number.
    (5) The date on which the initial filing first became effective.
    (6) The number of registered lots, parcels or units which are unsold 
as of the date on which the report is due.
    (7) One of the following:
    (i) A statement that the developer is still engaged in land sales 
activity at the subject subdivision and that there have been no changes 
in material fact since the last effective date was issued which would 
require an amendment to the Statement of Record; or
    (ii) A statement that the developer is still engaged in land sales 
activity at the subject subdivision, that material changes have occurred 
since the last effective date, and that corrected pages to the Property 
Report portion or Additional Information and Documentation portion of 
the Statement accompany the report; or
    (iii) A statement that the developer is no longer engaged in land 
sales activity at the subject subdivision, together with the reason the 
developer is no longer selling (e.g., all lots sold to the public or the 
remaining lots sold to another developer, along with the date of sale 
and the new developer's name, address and telephone number). A request 
may be made that the Statement of Record be voluntarily suspended. The 
request should be submitted in duplicate and will become effective upon 
the counter-signature of the Director (or an authorized Designee) with 
the duplicate being returned to the developer.
    (8) The report shall be dated and shall be signed by the senior 
executive officer of the developer on a signature line above his typed 
name and title. The senior executive officer's acknowledgement shall be 
attested to or certified by a notary public or similar public official 
authorized to attest or certify acknowledgements in the jurisdiction in 
which the report is executed.
    (d) If the report indicates that there are 101 or more registered 
lots, parcels or units remaining for sale, the report shall be 
accompanied by an amendment fee in the amount and form prescribed in 
Sec. 1010.35.
    (e) Failure to submit the report when due shall be grounds for an 
action to suspend the effective Statement of Record.



      Subpart C_Certification of Substantially Equivalent State Law



Sec. 1010.500  General.

    (a) This subpart establishes procedures and criteria for certifying 
state land sale or lease disclosure programs and State state land 
development standards programs. The purpose of

[[Page 320]]

State Certification is to lessen the administrative burden on the 
individual developer, arising where there are duplicative state and 
federal Federal registration and disclosure requirements, without 
affecting the level of protection given to the individual purchaser or 
lessee. If the Director determines that a state has adopted and is 
effectively administering a program that gives purchasers and lessees 
the same level of protection given to them by the Interstate Land Sales 
Registration Program, then the Director shall certify that state. 
Developers who accomplish an effective registration with a state in 
which the land is located after the Director has certified the state may 
satisfy the registration requirements of the Director by filing with the 
Director materials designated by agreement with certified states in lieu 
of the federal Federal Statement of Record and Property Report.
    (b) A state that is certified by the Director shall be known as the 
situs certified state for all land located within its borders.
    (c) After a developer is effectively registered with the Director 
through a certified state, the Director has the same authority over that 
developer as the Director has over developers who file directly with the 
Director. This includes the authority to subpoena information and to 
examine, evaluate and suspend a developer's registration under sections 
1407(d) and (e) of the Act and Sec. 1010.45(b)(1) and (b)(2) of these 
regulations.
    (d) The prohibitions against the use of the Property Report 
contained in Sec. 1010.29 apply to state disclosure materials and 
substantive development standards. In addition, for purposes of this 
paragraph, references made to the Director, ILSRP and the Bureau in 
Sec. 1010.29 will include a reference to the equivalent state officer or 
agency.
    (e) The Purchaser's Revocation Rights, Sales Practices and Standards 
rules contained in part 1011 of these regulations apply to developers 
who register with the Director through certified States. All of the 
rules in part 1011 apply, excepting the disclaimer statement in 
Sec. 1011.50(a) which is modified to read as follows: ``Obtain the 
Property Report or its equivalent, required by Federal and State law and 
read it before signing anything. No Federal or State agency has judged 
the merits or value, if any, of this property.''
    (f) Developers are obliged to pay filing fees as set forth in 
Sec. 1010.35 of this part.



Sec. 1010.503  Notice of certification.

    (a) If the Director determines that a state qualifies for 
certification under Sec. 1010.501(a) or (b), the Director shall so 
notify the state in writing. The state will be effectively certified 
under the section and as of the date specified in the notice.
    (b) If the Director determines that a state does not meet the 
standards for certification, the Director shall so notify the state in 
writing. The notice will specify particular changes in state law, 
regulations or administration that are needed to obtain certification. 
The Director shall not be bound in advance to certify a state that makes 
the suggested changes if other deficiencies become apparent at a later 
time.
    (c) The Director's final determination to accept or reject a State's 
Application for Certification of Land Sales Program shall be published 
in the Federal Register.
    (d) A state's certification will remain in effect until it is 
voluntarily suspended by the state or withdrawn by the Director. A state 
can voluntarily suspend its certification by notifying the Director in 
writing. The suspension will take effect as of the date and time 
specified in the notice to the Director, or upon receipt by the Director 
if no date is specified. The Director may withdraw certification as 
provided in Sec. 1010.505.



Sec. 1010.504  Cooperation among certified states and between certified
states and the Director.

    (a) By filing an Application for Certification of State Land Sales 
Program pursuant to Sec. 1010.502, a state agrees that, if it is 
certified by the Director, it will:
    (1) Accept for filing and allow to be distributed as the sole 
disclosure document, a disclosure document currently in effect in the 
situs certified state. Only those documents filed with the

[[Page 321]]

situs state after certification by the Director must automatically be 
accepted by other certified states;
    (2) Certify copies of all disclosure documents, amendments and 
consolidations filed with it by developers of land located within its 
borders for and as needed by developers required to submit certified 
copies to the Director and all other certified states. The certification 
shall indicate whether the documents are currently in effect. The 
certification should be in the format set forth in section XXIX of the 
appendix to this part: Form for Certification for Disclosure Documents.
    (3) Assist and cooperate with the Director and other certified 
states by requiring that developers of land within its borders amend 
disclosure documents if any change occurs in any representation of 
material fact required to be stated in the disclosure documents, 
including a change resulting from the developer's compliance with the 
requirements of the law in another certified state. The state shall 
require developers to send certified copies of the amended documents to 
the Director and requesting certified states. All amendments to such 
materials, which reflect changes in material facts regarding the 
subdivision, shall be submitted to the situs certified state authorities 
within 15 days of the date on which the developer knows, or should have 
known, of such change. Certified copies of the disclosure documents 
shall be submitted by the developer to the Director and the other 
certified states within 15 days after it becomes effective under the 
situs certified state laws.
    (4) Continue to effectively operate its Land Sales Program as that 
Program is described in the Application for Certification and as it was 
certified by the Director.
    (5) Assist and cooperate with the Director by monitoring the sales 
practices of developers registered with it directly or through another 
certified state, and by reporting to the Director any violations of the 
Act, including but not limited to the required contract provisions, 
revocation rights and anti-fraud provisions of 15 U.S.C. 1703, or the 
regulations.
    (b) A state required to accept the disclosure documents of another 
situs certified state pursuant to paragraph (a)(1) of this section, may, 
in its discretion, require the developer to furnish it with copies 
certified pursuant to paragraph (a)(2) of this section.
    (c) No state shall be prevented from establishing substantive or 
disclosure requirements which exceed the federal Federal standard 
provided that such requirements are not in conflict with the Act or 
these regulations. For example, a certified state may impose additional 
disclosure requirements on developers of land located within its borders 
but may not impose additional disclosure requirements on developers 
whose disclosure documents it is required to accept pursuant to 
paragraph (a)(1) of this section. However, a certified state may impose 
additional nondisclosure requirements on out of state developers even 
though the developer is registered in the certified state in which the 
land is located.
    (d) After a developer is effectively registered with a certified 
state through a situs certified state, either or both certified states 
may exercise full enforcement authorities and powers over that developer 
according to applicable law and regulations.
    (e) The Director shall cooperate with the certified states by 
offering a forum for nonbinding arbitration of disputes between two or 
more certified States arising out of the State Certification Program.



Sec. 1010.505  Withdrawal of State state certification.

    (a) The Director shall periodically review the laws, regulations and 
administration thereof, of a certified state. If the Director finds 
that, taken as a whole, the laws, regulations or administration thereof, 
no longer meet the requirements of subpart C, then the Director may 
issue a notice to withdraw the certification of that state.
    (b) The notice of proceedings to withdraw a state's certification 
will be issued to the state by the Director pursuant to Sec. 1012.236. 
The Director may, after notice and after an opportunity for a hearing, 
pursuant to Sec. 1012.237, issue an order withdrawing certification. In 
the event that a withdrawal

[[Page 322]]

order is issued, the order shall remain in effect until the state has 
amended its laws, regulations or the administration thereof or has 
otherwise complied with the requirements of the order. When the state 
has complied with the requirements of the order, the Director shall so 
declare and the withdrawal order shall cease to be effective.
    (c) Withdrawal orders issued pursuant to this subsection will be 
effective as of the date the order is received by the state. The 
withdrawal order shall be published in the Federal Register.
    (d) The rules of 12 CFR part 1080, unless otherwise specified in 12 
CFR part 1012, subpart D, will generally apply to hearings on withdrawal 
of a state's certification.



Sec. 1010.506  State/Federal filing requirements.

    (a)(1) If the Director has certified a state under Sec. 1010.501, 
the Director shall accept for filing disclosure materials or other 
acceptable documents which have been approved by the certified state 
within which the subdivision is located. Only those filings made by the 
developer with the state after the state was certified by the Director 
shall be automatically accepted by the Director.
    (2) Retroactive application of the effectiveness of state's 
certification to a specified date may be granted on a state-by-state 
basis, where the Director determines that retroactive application will 
not result in automatic federal Federal registration of any state filing 
that has not met the requirements of the certified state laws.
    (b) For a developer to be registered with the Director, the 
developer shall file with the Director a state certified copy of the 
Property Report or its equivalent, and any other documentation as 
stipulated in the Director's Notice of Certification to the state.
    (c) The documents and materials filed under paragraph (b) of this 
section will be automatically effective as the Federal Statement of 
Record and Property Report after these materials and the proper filing 
fee have been received by the Director.
    (d) The Director has authority pursuant to Sec. 1010.45(b)(1) and 
(b)(2) to suspend individual filings which fail to meet the requirements 
of the certified state's law or regulations or the standards in the 
certification agreement whether or not the state agency has initiated a 
similar action.
    (e)(1) State accepted materials filed with the Director pursuant to 
this section must be amended to reflect any amendment to such materials 
made effective by the state. All amendments to such materials must be 
submitted to the Director within 15 days after becoming effective under 
the applicable state laws. Amendments are automatically effective upon 
their receipt by the Director and the provisions of Sec. 1010.45(b)(1) 
and (2) apply to amendments filed under this section.
    (2) Amendments shall include or be accompanied by:
    (i) A letter from the developer giving a narrative statement fully 
explaining the purpose and significance of the amendment and referring 
to that section and page of the material which is being amended, and;
    (ii) A signed state acceptance certification substantially the same 
as that required by Sec. 1010.504(a)(2).
    (f) If a certified state suspends the registration of a particular 
subdivision for any reason, the subdivision's federal Federal 
registration with the Director shall be automatically suspended as a 
result of the state action. No action need be taken by the Director to 
effect the suspension.
    (g) A state is certified only with regard to land located within the 
state borders. The Director is not required to accept filings which have 
been accepted by a certified state if the land which is the subject of 
the filing is not located within that certified state. For example, if 
State A is certified by the Director and State B is not, the Director is 
not required to accept filings from State B simply because State A 
accepts filings from State B.



Sec. 1010.507  Effect of suspension or withdrawal of certification
granted under Sec. 1010.501(a): Full disclosure requirement.

    (a) If a state certified under Sec. 1010.501(a) suspends its own 
certification or has its certification withdrawn under Sec. 1010.505, 
the Federal disclosure materials accepted and made

[[Page 323]]

effective by the Director, pursuant to Sec. 1010.506, prior to the 
suspension or withdrawal shall remain in effect unless otherwise 
suspended by the Director.
    (b) In the event that there is a change in a material fact with 
regard to a subdivision that remains registered under the provisions of 
paragraph (a) of this section, the developer shall file a new 
registration with the Director meeting the requirements of the then 
applicable Federal registration regulations. Modifications of the 
Federal format may be used as specified by the Director.



Sec. 1010.508  Effect of suspension of certification granted under
Sec. 1010.501(b): Sufficient protection requirement.

    (a) If a state certified under Sec. 1010.501(b) suspends its own 
certification or has its certification withdrawn under Sec. 1010.505, 
the effectiveness of the Federal disclosure materials accepted and made 
effective by the Director, pursuant to Sec. 1010.506, prior to the 
suspension or withdrawal shall terminate ninety (90) days after the 
notice of withdrawal order is published in the Federal Register as 
provided in Sec. 1010.505(c).
    (b) At the end of the ninety day period, or during the ninety day 
period in the event that there is a change in material fact with regard 
to a subdivision that remains registered under the provisions of 
paragraph (a) of this section, the developer shall file a new 
registration with the Director meeting the requirements of the then 
applicable Federal registration regulations. Modifications of the 
Federal format may be used as specified by the Director.



Sec. 1010.552  Previously accepted state filings.

    (a) Materials filed with a state and accepted by the HUD Secretary 
as a Statement of Record prior to January 1, 1981, pursuant to 24 CFR 
1010.52 through 1010.59 (as published in the Federal Register on April 
10, 1979) may continue in effect. However, developers must comply with 
the applicable amendments to the Federal Act and the regulations 
thereunder. In particular, see Sec. Sec. 1010.558 and 1010.559, which 
require that the Property Report and contracts or agreements contain 
notice of purchaser's revocation rights. In addition see 
Sec. 1011.15(f), which provides that it is unlawful to make any 
representations with regard to the developer's obligation to provide or 
complete roads, water, sewers, gas, electrical facilities or 
recreational amenities, unless the developer is obligated to do so in 
the contract.
    (b) If any such filing becomes inactive or suspended under the laws 
of the state, the registration with the Director shall be ineffective 
from that time.
    (c) Such Statement of Record may be suspended pursuant to 
Sec. 1010.45.
    (d) The Director may refuse to accept any particular filing under 
this section when it is determined that acceptance is not in the public 
interest.
    (e) The Director may require such changes, additional information, 
documents or certification as the Director determines to be reasonably 
necessary or appropriate in the public interest.



Sec. 1010.556  Previously accepted state filings--amendments and 
consolidations.

    (a) Amendments--(1) General requirements. State accepted materials, 
filed with the Director pursuant to Sec. 1010.552, shall be amended to 
reflect any amendment to such materials made effective by the state or 
any change of a material fact regarding the subdivision. All amendments 
to such materials, which reflect changes in material facts regarding the 
subdivision, shall be submitted to the state authorities within 15 days 
of the date on which the developer knows, or should have known, of such 
change and to the Director within 15 days after it becomes effective 
under the applicable State laws. However, such amendment shall not be 
effective as a Federal registration until the Director has determined 
that the amendment meets all applicable requirements of these 
regulations.
    (2) Amendments shall include or be accompanied by:
    (i) A letter from the developer giving a narrative statement fully 
explaining the purpose and significance of the amendment and referring 
to that section and page of the Statement of Record which is being 
amended, and;

[[Page 324]]

    (ii) All amended pages of the state accepted materials filed with 
the Director. These pages shall be copied together with their 
amendments. Each such page shall have its date of preparation in the 
lower right hand corner, and;
    (iii) A signed state acceptance certification, and;
    (iv) The appropriate fees as indicated in Sec. 1010.35.
    (b) Consolidations--(1) When consolidations allowed. If lots are to 
be registered pursuant to Sec. 1010.552 which are in the same common 
promotional plan with other lots already registered with the Director, 
then new consolidated state accepted materials including such lots may 
be filed with the Director as a Statement of Record following the format 
of the previously accepted filing.
    (2) Consolidated Statements of Record shall include or be 
accompanied by:
    (i) State accepted consolidation materials which are also acceptable 
to the Director as a Statement of Record (state property report 
inclusive). These state accepted consolidation materials shall cover all 
lots previously registered in the common promotional plan except those 
deleted pursuant to other provisions in these regulations. These 
materials shall also include information and items required for state 
accepted materials filed as an initial registration Statement of Record, 
except that, supporting documentation in materials previously made 
effective by the Director for other lots in the subject common 
promotional plan may be included incorporated by reference into the new 
consolidation materials submitted as a Statement of Record. However, 
such documentation may be incorporated by reference included only if it 
is applicable to the new consolidated lots as well as to the previously 
registered lots.
    (ii) A signed state acceptance certification.
    (iii) The appropriate fees as indicated in Sec. 1010.35.
    (c) Effective date; state filing. The effective dates of state 
materials filed as amendments and consolidated Statements of Record 
shall be determined in accordance with the provisions of Sec. 1010.21.



Sec. 1010.558  Previously accepted state filings--notice of revocation
rights on property report cover page.

    (a)(1) The cover page on Property Reports for filings made with the 
Director pursuant to Sec. 1010.552 shall be prepared in accordance with 
Sec. 1010.105 and shall include the paragraphs set forth in section XXX 
of the appendix to this part: Language to be Included on Property Report 
Cover Page.
    (2) If the purchaser is entitled to a longer revocation period by 
operation of State law, that period becomes the Federal revocation 
period and the cover page must reflect the longer period, rather than 
the seven days.
    (b)(1) If a deed is not delivered within 180 days of the signing of 
the contract or agreement of sale or unless certain provisions are 
included in the contract or agreement, the purchaser is entitled to 
cancel the contract within two years from the date of signing the 
contract or agreement.
    (2) The deed must be a warranty deed, or where such a deed is not 
commonly used, a similar deed legally acceptable in the jurisdiction 
where the lot is located. The deed must be free and clear of liens and 
encumbrances.
    (3) The contract provisions are:
    (i) A legally sufficient and recordable lot description, and;
    (ii) A provision that the seller will give the purchaser written 
notification of purchaser's default or breach of contract and the 
opportunity to remedy the default or breach within 20 days of the 
notice; and
    (iii) A provision that, if the purchaser loses rights and interest 
in the lot because of the purchaser's default or breach of contract 
after 15 percent of the purchase price, exclusive of interest, has been 
paid, the seller shall refund to the purchaser any amount which remains 
from the payments made after subtracting 15 percent of the purchase 
price, exclusive of interest, or the amount of the seller's actual 
damages, whichever is the greater.
    (4) If a deed is not delivered within 180 days of the signing of the 
contract or if the necessary provisions are not included in the 
contract, the following statement shall be used in place of any other 
rescission language: ``Under Federal law you may cancel your contract

[[Page 325]]

or agreement of sale any time within two years from the date of 
signing.''



Sec. 1010.559  Previously accepted state filings--notice of revocation
rights in contracts and agreements.

    (a)(1) All contracts or agreements, including promissory notes used 
in sale of lots for filings made with the Director pursuant to 
Sec. 1010.552, must contain the language set forth in section XXXI of 
the appendix to this part: Notice of Revocation Rights in boldface type 
(which must be distinguished from the type used for the rest of the 
contract) on the face or signature page above all signatures:
    (2) If the purchaser is entitled to a longer revocation period by 
operation of State law or the Act, that period becomes the Federal 
revocation period and the contract or agreement must reflect the longer 
period, rather than the seven days. The language shall be consistent 
with that shown on the Cover Page (see Sec. 1010.558).
    (b) The above revocation provisions may not be limited or qualified 
in the contract or other document by requiring a specific type of notice 
or by requiring that notice be given at a specified place.



   Sec. Appendix A to Part 1010--Standard and Model Forms and Clauses

 I. Forms for Developer's Affirmation for Land Sale--Sec. 1010.13(a)(9)

Developer's Name________________________________________________________
Developer's Address_____________________________________________________
Purchaser's Name(s)_____________________________________________________
Purchaser's Address(es) (including county)______________________________
Name of Subdivision_____________________________________________________
Legal Description of Lot(s) Purchased___________________________________

    I hereby affirm that all of the requirements of the MSA exemption as 
set forth in 15 U.S.C. 1702(b)(8) and 12 CFR 1010.13 have been met in 
the sale or lease of the lot(s) described above.
    I also affirm that I submit to the jurisdiction of the Interstate 
Land Sales Full Disclosure Act with regard to the sale or lease cited 
above.

(Date)__________________________________________________________________
(Signature of Developer or Authorized Agent)____________________________
(Title)_________________________________________________________________

       II. Language Notifying Buyer of Option to Cancel Contract--
                          Sec. 1010.15(b)(5)(i)

    You have the option to cancel your contract or agreement of sale by 
notice to the seller until midnight of the seventh day following the 
date of signing of the contract or agreement.
    If you did not receive a Lot Information Statement prepared pursuant 
to the rules and regulations of the Bureau of Consumer Financial 
Protection in advance of your signing the contract or agreement, the 
contract or agreement of sale may be cancelled at your option for two 
years from the date of signing.

       III. Sample Lot Information Statement and Sample Receipt--
                           Sec. 1010.15(b)(11)

                              Sample Format

    (Use of the following headings and first paragraph are mandatory.)

                        Lot Information Statement

            Important: Read Carefully Before Signing Anything

    The developer has obtained a regulatory exemption from registration 
under the Interstate Land Sales Full Disclosure Act. One requirement of 
that exemption is that you must receive this Statement prior to the time 
you sign an agreement (contract) to purchase a lot.

                             Right To Cancel

    (Under this heading the developer is to state the specific 
rescission rights provided for in the contract pursuant to 
1010.15(b)(5)(i)).

                           Risk of Buying Land

    (Under this heading the developer is to list the following 
information:)
    There are certain risks in purchasing real estate that you should be 
aware of. The following are some of those risks:
    The future value of land is uncertain and dependent upon many 
factors. Do not expect all land to automatically increase in value.
    Any value which your lot may have will be affected if roads, 
utilities and/or amenities cannot be completed or maintained.
    Any development will likely have some impact on the surrounding 
environment. Development which adversely affects the environment may 
cause governmental agencies to impose restriction on the use of the 
land.
    In the purchase of real estate, many technical requirements must be 
met to assure that you receive proper title and that you will be able to 
use the land for its intended purpose. Since this purchase involves a 
major expenditure of money, it is recommended that you seek professional 
advice before you obligate yourself.
    If adequate provisions have not been made for maintenance of the 
roads or if the land is not served by publicly maintained roads, you

[[Page 326]]

may have to maintain the roads at your expense.
    If the land is not served by a central sewage system and/or water 
system, you should contact the local authorities to determine whether a 
permit will be given for an on-site sewage disposal system and/or well 
and whether there is an adequate supply of water. You should also become 
familiar with the requirements for, and the cost of, obtaining 
electrical service to the lot.

                          Developer Information

    (Under this heading the developer is to list the following 
information:)

Developer's Name:_______________________________________________________
Address:________________________________________________________________
Telephone Number:_______________________________________________________

                             Lot Information

    (Under this heading the developer is to list the following 
information:)

Lot Location:___________________________________________________________

    (Enter a statement disclosing all liens, reservations, taxes, 
assessments, easements and restrictions applicable to the lot. A copy of 
the restrictions may be attached in lieu of recitation.)

              Suppliers of Utilities and Issuers of Permits

    (Under this heading the developer is to list the name, address and 
phone number of the appropriate governmental agency or agencies, if any, 
that will provide information on permits or other requirements for 
water, sewer and electrical installations. The information will also 
contain the name, address and telephone number of the suppliers of such 
utilities which can provide information to the purchaser on costs and 
availability of such services. A chart similar to the one below may be 
used to supply this information).
    Listed below are contact points for determining permit requirements, 
if any, and to obtain information on approximate costs and availability 
for the listed services:

------------------------------------------------------------------------
                                            Name, address and telephone
                                                     number of
                                         -------------------------------
                                           Governmental
                                              agency         Supplier
------------------------------------------------------------------------
Water
Sewer
Electricity
------------------------------------------------------------------------

    If misrepresentations are made in the sale of this lot to you, you 
may have rights under the Interstate Land Sales Full Disclosure Act. If 
you have evidence of any scheme, artifice or device used to defraud you, 
you may wish to contact: Office of Nonbank Supervision, Interstate Land 
Sales Registration Program, Bureau of Consumer Financial Protection, 
1700 G Street NW., Washington, DC 20006.
    (The Receipt is to be in the following form:)

              Sample Receipt for Lot Information Statement

Purchaser (print or type):______________________________________________
Date:___________________________________________________________________
Signature of purchaser:_________________________________________________
________________________________________________________________________
Street Address:_________________________________________________________
City:___________________________________________________________________
State:__________________________________________________________________
Zip:____________________________________________________________________
Name of salesperson (print or type):____________________________________
Signature of salesperson:_______________________________________________

 IV. Request for Multiple Site Subdivision Exemption--Sec. 1010.15(c)(1)

             Request for Multiple Site Subdivision Exemption

    Developer:

Name:___________________________________________________________________
Address:________________________________________________________________
Telephone No.:__________________________________________________________

    Agent:

Name:___________________________________________________________________
Address:________________________________________________________________
Telephone No.:__________________________________________________________


    (Insert a general description of the developer's method of 
operation.)
    I affirm that I am, or will be, the developer of the property and/or 
method of operation described above.
    I affirm that the lots in said property will be sold in compliance 
with all of the requirements of 12 CFR 1010.15.
    I further affirm that the statements contained in all documents 
submitted with this request for an Exemption Order are true and 
complete.

Date:___________________________________________________________________
Signature:______________________________________________________________
Title:__________________________________________________________________


    WARNING: 18 U.S.C. 1001 provides, among other things, that whoever 
knowingly and willingly makes or uses a document or writing containing 
any false, fictitious, or fraudulent statement or entry, in any matter 
within the jurisdiction of any department or agency of the United 
States, shall be fined not more than $10,000 or imprisoned for not more 
than 5 years or both.

       V. Request for Regulatory Exemption Order--Sec. 1010.16(c)

                       REQUEST FOR EXEMPTION ORDER

Subdivision_____________________________________________________________
Location (including county)_____________________________________________
Developer_______________________________________________________________
Address_________________________________________________________________
Authorized Agent or President of Developer______________________________

[[Page 327]]

________________________________________________________________________
Address_________________________________________________________________
Number of Lots Subject to Exemption Request_____________________________
Description of Lots (list lot and block number or other identifying 
designation)____________________________________________________________
________________________________________________________________________

    I affirm that I am the developer or owner of the property described 
above or will be the developer or owner at the time the lots are offered 
for sale to the public, or that I am the agent authorized by the 
developer or owner to complete this statement.I further affirm that the 
statements contained in all documents submitted with the request for an 
exemption order are true and complete.

________________________________________________________________________
(Date)
________________________________________________________________________

(Signature of Developer, Owner or Authorized Agent)
________________________________________________________________________
(Title)

    WARNING: Section 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

  VI. Developer's Affirmation for Advisory Opinion--Sec. 1010.17(b)(3)

                         Developer's Affirmation

Name of Subdivision_____________________________________________________
Location (Including County and State)___________________________________
Name of Developer_______________________________________________________
Address of Developer____________________________________________________
Name of Agent___________________________________________________________
Address of Agent________________________________________________________
Number of Lots in Subdivision___________________________________________
Number of Acres in Subdivision__________________________________________

    I affirm that I am the developer or owner of the property described 
above or will be the developer or owner at the time the lots are offered 
for sale to the public, or that I am the agent authorized by the 
developer or owner to complete this statement.I further affirm that the 
statements contained in all documents submitted with the request for an 
Advisory Opinion are true and complete.

________________________________________________________________________
(Date)
________________________________________________________________________
(Signature)
________________________________________________________________________
(Title);

    WARNING: 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

VII. Initial and Consolidated Registration Fee Schedule--Sec. 1010.35(b)

------------------------------------------------------------------------
                        Number of lots                            Fees
------------------------------------------------------------------------
200 or fewer lots............................................       $800
201 or more lots.............................................      1,000
------------------------------------------------------------------------

     VIII. Property Report for Statement of Record--Sec. 1010.100(b)

                             Property Report
                       Heading and Section Number
 
Cover Sheet..................................................   1010.105
Table of Contents............................................   1010.106
Risks of Buying Land, Warnings...............................   1010.107
General Information..........................................   1010.108
Title and Land Use...........................................   1010.109
 
  (a) General Instructions
  (b) Method of Sale
  (c) Encumbrances, Mortgages and Liens
  (d) Recording the Contract and Deed
  (e) Payments
  (f) Restrictions
  (g) Plats, Zoning, Surveying, Permits, Environment
 
Roads........................................................   1010.110
Utilities....................................................   1010.111
 
  (a) Water
  (b) Sewer
  (c) Electricity
  (d) Telephone
  (e) Fuel or other Energy Source
Financial Information........................................   1010.112
Local Services...............................................   1010.113
Recreational Facilities......................................   1010.114
Subdivision Characteristics and Climate......................   1010.115
 
  (a) General Topography
  (b) Water Coverage
  (c) Drainage and Fill
  (d) Flood Plain
  (e) Flooding and Soil Erosion
  (f) Nuisances
  (g) Hazards
  (h) Climate
  (i) Occupancy
Additional Information.......................................   1010.116
 

[[Page 328]]

 
  (a) Property Owners' Association
  (b) Taxes
  (c) Violations and Litigation
  (d) Resale or Exchange Program
  (e) Unusual Situations
  1. Leases
  2. Foreign Subdivision
  3. Time Sharing
  4. Membership
  (f) Equal Opportunity in Lot Sales
  (g) Listing of lots
 
Cost Sheet...................................................   1010.117
Receipt, Agent Certification and Cancellation Page...........   1010.118
 
                ADDITIONAL INFORMATION AND DOCUMENTATION
 
General Information..........................................   1010.208
Title and Land Use...........................................   1010.209
Roads........................................................   1010.210
Utilities....................................................   1010.211
Financial Information........................................   1010.212
Recreational Facilities......................................   1010.214
Subdivision Characteristics..................................   1010.215
Additional Information.......................................   1010.216
Affirmation..................................................   1010.219
 
The Bureau's OMB control number for this information collection is: 3170-
 0012.
 

          IX. Sample Page for Statement of Record--1010.102(e)

                               SAMPLE PAGE

                                  ROADS

    Here we discuss the roads that lead to the subdivision, those within 
the subdivision and the location of nearby communities.
    ACCESS TO THE SUBDIVISION.
    County road 43 leads to the subdivision. It has two lanes 
and the width of the wearing surface is 22 feet. It's paved with a 
macadam surface.
    This road is maintained by Bottineau County with County funds. No 
improvements are planned at this time.
    ACCESS WITHIN THE SUBDIVISION.
    The roads within the subdivision will be located on rights of way 
dedicated to the public.
    We are responsible for constructing the interior roads. There will 
be no additional cost to you for this construction.
    WE HAVE NOT SET ASIDE ANY FUNDS IN AN ESCROW OR TRUST ACCOUNT OR 
MADE ANY OTHER FINANCIAL ARRANGEMENTS TO ASSURE COMPLETION OF THE ROADS, 
SO THERE IS NO ASSURANCE WE WILL BE ABLE TO COMPLETE THE ROADS.
    At present, the roads are under construction and do not provide 
access to the lots in Units 2 and 3 during wet weather. The succeeding 
chart describes their present condition and estimated completion dates.

----------------------------------------------------------------------------------------------------------------
                        Estimated       Percentage of      Estimated
       UUnit          starting date     construction    completion date     Present surface      Final surface
                     (month and year)   now complete    (month and year)
----------------------------------------------------------------------------------------------------------------
1.................  February 2010....              50  December 2010....  Gravel............  Asphalt.
2.................  August 2010......               0  June 2011........  Dirt..............  Do.
3.................  April 2011.......               0  October 2011.....  None..............  Do.
----------------------------------------------------------------------------------------------------------------

       X. Language for Warning on Cover Page of Property Report--
                            Sec. 1010.105(c)

    This Report is prepared and issued by the developer of this 
subdivision. It is not prepared or issued by the Federal Government.
    Federal law requires that you receive this Report prior to your 
signing a contract or agreement to buy or lease a lot in this 
subdivision. However, NO FEDERAL AGENCY HAS JUDGED THE MERITS OR VALUE, 
IF ANY, OF THIS PROPERTY.
    If you received this Report prior to signing a contract or 
agreement, you may cancel your contract or agreement by giving notice to 
the seller any time before midnight of the seventh day following the 
signing of the contract or agreement.
    If you did not receive this Report before you signed a contract or 
agreement, you may cancel the contract or agreement any time within two 
years from the date of signing.

Name of Subdivision_____________________________________________________
Name of Developer_______________________________________________________
Date of This Report_____________________________________________________

     XI. Sample Entry in Table of Contents for Statement of Record--
                            Sec. 1010.106(a)

    Title and Land Use  Page 
    Method of Sale
    Encumbrances, Mortgages and Liens
    Recording the Contract and Deed
    Payments
    Restrictions on the Use of Your Lot
    Plat Maps, Zoning, Surveying, Permits and Environment

[[Page 329]]

    XII. Required Language for Risks of Buying Land--Sec. 1010.107(a)

    (1) The future value of any land is uncertain and dependent upon 
many factors. DO NOT expect all land to increase in value.
    (2) Any value which your lot may have will be affected if the roads, 
utilities and all proposed improvements are not completed. This 
paragraph may be omitted if all improvements have been completed or if 
no improvements are proposed.
    (3) Resale of your lot may be difficult or impossible, since you may 
face the competition of our own sales program and local real estate 
brokers may not be interested in listing your lot.
    (4) Any subdivision will have an impact on the surrounding 
environment. Whether or not the impact is adverse and the degree of 
impact, will depend on the location, size, planning and extent of 
development. Subdivisions which adversely affect the environment may 
cause governmental agencies to impose restrictions on the use of the 
land. Changes in plant and animal life, air and water quality and noise 
levels may affect your use and enjoyment of your lot and your ability to 
sell it.
    (5) In the purchase of real estate, many technical requirements must 
be met to assure that you receive proper title. Since this purchase 
involves a major expenditure of money, it is recommended that you seek 
professional advice before you obligate yourself.

           XIII. Format for General Information--Sec. 1010.108

    ``This Report covers ---- lots located in ------------ County, 
(State). See Page ---- for a listing of these lots. It is estimated that 
this subdivision will eventually contain ---- lots.''
    ``The developer of this subdivision is:
________________________________________________________________________
(Developer's Name)
________________________________________________________________________
(Developer's Address)
________________________________________________________________________
(Developer's telephone number)

    ``Answers to questions and information about this subdivision may be 
obtained by telephoning the developer at the number listed above.''

   XIV. Paragraphs to be included in the General Report--Title to the 
               Property and Land Use--Sec. 1010.109(a)(1)

    ``A person with legal title to property generally has the right to 
own, use and enjoy the property. A contract to buy a lot may give you 
possession but doesn't give you legal title. You won't have legal title 
until you receive a valid deed. A restriction or an encumbrance on your 
lot, or on the subdivision, could adversely affect your title.''
    ``Here we will discuss the sales contract you will sign and the deed 
you will receive. We will also provide you with information about any 
land use restrictions and encumbrances, mortgages, or liens affecting 
your lot and some important facts about payments, recording, and title 
insurance.''

     XV. Statement on Release Provisions--Sec. 1010.109(c)(2)(i)(A)

    ``The release provisions for the (indicate all or particular lots) 
have not been recorded. Therefore, they may not be honored by subsequent 
holders of the mortgage. If they are not honored, you may not be able to 
obtain clear title to a lot covered by this mortgage until we have paid 
the mortgage in full, even if you have paid the full purchase price of 
the lot. If we should default on the mortgage prior to obtaining a 
release of your lot, you may lose your lot and all monies paid.''

    XVI. Warning for Release Provisions--Sec. 1010.109(c)(2)(i)(C)(1)

    ``The (state type of encumbrance) on (indicate all or particular 
lots) in this subdivision does not contain any provisions for the 
release of an individual lot when the full purchase price of the lot has 
been paid. Therefore, if your lot is subject to this (state type of 
encumbrance), you may not be able to obtain clear title to your lot 
until we have paid the (state type of encumbrance) in full, even though 
you may have received a deed and paid the full purchase price of the 
lot. If we should default on the (state type of encumbrance) prior to 
obtaining a release, you may lose your lot and all monies paid.''

 XVII. Method and Purpose of Recording Warning--Sec. 1010.109(d)(1)(iv)

    ``Unless your contract or deed is recorded you may lose your lot 
through the claims of subsequent purchasers or subsequent creditors of 
anyone having an interest in the land''.

         XVIII. Escrow Statement--Disclosure Sec. 1010.109(e)(1)

    ``You may lose your (indicate deposit, down payment and/or 
installment payments) on your lot if we fail to deliver legal title to 
you as called for in the contract, because (they are/it is) not held in 
an escrow account which fully protects you.''

                  XIX. Road Chart--Sec. 1010.110(b)(3)

[[Page 330]]



----------------------------------------------------------------------------------------------------------------
                       Estimated        Percentage of        Estimated
      UUnit          starting date     construction now   completion date    Present surface     Final surface
                      (month/year)         complete         (month/year)
----------------------------------------------------------------------------------------------------------------
                   .................
----------------------------------------------------------------------------------------------------------------

            XX. Nearby Communities Chart--Sec. 1010.110(b)(6)

 
 
 
Nearby Communities...........................................  .........
Population...................................................  .........
Distance Over Paved Roads....................................  .........
Distance Over Unpaved Roads..................................  .........
  Total......................................................
 

            XXI. Water Chart Form--Sec. 1010.111(a)(1)(ii)(B)

                                  Water
------------------------------------------------------------------------
                                                            Estimated
                       Estimated        Percentage of        service
      UUnit          starting date    construction now    availability
                    (month and year)      complete       date (month and
                                                              year)
------------------------------------------------------------------------
                   .................
------------------------------------------------------------------------

          XXII. Comfort Station Chart--Sec. 1010.111(b)(1)(ii)

                            Comfort Stations

Unit____________________________________________________________________
Estimated Starting Date (month-year)____________________________________
Percentage of Construction now complete_________________________________
Estimated Service Availability Date (month and year)____________________

             XXIII. Sewer Chart--Sec. 1010.111(b)(1)(iii)(B)

                                  Sewer

Unit Estimated Starting Date (month/year)_______________________________
Percentage of Construction now complete_________________________________
Estimated Service Availability Date (month/year)________________________

            XXIV. Electric Service Chart--Sec. 1010.111(c)(2)

                            Electric Service
------------------------------------------------------------------------
                                                            Estimated
                       Estimated        Percentage of        service
      UUnit          starting date      construction      availability
                    (month and year)      complete       date (month and
                                                              year)
------------------------------------------------------------------------
                   .................
------------------------------------------------------------------------

           XXV. Recreational Facility Chart--Sec. 1010.114(b)

----------------------------------------------------------------------------------------------------------------
                                      Estimated date of
                     Percentage of         start of        Estimated date       Financial        Buyer's annual
     Facility       construction now     construction    available for use     assurance of         cost or
                        complete         (month/year)       (month/year)        completion        assessments
----------------------------------------------------------------------------------------------------------------
                   .................
----------------------------------------------------------------------------------------------------------------

                XXVI. Cost Sheet Format--Sec. 1010.117(a)

                               Cost Sheet

    In addition to the purchase price of your lot, there are other 
expenditures which must be made.
    Listed below are the major costs. There may be other fees for use of 
the recreational facilities.
    All costs are subject to change.

                               Sales Price
Cash Price of lot.........................  $
Finance Charge............................  $
                                           -----------------------------
  Total...................................  $
 
                       Estimated one-time charges
 
1. Water connection fee/installation or     $
 private well.
2. Sewer connection fee/installation of     $
 private on-site sewer system.
3. Construction costs to extend electric    $
 and/or telephone services.
4. Other (Identify).......................  $
                                           -----------------------------
                                            $
  Total of estimated sales price and one-   $
   time charges.
 

[[Page 331]]

 
     Estimated monthly/annual charges, exclusive of utility use fees
 
1. Taxes--Average unimproved lot after      $
 sale to purchaser.
2. Dues and assessments...................  $
 

    The information contained in this Property Report is an accurate 
description of our subdivision and development plans.

________________________________________________________________________
Signature of Senior Executive Officer

   XXVII. Sample Receipt, Agent Certification and Cancellation Page--
                            Sec. 1010.118(a)

  Receipt, Agent Certification and Cancellation Page purchaser receipt 
                        Important: Read Carefully

Name of subdivision_____________________________________________________
ILSRP number____________________________________________________________
Date of report__________________________________________________________

    We must give you a copy of this Property Report and give you an 
opportunity to read it before you sign any contract or agreement. By 
signing this receipt, you acknowledge that you have received a copy of 
our Property Report.

Received by_____________________________________________________________
Date____________________________________________________________________
Street address__________________________________________________________
City____________________________________________________________________
State___________________________________________________________________
Zip_____________________________________________________________________

    If any representations are made to you which are contrary to those 
in this Report, please notify the:

Bureau of Consumer Financial Protection
1700 G Street NW
Washington, DC 20006

                           Agent Certification

    I certify that I have made no representations to the person(s) 
receiving this Property Report which are contrary to the information 
contained in this Property Report.

Lot_____________________________________________________________________
Block___________________________________________________________________
Section_________________________________________________________________
Name of salesperson_____________________________________________________
Signature_______________________________________________________________
Date____________________________________________________________________

                          Purchase Cancellation

    If you are entitled to cancel your purchase contract, and wish to do 
so, you may cancel by personal notice, or in writing. If you cancel in 
person or by telephone, it is recommended that you immediately confirm 
the cancellation by certified mail. You may use the form below.

Name of subdivision_____________________________________________________
Date of contract________________________________________________________

    This will confirm that I/we wish to cancel our purchase contract.


Purchaser(s) signature__________________________________________________
Date____________________________________________________________________

     XXVIII. Affirmation of Senior Executive Officer--Sec. 1010.219

    I hereby affirm that I am the Senior Executive Officer of the 
developer of the lots herein described or will be the Senior Executive 
Officer of the developer at the time lots are offered for sale or lease 
to the public, or that I am the agent authorized by the Senior Executive 
Officer of such developer to complete this statement (if agent, submit 
written authorization to act as agent); and,
    That the statements contained in this Statement of Record and any 
supplement hereto, together with any documents submitted herein, are 
full, true, complete, and correct; and,
    That the developer is bound to carry out the promises and 
obligations set forth in this Statement of Record and Property Report or 
I have clearly stated who is or will be responsible; and
    That the fees accompanying this submission are in the amount 
required by the rules and regulations of the Bureau of Consumer 
Financial Protection.
________________________________________________________________________
(Date)
________________________________________________________________________
(Signature)
________________________________________________________________________
(Corporate seal if applicable)
________________________________________________________________________
(Title)

    WARNING: 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

         XXIX. Form for Certification for Disclosure Documents--
                           Sec. 1010.504(a)(2)

    The (indicate the State Department of Real Estate or other 
appropriate entity) has reviewed the attached materials and finds they 
are true copies of (1) the (indicate Property Report or other similar 
state accepted document or amendment to such document) for (indicate the 
name of the subdivision), made effective by the state of ------------ on 
------------ (give date) and still in effect; and (2) the supporting 
documentation upon which such (indicate the document or amendment) is 
based.

________________________________________________________________________
Signature

[[Page 332]]

      XXX. Language to be Included on Property Report Cover Page--
                           Sec. 1010.558(a)(1)

    ``If you received this Report prior to signing a contract or 
agreement, you may cancel your contract or agreement by giving notice to 
the seller anytime before midnight of the seventh day following the 
signing of the contract or agreement.
    ``If you did not receive this Report before you signed a contract or 
agreement, you may cancel the contract or agreement anytime within two 
years from the date of signing.''

         XXXI. Notice of Revocation Rights--Sec. 1010.559(a)(1)

    You have the option to cancel your contract or agreement of sale by 
notice to the seller until midnight of the seventh day following the 
signing of the contract or agreement. If you did not receive a Property 
Report prepared pursuant to the rules and regulations of the Bureau of 
Consumer Financial Protection, in advance of your signing the contract 
or agreement, this contract or agreement may be revoked at your option 
for two years from the date of signing.



PART 1011_PURCHASERS' REVOCATION RIGHTS, SALES PRACTICES AND STANDARDS
(REGULATION K)--Table of Contents



                 Subpart A_Purchasers' Revocation Rights

Sec.
1011.1 General.
1011.2 Revocation regardless of registration.
1011.4 Contract requirements and revocation.
1011.5 Reimbursement.

                 Subpart B_Sales Practices and Standards

1011.10 General.
1011.15 Unlawful sales practices--statutory provisions.
1011.20 Unlawful sales practices--regulatory provisions.
1011.25 Misleading sales practices.
1011.27 Fair housing.
1011.30 Persons to whom subpart B is inapplicable.

                    Subpart C_Advertising Disclaimers

1011.50 Advertising disclaimers; subdivisions registered and effective 
          with the Bureau.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79522, Dec. 21, 2011, unless otherwise noted.



                 Subpart A_Purchasers' Revocation Rights



Sec. 1011.1  General.

    The purpose of this subpart A is to elaborate on the revocation 
rights in 15 U.S.C. 1703, by enumerating certain conditions under which 
purchasers may exercise revocation rights. Generally, whenever 
revocation rights are available, they apply to promissory notes, as well 
as traditional agreements.



Sec. 1011.2  Revocation regardless of registration.

    All purchasers have the option to revoke a contract or lease with 
regard to a lot not exempt under Sec. Sec. 1010.5 through 1010.11 and 
1010.14 until midnight of the seventh day after the day that the 
purchaser signs a contract or lease. If a purchaser is entitled to a 
longer revocation period under state law, that period is deemed the 
Federal revocation period rather than the 7 days, and all contracts and 
agreements (including promissory notes) shall so state.



Sec. 1011.4  Contract requirements and revocation.

    (a) In accordance with 15 U.S.C. 1703(d)(3), the refund to the 
purchaser is calculated by subtracting from the amount described in 15 
U.S.C. 1703(d)(3)(B), the greater of:
    (1) Fifteen percent of the purchase or lease price of the lot 
(excluding interest owed) at the time of the default or breach of 
contract or agreement; or
    (2) The amount of damages incurred by the seller or lessor due to 
the default or breach of contract.
    (b) For the purposes of this section:
    Damages incurred by the seller or lessor means actual damages 
resulting from the default or breach, as determined by the law of the 
jurisdiction governing the contract. However, no damages may be 
specified in the contract or agreement, except a liquidated damages 
clause not exceeding 15 percent of the purchase price of the lot, 
excluding any interest owed.
    Purchase price means the cash sales price of the lot shown on the 
contract.
    (c) The contractual requirements of 15 U.S.C. 1703(d) do not apply 
to the sale of a lot for which, within 180 days after the signing of the 
sales contract,

[[Page 333]]

the purchaser receives a warranty deed or, where warranty deeds are not 
commonly used, its equivalent under state law.



Sec. 1011.5  Reimbursement.

    If a purchaser exercises rights under 15 U.S.C. 1703(b), (c), or 
(d), but cannot reconvey the lot in substantially similar condition, the 
developer may subtract from the amount paid by the purchaser, and 
otherwise due to the purchaser under 15 U.S.C. 1703, any diminished 
value in the lot caused by the acts of the purchaser.



                 Subpart B_Sales Practices and Standards



Sec. 1011.10  General.

    Sales practices means any conduct or advertising by a developer or 
its agents to induce a person to buy or lease a lot. This subpart 
describes certain unlawful sales practices and provides standards to 
illustrate what other sales practices are considered misleading in light 
of certain circumstances in which they are made and within the context 
of the overall offer and sale or lease.



Sec. 1011.15  Unlawful sales practices--statutory provisions.

    The statutory prohibitions against fraudulent or misleading sales 
practices are set forth at 15 U.S.C. 1703(a). With respect to the 
prohibitions against representing that certain facilities will be 
provided or completed unless there is a contractual obligation to do so 
by the developer:
    (a) The contractual covenant to provide or complete the services or 
amenities may be conditioned only upon grounds that are legally 
sufficient to establish impossibility of performance in the jurisdiction 
where the services or amenities are being provided or completed;
    (b) Contingencies such as acts of God, strikes, or material 
shortages are recognized as permissible to defer completion of services 
or amenities; and
    (c) In creating these contractual obligations developers have the 
option of incorporating by reference the Property Report in effect at 
the time of the sale or lease. If a developer chooses to incorporate the 
Property Report by reference, the effective date of the Property Report 
being included by reference must be specified in the contract of sale or 
lease.



Sec. 1011.20  Unlawful sales practices--regulatory provisions.

    In selling, leasing or offering to sell or lease any lot in a 
subdivision it is an unlawful sales practice for any developer or agent, 
directly or indirectly, to:
    (a) Give the Property Report to a purchaser along with other 
materials when done in such a manner so as to conceal the Property 
Report from the purchaser.
    (b) Give a contract to a purchaser or encourage him to sign anything 
before delivery of the Property Report.
    (c) Refer to the Property Report or Offering Statement as anything 
other than a Property Report or Offering Statement.
    (d) Use any misleading practice, device or representation which 
would deny a purchaser any cancellation or refund rights or privileges 
granted the purchaser by the terms of a contract or any other document 
used by the developer as a sales inducement.
    (e) Refuse to deliver a Property Report to any person who exhibits 
an interest in buying or leasing a lot in the subdivision and requests a 
copy of the Property Report.
    (f) Use a Property Report, note, contract, deed or other document 
prepared in a language other than that in which the sales campaign is 
conducted, unless an accurate translation is attached to the document.
    (g) Deliberately fail to maintain a sufficient supply of restrictive 
covenants and financial statements or to deliver a copy to a purchaser 
upon request as required by Sec. Sec. 1010.109(f), 1010.112(d), 
1010.209(g), and 1010.212(i).
    (h) Use, as a sales inducement, any representation that any lot has 
good investment potential or will increase in value unless it can be 
established, in writing, that:
    (1) Comparable lots or parcels in the subdivision have, in fact, 
been resold by their owners on the open market at a profit, or;

[[Page 334]]

    (2) There is a factual basis for the represented future increase in 
value and the factual basis is certain, and;
    (3) The sales price of the offered lot does not already reflect the 
anticipated increase in value due to any promised facilities or 
amenities. The burden of establishing the relevancy of any comparable 
sales and the certainty of the factual basis of the increase in value 
shall rest upon the developer.
    (i) Represent a lot as a homesite or building lot unless:
    (1) Potable water is available at a reasonable cost;
    (2) The lot is suitable for a septic tank operation or there is 
reasonable assurance that the lot can be served by a central sewage 
system;
    (3) The lot is legally accessible; and
    (4) The lot is free from periodic flooding.



Sec. 1011.25  Misleading sales practices.

    Generally, promotional statements or material will be judged on the 
basis of the affirmative representations contained therein and the 
reasonable inferences to be drawn therefrom, unless the contrary is 
affirmatively stated or appears in promotional material, or unless 
adequate safeguards have been provided by the seller to reasonably 
guarantee the occurrence of the thing inferred. For example, when a lot 
is represented as being sold by a warranty deed, the inference is that 
the seller can and will convey fee simple title free and clear of all 
liens, encumbrances, and defects except those which are disclosed in 
writing to the prospective purchaser prior to conveyance. The following 
advertising and promotional practices, while not all inclusive, are 
considered misleading, and are used to evaluate a developer's or agent's 
representations in determining possible violations of the Act or 
regulations. In this section ``represent'' carries its common meaning.
    (a) Proposed improvements. References to proposed improvements of 
any land unless it is clearly indicated that the improvements are only 
proposed or what the completion date is for the proposed improvement.
    (b) Off-premises representations. Representing scenes or proposed 
improvements other than those in the subdivision unless
    (1) It is clearly stated that the scenes or improvements are not 
related to the subdivision offered; or
    (2) In the case of drawings that the scenes or improvements are 
artists' renderings;
    (3) If the areas or improvements shown are available to purchasers, 
what the distance in road miles is to the scenes or improvements 
represented.
    (c) Land use representations. Representing uses to which the offered 
land can be put unless the land can be put to such use without 
unreasonable cost to the purchaser and unless no fact or circumstance 
exists which would prohibit the immediate use of the land for its 
represented use.
    (d) Use of ``road'' and ``street.'' Using the words ``road'' or 
``street'' unless the type of road surface is disclosed. All roads and 
streets shown on subdivision maps are presumed to be of an all-weather 
graded gravel quality or higher and are presumed to be traversable by 
conventional automobile under all normal weather conditions unless 
otherwise shown on the map.
    (e) Road access and use. Representing the existence of a road 
easement or right-of-way unless the easement or right-of-way is 
dedicated to the public, to property owners or to the appropriate 
property owners association.
    (f) Waterfront property. References to waterfront property, unless 
the property being offered actually fronts on a body of water. 
Representations which refer to ``canal'' or ``canals'' must state the 
specific use to which such canal or canals can be put.
    (g) Maps and distances. (1) The use of maps to show proximity to 
other communities, unless the maps are drawn to scale and scale 
included, or the specific road mileage appears in easily readable print.
    (2) The use of the terms such as ``minutes away,'' ``short 
distance,'' ``only miles,'' or ``near'' or similar terms to indicate 
distance unless the actual distance in road miles is used in conjunction 
with such terms. Road miles will be measured from the approximate 
geographical center of the subdivided lands to the approximate

[[Page 335]]

downtown or geographical center of the community.
    (h) Lot size. Representation of the size of a lot offered unless the 
lot size represented is exclusive of all easements to which the lot may 
be subject, except for those for providing utilities to the lot.
    (i) ``Free'' lots. Representing lots as ``free'' if the prospective 
purchaser is required to give any consideration whatsoever, offering 
lots for ``closing costs only'' when the closing costs are substantially 
more than customary, or when an additional lot must be purchased at a 
higher price.
    (j) Pre-development prices. References to pre-development sales at a 
lower price because the land has not yet been developed unless there are 
plans for development, and reasonable assurance is available that the 
plans will be completed.
    (k) False reports of lot sales. Repeatedly announcing that lots are 
being sold or to make repetitive announcements of the same lot being 
sold when in fact this is not the case.
    (l) Guaranteed refund. Use of the word ``guarantee'' or phrase 
``guaranteed refund'' or similar language implying a money-back 
guarantee unless the refund is unconditional.
    (m) Discount certificates. The use of discount certificates when in 
fact there is no actual price reduction or when a discount certificate 
is regularly used.
    (n) Lot exchanges. Representations regarding property exchange 
privileges unless any applicable conditions are clearly stated.
    (o) Resale program. Making any representation that implies that the 
developer or agent will resell or repurchase the property being offered 
at some future time unless the developer or agent has an ongoing program 
for doing so.
    (p) Symbols for conditions. The use of asterisks or any other 
reference symbol or oral parenthetical expression as a means of 
contradicting or substantially changing any previously made statement or 
as a means of obscuring material facts.
    (q) Proposed public facilities. References to a proposed public 
facility unless money has been budgeted for construction of the facility 
and is available to the public authority having the responsibility of 
construction, or unless disclosure of the existing facts concerning the 
public facility is made.
    (r) Non-profit or institutional name use. The use of names or trade 
styles which imply that the developer is a nonprofit research 
organization, public bureau, group, etc., when such is not the case.



Sec. 1011.27  Fair housing.

    Title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601, et seq., 
and its implementing regulations and guidelines apply to land sales 
transactions to the extent warranted by the facts of the transaction.



Sec. 1011.30  Persons to whom subpart B is inapplicable.

    Newspaper or periodical publishers, job printers, broadcasters, or 
telecasters, or any of the employees thereof, are not subject to this 
subpart unless the publishers, printers, broadcasters, or telecasters:
    (a) Have actual knowledge of the falsity of the advertisement or
    (b) Have any interest in the subdivision advertised or
    (c) Also serve directly or indirectly as the advertising agent or 
agency for the developer.



                    Subpart C_Advertising Disclaimers



Sec. 1011.50  Advertising disclaimers; subdivisions registered and 
effective with the Bureau.

    (a) The following disclaimer statement shall be displayed below the 
text of all printed material and literature used in connection with the 
sale or lease of lots in a subdivision for which an effective Statement 
or Record is on file with the Director: ``Obtain the Property Report 
required by Federal law and read it before signing anything. No Federal 
agency has judged the merits or value, if any, of this property.'' If 
the material or literature consists of more than one page, it shall 
appear at the bottom of the front page. The disclaimer statement shall 
be set in type of at least ten point font.
    (b) If the advertising is of a classified type; is not more than 
five inches long

[[Page 336]]

and not more than one column in print wide, the disclaimer statement may 
be set in type of at least six point font.
    (c) This disclaimer statement need not appear on billboards, on 
normal size matchbook folders or business cards which are used in 
advertising nor in advertising of a classified type which is less than 
one column in print wide and is less than five inches long.
    (d) A developer who is required by any state, or states, to display 
an advertising disclaimer in the same location, or one of equal 
prominence, as that of the Federal disclaimer, may combine the wording 
of the disclaimers. All of the wording of the Federal disclaimer must be 
included in the resulting combined disclaimer.



PART 1012_SPECIAL RULES OF PRACTICE (REGULATION L)--Table of Contents



Subpart A [Reserved]

                       Subpart B_Filing Assistance

Sec.
1012.30 Scope of this subpart.
1012.35 Prefiling assistance.
1012.40 Processing of filings.

Subpart C [Reserved]

                   Subpart D_Adjudicatory Proceedings

1012.105-1012.200 [Reserved]
1012.205 Suspension notice prior to effective date.
1012.210 Hearings--suspension notice prior to effective date.
1012.215 Notice of proceedings subsequent to effective date.
1012.220 Hearings--notice of proceedings subsequent to effective date.
1012.225 Suspension order for failure to cooperate.
1012.230 Suspension order pending amendments.
1012.235 Hearings--suspension orders for failure to cooperate and 
          pending amendments.
1012.236 Notice of proceedings to withdraw a State's certification.
1012.237 Hearings--notice of proceedings pursuant to withdrawal of state 
          certification.
1012.238 Notices of proceedings to terminate exemptions.
1012.239 Hearings--notice of proceedings pursuant to exemptions.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79524, Dec. 21, 2011, unless otherwise noted.

Subpart A [Reserved]



                       Subpart B_Filing Assistance



Sec. 1012.30  Scope of this subpart.

    This subpart applies to and governs procedures under which 
developers may obtain prefiling assistance and be notified of and 
permitted to correct deficiencies in the Statement of Record.



Sec. 1012.35  Prefiling assistance.

    Persons intending to file with the Bureau of Consumer Financial 
Protection, Office of Nonbank Supervision may receive advice of a 
general nature as to the preparation of the filing including information 
as to proper format to be used and the scope of the items to be included 
in the format. Inquiries and requests for informal discussions with 
staff members should be directed to the Office of Nonbank Supervision, 
Interstate Land Sales Registration Program, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006.



Sec. 1012.40  Processing of filings.

    (a) Statements of Record and accompanying filing fees will be 
received on behalf of the Director by the Office of Nonbank Supervision, 
for determination of whether the criteria set forth in paragraphs (a)(1) 
through (3) of this section have been satisfied. Where it appears that 
all three criteria are satisfied and it is otherwise practicable, 
acceleration of the effectiveness of the Statement of Record will 
normally be granted.
    (1) Completeness of the statement
    (2) Adequacy of the filing fee, and
    (3) Adequacy of disclosure.
    (b) Filings intended as Statements of Record but which do not comply 
in form with Sec. Sec. 1010.105 and 1010.120 of this chapter, whichever 
is applicable, and Statements of Record accompanied by inadequate filing 
fees will not be effective to accomplish any purpose under the Act. At 
the discretion of the Interstate Land Sales Registration Program, such 
filings and any moneys accompanying them may be immediately

[[Page 337]]

returned to the sender or after notification may be held pending the 
sender's appropriate response.
    (c) Persons filing incomplete or inaccurate Statements of Record 
will be notified of the deficiencies therein by the Suspension Notice 
procedure described in Sec. 1010.45(a) of this chapter.

Subpart C [Reserved]



                   Subpart D_Adjudicatory Proceedings



Sec. Sec. 1012.105-1012.200  [Reserved]



Sec. 1012.205  Suspension notice prior to effective date.

    A suspension pursuant to Sec. 1010.45(a) of this chapter shall be 
effected by service of a suspension notice which shall contain:
    (a) An identification of the filing to which the notice applies.
    (b) A specification of the deficiencies of form, disclosure, 
accuracy, documentation or fee tender which constitute the grounds under 
Sec. 1010.45(a) of this chapter, of the suspension, and of the 
additional or corrective procedure, information, documentation, or 
tender which will satisfy the Director's requirements.
    (c) A notice of the hearing rights of the developer under 
Sec. 1012.210 and of the procedures for invoking those rights.
    (d) A notice that, unless otherwise ordered, the suspension shall 
remain in effect until 30 days after the developer cures the specified 
deficiencies as required by the notice.



Sec. 1012.210  Hearings--suspension notice prior to effective date.

    (a) A developer, upon receipt of a suspension notice issued pursuant 
to Sec. 1010.45(a) of this chapter, may obtain a hearing by filing a 
written request in accordance with the instructions regarding such 
request contained in the suspension notice. Such a request must be filed 
within 15 days of receipt of the suspension notice and must be 
accompanied by an answer and 3 copies thereof signed by the respondent 
or the respondent's attorney conforming to the requirements of 
1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 20 days of receipt of the 
request. The time and place for hearing shall be fixed with due regard 
for the public interest and the convenience and necessity of the parties 
or their representatives.
    (c) A request for hearing filed pursuant to paragraph (a) of this 
section shall not interrupt or annul the effectiveness of the suspension 
notice, and suspension of the effective date of the Statement or 
amendment shall continue until vacated by order of the Director or 
administrative law judge. Except in cases in which the developer shall 
waive or withdraw the request for such hearing, or shall fail to pursue 
the same by appropriate appearance at a hearing duly scheduled, noticed 
and convened, the suspended filing shall be reinstated in the event of 
failure of the Director to schedule, give notice of or hold a duly-
requested hearing within the time specified in paragraph (b) of this 
section, or in the event of a finding that the Director has failed to 
support at such hearing the propriety of the suspension with respect to 
the material issues of law and fact raised by the answer. Such 
reinstatement shall be effective on the date on which the filing would 
have become effective had no notice of suspension been issued with 
respect to it.
    (d) If there is an outstanding suspension notice under 
Sec. 1010.45(a) with respect to the same matter for which a suspension 
order under Sec. 1010.45(b)(3) is issued, the notice and order shall be 
consolidated for the purposes of hearing. In the event that allegations 
upon which the suspension notice and suspension order are based are 
identical, only one answer need be filed.



Sec. 1012.215  Notice of proceedings subsequent to effective date.

    A proceeding pursuant to Sec. 1010.45(b)(1) of this chapter is 
commenced by issuance and service of a notice which shall contain:
    (a) A clear and accurate identification of the filing or filings to 
which the notice relates.
    (b) A clear and concise statement of material facts, sufficient to 
inform the

[[Page 338]]

respondent with reasonable definiteness of the statements, omissions, 
conduct, circumstances or practices alleged to constitute the grounds 
for the proposed suspension order under Sec. 1010.45(b)(1) of this 
chapter.
    (c) A notice of hearing rights of the developer under Sec. 1012.220 
and of the procedures for invoking those rights.
    (d) Designation of the administrative law judge appointed to preside 
over pre-hearing procedures and over the hearings.
    (e) A notice that failure to file an answer conforming to the 
requirements of Sec. 1081.201(b) and (c) will result in an order 
suspending the Statement of Record.



Sec. 1012.220  Hearings--notice of proceedings subsequent to effective
date.

    (a) A developer, upon receipt of a notice of proceedings issued 
pursuant to Sec. 1010.45(b)(1) of this chapter, may obtain a hearing by 
filing a written request in accordance with the instructions regarding 
such request contained in the notice of proceedings. Such a request must 
be filed within 15 days of receipt of the notice of proceedings and must 
be accompanied by an answer conforming to the requirements of 
Sec. 1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45 days of receipt of the 
request by the Director unless it is determined that it is not in the 
public interest. The time and place for hearing shall be fixed with due 
regard for the public interest and the convenience and necessity of the 
parties or their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section or failure of a developer to appear at a hearing duly 
scheduled shall result in an appropriate order under Sec. 1010.45(b)(1) 
of this chapter suspending the statement of record. Such order shall be 
effective as of the date of service or receipt.



Sec. 1012.225  Suspension order for failure to cooperate.

    A suspension pursuant to Sec. 1010.45(b)(2) of this chapter shall be 
effected by service of a suspension order which shall contain:
    (a) An identification of the filing to which the order applies.
    (b) Bases for issuance of order.
    (c) A notice of the hearing rights of the developer under 
Sec. 1012.235 the procedures for invoking those rights.
    (d) A statement that the order shall remain in effect until the 
developer has complied with the Director's requirements.



Sec. 1012.230  Suspension order pending amendments.

    A suspension pursuant to paragraph (b)(3) of Sec. 1010.45 of this 
chapter shall be effected by service of a suspension order which shall 
contain:
    (a) An identification of the filing to which the order applies.
    (b) An identification of the amendment to the filing which generated 
the order.
    (c) A statement that the issuance of the order is necessary or 
appropriate in the public interest or for the protection of purchasers.
    (d) A statement that the order shall remain in effect until the 
amendment becomes effective.
    (e) A notice of the hearing rights of the developer under 
Sec. 1012.235 and of the procedure for invoking those rights.



Sec. 1012.235  Hearings--suspension orders for failure to cooperate
and pending amendments.

    (a) A developer, upon receipt of a suspension order issued pursuant 
to Sec. 1010.45(b)(2) or Sec. 1010.45(b)(3) of this chapter, may obtain 
a hearing by filing a written request in accordance with the 
instructions regarding such request contained in the suspension order. 
Such request must be filed within 15 days of receipt of the suspension 
order and must be accompanied by an answer and 3 copies thereof signed 
by the respondent or respondent's attorney conforming to the 
requirements of Sec. 1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 20 days of receipt of the 
request. The time and place for hearing shall be fixed with due regard 
for the public interest

[[Page 339]]

and the convenience and necessity of the parties or their 
representatives.
    (c) A request for hearing filed pursuant to paragraph (a) of this 
section shall not interrupt or annul the effectiveness of the suspension 
order.



Sec. 1012.236  Notice of proceedings to withdraw a State's certification.

    A proceeding pursuant to Sec. 1010.505 of this chapter is commenced 
by issuance and service of a notice which shall contain:
    (a) An identification of the state certification to which the notice 
applies.
    (b) A clear and concise statement of material facts, sufficient to 
inform the respondent with reasonable definiteness of the basis for the 
Director's determination, pursuant to Sec. 1010.505, that the State's 
laws, regulations and the administration thereof, taken as a whole, no 
longer meet the requirements of Sec. 1010.501.
    (c) A notice of hearing rights of the state under Sec. 1012.237 and 
of the procedures for invoking those rights.
    (d) A notice that failure to file an answer conforming to the 
requirements of Sec. 1081.201(b) and (c) will result in an order 
suspending the State's certification.



Sec. 1012.237  Hearings--notice of proceedings pursuant to withdrawal
of state certification.

    (a) A State, upon receipt of a notice of proceedings issued pursuant 
to Sec. 1010.505 of this chapter, may obtain a hearing by filing a 
written request in accordance with the instructions regarding such 
request contained in the notice of proceedings. Such request must be 
filed within 15 days of receipt of the notice of proceedings and must be 
accompanied by an answer conforming to the requirements of 
Sec. 1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45 days of receipt of this 
request. The time and place for the hearing shall be fixed with due 
regard for the public interest and the convenience and necessity of the 
parties or their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section or failure to appear at a hearing duly scheduled shall 
result in an appropriate order under Sec. 1010.505 of this chapter 
withdrawing the State's certification. Such order shall be effective as 
of the date of service or receipt.



Sec. 1012.238  Notices of proceedings to terminate exemptions.

    A proceeding to terminate a self-determining exemption under 
Sec. 1010.14 or an exemption order under Sec. 1010.15 or Sec. 1010.16 is 
commenced by issuance and service of a notice which shall contain:
    (a) In the case of an exemption under Sec. 1010.14, an 
identification of the developer and subdivision to which this notice 
applies. In the case of an exemption under either Sec. 1010.15 or 
Sec. 1010.16, an identification of the exemption order to which the 
notice applies.
    (b) A clear and concise statement of material facts, sufficient to 
inform the respondent with reasonable definiteness of the basis for the 
Director's determination that further exemption from the registration 
and disclosure requirements is not in the public interest or that the 
sales or leases do not meet the requirements for exemption, or both.
    (c) A notice of hearing rights of the respondent under Sec. 1012.239 
and of the procedures for invoking those rights.
    (d) A notice that failure to file an answer conforming to the 
requirements of Sec. 1081.201(b) and (c) will result, in the case of a 
notice issued under Sec. 1010.14, in an order terminating eligibility 
for the exemption, or, in the case of a notice issued under either 
Sec. 1010.15 or Sec. 1010.16, in an order terminating the exemption 
order.



Sec. 1012.239  Hearings--notice of proceedings pursuant to exemptions.

    (a) A developer, upon receipt of a notice of proceedings issued 
under Sec. Sec. 1010.14, 1010.15, and 1010.16 of this chapter, may 
obtain a hearing by filing a written request contained in the notice of 
proceedings. The request must be filed within 15 days of receipt of the 
notice of proceedings and must be accompanied by an answer conforming to 
the requirements of Sec. 1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45

[[Page 340]]

days of receipt of this request. The time and place for the hearing 
shall be fixed with due regard for the public interest and the 
convenience and necessity of the parties of their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section, or failure to appear at a duly scheduled hearing shall 
result in an appropriate order under Sec. 1010.14, Sec. 1010.15, or 
Sec. 1010.16 of this chapter terminating the developer's exemption. The 
order shall be effective as of the date of service or receipt.



PART 1013_CONSUMER LEASING (REGULATION M)--Table of Contents



Sec.
1013.1 Authority, scope, purpose, and enforcement.
1013.2 Definitions.
1013.3 General disclosure requirements.
1013.4 Content of disclosures.
1013.5 Renegotiations, extensions, and assumptions.
1013.6 [Reserved]
1013.7 Advertising.
1013.8 Record retention.
1013.9 Relation to state laws.

Appendix A to Part 1013--Model Forms
Appendix B to Part 1013 [Reserved]
Appendix C to Part 1013--Issuance of Official Interpretations
Supplement I to Part 1013--Official Interpretations

    Authority: 15 U.S.C. 1604 and 1667f; Pub. L. 111-203 section 1100E, 
124 Stat. 1376.

    Source: 76 FR 78502, Dec. 19, 2011, unless otherwise noted.



Sec. 1013.1  Authority, scope, purpose, and enforcement.

    (a) Authority. The regulation in this part, known as Regulation M, 
is issued by the Bureau of Consumer Financial Protection to implement 
the consumer leasing provisions of the Truth in Lending Act, which is 
title I of the Consumer Credit Protection Act, as amended (15 U.S.C. 
1601 et seq.). Information collection requirements contained in this 
part have been approved by the Office of Management and Budget under the 
provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB control 
number 3170-0006.
    (b) Scope and purpose. This part applies to all persons that are 
lessors of personal property under consumer leases as those terms are 
defined in Sec. 1013.2(e)(1) and (h), except persons excluded from 
coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act), Public Law 111-203, 124 Stat. 
1376. The purpose of this part is:
    (1) To ensure that lessees of personal property receive meaningful 
disclosures that enable them to compare lease terms with other leases 
and, where appropriate, with credit transactions;
    (2) To limit the amount of balloon payments in consumer lease 
transactions; and
    (3) To provide for the accurate disclosure of lease terms in 
advertising.
    (c) Enforcement and liability. Section 108 of the Act contains the 
administrative enforcement provisions. Sections 112, 130, 131, and 185 
of the Act contain the liability provisions for failing to comply with 
the requirements of the Act and this part.



Sec. 1013.2  Definitions.

    For the purposes of this part the following definitions apply:
    (a) Act means the Truth in Lending Act (15 U.S.C. 1601 et seq.) and 
the Consumer Leasing Act is Chapter 5 of the Truth in Lending Act.
    (b) Advertisement means a commercial message in any medium that 
directly or indirectly promotes a consumer lease transaction.
    (c) Bureau refers to the Bureau of Consumer Financial Protection.
    (d) Closed-end lease means a consumer lease other than an open-end 
lease as defined in this section.
    (e)(1) Consumer lease means a contract in the form of a bailment or 
lease for the use of personal property by a natural person primarily for 
personal, family, or household purposes, for a period exceeding four 
months and for a total contractual obligation not exceeding the 
applicable threshold amount, whether or not the lessee has the option to 
purchase or otherwise become the owner of the property at the expiration 
of the lease. The threshold amount is adjusted annually to reflect 
increases in the Consumer Price Index

[[Page 341]]

for Urban Wage Earners and Clerical Workers, as applicable. See the 
official commentary to this paragraph (e) for the threshold amount 
applicable to a specific consumer lease. Unless the context indicates 
otherwise, in this part ``lease'' means ``consumer lease.''
    (2) The term does not include a lease that meets the definition of a 
credit sale in Regulation Z (12 CFR 226.2(a)). It also does not include 
a lease for agricultural, business, or commercial purposes or a lease 
made to an organization.
    (3) This part does not apply to a lease transaction of personal 
property which is incident to the lease of real property and which 
provides that:
    (i) The lessee has no liability for the value of the personal 
property at the end of the lease term except for abnormal wear and tear; 
and
    (ii) The lessee has no option to purchase the leased property.
    (f) Gross capitalized cost means the amount agreed upon by the 
lessor and the lessee as the value of the leased property and any items 
that are capitalized or amortized during the lease term, including but 
not limited to taxes, insurance, service agreements, and any outstanding 
prior credit or lease balance. Capitalized cost reduction means the 
total amount of any rebate, cash payment, net trade-in allowance, and 
noncash credit that reduces the gross capitalized cost. The adjusted 
capitalized cost equals the gross capitalized cost less the capitalized 
cost reduction, and is the amount used by the lessor in calculating the 
base periodic payment.
    (g) Lessee means a natural person who enters into or is offered a 
consumer lease.
    (h) Lessor means a person who regularly leases, offers to lease, or 
arranges for the lease of personal property under a consumer lease. A 
person who has leased, offered, or arranged to lease personal property 
more than five times in the preceding calendar year or more than five 
times in the current calendar year is subject to the Act and this part.
    (i) Open-end lease means a consumer lease in which the lessee's 
liability at the end of the lease term is based on the difference 
between the residual value of the leased property and its realized 
value.
    (j) Organization means a corporation, trust, estate, partnership, 
cooperative, association, or government entity or instrumentality.
    (k) Person means a natural person or an organization.
    (l) Personal property means any property that is not real property 
under the law of the state where the property is located at the time it 
is offered or made available for lease.
    (m) Realized value means:
    (1) The price received by the lessor for the leased property at 
disposition;
    (2) The highest offer for disposition of the leased property; or
    (3) The fair market value of the leased property at the end of the 
lease term.
    (n) Residual value means the value of the leased property at the end 
of the lease term, as estimated or assigned at consummation by the 
lessor, used in calculating the base periodic payment.
    (o) Security interest and security mean any interest in property 
that secures the payment or performance of an obligation.
    (p) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, and any territory or possession of the 
United States.



Sec. 1013.3  General disclosure requirements.

    (a) General requirements. A lessor shall make the disclosures 
required by Sec. 1013.4, as applicable. The disclosures shall be made 
clearly and conspicuously in writing in a form the consumer may keep, in 
accordance with this section. The disclosures required by this part may 
be provided to the lessee in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.). For an advertisement accessed by the consumer in 
electronic form, the disclosures required by Sec. 1013.7 may be provided 
to the consumer in electronic form in the advertisement, without regard 
to the consumer consent or other provisions of the E-Sign Act.
    (1) Form of disclosures. The disclosures required by Sec. 1013.4 
shall be given to the lessee together in a dated statement

[[Page 342]]

that identifies the lessor and the lessee; the disclosures may be made 
either in a separate statement that identifies the consumer lease 
transaction or in the contract or other document evidencing the lease. 
Alternatively, the disclosures required to be segregated from other 
information under paragraph (a)(2) of this section may be provided in a 
separate dated statement that identifies the lease, and the other 
required disclosures may be provided in the lease contract or other 
document evidencing the lease. In a lease of multiple items, the 
property description required by Sec. 1013.4(a) may be given in a 
separate statement that is included in the disclosure statement required 
by this paragraph.
    (2) Segregation of certain disclosures. The following disclosures 
shall be segregated from other information and shall contain only 
directly related information: Sec. Sec. 1013.4(b) through (f), (g)(2), 
(h)(3), (i)(1), (j), and (m)(1). The headings, content, and format for 
the disclosures referred to in this paragraph (a)(2) shall be provided 
in a manner substantially similar to the applicable model form in 
appendix A of this part.
    (3) Timing of disclosures. A lessor shall provide the disclosures to 
the lessee prior to the consummation of a consumer lease.
    (4) Language of disclosures. The disclosures required by Sec. 1013.4 
may be made in a language other than English provided that they are made 
available in English upon the lessee's request.
    (b) Additional information; nonsegregated disclosures. Additional 
information may be provided with any disclosure not listed in paragraph 
(a)(2) of this section, but it shall not be stated, used, or placed so 
as to mislead or confuse the lessee or contradict, obscure, or detract 
attention from any disclosure required by this part.
    (c) Multiple lessors or lessees. When a transaction involves more 
than one lessor, the disclosures required by this part may be made by 
one lessor on behalf of all the lessors. When a lease involves more than 
one lessee, the lessor may provide the disclosures to any lessee who is 
primarily liable on the lease.
    (d) Use of estimates. If an amount or other item needed to comply 
with a required disclosure is unknown or unavailable after reasonable 
efforts have been made to ascertain the information, the lessor may use 
a reasonable estimate that is based on the best information available to 
the lessor, is clearly identified as an estimate, and is not used to 
circumvent or evade any disclosures required by this part.
    (e) Effect of subsequent occurrence. If a required disclosure 
becomes inaccurate because of an event occurring after consummation, the 
inaccuracy is not a violation of this part.
    (f) Minor variations. A lessor may disregard the effects of the 
following in making disclosures:
    (1) That payments must be collected in whole cents;
    (2) That dates of scheduled payments may be different because a 
scheduled date is not a business day;
    (3) That months have different numbers of days; and
    (4) That February 29 occurs in a leap year.



Sec. 1013.4  Content of disclosures.

    For any consumer lease subject to this part, the lessor shall 
disclose the following information, as applicable:
    (a) Description of property. A brief description of the leased 
property sufficient to identify the property to the lessee and lessor.
    (b) Amount due at lease signing or delivery. The total amount to be 
paid prior to or at consummation or by delivery, if delivery occurs 
after consummation, using the term ``amount due at lease signing or 
delivery.'' The lessor shall itemize each component by type and amount, 
including any refundable security deposit, advance monthly or other 
periodic payment, and capitalized cost reduction; and in motor vehicle 
leases, shall itemize how the amount due will be paid, by type and 
amount, including any net trade-in allowance, rebates, noncash credits, 
and cash payments in a format substantially similar to the model forms 
in appendix A of this part.
    (c) Payment schedule and total amount of periodic payments. The 
number, amount, and due dates or periods of payments scheduled under the 
lease, and the total amount of the periodic payments.

[[Page 343]]

    (d) Other charges. The total amount of other charges payable to the 
lessor, itemized by type and amount, that are not included in the 
periodic payments. Such charges include the amount of any liability the 
lease imposes upon the lessee at the end of the lease term; the 
potential difference between the residual and realized values referred 
to in paragraph (k) of this section is excluded.
    (e) Total of payments. The total of payments, with a description 
such as ``the amount you will have paid by the end of the lease.'' This 
amount is the sum of the amount due at lease signing (less any 
refundable amounts), the total amount of periodic payments (less any 
portion of the periodic payment paid at lease signing), and other 
charges under paragraphs (b), (c), and (d) of this section. In an open-
end lease, a description such as ``you will owe an additional amount if 
the actual value of the vehicle is less than the residual value'' shall 
accompany the disclosure.
    (f) Payment calculation. In a motor vehicle lease, a mathematical 
progression of how the scheduled periodic payment is derived, in a 
format substantially similar to the applicable model form in appendix A 
of this part, which shall contain the following:
    (1) Gross capitalized cost. The gross capitalized cost, including a 
disclosure of the agreed upon value of the vehicle, a description such 
as ``the agreed upon value of the vehicle [state the amount] and any 
items you pay for over the lease term (such as service contracts, 
insurance, and any outstanding prior credit or lease balance),'' and a 
statement of the lessee's option to receive a separate written 
itemization of the gross capitalized cost. If requested by the lessee, 
the itemization shall be provided before consummation.
    (2) Capitalized cost reduction. The capitalized cost reduction, with 
a description such as ``the amount of any net trade-in allowance, 
rebate, noncash credit, or cash you pay that reduces the gross 
capitalized cost.''
    (3) Adjusted capitalized cost. The adjusted capitalized cost, with a 
description such as ``the amount used in calculating your base 
[periodic] payment.''
    (4) Residual value. The residual value, with a description such as 
``the value of the vehicle at the end of the lease used in calculating 
your base [periodic] payment.''
    (5) Depreciation and any amortized amounts. The depreciation and any 
amortized amounts, which is the difference between the adjusted 
capitalized cost and the residual value, with a description such as 
``the amount charged for the vehicle's decline in value through normal 
use and for any other items paid over the lease term.''
    (6) Rent charge. The rent charge, with a description such as ``the 
amount charged in addition to the depreciation and any amortized 
amounts.'' This amount is the difference between the total of the base 
periodic payments over the lease term minus the depreciation and any 
amortized amounts.
    (7) Total of base periodic payments. The total of base periodic 
payments with a description such as ``depreciation and any amortized 
amounts plus the rent charge.''
    (8) Lease payments. The lease payments with a description such as 
``the number of payments in your lease.''
    (9) Base periodic payment. The total of the base periodic payments 
divided by the number of payment periods in the lease.
    (10) Itemization of other charges. An itemization of any other 
charges that are part of the periodic payment.
    (11) Total periodic payment. The sum of the base periodic payment 
and any other charges that are part of the periodic payment.
    (g) Early termination--(1) Conditions and disclosure of charges. A 
statement of the conditions under which the lessee or lessor may 
terminate the lease prior to the end of the lease term; and the amount 
or a description of the method for determining the amount of any penalty 
or other charge for early termination, which must be reasonable.
    (2) Early termination notice. In a motor vehicle lease, a notice 
substantially similar to the following: ``Early Termination. You may 
have to pay a substantial charge if you end this lease early. The charge 
may be up to several thousand dollars. The actual charge

[[Page 344]]

will depend on when the lease is terminated. The earlier you end the 
lease, the greater this charge is likely to be.''
    (h) Maintenance responsibilities. The following provisions are 
required:
    (1) Statement of responsibilities. A statement specifying whether 
the lessor or the lessee is responsible for maintaining or servicing the 
leased property, together with a brief description of the 
responsibility;
    (2) Wear and use standard. A statement of the lessor's standards for 
wear and use (if any), which must be reasonable; and
    (3) Notice of wear and use standard. In a motor vehicle lease, a 
notice regarding wear and use substantially similar to the following: 
``Excessive Wear and Use. You may be charged for excessive wear based on 
our standards for normal use.'' The notice shall also specify the amount 
or method for determining any charge for excess mileage.
    (i) Purchase option. A statement of whether or not the lessee has 
the option to purchase the leased property, and:
    (1) End of lease term. If at the end of the lease term, the purchase 
price; and
    (2) During lease term. If prior to the end of the lease term, the 
purchase price or the method for determining the price and when the 
lessee may exercise this option.
    (j) Statement referencing nonsegregated disclosures. A statement 
that the lessee should refer to the lease documents for additional 
information on early termination, purchase options and maintenance 
responsibilities, warranties, late and default charges, insurance, and 
any security interests, if applicable.
    (k) Liability between residual and realized values. A statement of 
the lessee's liability, if any, at early termination or at the end of 
the lease term for the difference between the residual value of the 
leased property and its realized value.
    (l) Right of appraisal. If the lessee's liability at early 
termination or at the end of the lease term is based on the realized 
value of the leased property, a statement that the lessee may obtain, at 
the lessee's expense, a professional appraisal by an independent third 
party (agreed to by the lessee and the lessor) of the value that could 
be realized at sale of the leased property. The appraisal shall be final 
and binding on the parties.
    (m) Liability at end of lease term based on residual value. If the 
lessee is liable at the end of the lease term for the difference between 
the residual value of the leased property and its realized value:
    (1) Rent and other charges. The rent and other charges, paid by the 
lessee and required by the lessor as an incident to the lease 
transaction, with a description such as ``the total amount of rent and 
other charges imposed in connection with your lease [state the 
amount].''
    (2) Excess liability. A statement about a rebuttable presumption 
that, at the end of the lease term, the residual value of the leased 
property is unreasonable and not in good faith to the extent that the 
residual value exceeds the realized value by more than three times the 
base monthly payment (or more than three times the average payment 
allocable to a monthly period, if the lease calls for periodic payments 
other than monthly); and that the lessor cannot collect the excess 
amount unless the lessor brings a successful court action and pays the 
lessee's reasonable attorney's fees, or unless the excess of the 
residual value over the realized value is due to unreasonable or 
excessive wear or use of the leased property (in which case the 
rebuttable presumption does not apply).
    (3) Mutually agreeable final adjustment. A statement that the lessee 
and lessor are permitted, after termination of the lease, to make any 
mutually agreeable final adjustment regarding excess liability.
    (n) Fees and taxes. The total dollar amount for all official and 
license fees, registration, title, or taxes required to be paid in 
connection with the lease.
    (o) Insurance. A brief identification of insurance in connection 
with the lease including:
    (1) Through the lessor. If the insurance is provided by or paid 
through the lessor, the types and amounts of coverage and the cost to 
the lessee; or
    (2) Through a third party. If the lessee must obtain the insurance, 
the types and amounts of coverage required of the lessee.

[[Page 345]]

    (p) Warranties or guarantees. A statement identifying all express 
warranties and guarantees from the manufacturer or lessor with respect 
to the leased property that apply to the lessee.
    (q) Penalties and other charges for delinquency. The amount or the 
method of determining the amount of any penalty or other charge for 
delinquency, default, or late payments, which must be reasonable.
    (r) Security interest. A description of any security interest, other 
than a security deposit disclosed under paragraph (b) of this section, 
held or to be retained by the lessor; and a clear identification of the 
property to which the security interest relates.
    (s) Limitations on rate information. If a lessor provides a 
percentage rate in an advertisement or in documents evidencing the lease 
transaction, a notice stating that ``this percentage may not measure the 
overall cost of financing this lease'' shall accompany the rate 
disclosure. The lessor shall not use the term ``annual percentage 
rate,'' ``annual lease rate,'' or any equivalent term.
    (t) Non-motor vehicle open-end leases. Non-motor vehicle open-end 
leases remain subject to section 182(10) of the Act regarding end of 
term liability.



Sec. 1013.5  Renegotiations, extensions, and assumptions.

    (a) Renegotiation. A renegotiation occurs when a consumer lease 
subject to this part is satisfied and replaced by a new lease undertaken 
by the same consumer. A renegotiation requires new disclosures, except 
as provided in paragraph (d) of this section.
    (b) Extension. An extension is a continuation, agreed to by the 
lessor and the lessee, of an existing consumer lease beyond the 
originally scheduled end of the lease term, except when the continuation 
is the result of a renegotiation. An extension that exceeds six months 
requires new disclosures, except as provided in paragraph (d) of this 
section.
    (c) Assumption. New disclosures are not required when a consumer 
lease is assumed by another person, whether or not the lessor charges an 
assumption fee.
    (d) Exceptions. New disclosures are not required for the following, 
even if they meet the definition of a renegotiation or an extension:
    (1) A reduction in the rent charge;
    (2) The deferment of one or more payments, whether or not a fee is 
charged;
    (3) The extension of a lease for not more than six months on a 
month-to-month basis or otherwise;
    (4) A substitution of leased property with property that has a 
substantially equivalent or greater economic value, provided no other 
lease terms are changed;
    (5) The addition, deletion, or substitution of leased property in a 
multiple-item lease, provided the average periodic payment does not 
change by more than 25 percent; or
    (6) An agreement resulting from a court proceeding.



Sec. 1013.6  [Reserved]



Sec. 1013.7  Advertising.

    (a) General rule. An advertisement for a consumer lease may state 
that a specific lease of property at specific amounts or terms is 
available only if the lessor usually and customarily leases or will 
lease the property at those amounts or terms.
    (b) Clear and conspicuous standard. Disclosures required by this 
section shall be made clearly and conspicuously.
    (1) Amount due at lease signing or delivery. Except for the 
statement of a periodic payment, any affirmative or negative reference 
to a charge that is a part of the disclosure required under paragraph 
(d)(2)(ii) of this section shall not be more prominent than that 
disclosure.
    (2) Advertisement of a lease rate. If a lessor provides a percentage 
rate in an advertisement, the rate shall not be more prominent than any 
of the disclosures in Sec. 1013.4, with the exception of the notice in 
Sec. 1013.4(s) required to accompany the rate; and the lessor shall not 
use the term ``annual percentage rate,'' ``annual lease rate,'' or 
equivalent term.
    (c) Catalogs or other multipage advertisements; electronic 
advertisements. A catalog or other multipage advertisement, or an 
electronic advertisement

[[Page 346]]

(such as an advertisement appearing on an Internet Web site), that 
provides a table or schedule of the required disclosures shall be 
considered a single advertisement if, for lease terms that appear 
without all the required disclosures, the advertisement refers to the 
page or pages on which the table or schedule appears.
    (d) Advertisement of terms that require additional disclosure--(1) 
Triggering terms. An advertisement that states any of the following 
items shall contain the disclosures required by paragraph (d)(2) of this 
section, except as provided in paragraphs (e) and (f) of this section:
    (i) The amount of any payment; or
    (ii) A statement of any capitalized cost reduction or other payment 
(or that no payment is required) prior to or at consummation or by 
delivery, if delivery occurs after consummation.
    (2) Additional terms. An advertisement stating any item listed in 
paragraph (d)(1) of this section shall also state the following items:
    (i) That the transaction advertised is a lease;
    (ii) The total amount due prior to or at consummation or by 
delivery, if delivery occurs after consummation;
    (iii) The number, amounts, and due dates or periods of scheduled 
payments under the lease;
    (iv) A statement of whether or not a security deposit is required; 
and
    (v) A statement that an extra charge may be imposed at the end of 
the lease term where the lessee's liability (if any) is based on the 
difference between the residual value of the leased property and its 
realized value at the end of the lease term.
    (e) Alternative disclosures--merchandise tags. A merchandise tag 
stating any item listed in paragraph (d)(1) of this section may comply 
with paragraph (d)(2) of this section by referring to a sign or display 
prominently posted in the lessor's place of business that contains a 
table or schedule of the required disclosures.
    (f) Alternative disclosures--television or radio advertisements--(1) 
Toll-free number or print advertisement. An advertisement made through 
television or radio stating any item listed in paragraph (d)(1) of this 
section complies with paragraph (d)(2) of this section if the 
advertisement states the items listed in paragraphs (d)(2)(i) through 
(iii) of this section, and:
    (i) Lists a toll-free telephone number along with a reference that 
such number may be used by consumers to obtain the information required 
by paragraph (d)(2) of this section; or
    (ii) Directs the consumer to a written advertisement in a 
publication of general circulation in the community served by the media 
station, including the name and the date of the publication, with a 
statement that information required by paragraph (d)(2) of this section 
is included in the advertisement. The written advertisement shall be 
published beginning at least three days before and ending at least ten 
days after the broadcast.
    (2) Establishment of toll-free number. (i) The toll-free telephone 
number shall be available for no fewer than ten days, beginning on the 
date of the broadcast.
    (ii) The lessor shall provide the information required by paragraph 
(d)(2) of this section orally, or in writing upon request.



Sec. 1013.8  Record retention.

    A lessor shall retain evidence of compliance with the requirements 
imposed by this part, other than the advertising requirements under 
Sec. 1013.7, for a period of not less than two years after the date the 
disclosures are required to be made or an action is required to be 
taken.



Sec. 1013.9  Relation to state laws.

    (a) Inconsistent state law. A state law that is inconsistent with 
the requirements of the Act and this part is preempted to the extent of 
the inconsistency. If a lessor cannot comply with a state law without 
violating a provision of this part, the state law is inconsistent within 
the meaning of section 186(a) of the Act and is preempted, unless the 
state law gives greater protection and benefit to the consumer. A state, 
through an official having primary enforcement or interpretative 
responsibilities for the state consumer leasing law, may apply to the 
Bureau for a preemption determination.
    (b) Exemptions--(1) Application. A state may apply to the Bureau for 
an

[[Page 347]]

exemption from the requirements of the Act and this part for any class 
of lease transactions within the state. The Bureau will grant such an 
exemption if the Bureau determines that:
    (i) The class of leasing transactions is subject to state law 
requirements substantially similar to the Act and this part or that 
lessees are afforded greater protection under state law; and
    (ii) There is adequate provision for state enforcement.
    (2) Enforcement and liability. After an exemption has been granted, 
the requirements of the applicable state law (except for additional 
requirements not imposed by Federal law) will constitute the 
requirements of the Act and this part. No exemption will extend to the 
civil liability provisions of sections 130, 131, and 185 of the Act.



                Sec. Appendix A to Part 1013--Model Forms

A-1--Model Open-End or Finance Vehicle Lease Disclosures
A-2--Model Closed-End or Net Vehicle Lease Disclosures
A-3--Model Furniture Lease Disclosures

[[Page 348]]

[GRAPHIC] [TIFF OMITTED] TR19DE11.010


[[Page 349]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.011


[[Page 350]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.012


[[Page 351]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.013


[[Page 352]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.014


[[Page 353]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.015


[[Page 354]]





                 Sec. Appendix B to Part 1013 [Reserved]



   Sec. Appendix C to Part 1013--Issuance of Official Interpretations

    Interpretations of this part issued by officials of the Bureau 
provide the formal protection afforded under section 130(f) of the Act. 
Except in unusual circumstances, interpretations will not be issued 
separately but will be incorporated in an official commentary to 
Regulation M (Supplement I of this part), which will be amended 
periodically. No official interpretations will be issued approving a 
lessor's forms, statements, or calculation tools or methods.



        Sec. Supplement I to Part 1013--Official Interpretations

                              Introduction

    1. Official status. The commentary in Supplement I is the vehicle by 
which the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation M (12 CFR part 1013). Good faith 
compliance with this commentary affords protection from liability under 
section 130(f) of the Truth in Lending Act (15 U.S.C. 1640(f)). Section 
130(f) protects lessors from civil liability for any act done or omitted 
in good faith in conformity with any interpretation issued by the 
Bureau.
    2. Procedures for requesting interpretations. Under appendix C of 
Regulation M, anyone may request an official interpretation. 
Interpretations that are adopted will be incorporated in this commentary 
following publication in the Federal Register. No official 
interpretations are expected to be issued other than by means of this 
commentary.
    3. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that it 
interprets. The comments are designated with as much specificity as 
possible according to the particular regulatory provision addressed. For 
example, some of the comments to Sec. 1013.4(f) are further divided by 
subparagraph, such as comment 4(f)(1)-1 and comment 4(f)(2)-1. In other 
cases, comments have more general application and are designated, for 
example, as comment 4(a)-1. This introduction may be cited as comments 
I-1 through I-4. An appendix may be cited as comment app. A-1.
    4. Illustrations. Lists that appear in the commentary may be 
exhaustive or illustrative; the appropriate construction should be clear 
from the context. Illustrative lists are introduced by phrases such as 
``including,'' ``such as,'' ``to illustrate,'' and ``for example.''

       Section 1013.1--Authority, Scope, Purpose, and Enforcement

    1. Foreign applicability. Regulation M applies to all persons 
(including branches of foreign banks or leasing companies located in the 
United States) that offer consumer leases to residents of any state 
(including foreign nationals) as defined in Sec. 1013.2(p), except 
persons excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376. The regulation does not apply to a foreign branch of a U.S. 
bank or to a leasing company leasing to a U.S. citizen residing or 
visiting abroad or to a foreign national abroad.

                       Section 1013.2--Definitions

                           2(b) Advertisement

    1. Coverage. The term advertisement includes messages inviting, 
offering, or otherwise generally announcing to prospective customers the 
availability of consumer leases, whether in visual, oral, print or 
electronic media. Examples include:
    i. Messages in newspapers, magazines, leaflets, catalogs, and 
fliers.
    ii. Messages on radio, television, and public address systems.
    iii. Direct mail literature.
    iv. Printed material on any interior or exterior sign or display, in 
any window display, in any point-of-transaction literature or price tag 
that is delivered or made available to a lessee or prospective lessee in 
any manner whatsoever.
    v. Telephone solicitations.
    vi. Online messages, such as those on the Internet.
    2. Exclusions. The term does not apply to the following:
    i. Direct personal contacts, including follow-up letters, cost 
estimates for individual lessees, or oral or written communications 
relating to the negotiation of a specific transaction.
    ii. Informational material distributed only to businesses.
    iii. Notices required by Federal or state law, if the law mandates 
that specific information be displayed and only the mandated information 
is included in the notice.
    iv. News articles controlled by the news medium.
    v. Market research or educational materials that do not solicit 
business.
    3. Persons covered. See the commentary to Sec. 1013.7(a).

                          2(d) Closed-End Lease

    1. General. In closed-end leases, sometimes referred to as ``walk-
away'' leases, the lessee is not responsible for the residual value of

[[Page 355]]

the leased property at the end of the lease term.

                           2(e) Consumer Lease

    1. Primary purposes. A lessor must determine in each case if the 
leased property will be used primarily for personal, family, or 
household purposes. If a question exists as to the primary purpose for a 
lease, the fact that a lessor gives disclosures is not controlling on 
the question of whether the transaction is covered. The primary purpose 
of a lease is determined before or at consummation and a lessor need not 
provide Regulation M disclosures where there is a subsequent change in 
the primary use.
    2. Period of time. To be a consumer lease, the initial term of the 
lease must be more than four months. Thus, a lease of personal property 
for four months, three months or on a month-to-month or week-to-week 
basis (even though the lease actually extends beyond four months) is not 
a consumer lease and is not subject to the disclosure requirements of 
the regulation. However, a lease that imposes a penalty for not 
continuing the lease beyond four months is considered to have a term of 
more than four months. To illustrate:
    i. A three-month lease extended on a month-to-month basis and 
terminated after one year is not subject to the regulation.
    ii. A month-to-month lease with a penalty, such as the forfeiture of 
a security deposit for terminating before one year, is subject to the 
regulation.
    3. Total contractual obligation. The total contractual obligation is 
not necessarily the same as the total of payments disclosed under 
Sec. 1013.4(e). The total contractual obligation includes nonrefundable 
amounts a lessee is contractually obligated to pay to the lessor, but 
excludes items such as:
    i. Residual value amounts or purchase-option prices;
    ii. Amounts collected by the lessor but paid to a third party, such 
as taxes, licenses, and registration fees.
    4. Credit sale. The regulation does not cover a lease that meets the 
definition of a credit sale in Regulation Z, 12 CFR 226.2(a)(16), which 
is defined, in part, as a bailment or lease (unless terminable without 
penalty at any time by the consumer) under which the consumer:
    i. Agrees to pay as compensation for use a sum substantially 
equivalent to, or in excess of, the total value of the property and 
services involved; and
    ii. Will become (or has the option to become), for no additional 
consideration or for nominal consideration, the owner of the property 
upon compliance with the agreement.
    5. Agricultural purpose. Agricultural purpose means a purpose 
related to the production, harvest, exhibition, marketing, 
transportation, processing, or manufacture of agricultural products by a 
natural person who cultivates, plants, propagates, or nurtures those 
agricultural products, including but not limited to the acquisition of 
personal property and services used primarily in farming. Agricultural 
products include horticultural, viticultural, and dairy products, 
livestock, wildlife, poultry, bees, forest products, fish and shellfish, 
and any products thereof, including processed and manufactured products, 
and any and all products raised or produced on farms and any processed 
or manufactured products thereof.
    6. Organization or other entity. A consumer lease does not include a 
lease made to an organization such as a corporation or a government 
agency or instrumentality. Such a lease is not covered by the regulation 
even if the leased property is used (by an employee, for example) 
primarily for personal, family or household purposes, or is guaranteed 
by or subsequently assigned to a natural person.
    7. Leases of personal property incidental to a service. The 
following leases of personal property are deemed incidental to a service 
and thus are not subject to the regulation:
    i. Home entertainment systems requiring the consumer to lease 
equipment that enables a television to receive the transmitted 
programming.
    ii. Security alarm systems requiring the installation of leased 
equipment intended to monitor unlawful entries into a home and in some 
cases to provide fire protection.
    iii. Propane gas service where the consumer must lease a propane 
tank to receive the service.
    8. Safe deposit boxes. The lease of a safe deposit box is not a 
consumer lease under Sec. 1013.2(e).
    9. Threshold amount. A consumer lease is exempt from the 
requirements of this part if the total contractual obligation exceeds 
the threshold amount in effect at the time of consummation. The 
threshold amount in effect during a particular time period is the amount 
stated below for that period. The threshold amount is adjusted effective 
January 1 of each year by any annual percentage increase in the Consumer 
Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that was 
in effect on the preceding June 1. This comment will be amended to 
provide the threshold amount for the upcoming year after the annual 
percentage change in the CPI-W that was in effect on June 1 becomes 
available. Any increase in the threshold amount will be rounded to the 
nearest $100 increment. For example, if the annual percentage increase 
in the CPI-W would result in a $950 increase in the threshold amount, 
the threshold amount will be increased by $1,000. However, if the annual 
percentage increase in the CPI-W would result in a $949 increase in the 
threshold amount, the threshold amount will be increased by

[[Page 356]]

$900. If a consumer lease is exempt from the requirements of this part 
because the total contractual obligation exceeds the threshold amount in 
effect at the time of consummation, the lease remains exempt regardless 
of a subsequent increase in the threshold amount.
    i. Prior to July 21, 2011, the threshold amount is $25,000.
    ii. From July 21, 2011 through December 31, 2011, the threshold 
amount is $50,000.
    iii. From January 1, 2012 through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013 through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014 through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015 through December 31, 2015, the threshold 
amount is $54,600.

                               2(g) Lessee

    1. Guarantors. Guarantors are not lessees for purposes of the 
regulation.

                               2(h) Lessor

    1. Arranger of a lease. To ``arrange'' for the lease of personal 
property means to provide or offer to provide a lease that is or will be 
extended by another person under a business or other relationship 
pursuant to which the person arranging the lease (a) receives or will 
receive a fee, compensation, or other consideration for the service or 
(b) has knowledge of the lease terms and participates in the preparation 
of the contract documents required in connection with the lease. To 
illustrate:
    i. An entity that, pursuant to a business relationship, completes 
the necessary lease agreement before forwarding it for execution to the 
leasing company (to whom the obligation is payable on its face) is 
``arranging'' for the lease.
    ii. An entity that, without receiving a fee for the service, refers 
a customer to a leasing company that will prepare all relevant contract 
documents is not ``arranging'' for the lease.
    2. Consideration. The term ``other consideration'' as used in 
comment 2(h)-1 refers to an actual payment corresponding to a fee or 
similar compensation and not to intangible benefits, such as the 
advantage of increased business, which may flow from the relationship 
between the parties.
    3. Assignees. An assignee may be a lessor for purposes of the 
regulation in circumstances where the assignee has substantial 
involvement in the lease transaction. See cf. Ford Motor Credit Co. v. 
Cenance, 452 U.S. 155 (1981) (held that an assignee was a creditor for 
purposes of the pre-1980 Truth in Lending Act and Regulation Z because 
of its substantial involvement in the credit transaction).
    4. Multiple lessors. See the commentary to Sec. 1013.3(c).

                            2(j) Organization

    1. Coverage. The term ``organization'' includes joint ventures and 
persons operating under a business name.

                         2(l) Personal Property

    1. Coverage. Whether property is personal property depends on state 
or other applicable law. For example, a mobile home or houseboat may be 
considered personal property in one state but real property in another.

                           2(m) Realized Value

    1. General. Realized value refers to either the retail or wholesale 
value of the leased property at early termination or at the end of the 
lease term. It is not a required disclosure. Realized value is relevant 
only to leases in which the lessee's liability at early termination or 
at the end of the lease term typically is based on the difference 
between the residual value (or the adjusted lease balance) of the leased 
property and its realized value.
    2. Options. Subject to the contract and to state or other applicable 
law, the lessor may calculate the realized value in determining the 
lessee's liability at the end of the lease term or at early termination 
in one of the three ways stated in Sec. 1013.2(m). If the lessor sells 
the property prior to making the determination about liability, the 
price received for the property (or the fair market value) is the 
realized value. If the lessor does not sell the property prior to making 
that determination, the highest offer or the fair market value is the 
realized value.
    3. Determination of realized value. Disposition charges are not 
subtracted in determining the realized value but amounts attributable to 
taxes may be subtracted.
    4. Offers. In determining the highest offer for disposition, the 
lessor may disregard offers that an offeror has withdrawn or is unable 
or unwilling to perform.
    5. Lessor's appraisal. See commentary to Sec. 1013.4(l).

                   2(o) Security Interest and Security

    1. Disclosable interests. For purposes of disclosure, a security 
interest is an interest taken by the lessor to secure performance of the 
lessee's obligation. For example, if a bank that is not a lessor makes a 
loan to a leasing company and takes assignments of consumer leases 
generated by that company to secure the loan, the bank's security 
interest in the lessor's receivables is not a security interest for 
purposes of this part.
    2. General coverage. An interest the lessor may have in leased 
property must be disclosed only if it is considered a security interest 
under state or other applicable law.

[[Page 357]]

The term includes, but is not limited to, security interests under the 
Uniform Commercial Code; real property mortgages, deeds of trust, and 
other consensual or confessed liens whether or not recorded; mechanic's, 
materialman's, artisan's, and other similar liens; vendor's liens in 
both real and personal property; liens on property arising by operation 
of law; and any interest in a lease when used to secure payment or 
performance of an obligation.
    3. Insurance exception. The lessor's right to insurance proceeds or 
unearned insurance premiums is not a security interest for purposes of 
this part.

             Section 1013.3--General Disclosure Requirements

                        3(a) General Requirements

    1. Basis of disclosures. Disclosures must reflect the terms of the 
legal obligation between the parties. For example:
    i. In a three-year lease with no penalty for termination after a 
one-year minimum term, disclosures are based on the full three-year term 
of the lease. The one-year minimum term is only relevant to the early 
termination provisions of Sec. Sec. 1013.4 (g)(1), (k) and (l).
    2. Clear and conspicuous standard. The clear and conspicuous 
standard requires that disclosures be reasonably understandable. For 
example, the disclosures must be presented in a way that does not 
obscure the relationship of the terms to each other; appendix A of this 
part contains model forms that meet this standard. In addition, although 
no minimum typesize is required, the disclosures must be legible, 
whether typewritten, handwritten, or printed by computer.
    3. Multipurpose disclosure forms. A lessor may use a multipurpose 
disclosure form provided the lessor is able to designate the specific 
disclosures applicable to a given transaction, consistent with the 
requirement that disclosures be clearly and conspicuously provided.
    4. Number of transactions. Lessors have flexibility in handling 
lease transactions that may be viewed as multiple transactions. For 
example:
    i. When a lessor leases two items to the same lessee on the same 
day, the lessor may disclose the leases as either one or two lease 
transactions.
    ii. When a lessor sells insurance or other incidental services in 
connection with a lease, the lessor may disclose in one of two ways: As 
a single lease transaction (in which case Regulation M, not Regulation 
Z, disclosures are required) or as a lease transaction and a credit 
transaction.
    iii. When a lessor includes an outstanding lease or credit balance 
in a lease transaction, the lessor may disclose the outstanding balance 
as part of a single lease transaction (in which case Regulation M, not 
Regulation Z, disclosures are required) or as a lease transaction and a 
credit transaction.

                       3(a)(1) Form of Disclosures

    1. Cross-references. Lessors may include in the nonsegregated 
disclosures a cross-reference to items in the segregated disclosures 
rather than repeat those items. A lessor may include in the segregated 
disclosures numeric or alphabetic designations as cross-references to 
related information so long as such references do not obscure or detract 
from the segregated disclosures.
    2. Identification of parties. While disclosures must be made clearly 
and conspicuously, lessors are not required to use the word ``lessor'' 
and ``lessee'' to identify the parties to the lease transaction.
    3. Lessor's address. The lessor must be identified by name; an 
address (and telephone number) may be provided.
    4. Multiple lessors and lessees. In transactions involving multiple 
lessors and multiple lessees, a single lessor may make all the 
disclosures to a single lessee as long as the disclosure statement 
identifies all the lessors and lessees.
    5. Lessee's signature. The regulation does not require that the 
lessee sign the disclosure statement, whether disclosures are separately 
provided or are part of the lease contract. Nevertheless, to provide 
evidence that disclosures are given before a lessee becomes obligated on 
the lease transaction, the lessor may, for example, ask the lessee to 
sign the disclosure statement or an acknowledgement of receipt, may 
place disclosures that are included in the lease documents above the 
lessee's signature, or include instructions alerting a lessee to read 
the disclosures prior to signing the lease.

               3(a)(2) Segregation of Certain Disclosures

    1. Location. The segregated disclosures referred to in 
Sec. 1013.3(a)(2) may be provided on a separate document and the other 
required disclosures may be provided in the lease contract, so long as 
all disclosures are given at the same time. Alternatively, all 
disclosures may be provided in a separate document or in the lease 
contract.
    2. Additional information among segregated disclosures. The 
disclosures required to be segregated may contain only the information 
required or permitted to be included among the segregated disclosures.
    3. Substantially similar. See commentary to appendix A of this part.

                      3(a)(3) Timing of Disclosures

    1. Consummation. When a contractual relationship is created between 
the lessor and the lessee is a matter to be determined under state or 
other applicable law.

[[Page 358]]

         3(b) Additional Information; Nonsegregated Disclosures

    1. State law disclosures. A lessor may include in the nonsegregated 
disclosures any state law disclosures that are not inconsistent with the 
Act and regulation under Sec. 1013.9 as long as, in accordance with the 
standard set forth in Sec. 1013.3(b) for additional information, the 
state law disclosures are not used or placed to mislead or confuse or 
detract from any disclosure required by the regulation.

                    3(c) Multiple Lessors or Lessees

    1. Multiple lessors. If a single lessor provides disclosures to a 
lessee on behalf of several lessors, all disclosures for the transaction 
must be given, even if the lessor making the disclosures would not 
otherwise have been obligated to make a particular disclosure.

                          3(d) Use of Estimates

    1. Time of estimated disclosure. The lessor may, after making a 
reasonable effort to obtain information, use estimates to make 
disclosures if necessary information is unknown or unavailable at the 
time the disclosures are made.
    2. Basis of estimates. Estimates must be made on the basis of the 
best information reasonably available at the time disclosures are made. 
The ``reasonably available'' standard requires that the lessor, acting 
in good faith, exercise due diligence in obtaining information. The 
lessor may rely on the representations of other parties. For example, 
the lessor might look to the consumer to determine the purpose for which 
leased property will be used, to insurance companies for the cost of 
insurance, or to an automobile manufacturer or dealer for the date of 
delivery. See commentary to Sec. 1013.4(n) for estimating official fees 
and taxes.
    3. Residual value of leased property at termination. In an open-end 
lease where the lessee's liability at the end of the lease term is based 
on the residual value of the leased property as determined at 
consummation, the estimate of the residual value must be reasonable and 
based on the best information reasonably available to the lessor (see 
Sec. 1013.4(m)). A lessor should generally use an accepted trade 
publication listing estimated current or future market prices for the 
leased property unless other information or a reasonable belief based on 
its experience provides the better information. For example:
    i. An automobile lessor offering a three-year open-end lease assigns 
a wholesale value to the vehicle at the end of the lease term. The 
lessor may disclose as an estimate a wholesale value derived from a 
generally accepted trade publication listing current wholesale values.
    ii. Same facts as above, except that the lessor discloses an 
estimated value derived by adjusting the residual value quoted in the 
trade publication because, in its experience, the trade publication 
values either understate or overstate the prices actually received in 
local used vehicle markets. The lessor may adjust estimated values 
quoted in trade publications if the lessor reasonably believes based on 
its experience that the values are understated or overstated.
    4. Retail or wholesale value. The lessor may choose either a retail 
or a wholesale value in estimating the value of leased property at 
termination of an open-end lease provided the choice is consistent with 
the lessor's general practice when determining the value of the property 
at the end of the lease term. The lessor should indicate whether the 
value disclosed is a retail or wholesale value.
    5. Labeling estimates. Generally, only the disclosure for which the 
exact information is unknown is labeled as an estimate. Nevertheless, 
when several disclosures are affected because of the unknown 
information, the lessor has the option of labeling as an estimate every 
affected disclosure or only the disclosure primarily affected.

                  3(e) Effect of Subsequent Occurrence

    1. Subsequent occurrences. Examples of subsequent occurrences 
include:
    i. An agreement between the lessee and lessor to change from a 
monthly to a weekly payment schedule.
    ii. An increase in official fees or taxes.
    iii. An increase in insurance premiums or coverage caused by a 
change in the law.
    iv. Late delivery of an automobile caused by a strike.
    2. Redisclosure. When a disclosure becomes inaccurate because of a 
subsequent occurrence, the lessor need not make new disclosures unless 
new disclosures are required under Sec. 1013.5.
    3. Lessee's failure to perform. The lessor does not violate the 
regulation if a previously given disclosure becomes inaccurate when a 
lessee fails to perform obligations under the contract and a lessor 
takes actions that are necessary and proper in such circumstances to 
protect its interest. For example, the addition of insurance or a 
security interest by the lessor because the lessee has not performed 
obligations contracted for in the lease is not a violation of the 
regulation.

                 Section 1013.4--Content of Disclosures

                      4(a) Description of Property

    1. Placement of description. Although the description of leased 
property may not be included among the segregated disclosures, a lessor 
may choose to place the description directly above the segregated 
disclosures.

[[Page 359]]

              4(b) Amount Due at Lease Signing or Delivery

    1. Consummation. See commentary to Sec. 1013.3(a)(3).
    2. Capitalized cost reduction. A capitalized cost reduction is a 
payment in the nature of a downpayment on the leased property that 
reduces the amount to be capitalized over the term of the lease. This 
amount does not include any amounts included in a periodic payment paid 
at lease signing or delivery.
    3. ``Negative'' equity trade-in allowance. If an amount owed on a 
prior lease or credit balance exceeds the agreed upon value of a trade-
in, the difference is not reflected as a negative trade-in allowance 
under Sec. 1013.4(b). The lessor may disclose the trade-in allowance as 
zero or not applicable, or may leave a blank line.
    4. Rebates. Only rebates applied toward an amount due at lease 
signing or delivery are required to be disclosed under Sec. 1013.4(b).
    5. Balance sheet approach. In motor vehicle leases, the total for 
the column labeled ``total amount due at lease signing or delivery'' 
must equal the total for the column labeled ``how the amount due at 
lease signing or delivery will be paid.''
    6. Amounts to be paid in cash. The term cash is intended to include 
payments by check or other payment methods in addition to currency; 
however, a lessor may add a line item under the column ``how the amount 
due at lease signing or delivery will be paid'' for non-currency 
payments such as credit cards.

       4(c) Payment Schedule and Total Amount of Periodic Payments

    1. Periodic payments. The phrase ``number, amount, and due dates or 
periods of payments'' requires the disclosure of all payments that are 
made at regular or irregular intervals and generally derived from rent, 
capitalized or amortized amounts such as depreciation, and other amounts 
that are collected by the lessor at the same interval(s), including, for 
example, taxes, maintenance, and insurance charges. Other periodic 
payments may, but need not, be disclosed under Sec. 1013.4(c).

                           4(d) Other Charges

    1. Coverage. Section 1013.4(d) requires the disclosure of charges 
that are anticipated by the parties incident to the normal operation of 
the lease agreement. If a lessor is unsure whether a particular fee is 
an ``other charge,'' the lessor may disclose the fee as such without 
violating Sec. 1013.4(d) or the segregation rule under 
Sec. 1013.3(a)(2).
    2. Excluded charges. This section does not require disclosure of 
charges that are imposed when the lessee terminates early, fails to 
abide by, or modifies the terms of the existing lease agreement, such as 
charges for:
    i. Late payment.
    ii. Default.
    iii. Early termination.
    iv. Deferral of payments.
    v. Extension of the lease.
    3. Third-party fees and charges. Third-party fees or charges 
collected by the lessor on behalf of third parties, such as taxes, are 
not disclosed under Sec. 1013.4(d).
    4. Relationship to other provisions. The other charges mentioned in 
this paragraph are charges that are not required to be disclosed under 
some other provision of Sec. 1013.4. To illustrate:
    i. The price of a mechanical breakdown protection (MBP) contract is 
sometimes disclosed as an ``other charge.'' Nevertheless, the price of 
MBP is sometimes reflected in the periodic payment disclosure under 
Sec. 1013.4(c) or in states where MBP is regarded as insurance, the cost 
is be disclosed in accordance with Sec. 1013.4(o).
    5. Lessee's liabilities at the end of the lease term. Liabilities 
that the lessor imposes upon the lessee at the end of the scheduled 
lease term and that must be disclosed under Sec. 1013.4(d) include 
disposition and ``pick-up'' charges.
    6. Optional ``disposition'' charges. Disposition and similar charges 
that are anticipated by the parties as an incident to the normal 
operation of the lease agreement must be disclosed under Sec. 1013.4(d). 
If, under a lease agreement, a lessee may return leased property to 
various locations, and the lessor charges a disposition fee depending 
upon the location chosen, under Sec. 1013.4(d), the lessor must disclose 
the highest amount charged. In such circumstances, the lessor may also 
include a brief explanation of the fee structure in the segregated 
disclosure. For example, if no fee or a lower fee is imposed for 
returning a leased vehicle to the originating dealer as opposed to 
another location, that fact may be disclosed. By contrast, if the terms 
of the lease treat the return of the leased property to a location 
outside the lessor's service area as a default, the fee imposed is not 
disclosed as an ``other charge,'' although it may be required to be 
disclosed under Sec. 1013.4(q).

                         4(e) Total of Payments

    1. Open-end lease. The additional statement is required under 
Sec. 1013.4(e) for open-end leases because, with some limitations, a 
lessee is liable at the end of the lease term for the difference between 
the residual and realized values of the leased property.

                        4(f) Payment Calculation

    1. Motor vehicle lease. Whether leased property is a motor vehicle 
is determined by state or other applicable law.
    2. Multiple items. If a lease transaction involves multiple items of 
leased property, one of which is not a motor vehicle under state law, at 
their option, lessors may include all

[[Page 360]]

items in the disclosures required under Sec. 1013.4(f). See comment 
3(a)-4 regarding disclosure of multiple transactions.

                     4(f)(1) Gross Capitalized Cost

    1. Agreed upon value of the vehicle. The agreed upon value of a 
motor vehicle includes the amount of capitalized items such as charges 
for vehicle accessories and options, and delivery or destination 
charges. The lessor may also include taxes and fees for title, licenses, 
and registration that are capitalized. Charges for service or 
maintenance contracts, insurance products, guaranteed automobile 
protection, or an outstanding balance on a prior lease or credit 
transaction are not included in the agreed upon value.
    2. Itemization of the gross capitalized cost. The lessor may choose 
to provide the itemization of the gross capitalized cost only on request 
or may provide the itemization as a matter of course. In the latter 
case, the lessor need not provide a statement of the lessee's option to 
receive an itemization. The gross capitalized cost must be itemized by 
type and amount. The lessor may include in the itemization an 
identification of the items and amounts of some or all of the items 
contained in the agreed upon value of the vehicle. The itemization must 
be provided at the same time as the other disclosures required by 
Sec. 1013.4, but it may not be included among the segregated 
disclosures.

                 4(f)(7) Total of Base Periodic Payments

    1. Accuracy of disclosure. If the periodic payment calculation under 
Sec. 1013.4(f) has been calculated correctly, the amount disclosed under 
Sec. 1013.4(f)(7)--the total of base periodic payments--is correct for 
disclosure purposes even if that amount differs from the base periodic 
payment disclosed under Sec. 1013.4(f)(9) multiplied by the number of 
lease payments disclosed under Sec. 1013.4(f)(8), when the difference is 
due to rounding.

                         4(f)(8) Lease Payments

    1. Lease Term. The lease term may be disclosed among the segregated 
disclosures.

                         4(g) Early Termination

              4(g)(1) Conditions and Disclosure of Charges

    1. Reasonableness of charges. See the commentary to Sec. 1013.4(q).
    2. Description of the method. Section 1013.4(g)(1) requires a full 
description of the method of determining an early termination charge. 
The lessor should attempt to provide consumers with clear and 
understandable descriptions of its early termination charges. 
Descriptions that are full, accurate, and not intended to be misleading 
will comply with Sec. 1013.4(g)(1), even if the descriptions are 
complex. In providing a full description of an early termination method, 
a lessor may use the name of a generally accepted method of computing 
the unamortized cost portion (also known as the ``adjusted lease 
balance'') of its early termination charges. For example, a lessor may 
state that the ``constant yield'' method will be utilized in obtaining 
the adjusted lease balance, but must specify how that figure, and any 
other term or figure, is used in computing the total early termination 
charge imposed upon the consumer. Additionally, if a lessor refers to a 
named method in this manner, the lessor must provide a written 
explanation of that method if requested by the consumer. The lessor has 
the option of providing the explanation as a matter of course in the 
lease documents or on a separate document.
    3. Timing of written explanation of a named method. While a lessor 
may provide an address or telephone number for the consumer to request a 
written explanation of the named method used to calculate the adjusted 
leased balance, if at consummation a consumer requests such an 
explanation, the lessor must provide a written explanation at that time. 
If a consumer requests an explanation after consummation, the lessor 
must provide a written explanation within a reasonable time after the 
request is made.
    4. Default. When default is a condition for early termination of a 
lease, default charges must be disclosed under Sec. 1013.4(g)(1). See 
the commentary to Sec. 1013.4(q).
    5. Lessee's liability at early termination. When the lessee is 
liable for the difference between the unamortized cost and the realized 
value at early termination, the method of determining the amount of the 
difference must be disclosed under Sec. 1013.4(g)(1).

                    4(h) Maintenance Responsibilities

    1. Standards for wear and use. No disclosure is required if a lessor 
does not set standards or impose charges for wear and use (such as 
excess mileage).

                          4(i) Purchase Option

    1. Mandatory disclosure of no purchase option. Generally the lessor 
need only make the specific required disclosures that apply to a 
transaction. In the case of a purchase option disclosure, however, a 
lessor must disclose affirmatively that the lessee has no option to 
purchase the leased property if the purchase option is inapplicable.
    2. Existence of purchase option. Whether a purchase option exists 
under the lease is determined by state or other applicable law. The 
lessee's right to submit a bid to purchase property at termination of 
the lease is not an option to purchase under Sec. 1013.4(i) if the 
lessor is not required to accept the lessee's bid and the lessee does 
not receive preferential treatment.

[[Page 361]]

    3. Purchase-option fee. A purchase-option fee is disclosed under 
Sec. 1013.4(i), not Sec. 1013.4(d). The fee may be separately itemized 
or disclosed as part of the purchase-option price.
    4. Official fees and taxes. Official fees such as those for taxes, 
licenses, and registration charged in connection with the exercise of a 
purchase option may be disclosed under Sec. 1013.4(i) as part of the 
purchase-option price (with or without a reference to their inclusion in 
that price) or may be separately disclosed and itemized by category. 
Alternatively, a lessor may provide a statement indicating that the 
purchase-option price does not include fees for tags, taxes, and 
registration.
    5. Purchase-option price. Lessors must disclose the purchase-option 
price as a sum certain or as a sum certain to be determined at a future 
date by reference to a readily available independent source. The 
reference should provide sufficient information so that the lessee will 
be able to determine the actual price when the option becomes available. 
Statements of a purchase price as the ``negotiated price'' or the ``fair 
market value'' do not comply with the requirements of Sec. 1013.4(i).

          4(j) Statement Referencing Nonsegregated Disclosures

    1. Content. A lessor may delete inapplicable items from the 
disclosure. For example, if a lease contract does not include a security 
interest, the reference to a security interest may be omitted.

                         4(l) Right of Appraisal

    1. Disclosure inapplicable. The lessee does not have the right to an 
independent appraisal merely because the lessee is liable at the end of 
the lease term or at early termination for unreasonable wear or use. 
Thus, the disclosure under Sec. 1013.4(l) does not apply. For example:
    i. The automobile lessor might expect a lessee to return an undented 
car with four good tires at the end of the lease term. Even though it 
may hold the lessee liable for the difference between a dented car with 
bald tires and the value of a car in reasonably good repair, the 
disclosure under Sec. 1013.4(l) is not required.
    2. Lessor's appraisal. If the lessor obtains an appraisal of the 
leased property to determine its realized value, that appraisal does not 
suffice for purposes of section 183(c) of the Act; the lessor must 
disclose the lessee's right to an independent appraisal under 
Sec. 1013.4(l).
    3. Retail or wholesale. In providing the disclosures in 
Sec. 1013.4(l), a lessor must indicate whether the wholesale or retail 
appraisal value will be used.
    4. Time restriction on appraisal. The regulation does not specify a 
time period in which the lessee must exercise the appraisal right. The 
lessor may require a lessee to obtain the appraisal within a reasonable 
time after termination of the lease.

       4(m) Liability at End of Lease Term Based on Residual Value

    1. Open-end leases. Section 1013.4(m) applies only to open-end 
leases.
    2. Lessor's payment of attorney's fees. Section 183(a) of the Act 
requires that the lessor pay the lessee's attorney's fees in all actions 
under Sec. 1013.4(m), whether successful or not.

                     4(m)(1) Rent and Other Charges

    1. General. This disclosure is intended to represent the cost of 
financing an open-end lease based on charges and fees that the lessor 
requires the lessee to pay. Examples of disclosable charges, in addition 
to the rent charge, include acquisition, disposition, or assignment 
fees. Charges imposed by a third party whose services are not required 
by the lessor (such as official fees and voluntary insurance) are not 
included in the Sec. 1013.4(m)(1) disclosure.

                        4(m)(2) Excess Liability

    1. Coverage. The disclosure limiting the lessee's liability for the 
value of the leased property does not apply in the case of early 
termination.
    2. Leases with a minimum term. If a lease has an alternative minimum 
term, the disclosures governing the liability limitation are not 
applicable for the minimum term.
    3. Charges not subject to rebuttable presumption. The limitation on 
liability applies only to liability at the end of the lease term that is 
based on the difference between the residual value of the leased 
property and its realized value. The regulation does not preclude a 
lessor from recovering other charges from the lessee at the end of the 
lease term. Examples of such charges include:
    i. Disposition charges.
    ii. Excess mileage charges.
    iii. Late payment and default charges.
    iv. In simple-interest accounting leases, amount by which the 
unamortized cost exceeds the residual value because the lessee has not 
made timely payments.

                           4(n) Fees and Taxes

    1. Treatment of certain taxes. Taxes paid in connection with the 
lease are generally disclosed under Sec. 1013.4(n), but there are 
exceptions. To illustrate:
    i. Taxes paid by lease signing or delivery are disclosed under 
Sec. 1013.4(b) and Sec. 1013.4(n).
    ii. Taxes that are part of the scheduled payments are reflected in 
the disclosure under Sec. 1013.4(c), (f), and (n).

[[Page 362]]

    iii. A tax payable by the lessor that is passed on to the consumer 
and is reflected in the lease documentation must be disclosed under 
Sec. 1013.4(n). A tax payable by the lessor and absorbed as a cost of 
doing business need not be disclosed.
    iv. Taxes charged in connection with the exercise of a purchase 
option are disclosed under Sec. 1013.4(i), not Sec. 1013.4(n).
    2. Estimates. In disclosing the total amount of fees and taxes under 
Sec. 1013.4(n), lessors may need to base the disclosure on estimated tax 
rates or amounts and are afforded great flexibility in doing so. Where a 
rate is applied to the future value of leased property, lessors have 
flexibility in estimating that value, including, but not limited to, 
using the mathematical average of the agreed upon value and the residual 
value or published valuation guides; or a lessor could prepare estimates 
using the agreed upon value and disclose a reasonable estimate of the 
total fees and taxes. Lessors may include a statement that the actual 
total of fees and taxes may be higher or lower depending on the tax 
rates in effect or the value of the leased property at the time a fee or 
tax is assessed.

                             4(o) Insurance

    1. Coverage. If insurance is obtained through the lessor, 
information on the type and amount of insurance coverage (whether 
voluntary or required) as well as the cost, must be disclosed.
    2. Lessor's insurance. Insurance purchased by the lessor primarily 
for its own benefit, and absorbed as a business expense and not 
separately charged to the lessee, need not be disclosed under 
Sec. 1013.4(o) even if it provides an incidental benefit to the lessee.
    3. Mechanical breakdown protection and other products. Whether 
products purchased in conjunction with a lease, such as mechanical 
breakdown protection (MBP) or guaranteed automobile protection (GAP), 
should be treated as insurance is determined by state or other 
applicable law. In states that do not treat MBP or GAP as insurance, 
Sec. 1013.4(o) disclosures are not required. In such cases the lessor 
may, however, disclose this information in accordance with the 
additional information provision in Sec. 1013.3(b). For MBP insurance 
contracts not capped by a dollar amount, lessors may describe coverage 
by referring to a limitation by mileage or time period, for example, by 
indicating that the mechanical breakdown contract insures parts of the 
automobile for up to 100,000 miles.

                      4(p) Warranties or Guarantees

    1. Brief identification. The statement identifying warranties may be 
brief and need not describe or list all warranties applicable to 
specific parts such as for air conditioning, radio, or tires in an 
automobile. For example, manufacturer's warranties may be identified 
simply by a reference to the standard manufacturer's warranty. If a 
lessor provides a comprehensive list of warranties that may not all 
apply, to comply with Sec. 1013.4(p) the lessor must indicate which 
warranties apply or, alternatively, which warranties do not apply.
    2. Warranty disclaimers. Although a disclaimer of warranties is not 
required by the regulation, the lessor may give a disclaimer as 
additional information in accordance with Sec. 1013.3(b).
    3. State law. Whether an express warranty or guaranty exists is 
determined by state or other law.

            4(q) Penalties and Other Charges for Delinquency

    1. Collection costs. The automatic imposition of collection costs or 
attorney fees upon default must be disclosed under Sec. 1013.4(q). 
Collection costs or attorney fees that are not imposed automatically, 
but are contingent upon expenditures in conjunction with a collection 
proceeding or upon the employment of an attorney to effect collection, 
need not be disclosed.
    2. Charges for early termination. When default is a condition for 
early termination of a lease, default charges must also be disclosed 
under Sec. 1013.4(g)(1). The Sec. 1013.4(q) and (g)(1) disclosures may, 
but need not, be combined. Examples of combined disclosures are provided 
in the model lease disclosure forms in appendix A.
    3. Simple-interest leases. In a simple-interest accounting lease, 
the additional rent charge that accrues on the lease balance when a 
periodic payment is made after the due date does not constitute a 
penalty or other charge for late payment. Similarly, continued accrual 
of the rent charge after termination of the lease because the lessee 
fails to return the leased property does not constitute a default 
charge. But in either case, if the additional charge accrues at a rate 
higher than the normal rent charge, the lessor must disclose the amount 
of or the method of determining the additional charge under 
Sec. 1013.4(q).
    4. Extension charges. Extension charges that exceed the rent charge 
in a simple-interest accounting lease or that are added separately are 
disclosed under Sec. 1013.4(q).
    5. Reasonableness of charges. Pursuant to section 183(b) of the Act, 
penalties or other charges for delinquency, default, or early 
termination may be specified in the lease but only in an amount that is 
reasonable in light of the anticipated or actual harm caused by the 
delinquency, default, or early termination, the difficulties of proof of 
loss, and the inconvenience or nonfeasibility of otherwise obtaining an 
adequate remedy.

[[Page 363]]

                         4(r) Security Interest

    1. Disclosable security interests. See Sec. 1013.2(o) and 
accompanying commentary to determine what security interests must be 
disclosed.

                  4(s) Limitations on Rate Information

    1. Segregated disclosures. A lease rate may not be included among 
the segregated disclosures referenced in Sec. 1013.3(a)(2).

       Section 1013.5--Renegotiations, Extensions, and Assumptions

    1. Coverage. Section 1013.5 applies only to existing leases that are 
covered by the regulation. It does not apply to the renegotiation or 
extension of leases with an initial term of four months or less, because 
such leases are not covered by the definition of consumer lease in 
Sec. 1013.2(e). Whether and when a lease is satisfied and replaced by a 
new lease is determined by state or other applicable law.

                           5(a) Renegotiation

    1. Basis of disclosures. Lessors have flexibility in making 
disclosures so long as they reflect the legal obligation under the 
renegotiated lease. For example, assume that a 24-month lease is 
replaced by a 36-month lease. The initial lease began on January 1, 
1998, and was renegotiated and replaced on July 1, 1998, so that the new 
lease term ends on January 1, 2001.
    i. If the renegotiated lease covers the 36-month period beginning 
January 1, 1998, the new disclosures would reflect all payments made by 
the lessee on the initial lease and all payments on the renegotiated 
lease. In this example, since the renegotiated lease covers a 36-month 
period beginning January 1, 1998, the disclosures must reflect payments 
made since that date. On the model form, the ``total of base periodic 
payments'' disclosed under Sec. 1013.4(f)(7) should reflect periodic 
payments to be made over the entire 36-month term. Payments received 
since January 1, 1998, are added as a new line item disclosed as ``total 
of payments received'' and are subtracted from the ``total of base 
periodic payments'' in calculating a new item disclosed as the ``total 
of base periodic payments remaining.'' For example, if 6 monthly 
payments of $300 were received since January 1, 1998, the disclosure 
form should include a ``total of base periodic payments'' line from 
which $1,800 is subtracted to arrive at the ``total of base periodic 
payments remaining.'' The remainder of the disclosures would not change.
    ii. If the renegotiated lease covers only the remaining 30 months, 
from July 1, 1998, to January 1, 2001, the disclosures would reflect 
only the charges incurred in connection with the renegotiation and the 
payments for the remaining period.

                             5(b) Extension

    1. Time of extension disclosures. If a consumer lease is extended 
for a specified term greater than six months, new disclosures are 
required at the time the extension is agreed upon. If the lease is 
extended on a month-to-month basis and the cumulative extensions exceed 
six months, new disclosures are required at the commencement of the 
seventh month and at the commencement of each seventh month thereafter 
for as long as the extensions continue. If a consumer lease is extended 
for terms of varying durations, one of which will exceed six months 
beyond the originally scheduled termination date of the lease, new 
disclosures are required at the commencement of the term that will 
exceed six months beyond the originally scheduled termination date.
    2. Content of disclosures for month-to-month extensions. The 
disclosures for a lease extended on a month-to-month basis for more than 
six months should reflect the month-to-month nature of the transaction.
    3. Basis of disclosures. The disclosures should be based on the 
extension period, including any upfront costs paid in connection with 
the extension. For example, assume that initially a lease ends on March 
1, 1999. In January 1999, agreement is reached to extend the lease until 
October 1, 1999. The disclosure would include any extension fee paid in 
January and the periodic payments for the seven-month extension period 
beginning in March.

                        Section 1013.6 [Reserved]

                       Section 1013.7--Advertising

                            7(a) General Rule

    1. Persons covered. All ``persons'' must comply with the advertising 
provisions in this section, not just those that meet the definition of a 
lessor in Sec. 1013.2(h). Thus, automobile dealers (to the extent they 
are not excluded from the Bureau's rulemaking authority by section 1029 
of the Dodd-Frank Act), merchants, and others who are not themselves 
lessors must comply with the advertising provisions of the regulation if 
they advertise consumer lease transactions. Pursuant to section 184(b) 
of the Act, however, owners and personnel of the media in which an 
advertisement appears or through which it is disseminated are not 
subject to civil liability for violations under section 185(b) of the 
Act.
    2. ``Usually and customarily.'' Section 1013.7(a) does not prohibit 
the advertising of a single item or the promotion of a new leasing 
program, but prohibits the advertising of terms that are not and will 
not be available. Thus, an advertisement may state terms that will be 
offered for only a limited period or terms that will become available at 
a future date.

[[Page 364]]

    3. Total contractual obligation of advertised lease. Section 1013.7 
applies to advertisements for consumer leases, as defined in 
Sec. 1013.2(e). Under Sec. 1013.2(e), a consumer lease is exempt from 
the requirements of this part if the total contractual obligation 
exceeds the threshold amount in effect at the time of consummation. See 
comment 2(e)-9. Accordingly, Sec. 1013.7 does not apply to an 
advertisement for a specific consumer lease if the total contractual 
obligation for that lease exceeds the threshold amount in effect when 
the advertisement is made. If a lessor promotes multiple consumer leases 
in a single advertisement, the entire advertisement must comply with 
Sec. 1013.7 unless all of the advertised leases are exempt under 
Sec. 1013.2(e). For example:
    i. Assume that, in an advertisement, a lessor states that certain 
terms apply to a consumer lease for a specific automobile. The total 
contractual obligation of the advertised lease exceeds the threshold 
amount in effect when the advertisement is made. Although the 
advertisement does not refer to any other lease, some or all of the 
advertised terms for the exempt lease also apply to other leases offered 
by the lessor with total contractual obligations that do not exceed the 
applicable threshold amount. The advertisement is not required to comply 
with Sec. 1013.7 because it refers only to an exempt lease.
    ii. Assume that, in an advertisement, a lessor states certain terms 
(such as the amount due at lease signing) that will apply to consumer 
leases for automobiles of a particular brand. However, the advertisement 
does not refer to a specific lease. The total contractual obligations of 
the leases for some of the automobiles will exceed the threshold amount 
in effect when the advertisement is made, but the total contractual 
obligations of the leases for other automobiles will not exceed the 
threshold. The entire advertisement must comply with Sec. 1013.7 because 
it refers to terms for consumer leases that are not exempt.
    iii. Assume that, in a single advertisement, a lessor states that 
certain terms apply to consumer leases for two different automobiles. 
The total contractual obligation of the lease for the first automobile 
exceeds the threshold amount in effect when the advertisement is made, 
but the total contractual obligation of the lease for the second 
automobile does not exceed the threshold. The entire advertisement must 
comply with Sec. 1013.7 because it refers to a consumer lease that is 
not exempt.

                   7(b) Clear and Conspicuous Standard

    1. Standard. The disclosures in an advertisement in any media must 
be reasonably understandable. For example, very fine print in a 
television advertisement or detailed and very rapidly stated information 
in a radio advertisement does not meet the clear and conspicuous 
standard if consumers cannot see and read or hear, and cannot 
comprehend, the information required to be disclosed.

             7(b)(1) Amount Due at Lease Signing or Delivery

    1. Itemization not required. Only a total of amounts due at lease 
signing or delivery is required to be disclosed, not an itemization of 
its component parts. Such an itemization is provided in any transaction-
specific disclosures provided under Sec. 1013.4.
    2. Prominence rule. Except for a periodic payment, oral or written 
references to components of the total due at lease signing or delivery 
(for example, a reference to a capitalized cost reduction, where 
permitted) may not be more prominent than the disclosure of the total 
amount due at lease signing or delivery.

                  7(b)(2) Advertisement of a Lease Rate

    1. Location of statement. The notice required to accompany a 
percentage rate stated in an advertisement must be placed in close 
proximity to the rate without any other intervening language or symbols. 
For example, a lessor may not place an asterisk next to the rate and 
place the notice elsewhere in the advertisement. In addition, with the 
exception of the notice required by Sec. 1013.4(s), the rate cannot be 
more prominent than any other Sec. 1013.4 disclosure stated in the 
advertisement.

      7(c) Catalogs or Other Multi-Page Advertisements; Electronic 
                             Advertisements

    1. General rule. The multiple-page advertisements referred to in 
Sec. 1013.7(c) are advertisements consisting of a series of numbered 
pages--for example, a supplement to a newspaper. A mailing comprising 
several separate flyers or pieces of promotional material in a single 
envelope is not a single multiple-page advertisement.
    2. Cross references. A catalog or other multiple-page advertisement 
or an electronic advertisement (such as an advertisement appearing on an 
internet Web site) is a single advertisement (requiring only one set of 
lease disclosures) if it contains a table, chart, or schedule with the 
disclosures required under Sec. 1013.7(d)(2)(i) through (v). If one of 
the triggering terms listed in Sec. 1013.7(d)(1) appears in a catalog, 
or in a multiple-page or electronic advertisement, it must clearly 
direct the consumer to the page or location where the table, chart, or 
schedule begins. For example, in an electronic advertisement, a term 
triggering additional disclosures may be accompanied by a link that 
directly connects the consumer to the additional information.

[[Page 365]]

                        7(d)(1) Triggering Terms

    1. Typical example. When any triggering term appears in a lease 
advertisement, the additional terms enumerated in Sec. 1013.7(d)(2)(i) 
through (v) must also appear. In a multi-lease advertisement, an example 
of one or more typical leases with a statement of all the terms 
applicable to each may be used. The examples must be labeled as such and 
must reflect representative lease terms that are made available by the 
lessor to consumers.

                        7(d)(2) Additional Terms

    1. Third-party fees that vary by state or locality. The disclosure 
of a periodic payment or total amount due at lease signing or delivery 
may:
    i. Exclude third-party fees, such as taxes, licenses, and 
registration fees and disclose that fact; or
    ii. Provide a periodic payment or total that includes third-party 
fees based on a particular state or locality as long as that fact and 
the fact that fees may vary by state or locality are disclosed.

             7(e) Alternative Disclosures--Merchandise Tags

    1. Multiple-item leases. Multiple-item leases that utilize 
merchandise tags requiring additional disclosures may use the alternate 
disclosure rule.

    7(f) Alternative Disclosures--Television or Radio Advertisements

             7(f)(1) Toll-Free Number or Print Advertisement

    1. Publication in general circulation. A reference to a written 
advertisement appearing in a newspaper circulated nationally, for 
example, USA Today or the Wall Street Journal, may satisfy the general 
circulation requirement in Sec. 1013.7(f)(1)(ii).
    2. Toll-free number, local or collect calls. In complying with the 
disclosure requirements of Sec. 1013.7(f)(1)(i), a lessor must provide a 
toll-free number for nonlocal calls made from an area code other than 
the one used in the lessor's dialing area. Alternatively, a lessor may 
provide any telephone number that allows a consumer to reverse the phone 
charges when calling for information.
    3. Multi-purpose number. When an advertised toll-free number 
responds with a recording, lease disclosures must be provided early in 
the sequence to ensure that the consumer receives the required 
disclosures. For example, in providing several dialing options--such as 
providing directions to the lessor's place of business--the option 
allowing the consumer to request lease disclosures should be provided 
early in the telephone message to ensure that the option to request 
disclosures is not obscured by other information.
    4. Statement accompanying toll free number. Language must accompany 
a telephone and television number indicating that disclosures are 
available by calling the toll-free number, such as ``call 1-(800) 000-
0000 for details about costs and terms.''

                    Section 1013.8--Record Retention

    1. Manner of retaining evidence. A lessor must retain evidence of 
having performed required actions and of having made required 
disclosures. Such records may be retained in paper form, on microfilm, 
microfiche, or computer, or by any other method designed to reproduce 
records accurately. The lessor need retain only enough information to 
reconstruct the required disclosures or other records.

                 Section 1013.9--Relation to State Laws

    1. Exemptions granted. The Bureau recognizes exemptions granted by 
the Board of Governors of the Federal Reserve System prior to July 21, 
2011, until and unless the Bureau makes and publishes any contrary 
determination. Effective October 1, 1982, the Board of Governors of the 
Federal Reserve System granted the following exemptions from portions of 
the Consumer Leasing Act:
    i. Maine. Lease transactions subject to the Maine Consumer Credit 
Code and its implementing regulations are exempt from Chapters 2, 4, and 
5 of the Federal act. (The exemption does not apply to transactions in 
which a federally chartered institution is a lessor.)
    ii. Oklahoma. Lease transactions subject to the Oklahoma Consumer 
Credit Code are exempt from Chapters 2 and 5 of the Federal act. (The 
exemption does not apply to sections 132 through 135 of the Federal act, 
nor does it apply to transactions in which a federally chartered 
institution is a lessor.)

                         Appendix A--Model Forms

    1. Permissible changes. Although use of the model forms is not 
required, lessors using them properly will be deemed to be in compliance 
with the regulation. Generally, lessors may make certain changes in the 
format or content of the forms and may delete any disclosures that are 
inapplicable to a transaction without losing the Act's protection from 
liability. For example, the model form based on monthly periodic 
payments may be modified for single-payment lease transactions or for 
quarterly or other regular or irregular periodic payments. The model 
form may also be modified to reflect that a transaction is an extension. 
The content, format, and headings for the segregated disclosures must be 
substantially similar to those contained in the model forms; therefore, 
any changes should be minimal. The changes to the model forms should not 
be so

[[Page 366]]

extensive as to affect the substance and the clarity of the disclosures.
    2. Examples of acceptable changes.
    i. Using the first person, instead of the second person, in 
referring to the lessee.
    ii. Using ``lessee,'' ``lessor,'' or names instead of pronouns.
    iii. Rearranging the sequence of the nonsegregated disclosures.
    iv. Incorporating certain state ``plain English'' requirements.
    v. Deleting or blocking out inapplicable disclosures, filling in 
``N/A'' (not applicable) or ``0,'' crossing out, leaving blanks, 
checking a box for applicable items, or circling applicable items (this 
should facilitate use of multipurpose standard forms).
    vi. Adding language or symbols to indicate estimates.
    vii. Adding numeric or alphabetic designations.
    viii. Rearranging the disclosures into vertical columns, except for 
Sec. 1013.4(b) through (e) disclosures.
    ix. Using icons and other graphics.
    3. Model closed-end or net vehicle lease disclosure. Model A-2 is 
designed for a closed-end or net vehicle lease. Under the ``Early 
Termination and Default'' provision a reference to the lessee's right to 
an independent appraisal of the leased vehicle under Sec. 1013.4(l) is 
included for those closed-end leases in which the lessee's liability at 
early termination is based on the vehicle's realized value.
    4. Model furniture lease disclosures. Model A-3 is a closed-end 
lease disclosure statement designed for a typical furniture lease. It 
does not include a disclosure of the appraisal right at early 
termination required under Sec. 1013.4(l) because few closed-end 
furniture leases base the lessee's liability at early termination on the 
realized value of the leased property. The disclosure should be added if 
it is applicable.

[76 FR 78502, Dec. 19, 2011, as amended at 76 FR 81790, Dec. 29, 2011; 
77 FR 69736, Nov. 21, 2012; 79 FR 70194, Nov. 25, 2013; 79 FR 56483, 
Sept. 22, 2014]



PART 1014_MORTGAGE ACTS AND PRACTICES_ADVERTISING (REGULATION N)--
Table of Contents



Sec.
1014.1 Scope of regulations in this part.
1014.2 Definitions.
1014.3 Prohibited representations.
1014.4 Waiver not permitted.
1014.5 Recordkeeping requirements.
1014.6 Actions by states.
1014.7 Severability.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1638 note.

    Source: 76 FR 78133, Dec. 16, 2011, unless otherwise noted.



Sec. 1014.1  Scope of regulations in this part.

    This part, known as Regulation N, is issued by the Bureau of 
Consumer Financial Protection to implement the 2009 Omnibus 
Appropriations Act, Public L. 111-8, section 626, 123 Stat. 524 (Mar. 
11, 2009), as amended by the Credit Card Accountability Responsibility 
and Disclosure Act of 2009, Public Law 111-24, section 511, 123 Stat. 
1734 (May 22, 2009), and as amended by the Dodd-Frank Wall Street Reform 
and Consumer Financial Protection Act of 2010, Public Law 111-203, 
section 1097, 124 Stat. 1376 (July 21, 2010). This part applies to 
persons over which the Federal Trade Commission has jurisdiction under 
the Federal Trade Commission Act.



Sec. 1014.2  Definitions.

    For the purposes of this part:
    Commercial communication means any written or oral statement, 
illustration, or depiction, whether in English or any other language, 
that is designed to effect a sale or create interest in purchasing goods 
or services, whether it appears on or in a label, package, package 
insert, radio, television, cable television, brochure, newspaper, 
magazine, pamphlet, leaflet, circular, mailer, book insert, free 
standing insert, letter, catalogue, poster, chart, billboard, public 
transit card, point of purchase display, film, slide, audio program 
transmitted over a telephone system, telemarketing script, on-hold 
script, upsell script, training materials provided to telemarketing 
firms, program-length commercial (``infomercial''), the internet, 
cellular network, or any other medium. Promotional materials and items 
and Web pages are included in the term commercial communication.
    Consumer means a natural person to whom a mortgage credit product is 
offered or extended.
    Credit means the right to defer payment of debt or to incur debt and 
defer its payment.
    Dwelling means a residential structure that contains one to four 
units,

[[Page 367]]

whether or not that structure is attached to real property. The term 
includes any of the following if used as a residence: an individual 
condominium unit, cooperative unit, mobile home, manufactured home, or 
trailer.
    Mortgage credit product means any form of credit that is secured by 
real property or a dwelling and that is offered or extended to a 
consumer primarily for personal, family, or household purposes.
    Person means any individual, group, unincorporated association, 
limited or general partnership, corporation, or other business entity.
    Term means any of the fees, costs, obligations, or characteristics 
of or associated with the product. It also includes any of the 
conditions on or related to the availability of the product.



Sec. 1014.3  Prohibited representations.

    It is a violation of this part for any person to make any material 
misrepresentation, expressly or by implication, in any commercial 
communication, regarding any term of any mortgage credit product, 
including but not limited to misrepresentations about:
    (a) The interest charged for the mortgage credit product, including 
but not limited to misrepresentations concerning:
    (1) The amount of interest that the consumer owes each month that is 
included in the consumer's payments, loan amount, or total amount due, 
or
    (2) Whether the difference between the interest owed and the 
interest paid is added to the total amount due from the consumer;
    (b) The annual percentage rate, simple annual rate, periodic rate, 
or any other rate;
    (c) The existence, nature, or amount of fees or costs to the 
consumer associated with the mortgage credit product, including but not 
limited to misrepresentations that no fees are charged;
    (d) The existence, cost, payment terms, or other terms associated 
with any additional product or feature that is or may be sold in 
conjunction with the mortgage credit product, including but not limited 
to credit insurance or credit disability insurance;
    (e) The terms, amounts, payments, or other requirements relating to 
taxes or insurance associated with the mortgage credit product, 
including but not limited to misrepresentations about:
    (1) Whether separate payment of taxes or insurance is required; or
    (2) The extent to which payment for taxes or insurance is included 
in the loan payments, loan amount, or total amount due from the 
consumer;
    (f) Any prepayment penalty associated with the mortgage credit 
product, including but not limited to misrepresentations concerning the 
existence, nature, amount, or terms of such penalty;
    (g) The variability of interest, payments, or other terms of the 
mortgage credit product, including but not limited to misrepresentations 
using the word ``fixed'';
    (h) Any comparison between:
    (1) Any rate or payment that will be available for a period less 
than the full length of the mortgage credit product; and
    (2) Any actual or hypothetical rate or payment;
    (i) The type of mortgage credit product, including but not limited 
to misrepresentations that the product is or involves a fully amortizing 
mortgage;
    (j) The amount of the obligation, or the existence, nature, or 
amount of cash or credit available to the consumer in connection with 
the mortgage credit product, including but not limited to 
misrepresentations that the consumer will receive a certain amount of 
cash or credit as part of a mortgage credit transaction;
    (k) The existence, number, amount, or timing of any minimum or 
required payments, including but not limited to misrepresentations about 
any payments or that no payments are required in a reverse mortgage or 
other mortgage credit product;
    (l) The potential for default under the mortgage credit product, 
including but not limited to misrepresentations concerning the 
circumstances under which the consumer could default for nonpayment of 
taxes, insurance, or maintenance, or for failure to meet other 
obligations;
    (m) The effectiveness of the mortgage credit product in helping the 
consumer resolve difficulties in paying

[[Page 368]]

debts, including but not limited to misrepresentations that any mortgage 
credit product can reduce, eliminate, or restructure debt or result in a 
waiver or forgiveness, in whole or in part, of the consumer's existing 
obligation with any person;
    (n) The association of the mortgage credit product or any provider 
of such product with any other person or program, including but not 
limited to misrepresentations that:
    (1) The provider is, or is affiliated with, any governmental entity 
or other organization; or
    (2) The product is or relates to a government benefit, or is 
endorsed, sponsored by, or affiliated with any government or other 
program, including but not limited to through the use of formats, 
symbols, or logos that resemble those of such entity, organization, or 
program;
    (o) The source of any commercial communication, including but not 
limited to misrepresentations that a commercial communication is made by 
or on behalf of the consumer's current mortgage lender or servicer;
    (p) The right of the consumer to reside in the dwelling that is the 
subject of the mortgage credit product, or the duration of such right, 
including but not limited to misrepresentations concerning how long or 
under what conditions a consumer with a reverse mortgage can stay in the 
dwelling;
    (q) The consumer's ability or likelihood to obtain any mortgage 
credit product or term, including but not limited to misrepresentations 
concerning whether the consumer has been preapproved or guaranteed for 
any such product or term;
    (r) The consumer's ability or likelihood to obtain a refinancing or 
modification of any mortgage credit product or term, including but not 
limited to misrepresentations concerning whether the consumer has been 
preapproved or guaranteed for any such refinancing or modification; and
    (s) The availability, nature, or substance of counseling services or 
any other expert advice offered to the consumer regarding any mortgage 
credit product or term, including but not limited to the qualifications 
of those offering the services or advice.



Sec. 1014.4  Waiver not permitted.

    It is a violation of this part for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this part.



Sec. 1014.5  Recordkeeping requirements.

    (a) Any person subject to this part shall keep, for a period of 
twenty-four months from the last date the person made or disseminated 
the applicable commercial communication regarding any term of any 
mortgage credit product, the following evidence of compliance with this 
part:
    (1) Copies of all materially different commercial communications as 
well as sales scripts, training materials, and marketing materials, 
regarding any term of any mortgage credit product, that the person made 
or disseminated during the relevant time period;
    (2) Documents describing or evidencing all mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such mortgage credit product available to consumers; and
    (3) Documents describing or evidencing all additional products or 
services (such as credit insurance or credit disability insurance) that 
are or may be offered or provided with the mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such additional product or service available to consumers.
    (b) Any person subject to this part may keep the records required by 
paragraph (a) of this section in any legible form, and in the same 
manner, format, or place as they keep such records in the ordinary 
course of business. Failure to keep all records required under paragraph 
(a) of this section shall be a violation of this part.



Sec. 1014.6  Actions by states.

    Any attorney general or other officer of a state authorized by the 
state to

[[Page 369]]

bring an action under this part may do so pursuant to section 626(b) of 
the 2009 Omnibus Appropriations Act, Public Law 111-8, section 626, 123 
Stat. 524 (Mar. 11, 2009), as amended by the Credit Card Accountability 
Responsibility and Disclosure Act of 2009, Public Law 111-24, section 
511, 123 Stat. 1734 (May 22, 2009), and as amended by Public Law 111-
203, section 1097, 124 Stat. 2102 (July 21, 2010).



Sec. 1014.7  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Bureau of Consumer Financial Protection's intention that the 
remaining provisions shall continue in effect.



PART 1015_MORTGAGE ASSISTANCE RELIEF SERVICES (REGULATION O)--
Table of Contents



Sec.
1015.1 Scope of regulations in this part.
1015.2 Definitions.
1015.3 Prohibited representations.
1015.4 Disclosures required in commercial communications.
1015.5 Prohibition on collection of advance payments and related 
          disclosures.
1015.6 Assisting and facilitating.
1015.7 Exemptions.
1015.8 Waiver not permitted.
1015.9 Recordkeeping and compliance requirements.
1015.10 Actions by states.
1015.11 Severability.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1638 note.

    Source: 76 FR 78133, Dec. 16, 2011, unless otherwise noted.



Sec. 1015.1  Scope of regulations in this part.

    This part, known as Regulation O, is issued by the Bureau of 
Consumer Financial Protection to implement the 2009 Omnibus 
Appropriations Act, Public Law 111-8, section 626, 123 Stat. 524 (Mar. 
11, 2009), as clarified by the Credit Card Accountability Responsibility 
and Disclosure Act of 2009, Public Law 111-24, section 511, 123 Stat. 
1734 (May 22, 2009), and as amended by the Dodd-Frank Wall Street Reform 
and Consumer Financial Protection Act of 2010, Public Law 111-203, 
section 1097, 124 Stat. 1376 (July 21, 2010). This part applies to 
persons over which the Federal Trade Commission has jurisdiction under 
the Federal Trade Commission Act.



Sec. 1015.2  Definitions.

    For the purposes of this part:
    Clear and prominent means:
    (1) In textual communications, the required disclosures shall be 
easily readable; in a high degree of contrast from the immediate 
background on which it appears; in the same languages that are 
substantially used in the commercial communication; in a format so that 
the disclosure is distinct from other text, such as inside a border; in 
a distinct type style, such as bold; parallel to the base of the 
commercial communication, and, except as otherwise provided in this 
rule, each letter of the disclosure shall be, at a minimum, the larger 
of 12-point type or one-half the size of the largest letter or numeral 
used in the name of the advertised Web site or telephone number to which 
consumers are referred to receive information relating to any mortgage 
assistance relief service. Textual communications include any 
communications in a written or printed form such as print publications 
or words displayed on the screen of a computer;
    (2) In communications disseminated orally or through audible means, 
such as radio or streaming audio, the required disclosures shall be 
delivered in a slow and deliberate manner and in a reasonably 
understandable volume and pitch;
    (3) In communications disseminated through video means, such as 
television or streaming video, the required disclosures shall appear 
simultaneously in the audio and visual parts of the commercial 
communication and be delivered in a manner consistent with paragraphs 
(1) and (2) of this definition. The visual disclosure shall be at least 
four percent of the vertical picture or screen height and appear for the 
duration of the oral disclosure;
    (4) In communications made through interactive media, such as the 
internet, online services, and software, the required disclosures shall:
    (i) Be consistent with paragraphs (1) through (3) of this 
definition;

[[Page 370]]

    (ii) Be made on, or immediately prior to, the page on which the 
consumer takes any action to incur any financial obligation;
    (iii) Be unavoidable, i.e., visible to consumers without requiring 
them to scroll down a Web page; and
    (iv) Appear in type at least the same size as the largest character 
of the advertisement;
    (5) In all instances, the required disclosures shall be presented in 
an understandable language and syntax, and with nothing contrary to, 
inconsistent with, or in mitigation of the disclosures used in any 
communication of them; and
    (6) For program-length television, radio, or internet-based 
multimedia commercial communications, the required disclosures shall be 
made at the beginning, near the middle, and at the end of the commercial 
communication.
    Client trust account means a separate account created by a licensed 
attorney for the purpose of holding client funds, which is:
    (1) Maintained in compliance with all applicable state laws and 
regulations, including licensing regulations; and
    (2) Located in the state where the attorney's office is located, or 
elsewhere in the United States with the consent of the consumer on whose 
behalf the funds are held.
    Commercial communication means any written or oral statement, 
illustration, or depiction, whether in English or any other language, 
that is designed to effect a sale or create interest in purchasing any 
service, plan, or program, whether it appears on or in a label, package, 
package insert, radio, television, cable television, brochure, 
newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, 
free standing insert, letter, catalogue, poster, chart, billboard, 
public transit card, point of purchase display, film, slide, audio 
program transmitted over a telephone system, telemarketing script, 
onhold script, upsell script, training materials provided to 
telemarketing firms, program-length commercial (``infomercial''), the 
internet, cellular network, or any other medium. Promotional materials 
and items and Web pages are included in the term ``commercial 
communication.''
    (1) General Commercial Communication means a commercial 
communication that occurs prior to the consumer agreeing to permit the 
provider to seek offers of mortgage assistance relief on behalf of the 
consumer, or otherwise agreeing to use the mortgage assistance relief 
service, and that is not directed at a specific consumer.
    (2) Consumer-Specific Commercial Communication means a commercial 
communication that occurs prior to the consumer agreeing to permit the 
provider to seek offers of mortgage assistance relief on behalf of the 
consumer, or otherwise agreeing to use the mortgage assistance relief 
service, and that is directed at a specific consumer.
    Consumer means any natural person who is obligated under any loan 
secured by a dwelling.
    Dwelling means a residential structure containing four or fewer 
units, whether or not that structure is attached to real property, that 
is primarily for personal, family, or household purposes. The term 
includes any of the following if used as a residence: An individual 
condominium unit, cooperative unit, mobile home, manufactured home, or 
trailer.
    Dwelling loan means any loan secured by a dwelling, and any 
associated deed of trust or mortgage.
    Dwelling Loan Holder means any individual or entity who holds the 
dwelling loan that is the subject of the offer to provide mortgage 
assistance relief services.
    Material means likely to affect a consumer's choice of, or conduct 
regarding, any mortgage assistance relief service.
    Mortgage Assistance Relief Service means any service, plan, or 
program, offered or provided to the consumer in exchange for 
consideration, that is represented, expressly or by implication, to 
assist or attempt to assist the consumer with any of the following:
    (1) Stopping, preventing, or postponing any mortgage or deed of 
trust foreclosure sale for the consumer's dwelling, any repossession of 
the consumer's dwelling, or otherwise saving the consumer's dwelling 
from foreclosure or repossession;
    (2) Negotiating, obtaining, or arranging a modification of any term 
of a

[[Page 371]]

dwelling loan, including a reduction in the amount of interest, 
principal balance, monthly payments, or fees;
    (3) Obtaining any forbearance or modification in the timing of 
payments from any dwelling loan holder or servicer on any dwelling loan;
    (4) Negotiating, obtaining, or arranging any extension of the period 
of time within which the consumer may:
    (i) Cure his or her default on a dwelling loan,
    (ii) Reinstate his or her dwelling loan,
    (iii) Redeem a dwelling, or
    (iv) Exercise any right to reinstate a dwelling loan or redeem a 
dwelling;
    (5) Obtaining any waiver of an acceleration clause or balloon 
payment contained in any promissory note or contract secured by any 
dwelling; or
    (6) Negotiating, obtaining or arranging:
    (i) A short sale of a dwelling,
    (ii) A deed-in-lieu of foreclosure, or
    (iii) Any other disposition of a dwelling other than a sale to a 
third party who is not the dwelling loan holder.
    Mortgage Assistance Relief Service Provider or Provider means any 
person that provides, offers to provide, or arranges for others to 
provide, any mortgage assistance relief service. This term does not 
include:
    (1) The dwelling loan holder, or any agent or contractor of such 
individual or entity.
    (2) The servicer of a dwelling loan, or any agent or contractor of 
such individual or entity.
    Person means any individual, group, unincorporated association, 
limited or general partnership, corporation, or other business entity, 
except to the extent that any person is specifically excluded from the 
Federal Trade Commission's jurisdiction pursuant to 15 U.S.C. 44 and 
45(a)(2).
    Servicer means the individual or entity responsible for:
    (1) Receiving any scheduled periodic payments from a consumer 
pursuant to the terms of the dwelling loan that is the subject of the 
offer to provide mortgage assistance relief services, including amounts 
for escrow accounts under section 10 of the Real Estate Settlement 
Procedures Act (12 U.S.C. 2609); and
    (2) Making the payments of principal and interest and such other 
payments with respect to the amounts received from the consumer as may 
be required pursuant to the terms of the mortgage servicing loan 
documents or servicing contract.
    Telemarketing means a plan, program, or campaign which is conducted 
to induce the purchase of any service, by use of one or more telephones 
and which involves more than one interstate telephone call.



Sec. 1015.3  Prohibited representations.

    It is a violation of this rule for any mortgage assistance relief 
service provider to engage in the following conduct:
    (a) Representing, expressly or by implication, in connection with 
the advertising, marketing, promotion, offering for sale, sale, or 
performance of any mortgage assistance relief service, that a consumer 
cannot or should not contact or communicate with his or her lender or 
servicer.
    (b) Misrepresenting, expressly or by implication, any material 
aspect of any mortgage assistance relief service, including but not 
limited to:
    (1) The likelihood of negotiating, obtaining, or arranging any 
represented service or result, such as those set forth in the definition 
of Mortgage Assistance Relief Service in Sec. 1015.2;
    (2) The amount of time it will take the mortgage assistance relief 
service provider to accomplish any represented service or result, such 
as those set forth in the definition of Mortgage Assistance Relief 
Service in Sec. 1015.2;
    (3) That a mortgage assistance relief service is affiliated with, 
endorsed or approved by, or otherwise associated with:
    (i) The United States government,
    (ii) Any governmental homeowner assistance plan,
    (iii) Any Federal, State, or local government agency, unit, or 
department,
    (iv) Any nonprofit housing counselor agency or program,
    (v) The maker, holder, or servicer of the consumer's dwelling loan, 
or
    (vi) Any other individual, entity, or program;
    (4) The consumer's obligation to make scheduled periodic payments or

[[Page 372]]

any other payments pursuant to the terms of the consumer's dwelling 
loan;
    (5) The terms or conditions of the consumer's dwelling loan, 
including but not limited to the amount of debt owed;
    (6) The terms or conditions of any refund, cancellation, exchange, 
or repurchase policy for a mortgage assistance relief service, including 
but not limited to the likelihood of obtaining a full or partial refund, 
or the circumstances in which a full or partial refund will be granted, 
for a mortgage assistance relief service;
    (7) That the mortgage assistance relief service provider has 
completed the represented services or has a right to claim, demand, 
charge, collect, or receive payment or other consideration;
    (8) That the consumer will receive legal representation;
    (9) The availability, performance, cost, or characteristics of any 
alternative to for-profit mortgage assistance relief services through 
which the consumer can obtain mortgage assistance relief, including 
negotiating directly with the dwelling loan holder or servicer, or using 
any nonprofit housing counselor agency or program;
    (10) The amount of money or the percentage of the debt amount that a 
consumer may save by using the mortgage assistance relief service;
    (11) The total cost to purchase the mortgage assistance relief 
service; or
    (12) The terms, conditions, or limitations of any offer of mortgage 
assistance relief the provider obtains from the consumer's dwelling loan 
holder or servicer, including the time period in which the consumer must 
decide to accept the offer;
    (c) Making a representation, expressly or by implication, about the 
benefits, performance, or efficacy of any mortgage assistance relief 
service unless, at the time such representation is made, the provider 
possesses and relies upon competent and reliable evidence that 
substantiates that the representation is true. For the purposes of this 
paragraph, competent and reliable evidence means tests, analyses, 
research, studies, or other evidence based on the expertise of 
professionals in the relevant area, that have been conducted and 
evaluated in an objective manner by individuals qualified to do so, 
using procedures generally accepted in the profession to yield accurate 
and reliable results.



Sec. 1015.4  Disclosures required in commercial communications.

    It is a violation of this rule for any mortgage assistance relief 
service provider to engage in the following conduct:
    (a) Disclosures in All General Commercial Communications--Failing to 
place the following statements in every general commercial communication 
for any mortgage assistance relief service:
    (1) ``(Name of company) is not associated with the government, and 
our service is not approved by the government or your lender.''
    (2) In cases where the mortgage assistance relief service provider 
has represented, expressly or by implication, that consumers will 
receive any service or result set forth in paragraphs (2) through (6) of 
the definition of Mortgage Assistance Relief Service in Sec. 1015.2, 
``Even if you accept this offer and use our service, your lender may not 
agree to change your loan.''
    (3) The disclosures required by this paragraph must be made in a 
clear and prominent manner, and--
    (i) In textual communications the disclosures must appear together 
and be preceded by the heading ``IMPORTANT NOTICE,'' which must be in 
bold face font that is two point-type larger than the font size of the 
required disclosures; and
    (ii) In communications disseminated orally or through audible means, 
wholly or in part, the audio component of the required disclosures must 
be preceded by the statement ``Before using this service, consider the 
following information.''
    (b) Disclosures in All Consumer-Specific Commercial Communications--
Failing to disclose the following information in every consumer-specific 
commercial communication for any mortgage assistance relief service:
    (1) ``You may stop doing business with us at any time. You may 
accept or reject the offer of mortgage assistance we obtain from your 
lender [or servicer]. If you reject the offer, you do not have to pay 
us. If you accept the

[[Page 373]]

offer, you will have to pay us (insert amount or method for calculating 
the amount) for our services.'' For the purposes of this paragraph 
(b)(1), the amount ``you will have to pay'' shall consist of the total 
amount the consumer must pay to purchase, receive, and use all of the 
mortgage assistance relief services that are the subject of the sales 
offer, including, but not limited to, all fees and charges.
    (2) ``(Name of company) is not associated with the government, and 
our service is not approved by the government or your lender.''
    (3) In cases where the mortgage assistance relief service provider 
has represented, expressly or by implication, that consumers will 
receive any service or result set forth in paragraphs (2) through (6) of 
the definition of Mortgage Assistance Relief Service in Sec. 1015.2, 
``Even if you accept this offer and use our service, your lender may not 
agree to change your loan.''
    (4) The disclosures required by this paragraph must be made in a 
clear and prominent manner, and--
    (i) In textual communications the disclosures must appear together 
and be preceded by the heading ``IMPORTANT NOTICE,'' which must be in 
bold face font that is two point-type larger than the font size of the 
required disclosures; and
    (ii) In communications disseminated orally or through audible means, 
wholly or in part, the audio component of the required disclosures must 
be preceded by the statement ``Before using this service, consider the 
following information'' and, in telephone communications, must be made 
at the beginning of the call.
    (c) Disclosures in All General Commercial Communications, Consumer-
Specific Commercial Communications, and Other Communications--In cases 
where the mortgage assistance relief service provider has represented, 
expressly or by implication, in connection with the advertising, 
marketing, promotion, offering for sale, sale, or performance of any 
mortgage assistance relief service, that the consumer should temporarily 
or permanently discontinue payments, in whole or in part, on a dwelling 
loan, failing to disclose, clearly and prominently, and in close 
proximity to any such representation that ``If you stop paying your 
mortgage, you could lose your home and damage your credit rating.''



Sec. 1015.5  Prohibition on collection of advance payments and related
disclosures.

    It is a violation of this rule for any mortgage assistance relief 
service provider to:
    (a) Request or receive payment of any fee or other consideration 
until the consumer has executed a written agreement between the consumer 
and the consumer's dwelling loan holder or servicer incorporating the 
offer of mortgage assistance relief the provider obtained from the 
consumer's dwelling loan holder or servicer;
    (b) Fail to disclose, at the time the mortgage assistance relief 
service provider furnishes the consumer with the written agreement 
specified in paragraph (a) of this section, the following information: 
``This is an offer of mortgage assistance we obtained from your lender 
[or servicer]. You may accept or reject the offer. If you reject the 
offer, you do not have to pay us. If you accept the offer, you will have 
to pay us [same amount as disclosed pursuant to Sec. 1015.4(b)(1)] for 
our services.'' The disclosure required by this paragraph must be made 
in a clear and prominent manner, on a separate written page, and 
preceded by the heading: ``IMPORTANT NOTICE: Before buying this service, 
consider the following information.'' The heading must be in bold face 
font that is two point-type larger than the font size of the required 
disclosure; or
    (c)(1) Fail to provide, at the time the mortgage assistance relief 
service provider furnishes the consumer with the written agreement 
specified in paragraph (a) of this section, a notice from the consumer's 
dwelling loan holder or servicer that describes all material differences 
between the terms, conditions, and limitations associated with the 
consumer's current mortgage loan and the terms, conditions, and 
limitations associated with the consumer's mortgage loan if he or she 
accepts the dwelling loan holder's or servicer's offer, including but 
not limited to differences in the loan's:

[[Page 374]]

    (i) Principal balance;
    (ii) Contract interest rate, including the maximum rate and any 
adjustable rates, if applicable;
    (iii) Amount and number of the consumer's scheduled periodic 
payments on the loan;
    (iv) Monthly amounts owed for principal, interest, taxes, and any 
mortgage insurance on the loan;
    (v) Amount of any delinquent payments owing or outstanding;
    (vi) Assessed fees or penalties; and
    (vii) Term.
    (2) The notice must be made in a clear and prominent manner, on a 
separate written page, and preceded by heading: ``IMPORTANT INFORMATION 
FROM YOUR [name of lender or servicer] ABOUT THIS OFFER.'' The heading 
must be in bold face font that is two-point-type larger than the font 
size of the required disclosure.
    (d) Fail to disclose in the notice specified in paragraph (c) of 
this section, in cases where the offer of mortgage assistance relief the 
provider obtained from the consumer's dwelling loan holder or servicer 
is a trial mortgage loan modification, the terms, conditions, and 
limitations of this offer, including but not limited to:
    (1) The fact that the consumer may not qualify for a permanent 
mortgage loan modification; and
    (2) The likely amount of the scheduled periodic payments and any 
arrears, payments, or fees that the consumer would owe in failing to 
qualify.



Sec. 1015.6  Assisting and facilitating.

    It is a violation of this rule for a person to provide substantial 
assistance or support to any mortgage assistance relief service provider 
when that person knows or consciously avoids knowing that the provider 
is engaged in any act or practice that violates this rule.



Sec. 1015.7  Exemptions.

    (a) An attorney is exempt from this part, with the exception of 
Sec. 1015.5, if the attorney:
    (1) Provides mortgage assistance relief services as part of the 
practice of law;
    (2) Is licensed to practice law in the state in which the consumer 
for whom the attorney is providing mortgage assistance relief services 
resides or in which the consumer's dwelling is located; and
    (3) Complies with state laws and regulations that cover the same 
type of conduct the rule requires.
    (b) An attorney who is exempt pursuant to paragraph (a) of this 
section is also exempt from Sec. 1015.5 if the attorney:
    (1) Deposits any funds received from the consumer prior to 
performing legal services in a client trust account; and
    (2) Complies with all state laws and regulations, including 
licensing regulations, applicable to client trust accounts.



Sec. 1015.8  Waiver not permitted.

    It is a violation of this rule for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this rule.



Sec. 1015.9  Recordkeeping and compliance requirements.

    (a) Any mortgage assistance relief provider must keep, for a period 
of twenty-four (24) months from the date the record is created, the 
following records:
    (1) All contracts or other agreements between the provider and any 
consumer for any mortgage assistance relief service;
    (2) Copies of all written communications between the provider and 
any consumer occurring prior to the date on which the consumer entered 
into an agreement with the provider for any mortgage assistance relief 
service;
    (3) Copies of all documents or telephone recordings created in 
connection with compliance with paragraph (b) of this section;
    (4) All consumer files containing the names, phone numbers, dollar 
amounts paid, and descriptions of mortgage assistance relief services 
purchased, to the extent the mortgage assistance relief service provider 
keeps such information in the ordinary course of business;
    (5) Copies of all materially different sales scripts, training 
materials, commercial communications, or other marketing materials, 
including Web sites

[[Page 375]]

and weblogs, for any mortgage assistance relief service; and
    (6) Copies of the documentation provided to the consumer as 
specified in Sec. 1015.5 of this rule;
    (b) A mortgage assistance relief service provider also must:
    (1) Take reasonable steps sufficient to monitor and ensure that all 
employees and independent contractors comply with this rule. Such steps 
shall include the monitoring of communications directed at specific 
consumers, and shall also include, at a minimum, the following:
    (i) If the mortgage assistance relief service provider is engaged in 
the telemarketing of mortgage assistance relief services, performing 
random, blind recording and testing of the oral representations made by 
individuals engaged in sales or other customer service functions;
    (ii) Establishing a procedure for receiving and responding to all 
consumer complaints; and
    (iii) Ascertaining the number and nature of consumer complaints 
regarding transactions in which all employees and independent 
contractors are involved;
    (2) Investigate promptly and fully each consumer complaint received;
    (3) Take corrective action with respect to any employee or 
contractor whom the mortgage assistance relief service provider 
determines is not complying with this rule, which may include training, 
disciplining, or terminating such individual; and
    (4) Maintain any information and material necessary to demonstrate 
its compliance with paragraphs (b)(1) through (3) of this section.
    (c) A mortgage assistance relief provider may keep the records 
required by paragraphs (a) and (b) of this section in any form, and in 
the same manner, format, or place as it keeps such records in the 
ordinary course of business.
    (d) It is a violation of this rule for a mortgage assistance relief 
service provider not to comply with this section.



Sec. 1015.10  Actions by states.

    Any attorney general or other officer of a state authorized by the 
state to bring an action under this part may do so pursuant to section 
626(b) of the 2009 Omnibus Appropriations Act, Public Law 111-8, section 
626, 123 Stat. 524 (Mar. 11, 2009), as amended by Public Law 111-24, 
section 511, 123 Stat. 1734 (May 22, 2009), and as amended by Public Law 
111-203, section 1097, 124 Stat. 2102 (July 21, 2010).



Sec. 1015.11  Severability.

    The provisions of this rule are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Bureau of Consumer Financial Protection's intention that the 
remaining provisions shall continue in effect.



PART 1016_PRIVACY OF CONSUMER FINANCIAL INFORMATION (REGULATION P)--
Table of Contents



Sec.
1016.1 Purpose and scope.
1016.2 Model privacy form and examples.
1016.3 Definitions.

                  Subpart A_Privacy and Opt Out Notices

1016.4 Initial privacy notice to consumers required.
1016.5 Annual privacy notice to customers required.
1016.6 Information to be included in privacy notices.
1016.7 Form of opt out notice to consumers; opt out methods.
1016.8 Revised privacy notices.
1016.9 Delivering privacy and opt out notices.

                     Subpart B_Limits on Disclosures

1016.10 Limits on disclosure of nonpublic personal information to 
          nonaffiliated third parties.
1016.11 Limits on redisclosure and reuse of information.
1016.12 Limits on sharing account number information for marketing 
          purposes.

                          Subpart C_Exceptions

1016.13 Exception to opt out requirements for service providers and 
          joint marketing.
1016.14 Exceptions to notice and opt out requirements for processing and 
          servicing transactions.
1016.15 Other exceptions to notice and opt out requirements.

[[Page 376]]

                    Subpart D_Relation to Other Laws

1016.16 Protection of Fair Credit Reporting Act.
1016.17 Relation to state laws.

Appendix to Part 1016--Model Privacy Form

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 6804.

    Source: 76 FR 79028, Dec. 21, 2011, unless otherwise noted.



Sec. 1016.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution may 
disclose nonpublic personal information about consumers to nonaffiliated 
third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated third 
parties by ``opting out'' of that disclosure, subject to the exceptions 
in Sec. Sec. 1016.13, 1016.14, and 1016.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information about 
companies or about individuals who obtain financial products or services 
for business, commercial, or agricultural purposes. This part applies to 
those financial institutions and other persons for which the Bureau of 
Consumer Financial Protection (Bureau) has rulemaking authority pursuant 
to section 504(a)(1)(A) of the Gramm-Leach-Bliley Act (GLB Act) (15 
U.S.C. 6804(a)(1)(A)). Specifically, this part applies to any financial 
institution and other covered person or service provider that is subject 
to Subtitle A of Title V of the GLB Act, including third parties that 
are not financial institutions but that receive nonpublic personal 
information from financial institutions with whom they are not 
affiliated. This part does not apply to certain motor vehicle dealers 
described in 12 U.S.C. 5519 or to entities for which the Securities and 
Exchange Commission or the Commodity Futures Trading Commission has 
rulemaking authority pursuant to sections 504(a)(1)(A)-(B) of the GLB 
Act (15 U.S.C. 6804(a)(1)(A)-(B)). Except as otherwise specifically 
provided herein, entities to which this part applies are referred to in 
this part as ``you.''
    (2)(i) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).
    (ii) Any institution of higher education that complies with the 
Federal Educational Rights and Privacy Act (FERPA), 20 U.S.C. 1232g, and 
its implementing regulations, 34 CFR part 99, and that is also a 
financial institution described in Sec. 1016.3(l)(3) of this part, shall 
be deemed to be in compliance with this part if it is in compliance with 
FERPA.
    (3) Nothing in this part shall apply to:
    (i) A financial institution that is a person described in section 
1029(a) of the Consumer Financial Protection Act of 2010, title X of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), Public Law 111-203, 124 Stat. 1376 (12 U.S.C. 5519(a));
    (ii) A financial institution or other person subject to the 
jurisdiction on the Commodity Futures Trading Commission under 7 U.S.C. 
7b-2;
    (iii) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.;)
    (iv) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any state, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (v) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.;) or
    (vi) An insurance company, with respect to its insurance activities 
and its

[[Page 377]]

activities incidental to those insurance activities, that is subject to 
supervision by a state insurance regulator.

[76 FR 79028, Dec. 21, 2011, as amended at 79 FR 64081, Oct. 28, 2014]



Sec. 1016.2  Model privacy form and examples.

    (a) Model privacy form. Use of the model privacy form in the 
appendix to this part, consistent with the instructions in the appendix 
constitutes compliance with the notice content requirements of 
Sec. Sec. 1016.6 and 1016.7 of this part, although use of the model 
privacy form is not required.
    (b) Examples. The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.



Sec. 1016.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a)(1) Affiliate means any company that controls, is controlled by, 
or is under common control with another company.
    (2) Examples in the case of a credit union. (i) An affiliate of a 
Federal credit union is a credit union service organization (CUSO), as 
provided in 12 CFR part 712, that is controlled by the Federal credit 
union.
    (ii) An affiliate of a federally-insured, state-chartered credit 
union is a company that is controlled by the credit union.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice whenever 
possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on Web sites. If you provide a notice on a Web site, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the Web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and you 
either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly to 
the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, irrespective 
of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family,

[[Page 378]]

or household purposes, or that individual's legal representative.
    (2) Examples in the case of a financial institution other than a 
credit union. For purposes of this paragraph (e)(2), ``you'' is limited 
to financial institutions other than credit unions.
    (i) An individual who applies to you for credit for personal, 
family, or household purposes is a consumer of a financial service, 
regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household purposes, 
the individual is your consumer, even if you hold those rights in 
conjunction with one or more other institutions. (The individual is also 
a consumer with respect to the other financial institutions involved.) 
An individual who has a loan in which you have ownership or servicing 
rights is your consumer, even if you, or another institution with those 
rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial institution 
is not your consumer solely because you act as agent for, or provide 
processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she has 
designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she is 
a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (3) Examples in the case of a credit union. For purposes of this 
paragraph (e)(3), ``you'' is limited to credit unions.
    (i) An individual who provides nonpublic personal information to you 
in connection with obtaining or seeking to obtain credit union 
membership is your consumer regardless of whether you establish a 
customer relationship.
    (ii) An individual who provides nonpublic personal information to 
you in connection with using your ATM is your consumer.
    (iii) If you hold ownership or servicing rights to an individual's 
loan, the individual is your consumer, even if you hold those rights in 
conjunction with one or more financial institutions. The individual is 
also a consumer with respect to the other financial institutions 
involved. This applies even if you, or another financial institution 
with those rights, hire an agent to collect on the loan or to provide 
processing or other services.
    (iv) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, or 
provide processing or other services to, that financial institution.
    (v) An individual is not your consumer solely because he or she is a 
participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the

[[Page 379]]

company as determined by the applicable prudential regulator (as defined 
in 12 U.S.C. 5481(24)), if any.
    (4) Example in the case of credit unions. A credit union is presumed 
to have a controlling influence over the management or policies of a 
CUSO, if the CUSO is 67% owned by credit unions.
    (h) Credit union means a Federal or state-chartered credit union 
that the National Credit Union Share Insurance Fund insures.
    (i) Customer means a consumer who has a customer relationship with 
you.
    (j)(1) Customer relationship means a continuing relationship between 
a consumer and you under which you provide one or more financial 
products or services to the consumer that are to be used primarily for 
personal, family, or household purposes. As noted in the examples, and 
for purposes of this part only, in the case of a credit union, a 
customer relationship will exist between a credit union and certain 
consumers that are not the credit union's members.
    (2) Examples in the case of financial institutions other than credit 
unions and covered entities subject to FTC enforcement jurisdiction. For 
purposes of this paragraph (j)(2), ``you'' is limited to financial 
institutions other than credit unions and financial institutions 
described in paragraph (l)(3) of this section.
    (i) Continuing relationship. A consumer has a continuing 
relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act as 
a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or
    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's check 
or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (3) Examples in the case of covered entities subject to FTC 
enforcement jurisdiction. For purposes of this paragraph (j)(3), ``you'' 
is limited to financial institutions described in paragraph (l)(3) of 
this section.
    (i) Continuing relationship. A consumer has a continuing 
relationship with you if the consumer:
    (A) Has a credit or investment account with you;
    (B) Obtains a loan from you;
    (C) Purchases an insurance product from you;
    (D) Holds an investment product through you, such as when you act as 
a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (E) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan, or credit to 
purchase a vehicle, for the consumer;
    (F) Enters into a lease of personal property on a non-operating 
basis with you;
    (G) Obtains financial, investment, or economic advisory services 
from you for a fee;
    (H) Becomes your client for the purpose of obtaining tax preparation 
or credit counseling services from you;
    (I) Obtains career counseling while seeking employment with a 
financial institution or the finance, accounting, or audit department of 
any company (or while employed by such a financial institution or 
department of any company);

[[Page 380]]

    (J) Is obligated on an account that you purchase from another 
financial institution, regardless of whether the account is in default 
when purchased, unless you do not locate the consumer or attempt to 
collect any amount from the consumer on the account;
    (K) Obtains real estate settlement services from you; or
    (L) Has a loan for which you own the servicing rights.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service from you 
only in isolated transactions, such as using your ATM to withdraw cash 
from an account at another financial institution; purchasing a money 
order from you; cashing a check with you; or making a wire transfer 
through you;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan;
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions;
    (D) The consumer obtains one-time personal or real property 
appraisal services from you; or
    (E) The consumer purchases checks for a personal checking account 
from you.
    (4) Examples in the case of a credit union. (i) Continuing 
relationship. A consumer has a continuing relationship with a credit 
union if the consumer:
    (A) Is a member as defined in the credit union's bylaws;
    (B) Is a nonmember who has a share, share draft, or credit card 
account with the credit union jointly with a member;
    (C) Is a nonmember who has a loan that the credit union services;
    (D) Is a nonmember who has an account with a credit union that has 
been designated as a low-income credit union; or
    (E) Is a nonmember who has an account in a federally-insured, state-
chartered credit union pursuant to state law.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with a credit union if the consumer is a 
nonmember and:
    (A) The consumer only obtains a financial product or service in 
isolated transactions, such as using the credit union's ATM to withdraw 
cash from an account maintained at another financial institution or 
purchasing travelers checks; or
    (B) The credit union sells the consumer's loan and does not retain 
the rights to service that loan.
    (k) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The National Credit Union Administration Board; and
    (5) The Securities and Exchange Commission.
    (l)(1) Except for entities described in paragraph (l)(3) of this 
section, financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) For purposes of paragraph (l)(1) of this section, financial 
institution does not include:
    (i) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.;)
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.;) or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party.
    (3)(i) Special definition for entities subject to the Federal Trade 
Commission's enforcement jurisdiction. In the case of an entity 
described in section 505(a)(7) of the GLB Act (other than such an entity 
described in section 504(a)(1)(C) of that

[[Page 381]]

Act), financial institution means any institution the business of which 
is engaging in financial activities as described in section 4(k) of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)). For purposes of 
this paragraph (l)(3), an institution that is significantly engaged in 
financial activities is a financial institution.
    (ii) Examples of financial institution. For purposes of this 
paragraph (l)(3):
    (A) A retailer that extends credit by issuing its own credit card 
directly to consumers is a financial institution because extending 
credit is a financial activity listed in 12 CFR 225.28(b)(1) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act and 
issuing that extension of credit through a proprietary credit card 
demonstrates that a retailer is significantly engaged in extending 
credit.
    (B) A personal property or real estate appraiser is a financial 
institution because real and personal property appraisal is a financial 
activity listed in 12 CFR 225.28(b)(2)(i) and referenced in section 
4(k)(4)(F) of the Bank Holding Company Act.
    (C) An automobile dealership that is not described in section 
1029(a) of the Dodd-Frank Act (12 U.S.C. 5519(a)) and that, as a usual 
part of its business, leases automobiles on a nonoperating basis for 
longer than 90 days is a financial institution with respect to its 
leasing business because leasing personal property on a nonoperating 
basis where the initial term of the lease is at least 90 days is a 
financial activity listed in 12 CFR 225.28(b)(3) and referenced in 
section 4(k)(4)(F) of the Bank Holding Company Act.
    (D) A career counselor that specializes in providing career 
counseling services to individuals currently employed by or recently 
displaced from a financial organization, individuals who are seeking 
employment with a financial organization, or individuals who are 
currently employed by or seeking placement with the finance, accounting 
or audit departments of any company is a financial institution because 
such career counseling activities are financial activities listed in 12 
CFR 225.28(b)(9)(iii) and referenced in section 4(k)(4)(F) of the Bank 
Holding Company Act.
    (E) A business that prints and sells checks for consumers, either as 
its sole business or as one of its product lines, is a financial 
institution because printing and selling checks is a financial activity 
that is listed in 12 CFR 225.28(b)(10)(ii) and referenced in section 
4(k)(4)(F) of the Bank Holding Company Act.
    (F) A business that regularly wires money to and from consumers is a 
financial institution because transferring money is a financial activity 
referenced in section 4(k)(4)(A) of the Bank Holding Company Act and 
regularly providing that service demonstrates that the business is 
significantly engaged in that activity.
    (G) A check cashing business is a financial institution because 
cashing a check is exchanging money, which is a financial activity 
listed in section 4(k)(4)(A) of the Bank Holding Company Act.
    (H) An accountant or other tax preparation service that is in the 
business of completing income tax returns is a financial institution 
because tax preparation services is a financial activity listed in 12 
CFR 225.28(b)(6)(vi) and referenced in section 4(k)(4)(G) of the Bank 
Holding Company Act.
    (I) A business that operates a travel agency in connection with 
financial services is a financial institution because operating a travel 
agency in connection with financial services is a financial activity 
listed in 12 CFR 211.5(d)(15) and referenced in section 4(k)(4)(G) of 
the Bank Holding Company Act.
    (J) An entity that provides real estate settlement services is a 
financial institution because providing real estate settlement services 
is a financial activity listed in 12 CFR 225.28(b)(2)(viii) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act.
    (K) A mortgage broker is a financial institution because brokering 
loans is a financial activity listed in 12 CFR 225.28(b)(1) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act.
    (L) An investment advisory company and a credit counseling service 
are

[[Page 382]]

each financial institutions because providing financial and investment 
advisory services are financial activities referenced in section 
4(k)(4)(C) of the Bank Holding Company Act.
    (iii) For purposes of this paragraph (l)(3), financial institution 
does not include:
    (A) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.;)
    (B) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.;) or
    (C) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights) or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party other than as permitted by 
Sec. Sec. 1016.14 and 1016.15 of this part.
    (D) Entities that engage in financial activities but that are not 
significantly engaged in those financial activities.
    (iv) Examples of entities that are not significantly engaged in 
financial activities. (A) A retailer is not a financial institution if 
its only means of extending credit are occasional ``lay away'' and 
deferred payment plans or accepting payment by means of credit cards 
issued by others.
    (B) A retailer is not a financial institution merely because it 
accepts payment in the form of cash, checks, or credit cards that it did 
not issue.
    (C) A merchant is not a financial institution merely because it 
allows an individual to ``run a tab.''
    (D) A grocery store is not a financial institution merely because it 
allows individuals to whom it sells groceries to cash a check, or write 
a check for a higher amount than the grocery purchase and obtain cash in 
return.
    (m)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Special definition for entities subject to the Federal Trade 
Commission's enforcement jurisdiction. In the case of an entity 
described in section 505(a)(7) of the GLB Act (other than such an entity 
described in section 504(a)(1)(C) of that Act), financial product or 
service means any product or service that a financial holding company 
could offer by engaging in a financial activity under section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (3) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (n) Member means a consumer who is a member of a credit union, as 
defined in the credit union's bylaws.
    (o)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other company 
that jointly employs the person).
    (2) Nonaffiliated third party includes, for financial institutions 
other than credit unions, any company that is an affiliate solely by 
virtue of your or your affiliate's direct or indirect ownership or 
control of the company in conducting merchant banking or investment 
banking activities of the type described in section 4(k)(4)(H) or 
insurance company investment activities of the type described in section 
4(k)(4)(I) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)(4)(H) and (I)).
    (p)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived using 
any personally identifiable financial information that is not publicly 
available.
    (2) Nonpublic personal information does not include:

[[Page 383]]

    (i) Publicly available information, except as included on a list 
described in paragraph (p)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists. (i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (q)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, a credit card, a credit union membership, or other 
financial product or service;
    (B) Account balance information, payment history, overdraft history, 
and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your customers 
or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on, or 
servicing, a loan or a credit account;
    (F) Any information you collect through an internet ``cookie'' (an 
information collecting device from a Web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as aggregate 
information or blind data that does not contain personal identifiers 
such as account numbers, names, or addresses.
    (r)(1) Publicly available information means any information that you 
have a reasonable basis to believe is lawfully made available to the 
general public from:
    (i) Federal, state, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be made 
by Federal, state, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you have 
taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples. (i) Government records. Publicly available information 
in government records includes information in government real estate 
records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a Web site that is 
available to the general

[[Page 384]]

public on an unrestricted basis. A Web site is not restricted merely 
because an Internet service provider or a site operator requires a fee 
or a password, so long as access is available to the general public.
    (iii) Reasonable basis. (A) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if you 
have located the telephone number in the telephone book or the consumer 
has informed you that the telephone number is not unlisted.
    (s)(1) You means a financial institution or other person for which 
the Bureau has rulemaking authority under section 504(a)(1)(A) of the 
GLB Act (15 U.S.C. 6804(a)(1)(A)).
    (2) You does not include:
    (i) A financial institution that is a person described in section 
1029(a) of the Consumer Financial Protection Act of 2010 (12 U.S.C. 
5519(a));
    (ii) A financial institution or other person subject to the 
jurisdiction on the Commodity Futures Trading Commission under 7 U.S.C. 
7b-2;
    (iii) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.;)
    (iv) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any State, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (v) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.;) or
    (vi) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a State insurance regulator.



                  Subpart A_Privacy and Opt Out Notices



Sec. 1016.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic personal 
information about the consumer to any nonaffiliated third party, if you 
make such a disclosure other than as authorized by Sec. Sec. 1016.14 and 
1016.15 of this part.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about the 
consumer to any nonaffiliated third party, other than as authorized by 
Sec. Sec. 1016.14 and 1016.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans. You establish a customer relationship 
with a consumer when you originate or acquire the servicing rights to a 
loan to the consumer for personal, family, or household purposes. If you 
subsequently transfer the servicing rights to that loan to another 
financial institution, the customer relationship transfers with the 
servicing rights.
    (3) Examples--(i) Examples of establishing customer relationship by 
financial institutions other than credit unions and covered entities 
subject to FTC enforcement jurisdiction. For purposes of this paragraph 
(c)(3)(i), ``you'' is limited to financial institutions other than 
credit unions and financial institutions described in Sec. 1016.3(l)(3). 
You establish a customer relationship when the consumer:
    (A) Opens a credit card account with you;

[[Page 385]]

    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of establishing customer relationship by covered 
entities subject to FTC enforcement jurisdiction. For purposes of this 
paragraph (c)(3)(ii), ``you'' is limited to financial institutions 
described in Sec. 1016.3(l)(3) of this part. You establish a customer 
relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to obtain credit from you or purchases 
insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee;
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services or to obtain career counseling 
while seeking employment with a financial institution or the finance, 
accounting, or audit department of any company (or while employed by 
such a company or financial institution);
    (E) Provides any personally identifiable financial information to 
you in an effort to obtain a mortgage loan through you;
    (F) Executes the lease for personal property with you;
    (G) Is an obligor on an account that you purchased from another 
financial institution and whom you have located and begun attempting to 
collect amounts owed on the account; or
    (H) Provides you with the information necessary for you to compile 
and provide access to all of the consumer's online financial accounts at 
your Web site.
    (iii) Examples of establishing customer relationship by credit 
unions. For purposes of this paragraph (c)(3)(iii), ``you'' is limited 
to a credit union. You establish a customer relationship when the 
consumer:
    (A) Becomes your member under your bylaws;
    (B) Is a nonmember and opens a credit card account with you jointly 
with a member under your procedures;
    (C) Is a nonmember and executes the contract to open a share or 
share draft account with you or obtains credit from you jointly with a 
member, including an individual acting as a guarantor;
    (D) Is a nonmember and opens an account with you and you are a 
credit union designated as a low-income credit union;
    (E) Is a nonmember and opens an account with you pursuant to State 
law and you are a State-chartered credit union.
    (iv) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec. 1016.8 of 
this part, that covers the customer's new financial product or service; 
or
    (2) If the initial, revised, or annual notice that you most recently 
provided to that customer was accurate with respect to the new financial 
product or service, you do not need to provide a new privacy notice 
under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.

[[Page 386]]

    (2) Examples of exceptions--(i) Not at customer's election. (A) In 
the case of financial institutions other than credit unions and 
financial institutions described in Sec. 1016.3(l)(3), establishing a 
customer relationship is not at the customer's election if you acquire a 
customer's deposit liability or the servicing rights to a customer's 
loan from another financial institution and the customer does not have a 
choice about your acquisition.
    (B) In the case of financial institutions described in 
Sec. 1016.3(l)(3), establishing a customer relationship is not at the 
customer's election if you acquire a customer's loan or the servicing 
rights from another financial institution and the customer does not have 
a choice about your acquisition.
    (C) In the case of credit unions, establishing a customer 
relationship is not at the customer's election if you acquire a 
customer's deposit liability from another financial institution and the 
customer does not have a choice about your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial product 
or service; or
    (B) You establish a customer relationship with an individual under a 
program authorized by title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the relationship 
is initiated in person at your office or through other means by which 
the customer may view the notice, such as on a Web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec. 1016.9 of 
this part. If you use a short-form initial notice for non-customers 
according to Sec. 1016.6(d) of this part, you may deliver your privacy 
notice according to Sec. 1016.6(d)(3).



Sec. 1016.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous notice 
to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the customer 
relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may define 
the 12-consecutive-month period, but you must apply it to the customer 
on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the calendar 
year in which you provided the initial notice. For example, if a 
customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required to 
provide an annual notice to a former customer.
    (2) Examples in the case of financial institutions other than credit 
unions and covered entities subject to FTC enforcement jurisdiction. For 
purposes of this paragraph (b)(2), ``you'' is limited to financial 
institutions other than credit unions and financial institutions 
described in Sec. 1016.3(l)(3). Your customer becomes a former customer 
when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan in 
full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months,

[[Page 387]]

other than to provide annual privacy notices or promotional material.
    (3) Examples in the case of covered entities subject to FTC 
enforcement jurisdiction. For purposes of this paragraph (b)(3), ``you'' 
is limited to financial institutions described in Sec. 1016.3(l)(3) of 
this part. Your customer becomes a former customer when:
    (i) In the case of a closed-end loan, the customer pays the loan in 
full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (ii) In the case of a credit card relationship or other open-end 
credit relationship, you sell the receivables without retaining 
servicing rights;
    (iii) In the case of credit counseling services, the customer has 
failed to make required payments under a debt management plan, has been 
notified that the plan is terminated, and you no longer provide any 
statements or notices to the customer concerning that relationship;
    (iv) In the case of mortgage or vehicle loan brokering services, 
your customer has obtained a loan through you (and you no longer provide 
any statements or notices to the customer concerning that relationship), 
or has ceased using your services for such purposes;
    (v) In the case of tax preparation services, you have provided and 
received payment for the service and no longer provide any statements or 
notices to the customer concerning that relationship;
    (vi) In the case of providing real estate settlement services, at 
the time the customer completes execution of all documents related to 
the real estate closing, you have received payment, or you have 
completed all of your responsibilities with respect to the settlement, 
including filing documents on the public record, whichever is later; or
    (vii) In cases where there is no definitive time at which the 
customer relationship has terminated, you have not communicated with the 
customer about the relationship for a period of 12 consecutive months, 
other than to provide annual privacy notices or promotional material.
    (4) Examples in the case of a credit union. An individual becomes a 
former customer of a credit union when:
    (i) The individual is no longer the credit union's member as defined 
in the credit union's bylaws;
    (ii) In the case of a nonmember's share or share draft account, the 
account is inactive under the credit union's policies;
    (iii) In the case of a nonmember's closed-end loan, the loan is paid 
in full, the credit union charges off the loan, or the credit union 
sells the loan without retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship with a nonmember, the credit union no longer 
provides any statements or notices to the nonmember concerning that 
relationship, or the credit union sells the credit card receivables 
without retaining servicing rights; or
    (v) The credit union has not communicated with the nonmember about 
the relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans in the case of a financial institution 
other than a credit union. If a financial institution other than a 
credit union does not have a customer relationship with a consumer under 
the special rule for loans in Sec. 1016.4(c)(2) of this part, then it 
need not provide an annual notice to that consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec. 1016.9 of 
this part.



Sec. 1016.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that you provide under Sec. Sec. 1016.4, 1016.5, and 1016.8 of this part 
must include each of the following items of information, in addition to 
any other information you wish to provide, that applies to you and to 
the consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom

[[Page 388]]

you disclose nonpublic personal information, other than those parties to 
whom you disclose information under Sec. Sec. 1016.14 and 1016.15 of 
this part;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Sec. Sec. 1016.14 and 1016.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 1016.13 (and no other exception in 
Sec. 1016.14 or Sec. 1016.15 applies to that disclosure), a separate 
statement of the categories of information you disclose and the 
categories of third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec. 1016.10(a) of 
this part to opt out of the disclosure of nonpublic personal information 
to nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, 
notices regarding the ability to opt out of disclosures of information 
among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Sec. Sec. 1016.14 and 1016.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Sec. Sec. 1016.4 and 1016.5. When describing the 
categories with respect to those parties, it is sufficient to state that 
you make disclosures to other nonaffiliated companies:
    (1) For your everyday business purposes, such as [include all that 
apply] to process transactions, maintain account(s), respond to court 
orders and legal investigations, or report to credit bureaus; or
    (2) As permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose. (i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (c)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to whom 
you disclose. You satisfy the requirement to categorize the affiliates 
and nonaffiliated third parties to whom you disclose nonpublic personal 
information if you list the following categories, as applicable, and a 
few examples to illustrate the types of third parties in each category.
    (i) Financial service providers, followed by illustrative examples 
such as mortgage bankers, securities broker-dealers, and insurance 
agents;
    (ii) Non-financial companies, followed by illustrative examples such 
as retailers, magazine publishers, airlines, and direct marketers; and
    (iii) Others, followed by examples such as nonprofit organizations.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 1016.13 of this part to a nonaffiliated third party to 
market products or services that you offer alone or jointly with another

[[Page 389]]

financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Sec. Sec. 1016.14 and 1016.15, you 
may simply state that fact, in addition to the information you must 
provide under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this 
section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security of 
nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical information 
about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-customers. 
(1) You may satisfy the initial notice requirements in 
Sec. Sec. 1016.4(a)(2), 1016.7(b), and 1016.7(c) of this part for a 
consumer who is not a customer by providing a short-form initial notice 
at the same time as you deliver an opt out notice as required in 
Sec. 1016.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 1016.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a consumer 
who receives your short-form notice requests your privacy notice, you 
must deliver your privacy notice according to Sec. 1016.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Model privacy form. Pursuant to Sec. 1016.2(a) of this part, a 
model privacy form that meets the notice content requirements of this 
section is included in the appendix to this part.



Sec. 1016.7  Form of opt out notice to consumers; opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an opt 
out notice under Sec. 1016.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and

[[Page 390]]

    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal information 
that you disclose or reserve the right to disclose, and all of the 
categories of nonaffiliated third parties to which you disclose the 
information, as described in Sec. 1016.6(a)(2) and (3) of this part, and 
state that the consumer can opt out of the disclosure of that 
information; and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice that, in 
the case of financial institutions described in Sec. 1016.3(l)(3) of 
this part, includes the address to which the form should be mailed;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your Web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his or 
her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provided with the initial notice but did not include with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec. 1016.4.
    (c) Initial notice required when opt out notice delivered subsequent 
to initial notice. If you provide the opt out notice later than required 
for the initial notice in accordance with Sec. 1016.4 of this part, you 
must also include a copy of the initial notice with the opt out notice 
in writing or, if the consumer agrees, electronically.
    (d) Joint relationships in the case of financial institutions other 
than credit unions and covered entities subject to FTC enforcement 
jurisdiction. For purposes of this paragraph (d), ``you'' is limited to 
financial institutions other than credit unions and financial 
institutions described in Sec. 1016.3(l)(3) of this part.
    (1) If two or more consumers jointly obtain a financial product or 
service from you, you may provide a single opt out notice. Your opt out 
notice must explain how you will treat an opt out direction by a joint 
consumer (as explained in paragraph (d)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with you 
and arrange for you to send statements to John's address, you may do any 
of the following, but you must explain in your opt out notice which opt 
out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an

[[Page 391]]

opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Joint relationships in the case of credit unions. (1) If two or 
more consumers jointly obtain a financial product or service, other than 
a loan, from a credit union, the credit union may provide only a single 
opt out notice. The opt out notice must explain how the credit union 
will treat an opt out direction by a joint consumer (as explained in the 
examples in paragraph (e)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. A 
credit union may either:
    (i) Treat an opt out direction by a joint consumer to apply to all 
of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If a credit union permits each joint consumer to opt out 
separately, the credit union must permit one of the joint consumers to 
opt out on behalf of all of the joint consumers.
    (4) A credit union may not require all joint consumers to opt out 
before the credit union implements any opt out direction.
    (5) Example. If John and Mary have a joint share account with a 
credit union and arrange for the credit union to send statements to 
John's address, the credit union may do any of the following, but it 
must explain in its opt out notice which opt out policy it will follow:
    (i) Send a single opt out notice to John's address, but it must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If it does so, and John opts out, it may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
it does so, and if John and Mary both opt out, it must permit one or 
both of them to notify it in a single response (such as on a form or 
through a telephone call).
    (6) Special rule for loans. (i) A credit union is required to 
provide an initial opt out notice to a borrower or guarantor on a loan 
if it shares his or her nonpublic personal information with 
nonaffiliated third parties other than for purposes under 
Sec. Sec. 1016.13, 1016.14, and 1016.15.
    (ii) A credit union may satisfy its annual opt out notice 
requirement by providing one notice to those borrowers and guarantors 
jointly.
    (f) Joint relationships in the case of covered entities subject to 
FTC enforcement jurisdiction. For purposes of this paragraph (f), 
``you'' is limited to the financial institutions described in 
Sec. 1016.3(l)(3).
    (1) If two or more consumers jointly obtain a financial product or 
service from you, you may provide a single opt out notice, unless one or 
more of those consumers requests a separate opt out notice. Your opt out 
notice must explain how you will treat an opt out direction by a joint 
consumer (as explained in paragraph (f)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.

[[Page 392]]

    (5) Example. If John and Mary have a joint credit card account with 
you and arrange for you to send statements to John's address, you may do 
any of the following, but you must explain in your opt out notice which 
opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (g) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (h) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (i) Duration of consumer's opt out direction. (1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (j) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec. 1016.9 of this part.
    (k) Model privacy form. Pursuant to Sec. 1016.2(a) of this part, a 
model privacy form that meets the notice content requirements of this 
section is included in the appendix to this part.



Sec. 1016.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 1016.4 of this part, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before you 
disclose the information to the nonaffiliated third party, to opt out of 
the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples. (1) Except as otherwise permitted by 
Sec. Sec. 1016.13, 1016.14, and 1016.15 of this part, you must provide a 
revised notice before you:
    (i) Disclose a new category of nonpublic personal information to any 
nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has not 
had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec. 1016.9 of 
this part.



Sec. 1016.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices and 
opt

[[Page 393]]

out notices, including short-form initial notices, that this part 
requires so that each consumer can reasonably be expected to receive 
actual notice in writing or, if the consumer agrees, electronically.
    (b)(1) Examples of reasonable expectation of actual notice. You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically:
    (A) In the case of financial institutions other than those described 
in Sec. 1016.3(l)(3) of this part, post the notice on the electronic 
site and require the consumer to acknowledge receipt of the notice as a 
necessary step to obtaining a particular financial product or service; 
or
    (B) In the case of financial institutions described in 
Sec. 1016.3(l)(3), clearly and conspicuously post the notice on the 
electronic site and require the consumer to acknowledge receipt of the 
notice as a necessary step to obtaining a particular financial product 
or service;
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only--(1) Reasonable expectation. You may 
reasonably expect that a customer will receive actual notice of your 
annual privacy notice if:
    (i) The customer uses your Web site to access financial products and 
services electronically and agrees to receive notices at the Web site, 
and you post your current privacy notice continuously in a clear and 
conspicuous manner on the Web site; or
    (ii) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (2) Alternative method for providing certain annual notices. (i) 
Notwithstanding paragraph (a) of this section, you may use the 
alternative method described in paragraph (c)(2)(ii) of this section to 
satisfy the requirement in Sec. 1016.5(a)(1) to provide a notice if:
    (A) You do not disclose the customer's nonpublic personal 
information to nonaffiliated third parties other than for purposes under 
Sec. Sec. 1016.13, 1016.14, and 1016.15;
    (B) You do not include on your annual privacy notice pursuant to 
Sec. 1016.6(a)(7) an opt out under section 603(d)(2)(A)(iii) of the Fair 
Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii));
    (C) The requirements of section 624 of the Fair Credit Reporting Act 
(15 U.S.C. 1681s-3) and subpart C of part 1022 of this chapter, if 
applicable, have been satisfied previously or the annual privacy notice 
is not the only notice provided to satisfy such requirements;
    (D) The information you are required to convey on your annual 
privacy notice pursuant to Sec. 1016.6(a)(1) through (5), (8), and (9) 
has not changed since you provided the immediately previous privacy 
notice (whether initial, annual, or revised) to the customer, other than 
to eliminate categories of information you disclose or categories of 
third parties to whom you disclose information; and
    (E) You use the model privacy form in the appendix to this part for 
your annual privacy notice.
    (ii) For an annual privacy notice that meets the requirements in 
paragraph (c)(2)(i) of this section, you satisfy the requirement in 
Sec. 1016.5(a)(1) to provide a notice if you:

[[Page 394]]

    (A) Convey in a clear and conspicuous manner not less than annually 
on an account statement, coupon book, or a notice or disclosure you are 
required or expressly and specifically permitted to issue to the 
customer under any other provision of law that your privacy notice is 
available on your Web site and will be mailed to the customer upon 
request by telephone. The statement must state that your privacy notice 
has not changed and must include a specific Web address that takes the 
customer directly to the page where the privacy notice is posted and a 
telephone number for the customer to request that it be mailed;
    (B) Post your current privacy notice continuously and in clear and 
conspicuous manner on a page of your Web site on which the only content 
is the privacy notice, without requiring the customer to provide any 
information such as a login name or password or agree to any conditions 
to access the page; and
    (C) Mail your current privacy notice to those customers who request 
it by telephone within ten days of the request.
    (iii) An example of a statement that satisfies paragraph 
(c)(2)(ii)(A) of this section is as follows with the words ``Privacy 
Notice'' in boldface or otherwise emphasized: Privacy Notice--Federal 
law requires us to tell you how we collect, share, and protect your 
personal information. Our privacy policy has not changed and you may 
review our policy and practices with respect to your personal 
information at [Web address] or we will mail you a free copy upon 
request if you call us at [telephone number].
    (d) Oral description of notice insufficient. You may not provide any 
notice required by this part solely by orally explaining the notice, 
either in person or over the telephone.
    (e) Retention or accessibility of notices for customers. (1) For 
customers only, you must provide the initial notice required by 
Sec. 1016.4(a)(1), the annual notice required by Sec. 1016.5(a), and the 
revised notice required by Sec. 1016.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer, or, in the case of credit unions, mail a printed copy of 
the notice to the last known address of the customer upon request of the 
customer; or
    (iii) Make your current privacy notice available on a Web site (or a 
link to another Web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the Web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships in the case of financial institutions other 
than credit unions and covered entities subject to FTC enforcement 
jurisdiction. For purposes of this paragraph (g), ``you'' is limited to 
financial institutions other than credit unions and the financial 
institutions described in Sec. 1016.3(l)(3). If two or more consumers 
jointly obtain a financial product or service from you, you may satisfy 
the initial, annual, and revised notice requirements of 
Sec. Sec. 1016.4(a), 1016.5(a), and 1016.8(a), respectively, by 
providing one notice to those consumers jointly.
    (h) Joint relationships in the case of covered entities subject to 
FTC enforcement jurisdiction. For purposes of this paragraph (h), 
``you'' is limited to the financial institutions described in 
Sec. 1016.3(l)(3). If two or more consumers jointly obtain a financial 
product or service from you, you may satisfy the initial, annual, and 
revised notice requirements of Sec. Sec. 1016.4(a), 1016.5(a), and 
1016.8(a) by providing one notice to those consumers jointly, unless one 
or more of those consumers requests separate notices.
    (i) Joint relationships in the case of credit unions. (1) If two or 
more consumers jointly obtain a financial product or service, other than 
a loan, from a credit union, the credit union may

[[Page 395]]

satisfy the requirements of Sec. 1016.4(a) by providing one initial 
notice to those consumers jointly.
    (2) Special rule for loans in the case of credit unions. (i) A 
credit union is required to provide an initial notice to a borrower or 
guarantor on a loan if the credit union shares his or her nonpublic 
personal information with nonaffiliated third parties other than for 
purposes under Sec. Sec. 1016.13, 1016.14, and 1016.15.
    (ii) A credit union may satisfy the annual notice requirements of 
Sec. 1016.5 by providing one notice to those borrowers and guarantors 
jointly.

[76 FR 79028, Dec. 21, 2011, as amended at 79 FR 64081, Oct. 28, 2014]



                     Subpart B_Limits on Disclosures



Sec. 1016.10  Limits on disclosure of nonpublic personal information
to nonaffiliated third parties.

    (a)(1) Conditions for disclosure. Except as otherwise authorized in 
this part, you may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated third 
party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 1016.4 of this part;
    (ii) You have provided to the consumer an opt out notice as required 
in Sec. 1016.7 of this part;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that consumer 
to a nonaffiliated third party, other than as permitted by 
Sec. Sec. 1016.13, 1016.14, and 1016.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A customer opens an online account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if you 
provide the notices required in paragraph (a)(1) of this section at the 
time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information. (1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information about 
a consumer that you have collected, regardless of whether you collected 
it before or after receiving the direction to opt out from the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.



Sec. 1016.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 1016.14 or Sec. 1016.15 of this 
part, your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates

[[Page 396]]

may, in turn, disclose and use the information only to the extent that 
you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 1016.14 or Sec. 1016.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
you received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec. 1016.14(a), you may disclose that 
information under any exception in Sec. 1016.14 or Sec. 1016.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or, in the case of financial institutions other than 
those described in Sec. 1016.3(l)(3), to your attorneys, accountants, 
and auditors. You could not disclose that information to a third party 
for marketing purposes or use that information for your own marketing 
purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 1016.14 or 
Sec. 1016.15 of this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if made 
directly to that person by the financial institution from which you 
received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. Sec. 1016.14 and 
1016.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third party 
only if the financial institution from which you purchased the list 
could have lawfully disclosed the list to that third party. That is, you 
may disclose the list in accordance with the privacy policy of the 
financial institution from which you received the list, as limited by 
the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec. 1016.14 or Sec. 1016.15, such as to 
your attorneys or accountants.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec. 1016.14 or Sec. 1016.15 of this part, the third party 
may disclose and use that information only as follows:
    (1) The third party may disclose the information to your affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the information; 
and
    (3) The third party may disclose and use the information pursuant to 
an exception in Sec. 1016.14 or Sec. 1016.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 1016.14 or Sec. 1016.15 of this 
part, the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose the 
information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.



Sec. 1016.12  Limits on sharing account number information for
marketing purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, share account, or

[[Page 397]]

transaction account to any nonaffiliated third party for use in 
telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar form 
of access number or access code, does not include a number or code in an 
encrypted form, as long as you do not provide the recipient with a means 
to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account, a share account, or a credit card account. A 
transaction account does not include an account to which third parties 
cannot initiate charges.



                          Subpart C_Exceptions



Sec. 1016.13  Exception to opt out requirements for service providers
and joint marketing.

    (a) General rule. (1) The opt out requirements in Sec. Sec. 1016.7 
and 1016.10 of this part do not apply when you provide nonpublic 
personal information to a nonaffiliated third party to perform services 
for you or functions on your behalf, if you:
    (i) Provide the initial notice in accordance with Sec. 1016.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information other 
than to carry out the purposes for which you disclosed the information, 
including use under an exception in Sec. 1016.14 or Sec. 1016.15 in the 
ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits the 
institution from disclosing or using the nonpublic personal information 
except as necessary to carry out the joint marketing or under an 
exception in Sec. 1016.14 or Sec. 1016.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.



Sec. 1016.14  Exceptions to notice and opt out requirements for
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 1016.4(a)(2), for the opt 
out in Sec. Sec. 1016.7 and 1016.10, and for service providers and joint 
marketing in Sec. 1016.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related to 
a transaction of the consumer.

[[Page 398]]

    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain the 
consumer's account in the ordinary course of providing the financial 
service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or state law; or
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.



Sec. 1016.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for initial 
notice in Sec. 1016.4(a)(2), for the opt out in Sec. Sec. 1016.7 and 
1016.10, and for service providers and joint marketing in Sec. 1016.13 
do not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory organizations, 
guaranty funds or agencies, agencies that are rating you, persons that 
are assessing your compliance with industry standards, and your 
attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.) to law enforcement agencies 
(including the Bureau, a Federal functional regulator, the Secretary of 
the Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II 
(Records and Reports on Monetary Instruments and Transactions) and 12 
U.S.C. Chapter 21 (Financial Recordkeeping), a state insurance 
authority, with respect to any person domiciled in that insurance 
authority's state that is engaged in providing insurance, and the 
Federal Trade Commission), self-regulatory organizations, or for an 
investigation on a matter related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.); or

[[Page 399]]

    (ii) From a consumer report reported by a consumer reporting agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with Federal, state, or local laws, rules and other 
applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, state, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, or 
other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated insurance 
company of the fact that the consumer has applied to you for a mortgage 
so that the insurance company can offer homeowner's insurance to the 
consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal information 
as permitted under Sec. 1016.7(h) of this part.



                    Subpart D_Relation to Other Laws



Sec. 1016.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), and no inference shall be drawn on the basis of the provisions 
of this part regarding whether information is transaction or experience 
information under section 603 of that Act.



Sec. 1016.17  Relation to state laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or interpretation 
in effect in any state, except to the extent that such state statute, 
regulation, order, or interpretation is inconsistent with the provisions 
of this part, and then only to the extent of the inconsistency.
    (b) Greater protection under state law. For purposes of this 
section, a state statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Bureau, on its own motion or upon the petition of any interested 
party, after consultation with the agency or authority with jurisdiction 
under section 505(a) of the GLB Act (15 U.S.C. 6805(a)) over either the 
person that initiated the complaint or that is the subject of the 
complaint.



             Sec. Appendix to Part 1016--Model Privacy Form

                        A. The Model Privacy Form

[[Page 400]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.058


[[Page 401]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.059


[[Page 402]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.060


[[Page 403]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.061


[[Page 404]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.062


[[Page 405]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.063


[[Page 406]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.064

                         B. General Instructions

                  1. How the Model Privacy Form Is Used

    (a) The model form may be used, at the option of a financial 
institution, including a group of financial institutions that use a 
common privacy notice, to meet the content requirements of the privacy 
notice and opt-out notice set forth in Sec. Sec. 1016.6 and 1016.7 of 
this part.
    (b) The model form is a standardized form, including page layout, 
content, format, style, pagination, and shading. Institutions seeking to 
obtain the safe harbor through use of the model form may modify it only 
as described in these Instructions.
    (c) Note that disclosure of certain information, such as assets, 
income, and information from a consumer reporting agency, may give rise 
to obligations under the Fair Credit Reporting Act [15 U.S.C. 1681-
1681x] (FCRA), such as a requirement to permit a consumer to opt out of 
disclosures to affiliates or designation as a consumer reporting agency 
if disclosures are made to nonaffiliated third parties.
    (d) The word ``customer'' may be replaced by the word ``member'' 
whenever it appears in the model form, as appropriate.

                2. The Contents of the Model Privacy Form

    The model form consists of two pages, which may be printed on both 
sides of a single sheet of paper, or may appear on two separate pages. 
Where an institution provides a long list of institutions at the end of 
the model form in accordance with Instruction C.3(a)(1), or provides 
additional information in accordance with Instruction C.3(c), and such 
list or additional information exceeds the space available on page two 
of the model form, such list or additional information may extend to a 
third page.
    (a) Page One. The first page consists of the following components:
    (1) Date last revised (upper right-hand corner).
    (2) Title.
    (3) Key frame (Why?, What?, How?).
    (4) Disclosure table (``Reasons we can share your personal 
information'').
    (5) ``To limit our sharing'' box, as needed, for the financial 
institution's opt-out information.
    (6) ``Questions'' box, for customer service contact information.
    (7) Mail-in opt-out form, as needed.
    (b) Page Two. The second page consists of the following components:
    (1) Heading (Page 2).
    (2) Frequently Asked Questions (``Who we are'' and ``What we do'').
    (3) Definitions.
    (4) ``Other important information'' box, as needed.

                 3. The Format of the Model Privacy Form

    The format of the model form may be modified only as described 
below.
    (a) Easily readable type font. Financial institutions that use the 
model form must use an easily readable type font. While a number of 
factors together produce easily readable type font, institutions are 
required to use a minimum of 10-point font (unless otherwise expressly 
permitted in these Instructions) and sufficient spacing between the 
lines of type.
    (b) Logo. A financial institution may include a corporate logo on 
any page of the notice, so long as it does not interfere with the 
readability of the model form or the space constraints of each page.

[[Page 407]]

    (c) Page size and orientation. Each page of the model form must be 
printed on paper in portrait orientation, the size of which must be 
sufficient to meet the layout and minimum font size requirements, with 
sufficient white space on the top, bottom, and sides of the content.
    (d) Color. The model form must be printed on white or light color 
paper (such as cream) with black or other contrasting ink color. Spot 
color may be used to achieve visual interest, so long as the color 
contrast is distinctive and the color does not detract from the 
readability of the model form. Logos may also be printed in color.
    (e) Languages. The model form may be translated into languages other 
than English.

            C. Information Required in the Model Privacy Form

    The information in the model form may be modified only as described 
below:

1. Name of the Institution or Group of Affiliated Institutions Providing 
                               the Notice

    Insert the name of the financial institution providing the notice or 
a common identity of affiliated institutions jointly providing the 
notice on the form wherever [name of financial institution] appears.

                               2. Page One

    (a) Last revised date. The financial institution must insert in the 
upper right-hand corner the date on which the notice was last revised. 
The information shall appear in minimum 8-point font as ``rev. [month/
year]'' using either the name or number of the month, such as ``rev. 
July 2009'' or ``rev. 7/09''.
    (b) General instructions for the ``What?'' box.
    (1) The bulleted list identifies the types of personal information 
that the institution collects and shares. All institutions must use the 
term ``Social Security number'' in the first bullet.
    (2) Institutions must use five (5) of the following terms to 
complete the bulleted list: Income; account balances; payment history; 
transaction history; transaction or loss history; credit history; credit 
scores; assets; investment experience; credit-based insurance scores; 
insurance claim history; medical information; overdraft history; 
purchase history; account transactions; risk tolerance; medical-related 
debts; credit card or other debt; mortgage rates and payments; 
retirement assets; checking account information; employment information; 
wire transfer instructions.
    (c) General instructions for the disclosure table. The left column 
lists reasons for sharing or using personal information. Each reason 
correlates to a specific legal provision described in paragraph C.2(d) 
of this Instruction. In the middle column, each institution must provide 
a ``Yes'' or ``No'' response that accurately reflects its information 
sharing policies and practices with respect to the reason listed on the 
left. In the right column, each institution must provide in each box one 
of the following three (3) responses, as applicable, that reflects 
whether a consumer can limit such sharing: ``Yes'' if it is required to 
or voluntarily provides an opt-out; ``No'' if it does not provide an 
opt-out; or ``We don't share'' if it answers ``No'' in the middle 
column. Only the sixth row (``For our affiliates to market to you'') may 
be omitted at the option of the institution. See paragraph C.2(d)(6) of 
this Instruction.
    (d) Specific disclosures and corresponding legal provisions.
    (1) For our everyday business purposes. This reason incorporates 
sharing information under Sec. Sec. 1016.14 and 1016.15 and with service 
providers pursuant to Sec. 1016.13 of this part other than the purposes 
specified in paragraphs C.2(d)(2) or C.2(d)(3) of these Instructions.
    (2) For our marketing purposes. This reason incorporates sharing 
information with service providers by an institution for its own 
marketing pursuant to Sec. 1016.13 of this part. An institution that 
shares for this reason may choose to provide an opt-out.
    (3) For joint marketing with other financial companies. This reason 
incorporates sharing information under joint marketing agreements 
between two or more financial institutions and with any service provider 
used in connection with such agreements pursuant to Sec. 1016.13 of this 
part. An institution that shares for this reason may choose to provide 
an opt-out.
    (4) For our affiliates' everyday business purposes--information 
about transactions and experiences. This reason incorporates sharing 
information specified in sections 603(d)(2)(A)(i) and (ii) of the FCRA. 
An institution that shares for this reason may choose to provide an opt-
out.
    (5) For our affiliates' everyday business purposes--information 
about creditworthiness. This reason incorporates sharing information 
pursuant to section 603(d)(2)(A)(iii) of the FCRA. An institution that 
shares for this reason must provide an opt-out.
    (6) For our affiliates to market to you. This reason incorporates 
sharing information specified in section 624 of the FCRA. This reason 
may be omitted from the disclosure table when: the institution does not 
have affiliates (or does not disclose personal information to its 
affiliates); the institution's affiliates do not use personal 
information in a manner that requires an opt-out; or the institution 
provides the affiliate marketing notice separately. Institutions that 
include this reason must provide an opt-out of indefinite duration. An 
institution that is required to provide an affiliate marketing opt-

[[Page 408]]

out, but does not include that opt-out in the model form under this 
part, must comply with section 624 of the FCRA and 12 CFR part 1022, 
subpart C, with respect to the initial notice and opt-out and any 
subsequent renewal notice and opt-out. An institution not required to 
provide an opt-out under this subparagraph may elect to include this 
reason in the model form.
    (7) For nonaffiliates to market to you. This reason incorporates 
sharing described in Sec. Sec. 1016.7 and 1016.10(a) of this part. An 
institution that shares personal information for this reason must 
provide an opt-out.
    (e) To limit our sharing: A financial institution must include this 
section of the model form only if it provides an opt-out. The word 
``choice'' may be written in either the singular or plural, as 
appropriate. Institutions must select one or more of the applicable opt-
out methods described: Telephone, such as by a toll-free number; a Web 
site; or use of a mail-in opt-out form. Institutions may include the 
words ``toll-free'' before telephone, as appropriate. An institution 
that allows consumers to opt out online must provide either a specific 
Web address that takes consumers directly to the opt-out page or a 
general Web address that provides a clear and conspicuous direct link to 
the opt-out page. The opt-out choices made available to the consumer who 
contacts the institution through these methods must correspond 
accurately to the ``Yes'' responses in the third column of the 
disclosure table. In the part titled ``Please note,'' institutions may 
insert a number that is 30 or greater in the space marked ``[30].'' 
Instructions on voluntary or state privacy law opt-out information are 
in paragraph C.2(g)(5) of these Instructions.
    (f) Questions box. Customer service contact information must be 
inserted as appropriate, where [phone number] or [Web site] appear. 
Institutions may elect to provide either a phone number, such as a toll-
free number, or a web address, or both. Institutions may include the 
words ``toll-free'' before the telephone number, as appropriate.
    (g) Mail-in opt-out form. Financial institutions must include this 
mail-in form only if they state in the ``To limit our sharing'' box that 
consumers can opt out by mail. The mail-in form must provide opt-out 
options that correspond accurately to the ``Yes'' responses in the third 
column in the disclosure table. Institutions that require customers to 
provide only name and address may omit the section identified as 
``[account ].'' Institutions that require additional or 
different information, such as a random opt-out number or a truncated 
account number, to implement an opt-out election should modify the 
``[account ]'' reference accordingly. This includes 
institutions that require customers with multiple accounts to identify 
each account to which the opt-out should apply. An institution must 
enter its opt-out mailing address: in the far right of this form (see 
version 3); or below the form (see version 4). The reverse side of the 
mail-in opt-out form must not include any content of the model form.
    (1) Joint accountholder. Only institutions that provide their joint 
accountholders the choice to opt out for only one accountholder, in 
accordance with paragraph C.3(a)(5) of these Instructions, must include 
in the far left column of the mail-in form the following statement: ``If 
you have a joint account, your choice(s) will apply to everyone on your 
account unless you mark below. Apply my choice(s) only to me.'' The word 
``choice'' may be written in either the singular or plural, as 
appropriate. Financial institutions that provide insurance products or 
services, provide this option, and elect to use the model form may 
substitute the word ``policy'' for ``account'' in this statement. 
Institutions that do not provide this option may eliminate this left 
column from the mail-in form.
    (2) FCRA section 603(d)(2)(A)(iii) opt-out. If the institution 
shares personal information pursuant to section 603(d)(2)(A)(iii) of the 
FCRA, it must include in the mail-in opt-out form the following 
statement: `` Do not share information about my creditworthiness with 
your affiliates for their everyday business purposes.''
    (3) FCRA section 624 opt-out. If the institution incorporates 
section 624 of the FCRA in accord with paragraph C.2(d)(6) of these 
Instructions, it must include in the mail-in opt-out form the following 
statement: `` Do not allow your affiliates to use my personal 
information to market to me.''
    (4) Nonaffiliate opt-out. If the financial institution shares 
personal information pursuant to Sec. 1016.10(a) of this part, it must 
include in the mail-in opt-out form the following statement: `` Do not 
share my personal information with nonaffiliates to market their 
products and services to me.''
    (5) Additional opt-outs. Financial institutions that use the 
disclosure table to provide opt-out options beyond those required by 
Federal law must provide those opt-outs in this section of the model 
form. A financial institution that chooses to offer an opt-out for its 
own marketing in the mail-in opt-out form must include one of the two 
following statements: `` Do not share my personal information to market 
to me.'' or `` Do not use my personal information to market to me.'' A 
financial institution that chooses to offer an opt-out for joint 
marketing must include the following statement: `` Do not share my 
personal information with other financial institutions to jointly market 
to me.''
    (h) Barcodes. A financial institution may elect to include a barcode 
and/or ``tagline'' (an internal identifier) in 6-point font at the 
bottom of page one, as needed for information internal to the 
institution, so long as

[[Page 409]]

these do not interfere with the clarity or text of the form.

                               3. Page Two

    (a) General Instructions for the Questions. Certain of the Questions 
may be customized as follows:
    (1) ``Who is providing this notice?'' This question may be omitted 
where only one financial institution provides the model form and that 
institution is clearly identified in the title on page one. Two or more 
financial institutions that jointly provide the model form must use this 
question to identify themselves as required by Sec. 1016.9(f) of this 
part. Where the list of institutions exceeds four (4) lines, the 
institution must describe in the response to this question the general 
types of institutions jointly providing the notice and must separately 
identify those institutions, in minimum 8-point font, directly following 
the ``Other important information'' box, or, if that box is not included 
in the institution's form, directly following the ``Definitions.'' The 
list may appear in a multi-column format.
    (2) ``How does [name of financial institution] protect my personal 
information?'' The financial institution may only provide additional 
information pertaining to its safeguards practices following the 
designated response to this question. Such information may include 
information about the institution's use of cookies or other measures it 
uses to safeguard personal information. Institutions are limited to a 
maximum of 30 additional words.
    (3) ``How does [name of financial institution] collect my personal 
information?'' Institutions must use five (5) of the following terms to 
complete the bulleted list for this question: Open an account; deposit 
money; pay your bills; apply for a loan; use your credit or debit card; 
seek financial or tax advice; apply for insurance; pay insurance 
premiums; file an insurance claim; seek advice about your investments; 
buy securities from us; sell securities to us; direct us to buy 
securities; direct us to sell your securities; make deposits or 
withdrawals from your account; enter into an investment advisory 
contract; give us your income information; provide employment 
information; give us your employment history; tell us about your 
investment or retirement portfolio; tell us about your investment or 
retirement earnings; apply for financing; apply for a lease; provide 
account information; give us your contact information; pay us by check; 
give us your wage statements; provide your mortgage information; make a 
wire transfer; tell us who receives the money; tell us where to send the 
money; show your government-issued ID; show your driver's license; order 
a commodity futures or option trade. Institutions that collect personal 
information from their affiliates and/or credit bureaus must include 
after the bulleted list the following statement: ``We also collect your 
personal information from others, such as credit bureaus, affiliates, or 
other companies.'' Institutions that do not collect personal information 
from their affiliates or credit bureaus but do collect information from 
other companies must include the following statement instead: ``We also 
collect your personal information from other companies.'' Only 
institutions that do not collect any personal information from 
affiliates, credit bureaus, or other companies can omit both statements.
    (4) ``Why can't I limit all sharing?'' Institutions that describe 
state privacy law provisions in the ``Other important information'' box 
must use the bracketed sentence: ``See below for more on your rights 
under state law.'' Other institutions must omit this sentence.
    (5) ``What happens when I limit sharing for an account I hold 
jointly with someone else?'' Only financial institutions that provide 
opt-out options must use this question. Other institutions must omit 
this question. Institutions must choose one of the following two 
statements to respond to this question: ``Your choices will apply to 
everyone on your account.'' or ``Your choices will apply to everyone on 
your account--unless you tell us otherwise.'' Financial institutions 
that provide insurance products or services and elect to use the model 
form may substitute the word ``policy'' for ``account'' in these 
statements.
    (b) General Instructions for the Definitions. The financial 
institution must customize the space below the responses to the three 
definitions in this section. This specific information must be in 
italicized lettering to set off the information from the standardized 
definitions.
    (1) Affiliates. As required by Sec. 1016.6(a)(3) of this part, where 
[affiliate information] appears, the financial institution must:
    (i) If it has no affiliates, state: ``[name of financial 
institution] has no affiliates'';
    (ii) If it has affiliates but does not share personal information, 
state: ``[name of financial institution] does not share with our 
affiliates''; or
    (iii) If it shares with its affiliates, state, as applicable: ``Our 
affiliates include companies with a [common corporate identity of 
financial institution] name; financial companies such as [insert 
illustrative list of companies]; nonfinancial companies, such as [insert 
illustrative list of companies]; and others, such as [insert 
illustrative list].''
    (2) Nonaffiliates. As required by Sec. 1016.6(c)(3) of this part, 
where [nonaffiliate information] appears, the financial institution 
must:
    (i) If it does not share with nonaffiliated third parties, state: 
``[name of financial institution] does not share with nonaffiliates so 
they can market to you''; or

[[Page 410]]

    (ii) If it shares with nonaffiliated third parties, state, as 
applicable: ``Nonaffiliates we share with can include [list categories 
of companies such as mortgage companies, insurance companies, direct 
marketing companies, and nonprofit organizations].''
    (3) Joint Marketing. As required by Sec. 1016.13 of this part, where 
[joint marketing] appears, the financial institution must:
    (i) If it does not engage in joint marketing, state: ``[name of 
financial institution] doesn't jointly market''; or
    (ii) If it shares personal information for joint marketing, state, 
as applicable: ``Our joint marketing partners include [list categories 
of companies such as credit card companies].''
    (c) General instructions for the ``Other important information'' 
box. This box is optional. The space provided for information in this 
box is not limited. Only the following types of information can appear 
in this box.
    (1) State and/or international privacy law information; and/or
    (2) Acknowledgment of receipt form.



PART 1022_FAIR CREDIT REPORTING (REGULATION V)--Table of Contents



                      Subpart A_General Provisions

Sec.
1022.1 Purpose, scope, and model forms and disclosures.
1022.2 Examples.
1022.3 Definitions.

Subpart B [Reserved]

                      Subpart C_Affiliate Marketing

1022.20 Coverage and definitions.
1022.21 Affiliate marketing opt-out and exceptions.
1022.22 Scope and duration of opt-out.
1022.23 Contents of opt-out notice; consolidated and equivalent notices.
1022.24 Reasonable opportunity to opt out.
1022.25 Reasonable and simple methods of opting out.
1022.26 Delivery of opt-out notices.
1022.27 Renewal of opt-out.

                      Subpart D_Medical Information

1022.30 Obtaining or using medical information in connection with a 
          determination of eligibility for credit.
1022.31 Limits on redisclosure of information.
1022.32 Sharing medical information with affiliates.

              Subpart E_Duties of Furnishers of Information

1022.40 Scope.
1022.41 Definitions.
1022.42 Reasonable policies and procedures concerning the accuracy and 
          integrity of furnished information.
1022.43 Direct disputes.

Subpart F_Duties of Users Regarding Obtaining and Using Consumer Reports

1022.50-1022.53 [Reserved]
1022.54 Duties of users making written firm offers of credit or 
          insurance based on information contained in consumer files.

Subpart G [Reserved]

         Subpart H_Duties of Users Regarding Risk-Based Pricing

1022.70 Scope.
1022.71 Definitions.
1022.72 General requirements for risk-based pricing notices.
1022.73 Content, form, and timing of risk-based pricing notices.
1022.74 Exceptions.
1022.75 Rules of construction.

 Subpart I_Duties of Users of Consumer Reports Regarding Identity Theft

1022.80-1022.81 [Reserved]
1022.82 Duties of users regarding address discrepancies.

Subparts J-L [Reserved]

Subpart M_Duties of Consumer Reporting Agencies Regarding Identity Theft

1022.120 [Reserved]
1022.121 Active duty alerts.
1022.122 [Reserved]
1022.123 Proof of identity.

Subpart N_Duties of Consumer Reporting Agencies Regarding Disclosures to 
                                Consumers

1022.130 Definitions
1022.131-1022.135 [Reserved]
1022.136 Centralized source for requesting annual file disclosures from 
          nationwide consumer reporting agencies.
1022.137 Streamlined process for requesting annual file disclosures from 
          nationwide specialty consumer reporting agencies.
1022.138 Prevention of deceptive marketing of free credit reports.

      Subpart O_Miscellaneous Duties of Consumer Reporting Agencies

1022.140 Prohibition against circumventing or evading treatment as a 
          consumer reporting agency.

Appendix A to Part 1022 [Reserved]

[[Page 411]]

Appendix B to Part 1022--Model Notices of Furnishing Negative 
          Information
Appendix C to Part 1022--Model Forms for Opt-Out Notices
Appendix D to Part 1022--Model Forms for Firm Offers of Credit or 
          Insurance
Appendix E to Part 1022-- Interagency Guidelines Concerning the Accuracy 
          and Integrity of Information Furnished to Consumer Reporting 
          Agencies
Appendixes F-G to Part 1022 [Reserved]
Appendix H to Part 1022--Model Forms for Risk-Based Pricing and Credit 
          Score Disclosure Exception Notices
Appendix I to Part 1022--Summary of Consumer Identity Theft Rights
Appendix J to Part 1022 [Reserved]
Appendix K to Part 1022--Summary of Consumer Rights
Appendix L to Part 1022--Standardized Form for Requesting Annual File 
          Disclosures
Appendix M to Part 1022--Notice of Furnisher Responsibilities
Appendix N to Part 1022--Notice of User Responsibilities

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1681a, 1681b, 1681c, 
1681c-1, 1681e, 1681g, 1681i, 1681j, 1681m, 1681s, 1681s-2, 1681s-3, and 
1681t; Sec. 214, Public Law 108-159, 117 Stat. 1952.

    Source: 76 FR 79312, Dec. 21, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 1022.1  Purpose, scope, and model forms and disclosures.

    (a) Purpose. The purpose of this part is to implement the Fair 
Credit Reporting Act (FCRA). This part generally applies to persons that 
obtain and use information about consumers to determine the consumer's 
eligibility for products, services, or employment, share such 
information among affiliates, and furnish information to consumer 
reporting agencies.
    (b) Scope. (1) [Reserved]
    (2) Institutions covered. (i) Except as otherwise provided in this 
part, this part applies to any person subject to the FCRA except for a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376.
    (ii) For purposes of appendix B to this part, financial institutions 
as defined in section 509 of the Gramm-Leach-Bliley Act (12 U.S.C. 
6809), may use the model notices in appendix B to this part to comply 
with the notice requirement in section 623(a)(7) of the FCRA (15 U.S.C. 
1681s-2(a)(7)).
    (c) Model forms and disclosures--(1) Use. Appendices D, H, I, K, L, 
M, and N contain model forms and disclosures. These appendices carry out 
the directive in FCRA that the Bureau prescribe such model forms and 
disclosures. Use or distribution of these model forms and disclosures, 
or substantially similar forms and disclosures, will constitute 
compliance with any section or subsection of the FCRA requiring that 
such forms and disclosures be used by or supplied to any person.
    (2) Definition. Substantially similar means that all information in 
the Bureau's prescribed model is included in the document that is 
distributed, and that the document distributed is formatted in a way 
consistent with the format prescribed by the Bureau. The document that 
is distributed shall not include anything that interferes with, detracts 
from, or otherwise undermines the information contained in the Bureau's 
prescribed model. Until January 1, 2013, the model forms in appendices 
B, E, F, G, and H to 16 CFR part 698, as those appendices existed as of 
October 1, 2011, are deemed substantially similar to the corresponding 
model forms in appendices H, I, K, M, and N to this part, and the model 
forms in appendix H to 12 CFR part 222, as that appendix existed as of 
October 1, 2011, are deemed substantially similar to the corresponding 
model forms in appendix H to this part.



Sec. 1022.2  Examples.

    The examples in this part are not exclusive. Compliance with an 
example, to the extent applicable, constitutes compliance with this 
part. Examples in a paragraph illustrate only the issue described in the 
paragraph and do not illustrate any other issue that may arise in this 
part.



Sec. 1022.3  Definitions.

    For purposes of this part, unless explicitly stated otherwise:
    (a) Act means the FCRA (15 U.S.C. 1681 et seq.).

[[Page 412]]

    (b) Affiliate means any company that is related by common ownership 
or common corporate control with another company. For example, an 
affiliate of a Federal credit union is a credit union service 
corporation, as provided in 12 CFR part 712, that is controlled by the 
Federal credit union.
    (c) [Reserved]
    (d) Common ownership or common corporate control means a 
relationship between two companies under which:
    (1) One company has, with respect to the other company:
    (i) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of a company, 
directly or indirectly, or acting through one or more other persons;
    (ii) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of a company; or
    (iii) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of a company, as determined by 
the applicable prudential regulator (as defined in 12 U.S.C. 5481(24)) 
(a credit union is presumed to have a controlling influence over the 
management or policies of a credit union service corporation if the 
credit union service corporation is 67% owned by credit unions) or, 
where there is no prudential regulator, by the Bureau; or
    (2) Any other person has, with respect to both companies, a 
relationship described in paragraphs (d)(1)(i) through (d)(1)(ii).
    (e) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (f) Consumer means an individual.
    (g) Identifying information means any name or number that may be 
used, alone or in conjunction with any other information, to identify a 
specific person, including any:
    (1) Name, social security number, date of birth, official state or 
government issued driver's license or identification number, alien 
registration number, government passport number, employer or taxpayer 
identification number;
    (2) Unique biometric data, such as fingerprint, voice print, retina 
or iris image, or other unique physical representation;
    (3) Unique electronic identification number, address, or routing 
code; or
    (4) Telecommunication identifying information or access device (as 
defined in 18 U.S.C. 1029(e)).
    (h) Identity theft means a fraud committed or attempted using the 
identifying information of another person without authority.
    (i)(1) Identity theft report means a report:
    (i) That alleges identity theft with as much specificity as the 
consumer can provide;
    (ii) That is a copy of an official, valid report filed by the 
consumer with a Federal, state, or local law enforcement agency, 
including the United States Postal Inspection Service, the filing of 
which subjects the person filing the report to criminal penalties 
relating to the filing of false information, if, in fact, the 
information in the report is false; and
    (iii) That may include additional information or documentation that 
an information furnisher or consumer reporting agency reasonably 
requests for the purpose of determining the validity of the alleged 
identity theft, provided that the information furnisher or consumer 
reporting agency:
    (A) Makes such request not later than fifteen days after the date of 
receipt of the copy of the report form identified in Paragraph 
(i)(1)(ii) of this section or the request by the consumer for the 
particular service, whichever shall be the later;
    (B) Makes any supplemental requests for information or documentation 
and final determination on the acceptance of the identity theft report 
within another fifteen days after its initial request for information or 
documentation; and
    (C) Shall have five days to make a final determination on the 
acceptance of the identity theft report, in the event that the consumer 
reporting agency or information furnisher receives any such additional 
information or documentation on the eleventh day or later within the 
fifteen day period

[[Page 413]]

set forth in Paragraph (i)(1)(iii)(B) of this section.
    (2) Examples of the specificity referenced in Paragraph (i)(1)(i) of 
this section are provided for illustrative purposes only, as follows:
    (i) Specific dates relating to the identity theft such as when the 
loss or theft of personal information occurred or when the fraud(s) 
using the personal information occurred, and how the consumer discovered 
or otherwise learned of the theft.
    (ii) Identification information or any other information about the 
perpetrator, if known.
    (iii) Name(s) of information furnisher(s), account numbers, or other 
relevant account information related to the identity theft.
    (iv) Any other information known to the consumer about the identity 
theft.
    (3) Examples of when it would or would not be reasonable to request 
additional information or documentation referenced in Paragraph 
(i)(1)(iii) of this section are provided for illustrative purposes only, 
as follows:
    (i) A law enforcement report containing detailed information about 
the identity theft and the signature, badge number or other 
identification information of the individual law enforcement official 
taking the report should be sufficient on its face to support a victim's 
request. In this case, without an identifiable concern, such as an 
indication that the report was fraudulent, it would not be reasonable 
for an information furnisher or consumer reporting agency to request 
additional information or documentation.
    (ii) A consumer might provide a law enforcement report similar to 
the report in Paragraph (i)(1) of this section but certain important 
information such as the consumer's date of birth or Social Security 
number may be missing because the consumer chose not to provide it. The 
information furnisher or consumer reporting agency could accept this 
report, but it would be reasonable to require that the consumer provide 
the missing information. The Bureau's Identity Theft Affidavit is 
available on the Bureau's Web site (consumerfinance.gov/learnmore). The 
version of this form developed by the Federal Trade Commission, 
available on the FTC's Web site (ftc.gov/idtheft), remains valid and 
sufficient for this purpose.
    (iii) A consumer might provide a law enforcement report generated by 
an automated system with a simple allegation that an identity theft 
occurred to support a request for a tradeline block or cessation of 
information furnishing. In such a case, it would be reasonable for an 
information furnisher or consumer reporting agency to ask that the 
consumer fill out and have notarized the Bureau's Identity Theft 
Affidavit or a similar form and provide some form of identification 
documentation.
    (iv) A consumer might provide a law enforcement report generated by 
an automated system with a simple allegation that an identity theft 
occurred to support a request for an extended fraud alert. In this case, 
it would not be reasonable for a consumer reporting agency to require 
additional documentation or information, such as a notarized affidavit.
    (j) [Reserved]
    (k) Medical information means:
    (1) Information or data, whether oral or recorded, in any form or 
medium, created by or derived from a health care provider or the 
consumer, that relates to:
    (i) The past, present, or future physical, mental, or behavioral 
health or condition of an individual;
    (ii) The provision of health care to an individual; or
    (iii) The payment for the provision of health care to an individual.
    (2) The term does not include:
    (i) The age or gender of a consumer;
    (ii) Demographic information about the consumer, including a 
consumer's residence address or email address;
    (iii) Any other information about a consumer that does not relate to 
the physical, mental, or behavioral health or condition of a consumer, 
including the existence or value of any insurance policy; or
    (iv) Information that does not identify a specific consumer.
    (l) Person means any individual, partnership, corporation, trust, 
estate cooperative, association, government or governmental subdivision 
or agency, or other entity.

[[Page 414]]

Subpart B [Reserved]



                      Subpart C_Affiliate Marketing



Sec. 1022.20  Coverage and definitions.

    (a) Coverage. Subpart C of this part applies to any person that uses 
information from its affiliates for the purpose of marketing 
solicitations, or provides information to its affiliates for that 
purpose, other than a person excluded from coverage of this part by 
section 1029 of the Consumer Financial Protection Act of 2010, title X 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public 
Law 111-203, 124 Stat. 137.
    (b) Definitions. For purposes of this subpart:
    (1) Clear and conspicuous. The term ``clear and conspicuous'' means 
reasonably understandable and designed to call attention to the nature 
and significance of the information presented.
    (2) Concise--(i) In general. The term ``concise'' means a reasonably 
brief expression or statement.
    (ii) Combination with other required disclosures. A notice required 
by this subpart may be concise even if it is combined with other 
disclosures required or authorized by Federal or state law.
    (3) Eligibility information. The term ``eligibility information'' 
means any information the communication of which would be a consumer 
report if the exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the Act did not apply. Eligibility information 
does not include aggregate or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (4) Pre-existing business relationship--(i) In general. The term 
``pre-existing business relationship'' means a relationship between a 
person, or a person's licensed agent, and a consumer based on:
    (A) A financial contract between the person and the consumer which 
is in force on the date on which the consumer is sent a solicitation 
covered by this subpart;
    (B) The purchase, rental, or lease by the consumer of the person's 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which the consumer is sent a 
solicitation covered by this subpart; or
    (C) An inquiry or application by the consumer regarding a product or 
service offered by that person during the three-month period immediately 
preceding the date on which the consumer is sent a solicitation covered 
by this subpart.
    (ii) Examples of pre-existing business relationships. (A) If a 
consumer has a time deposit account, such as a certificate of deposit, 
at a financial institution that is currently in force, the financial 
institution has a pre-existing business relationship with the consumer 
and can use eligibility information it receives from its affiliates to 
make solicitations to the consumer about its products or services.
    (B) If a consumer obtained a certificate of deposit from a financial 
institution, but did not renew the certificate at maturity, the 
financial institution has a pre-existing business relationship with the 
consumer and can use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for 18 months after the date of maturity of the certificate of 
deposit.
    (C) If a consumer obtains a mortgage, the mortgage lender has a pre-
existing business relationship with the consumer. If the mortgage lender 
sells the consumer's entire loan to an investor, the mortgage lender has 
a pre-existing business relationship with the consumer and can use 
eligibility information it receives from its affiliates to make 
solicitations to the consumer about its products or services for 18 
months after the date it sells the loan, and the investor has a pre-
existing business relationship with the consumer upon purchasing the 
loan. If, however, the mortgage lender sells a fractional interest in 
the consumer's loan to an investor but also retains an ownership 
interest in the loan, the mortgage lender continues to have a pre-
existing business relationship with the consumer, but the investor does

[[Page 415]]

not have a pre-existing business relationship with the consumer. If the 
mortgage lender retains ownership of the loan, but sells ownership of 
the servicing rights to the consumer's loan, the mortgage lender 
continues to have a pre-existing business relationship with the 
consumer. The purchaser of the servicing rights also has a pre-existing 
business relationship with the consumer as of the date it purchases 
ownership of the servicing rights, but only if it collects payments from 
or otherwise deals directly with the consumer on a continuing basis.
    (D) If a consumer applies to a financial institution for a product 
or service that it offers, but does not obtain a product or service from 
or enter into a financial contract or transaction with the institution, 
the financial institution has a pre-existing business relationship with 
the consumer and can therefore use eligibility information it receives 
from an affiliate to make solicitations to the consumer about its 
products or services for three months after the date of the application.
    (E) If a consumer makes a telephone inquiry to a financial 
institution about its products or services and provides contact 
information to the institution, but does not obtain a product or service 
from or enter into a financial contract or transaction with the 
institution, the financial institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (F) If a consumer makes an inquiry to a financial institution by 
email about its products or services, but does not obtain a product or 
service from or enter into a financial contract or transaction with the 
institution, the financial institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (G) If a consumer has an existing relationship with a financial 
institution that is part of a group of affiliated companies, makes a 
telephone call to the centralized call center for the group of 
affiliated companies to inquire about products or services offered by 
the insurance affiliate, and provides contact information to the call 
center, the call constitutes an inquiry to the insurance affiliate that 
offers those products or services. The insurance affiliate has a pre-
existing business relationship with the consumer and can therefore use 
eligibility information it receives from its affiliated financial 
institution to make solicitations to the consumer about its products or 
services for three months after the date of the inquiry.
    (iii) Examples where no pre-existing business relationship is 
created. (A) If a consumer makes a telephone call to a centralized call 
center for a group of affiliated companies to inquire about the 
consumer's existing account at a financial institution, the call does 
not constitute an inquiry to any affiliate other than the financial 
institution that holds the consumer's account and does not establish a 
pre-existing business relationship between the consumer and any 
affiliate of the account-holding financial institution.
    (B) If a consumer who has a deposit account with a financial 
institution makes a telephone call to an affiliate of the institution to 
ask about the affiliate's retail locations and hours, but does not make 
an inquiry about the affiliate's products or services, the call does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate. Also, the 
affiliate's capture of the consumer's telephone number does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate.
    (C) If a consumer makes a telephone call to a financial institution 
in response to an advertisement that offers a free promotional item to 
consumers who call a toll-free number, but the advertisement does not 
indicate that the financial institution's products or services will be 
marketed to consumers who call in response, the call does not

[[Page 416]]

create a pre-existing business relationship between the consumer and the 
financial institution because the consumer has not made an inquiry about 
a product or service offered by the institution, but has merely 
responded to an offer for a free promotional item.
    (5) Solicitation--(i) In general. The term ``solicitation'' means 
the marketing of a product or service initiated by a person to a 
particular consumer that is:
    (A) Based on eligibility information communicated to that person by 
its affiliate as described in this subpart; and
    (B) Intended to encourage the consumer to purchase or obtain such 
product or service.
    (ii) Exclusion of marketing directed at the general public. A 
solicitation does not include marketing communications that are directed 
at the general public. For example, television, general circulation 
magazine, and billboard advertisements do not constitute solicitations, 
even if those communications are intended to encourage consumers to 
purchase products and services from the person initiating the 
communications.
    (iii) Examples of solicitations. A solicitation would include, for 
example, a telemarketing call, direct mail, email, or other form of 
marketing communication directed to a particular consumer that is based 
on eligibility information received from an affiliate.
    (6) You means a person described in paragraph (a) of this section.



Sec. 1022.21  Affiliate marketing opt-out and exceptions.

    (a) Initial notice and opt-out requirement--(1) In general. You may 
not use eligibility information about a consumer that you receive from 
an affiliate to make a solicitation for marketing purposes to the 
consumer, unless:
    (i) It is clearly and conspicuously disclosed to the consumer in 
writing or, if the consumer agrees, electronically, in a concise notice 
that you may use eligibility information about that consumer received 
from an affiliate to make solicitations for marketing purposes to the 
consumer;
    (ii) The consumer is provided a reasonable opportunity and a 
reasonable and simple method to ``opt out,'' or prohibit you from using 
eligibility information to make solicitations for marketing purposes to 
the consumer; and
    (iii) The consumer has not opted out.
    (2) Example. A consumer has a homeowner's insurance policy with an 
insurance company. The insurance company furnishes eligibility 
information about the consumer to its affiliated creditor. Based on that 
eligibility information, the creditor wants to make a solicitation to 
the consumer about its home equity loan products. The creditor does not 
have a pre-existing business relationship with the consumer and none of 
the other exceptions apply. The creditor is prohibited from using 
eligibility information received from its insurance affiliate to make 
solicitations to the consumer about its home equity loan products unless 
the consumer is given a notice and opportunity to opt out and the 
consumer does not opt out.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By an affiliate that has or has previously had a pre-existing 
business relationship with the consumer; or
    (ii) As part of a joint notice from two or more members of an 
affiliated group of companies, provided that at least one of the 
affiliates on the joint notice has or has previously had a pre-existing 
business relationship with the consumer.
    (b) Making solicitations--(1) In general. For purposes of this 
subpart, you make a solicitation for marketing purposes if:
    (i) You receive eligibility information from an affiliate;
    (ii) You use that eligibility information to do one or more of the 
following:
    (A) Identify the consumer or type of consumer to receive a 
solicitation;
    (B) Establish criteria used to select the consumer to receive a 
solicitation; or
    (C) Decide which of your products or services to market to the 
consumer or tailor your solicitation to that consumer; and
    (iii) As a result of your use of the eligibility information, the 
consumer is provided a solicitation.

[[Page 417]]

    (2) Receiving eligibility information from an affiliate, including 
through a common database. You may receive eligibility information from 
an affiliate in various ways, including when the affiliate places that 
information into a common database that you may access.
    (3) Receipt or use of eligibility information by your service 
provider. Except as provided in paragraph (b)(5) of this section, you 
receive or use an affiliate's eligibility information if a service 
provider acting on your behalf (whether an affiliate or a nonaffiliated 
third party) receives or uses that information in the manner described 
in paragraphs (b)(1)(i) or (b)(1)(ii) of this section. All relevant 
facts and circumstances will determine whether a person is acting as 
your service provider when it receives or uses an affiliate's 
eligibility information in connection with marketing your products and 
services.
    (4) Use by an affiliate of its own eligibility information. Unless 
you have used eligibility information that you receive from an affiliate 
in the manner described in paragraph (b)(1)(ii) of this section, you do 
not make a solicitation subject to this subpart if your affiliate:
    (i) Uses its own eligibility information that it obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer to market your products or services to the consumer; or
    (ii) Directs its service provider to use the affiliate's own 
eligibility information that it obtained in connection with a pre-
existing business relationship it has or had with the consumer to market 
your products or services to the consumer, and you do not communicate 
directly with the service provider regarding that use.
    (5) Use of eligibility information by a service provider--(i) In 
general. You do not make a solicitation subject to Subpart C of this 
part if a service provider (including an affiliated or third-party 
service provider that maintains or accesses a common database that you 
may access) receives eligibility information from your affiliate that 
your affiliate obtained in connection with a pre-existing business 
relationship it has or had with the consumer and uses that eligibility 
information to market your products or services to the consumer, so long 
as:
    (A) Your affiliate controls access to and use of its eligibility 
information by the service provider (including the right to establish 
the specific terms and conditions under which the service provider may 
use such information to market your products or services);
    (B) Your affiliate establishes specific terms and conditions under 
which the service provider may access and use the affiliate's 
eligibility information to market your products and services (or those 
of affiliates generally) to the consumer, such as the identity of the 
affiliated companies whose products or services may be marketed to the 
consumer by the service provider, the types of products or services of 
affiliated companies that may be marketed, and the number of times the 
consumer may receive marketing materials, and periodically evaluates the 
service provider's compliance with those terms and conditions;
    (C) Your affiliate requires the service provider to implement 
reasonable policies and procedures designed to ensure that the service 
provider uses the affiliate's eligibility information in accordance with 
the terms and conditions established by the affiliate relating to the 
marketing of your products or services;
    (D) Your affiliate is identified on or with the marketing materials 
provided to the consumer; and
    (E) You do not directly use your affiliate's eligibility information 
in the manner described in paragraph (b)(1)(ii) of this section.
    (ii) Writing requirements. (A) The requirements of paragraphs 
(b)(5)(i)(A) and (C) of this section must be set forth in a written 
agreement between your affiliate and the service provider; and
    (B) The specific terms and conditions established by your affiliate 
as provided in paragraph (b)(5)(i)(B) of this section must be set forth 
in writing.
    (6) Examples of making solicitations. (i) A consumer has a deposit 
account with a financial institution, which is affiliated with an 
insurance company. The insurance company receives eligibility 
information about the consumer from

[[Page 418]]

the financial institution. The insurance company uses that eligibility 
information to identify the consumer to receive a solicitation about 
insurance products, and, as a result, the insurance company provides a 
solicitation to the consumer about its insurance products. Pursuant to 
paragraph (b)(1) of this section, the insurance company has made a 
solicitation to the consumer.
    (ii) The same facts as in the example in paragraph (b)(6)(i) of this 
section, except that after using the eligibility information to identify 
the consumer to receive a solicitation about insurance products, the 
insurance company asks the financial institution to send the 
solicitation to the consumer and the financial institution does so. 
Pursuant to paragraph (b)(1) of this section, the insurance company has 
made a solicitation to the consumer because it used eligibility 
information about the consumer that it received from an affiliate to 
identify the consumer to receive a solicitation about its products or 
services, and, as a result, a solicitation was provided to the consumer 
about the insurance company's products.
    (iii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that eligibility information about consumers that 
have deposit accounts with the financial institution is placed into a 
common database that all members of the affiliated group of companies 
may independently access and use. Without using the financial 
institution's eligibility information, the insurance company develops 
selection criteria and provides those criteria, marketing materials, and 
related instructions to the financial institution. The financial 
institution reviews eligibility information about its own consumers 
using the selection criteria provided by the insurance company to 
determine which consumers should receive the insurance company's 
marketing materials and sends marketing materials about the insurance 
company's products to those consumers. Even though the insurance company 
has received eligibility information through the common database as 
provided in paragraph (b)(2) of this section, it did not use that 
information to identify consumers or establish selection criteria; 
instead, the financial institution used its own eligibility information. 
Therefore, pursuant to paragraph (b)(4)(i) of this section, the 
insurance company has not made a solicitation to the consumer.
    (iv) The same facts as in the example in paragraph (b)(6)(iii) of 
this section, except that the financial institution provides the 
insurance company's criteria to the financial institution's service 
provider and directs the service provider to use the financial 
institution's eligibility information to identify financial institution 
consumers who meet the criteria and to send the insurance company's 
marketing materials to those consumers. The insurance company does not 
communicate directly with the service provider regarding the use of the 
financial institution's information to market its products to the 
financial institution's consumers. Pursuant to paragraph (b)(4)(ii) of 
this section, the insurance company has not made a solicitation to the 
consumer.
    (v) An affiliated group of companies includes a financial 
institution, an insurance company, and a service provider. Each 
affiliate in the group places information about its consumers into a 
common database. The service provider has access to all information in 
the common database. The financial institution controls access to and 
use of its eligibility information by the service provider. This control 
is set forth in a written agreement between the financial institution 
and the service provider. The written agreement also requires the 
service provider to establish reasonable policies and procedures 
designed to ensure that the service provider uses the financial 
institution's eligibility information in accordance with specific terms 
and conditions established by the financial institution relating to the 
marketing of the products and services of all affiliates, including the 
insurance company. In a separate written communication, the financial 
institution specifies the terms and conditions under which the service 
provider may use the financial institution's eligibility information to

[[Page 419]]

market the insurance company's products and services to the financial 
institution's consumers. The specific terms and conditions are: a list 
of affiliated companies (including the insurance company) whose products 
or services may be marketed to the financial institution's consumers by 
the service provider; the specific products or types of products that 
may be marketed to the financial institution's consumers by the service 
provider; the categories of eligibility information that may be used by 
the service provider in marketing products or services to the financial 
institution's consumers; the types or categories of the financial 
institution's consumers to whom the service provider may market products 
or services of financial institution affiliates; the number and/or types 
of marketing communications that the service provider may send to the 
financial institution's consumers; and the length of time during which 
the service provider may market the products or services of the 
financial institution's affiliates to its consumers. The financial 
institution periodically evaluates the service provider's compliance 
with these terms and conditions. The insurance company asks the service 
provider to market insurance products to certain consumers who have 
deposit accounts with the financial institution. Without using the 
financial institution's eligibility information, the insurance company 
develops selection criteria and provides those criteria, marketing 
materials, and related instructions to the service provider. The service 
provider uses the financial institution's eligibility information from 
the common database to identify the financial institution's consumers to 
whom insurance products will be marketed. When the insurance company's 
marketing materials are provided to the identified consumers, the name 
of the financial institution is displayed on the insurance marketing 
materials, an introductory letter that accompanies the marketing 
materials, an account statement that accompanies the marketing 
materials, or the envelope containing the marketing materials. The 
requirements of paragraph (b)(5) of this section have been satisfied, 
and the insurance company has not made a solicitation to the consumer.
    (vi) The same facts as in the example in paragraph (b)(6)(v) of this 
section, except that the terms and conditions permit the service 
provider to use the financial institution's eligibility information to 
market the products and services of other affiliates to the financial 
institution's consumers whenever the service provider deems it 
appropriate to do so. The service provider uses the financial 
institution's eligibility information in accordance with the discretion 
afforded to it by the terms and conditions. Because the terms and 
conditions are not specific, the requirements of paragraph (b)(5) of 
this section have not been satisfied.
    (c) Exceptions. The provisions of this subpart do not apply to you 
if you use eligibility information that you receive from an affiliate:
    (1) To make a solicitation for marketing purposes to a consumer with 
whom you have a pre-existing business relationship;
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the current employment 
relationship or status of the individual as a participant or beneficiary 
of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
subparagraph shall not be construed as permitting you to send 
solicitations on behalf of an affiliate if the affiliate would not be 
permitted to send the solicitation as a result of the election of the 
consumer to opt out under this subpart;
    (4) In response to a communication about your products or services 
initiated by the consumer;
    (5) In response to an authorization or request by the consumer to 
receive solicitations; or
    (6) If your compliance with this subpart would prevent you from 
complying with any provision of state insurance laws pertaining to 
unfair discrimination in any state in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Example of the pre-existing business 
relationship

[[Page 420]]

exception. A consumer has a deposit account with a financial 
institution. The consumer also has a relationship with the financial 
institution's securities affiliate for management of the consumer's 
securities portfolio. The financial institution receives eligibility 
information about the consumer from its securities affiliate and uses 
that information to make a solicitation to the consumer about the 
financial institution's wealth management services. The financial 
institution may make this solicitation even if the consumer has not been 
given a notice and opportunity to opt out because the financial 
institution has a pre-existing business relationship with the consumer.
    (2) Examples of service provider exception. (i) A consumer has an 
insurance policy issued by an insurance company. The insurance company 
furnishes eligibility information about the consumer to its affiliated 
financial institution. Based on that eligibility information, the 
financial institution wants to make a solicitation to the consumer about 
its deposit products. The financial institution does not have a pre-
existing business relationship with the consumer and none of the other 
exceptions in paragraph (c) of this section apply. The consumer has been 
given an opt-out notice and has elected to opt out of receiving such 
solicitations. The financial institution asks a service provider to send 
the solicitation to the consumer on its behalf. The service provider may 
not send the solicitation on behalf of the financial institution 
because, as a result of the consumer's opt-out election, the financial 
institution is not permitted to make the solicitation.
    (ii) The same facts as in paragraph (d)(2)(i) of this section, 
except the consumer has been given an opt-out notice, but has not 
elected to opt out. The financial institution asks a service provider to 
send the solicitation to the consumer on its behalf. The service 
provider may send the solicitation on behalf of the financial 
institution because, as a result of the consumer's not opting out, the 
financial institution is permitted to make the solicitation.
    (3) Examples of consumer-initiated communications. (i) A consumer 
who has a deposit account with a financial institution initiates a 
communication with the financial institution's credit card affiliate to 
request information about a credit card. The credit card affiliate may 
use eligibility information about the consumer it obtains from the 
financial institution or any other affiliate to make solicitations 
regarding credit card products in response to the consumer-initiated 
communication.
    (ii) A consumer who has a deposit account with a financial 
institution contacts the institution to request information about how to 
save and invest for a child's college education without specifying the 
type of product in which the consumer may be interested. Information 
about a range of different products or services offered by the financial 
institution and one or more affiliates of the institution may be 
responsive to that communication. Such products or services may include 
the following: mutual funds offered by the institution's mutual fund 
affiliate; section 529 plans offered by the institution, its mutual fund 
affiliate, or another securities affiliate; or trust services offered by 
a different financial institution in the affiliated group. Any affiliate 
offering investment products or services that would be responsive to the 
consumer's request for information about saving and investing for a 
child's college education may use eligibility information to make 
solicitations to the consumer in response to this communication.
    (iii) A credit card issuer makes a marketing call to the consumer 
without using eligibility information received from an affiliate. The 
issuer leaves a voice-mail message that invites the consumer to call a 
toll-free number to apply for the issuer's credit card. If the consumer 
calls the toll-free number to inquire about the credit card, the call is 
a consumer-initiated communication about a product or service and the 
credit card issuer may now use eligibility information it receives from 
its affiliates to make solicitations to the consumer.
    (iv) A consumer calls a financial institution to ask about retail 
locations and hours, but does not request information about products or 
services. The institution may not use eligibility information it 
receives from an affiliate

[[Page 421]]

to make solicitations to the consumer about its products or services 
because the consumer-initiated communication does not relate to the 
financial institution's products or services. Thus, the use of 
eligibility information received from an affiliate would not be 
responsive to the communication and the exception does not apply.
    (v) A consumer calls a financial institution to ask about retail 
locations and hours. The customer service representative asks the 
consumer if there is a particular product or service about which the 
consumer is seeking information. The consumer responds that the consumer 
wants to stop in and find out about certificates of deposit. The 
customer service representative offers to provide that information by 
telephone and mail additional information and application materials to 
the consumer. The consumer agrees and provides or confirms contact 
information for receipt of the materials to be mailed. The financial 
institution may use eligibility information it receives from an 
affiliate to make solicitations to the consumer about certificates of 
deposit because such solicitations would respond to the consumer-
initiated communication about products or services.
    (4) Examples of consumer authorization or request for solicitations. 
(i) A consumer who obtains a mortgage from a mortgage lender authorizes 
or requests information about homeowner's insurance offered by the 
mortgage lender's insurance affiliate. Such authorization or request, 
whether given to the mortgage lender or to the insurance affiliate, 
would permit the insurance affiliate to use eligibility information 
about the consumer it obtains from the mortgage lender or any other 
affiliate to make solicitations to the consumer about homeowner's 
insurance.
    (ii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's online application 
contains a blank check box that the consumer may check to authorize or 
request information from the credit card issuer's affiliates. The 
consumer checks the box. The consumer has authorized or requested 
solicitations from the card issuer's affiliates.
    (iii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's online application 
contains a pre-selected check box indicating that the consumer 
authorizes or requests information from the issuer's affiliates. The 
consumer does not deselect the check box. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (iv) The terms and conditions of a credit card account agreement 
contain preprinted boilerplate language stating that by applying to open 
an account the consumer authorizes or requests to receive solicitations 
from the credit card issuer's affiliates. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (e) Relation to affiliate-sharing notice and opt-out. Nothing in 
this subpart limits the responsibility of a person to comply with the 
notice and opt-out provisions of section 603(d)(2)(A)(iii) of the Act 
where applicable.



Sec. 1022.22  Scope and duration of opt-out.

    (a) Scope of opt-out--(1) In general. Except as otherwise provided 
in this section, the consumer's election to opt out prohibits any 
affiliate covered by the opt-out notice from using eligibility 
information received from another affiliate as described in the notice 
to make solicitations to the consumer.
    (2) Continuing relationship. (i) In general. If the consumer 
establishes a continuing relationship with you or your affiliate, an 
opt-out notice may apply to eligibility information obtained in 
connection with:
    (A) A single continuing relationship or multiple continuing 
relationships that the consumer establishes with you or your affiliates, 
including continuing relationships established subsequent to delivery of 
the opt-out notice, so long as the notice adequately describes the 
continuing relationships covered by the opt-out; or
    (B) Any other transaction between the consumer and you or your 
affiliates as described in the notice.

[[Page 422]]

    (ii) Examples of continuing relationships. A consumer has a 
continuing relationship with you or your affiliate if the consumer:
    (A) Opens a deposit or investment account with you or your 
affiliate;
    (B) Obtains a loan for which you or your affiliate owns the 
servicing rights;
    (C) Purchases an insurance product from you or your affiliate;
    (D) Holds an investment product through you or your affiliate, such 
as when you act or your affiliate acts as a custodian for securities or 
for assets in an individual retirement arrangement;
    (E) Enters into an agreement or understanding with you or your 
affiliate whereby you or your affiliate undertakes to arrange or broker 
a home mortgage loan for the consumer;
    (F) Enters into a lease of personal property with you or your 
affiliate; or
    (G) Obtains financial, investment, or economic advisory services 
from you or your affiliate for a fee.
    (3) No continuing relationship. (i) In general. If there is no 
continuing relationship between a consumer and you or your affiliate, 
and you or your affiliate obtain eligibility information about a 
consumer in connection with a transaction with the consumer, such as an 
isolated transaction or a credit application that is denied, an opt-out 
notice provided to the consumer only applies to eligibility information 
obtained in connection with that transaction.
    (ii) Examples of isolated transactions. An isolated transaction 
occurs if:
    (A) The consumer uses your or your affiliate's ATM to withdraw cash 
from an account at another financial institution; or
    (B) You or your affiliate sells the consumer a cashier's check or 
money order, airline tickets, travel insurance, or traveler's checks in 
isolated transactions.
    (4) Menu of alternatives. A consumer may be given the opportunity to 
choose from a menu of alternatives when electing to prohibit 
solicitations, such as by electing to prohibit solicitations from 
certain types of affiliates covered by the opt-out notice but not other 
types of affiliates covered by the notice, electing to prohibit 
solicitations based on certain types of eligibility information but not 
other types of eligibility information, or electing to prohibit 
solicitations by certain methods of delivery but not other methods of 
delivery. However, one of the alternatives must allow the consumer to 
prohibit all solicitations from all of the affiliates that are covered 
by the notice.
    (5) Special rule for a notice following termination of all 
continuing relationships--(i) In general. A consumer must be given a new 
opt-out notice if, after all continuing relationships with you or your 
affiliate(s) are terminated, the consumer subsequently establishes 
another continuing relationship with you or your affiliate(s) and the 
consumer's eligibility information is to be used to make a solicitation. 
The new opt-out notice must apply, at a minimum, to eligibility 
information obtained in connection with the new continuing relationship. 
Consistent with paragraph (b) of this section, the consumer's decision 
not to opt out after receiving the new opt-out notice would not override 
a prior opt-out election by the consumer that applies to eligibility 
information obtained in connection with a terminated relationship, 
regardless of whether the new opt-out notice applies to eligibility 
information obtained in connection with the terminated relationship.
    (ii) Example. A consumer has a checking account with a financial 
institution that is part of an affiliated group. The consumer closes the 
checking account. One year after closing the checking account, the 
consumer opens a savings account with the same financial institution. 
The consumer must be given a new notice and opportunity to opt out 
before the financial institution's affiliates may make solicitations to 
the consumer using eligibility information obtained by the financial 
institution in connection with the new savings account relationship, 
regardless of whether the consumer opted out in connection with the 
checking account.
    (b) Duration of opt-out. The election of a consumer to opt out must 
be effective for a period of at least five years (the ``opt-out 
period'') beginning when the consumer's opt-out election is received and 
implemented, unless the

[[Page 423]]

consumer subsequently revokes the opt-out in writing or, if the consumer 
agrees, electronically. An opt-out period of more than five years may be 
established, including an opt-out period that does not expire unless 
revoked by the consumer.
    (c) Time of opt-out. A consumer may opt out at any time.



Sec. 1022.23  Contents of opt-out notice; consolidated and equivalent
notices.

    (a) Contents of opt-out notice--(1) In general. A notice must be 
clear, conspicuous, and concise, and must accurately disclose:
    (i) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies;''
    (ii) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies;''
    (iii) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (iv) That the consumer may elect to limit the use of eligibility 
information to make solicitations to the consumer;
    (v) That the consumer's election will apply for the specified period 
of time stated in the notice and, if applicable, that the consumer will 
be allowed to renew the election once that period expires;
    (vi) If the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, that 
the consumer who has chosen to limit solicitations does not need to act 
again until the consumer receives a renewal notice; and
    (vii) A reasonable and simple method for the consumer to opt out.
    (2) Joint relationships. (i) If two or more consumers jointly obtain 
a product or service, a single opt-out notice may be provided to the 
joint consumers. Any of the joint consumers may exercise the right to 
opt out.
    (ii) The opt-out notice must explain how an opt-out direction by a 
joint consumer will be treated. An opt-out direction by a joint consumer 
may be treated as applying to all of the associated joint consumers, or 
each joint consumer may be permitted to opt out separately. If each 
joint consumer is permitted to opt out separately, one of the joint 
consumers must be permitted to opt out on behalf of all of the joint 
consumers and the joint consumers must be permitted to exercise their 
separate rights to opt out in a single response.
    (iii) It is impermissible to require all joint consumers to opt out 
before implementing any opt-out direction.

[[Page 424]]

    (3) Alternative contents. If the consumer is afforded a broader 
right to opt out of receiving marketing than is required by this 
subpart, the requirements of this section may be satisfied by providing 
the consumer with a clear, conspicuous, and concise notice that 
accurately discloses the consumer's opt-out rights.
    (4) Model notices. Model notices are provided in appendix C of this 
part.
    (b) Coordinated and consolidated notices. A notice required by this 
subpart may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law by the 
entity providing the notice, including but not limited to the notice 
described in section 603(d)(2)(A)(iii) of the Act and the Gramm-Leach-
Bliley Act privacy notice.
    (c) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this subpart, and that is provided 
to a consumer together with disclosures required by any other provision 
of law, satisfies the requirements of this section.



Sec. 1022.24  Reasonable opportunity to opt out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable opportunity to opt out, as required by 
Sec. 1022.21(a)(1)(ii) of this part.
    (b) Examples of a reasonable opportunity to opt out. The consumer is 
given a reasonable opportunity to opt out if:
    (1) By mail. The opt-out notice is mailed to the consumer. The 
consumer is given 30 days from the date the notice is mailed to elect to 
opt out by any reasonable means.
    (2) By electronic means. (i) The opt-out notice is provided 
electronically to the consumer, such as by posting the notice at a Web 
site at which the consumer has obtained a product or service. The 
consumer acknowledges receipt of the electronic notice. The consumer is 
given 30 days after the date the consumer acknowledges receipt to elect 
to opt out by any reasonable means.
    (ii) The opt-out notice is provided to the consumer by email where 
the consumer has agreed to receive disclosures by email from the person 
sending the notice. The consumer is given 30 days after the email is 
sent to elect to opt out by any reasonable means.
    (3) At the time of an electronic transaction. The opt-out notice is 
provided to the consumer at the time of an electronic transaction, such 
as a transaction conducted on a Web site. The consumer is required to 
decide, as a necessary part of proceeding with the transaction, whether 
to opt out before completing the transaction. There is a simple process 
that the consumer may use to opt out at that time using the same 
mechanism through which the transaction is conducted.
    (4) At the time of an in-person transaction. The opt-out notice is 
provided to the consumer in writing at the time of an in-person 
transaction. The consumer is required to decide, as a necessary part of 
proceeding with the transaction, whether to opt out before completing 
the transaction, and is not permitted to complete the transaction 
without making a choice. There is a simple process that the consumer may 
use during the course of the in-person transaction to opt out, such as 
completing a form that requires consumers to write a ``yes'' or ``no'' 
to indicate their opt-out preference or that requires the consumer to 
check one of two blank check boxes; one that allows consumers to 
indicate that they want to opt out and one that allows consumers to 
indicate that they do not want to opt out.
    (5) By including in a privacy notice. The opt-out notice is included 
in a Gramm-Leach-Bliley Act privacy notice. The consumer is allowed to 
exercise the opt-out within a reasonable period of time and in the same 
manner as the opt-out under that privacy notice.



Sec. 1022.25  Reasonable and simple methods of opting out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable

[[Page 425]]

and simple method to opt out, as required by Sec. 1022.21(a)(1)(ii) of 
this part.
    (b) Examples--(1) Reasonable and simple opt-out methods. Reasonable 
and simple methods for exercising the opt-out right include:
    (i) Designating a check-off box in a prominent position on the opt-
out form;
    (ii) Including a reply form and a self-addressed envelope together 
with the opt-out notice;
    (iii) Providing an electronic means to opt out, such as a form that 
can be electronically mailed or processed at a Web site, if the consumer 
agrees to the electronic delivery of information;
    (iv) Providing a toll-free telephone number that consumers may call 
to opt out; or
    (v) Allowing consumers to exercise all of their opt-out rights 
described in a consolidated opt-out notice that includes the privacy 
opt-out under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., the 
affiliate sharing opt-out under the Act, and the affiliate marketing 
opt-out under the Act, by a single method, such as by calling a single 
toll-free telephone number.
    (2) Opt-out methods that are not reasonable and simple. Reasonable 
and simple methods for exercising an opt-out right do not include--
    (i) Requiring the consumer to write his or her own letter;
    (ii) Requiring the consumer to call or write to obtain a form for 
opting out, rather than including the form with the opt-out notice;
    (iii) Requiring the consumer who receives the opt-out notice in 
electronic form only, such as through posting at a Web site, to opt out 
solely by paper mail or by visiting a different Web site without 
providing a link to that site.
    (c) Specific opt-out means. Each consumer may be required to opt out 
through a specific means, as long as that means is reasonable and simple 
for that consumer.



Sec. 1022.26  Delivery of opt-out notices.

    (a) In general. The opt-out notice must be provided so that each 
consumer can reasonably be expected to receive actual notice. For opt-
out notices provided electronically, the notice may be provided in 
compliance with either the electronic disclosure provisions in this 
subpart or the provisions in section 101 of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq.
    (b) Examples of reasonable expectation of actual notice. A consumer 
may reasonably be expected to receive actual notice if the affiliate 
providing the notice:
    (1) Hand-delivers a printed copy of the notice to the consumer;
    (2) Mails a printed copy of the notice to the last known mailing 
address of the consumer;
    (3) Provides a notice by email to a consumer who has agreed to 
receive electronic disclosures by email from the affiliate providing the 
notice; or
    (4) Posts the notice on the Web site at which the consumer obtained 
a product or service electronically and requires the consumer to 
acknowledge receipt of the notice.
    (c) Examples of no reasonable expectation of actual notice. A 
consumer may not reasonably be expected to receive actual notice if the 
affiliate providing the notice:
    (1) Only posts the notice on a sign in a branch or office or 
generally publishes the notice in a newspaper;
    (2) Sends the notice via email to a consumer who has not agreed to 
receive electronic disclosures by email from the affiliate providing the 
notice; or
    (3) Posts the notice on a Web site without requiring the consumer to 
acknowledge receipt of the notice.



Sec. 1022.27  Renewal of opt-out.

    (a) Renewal notice and opt-out requirement--(1) In general. After 
the opt-out period expires, you may not make solicitations based on 
eligibility information you receive from an affiliate to a consumer who 
previously opted out, unless:
    (i) The consumer has been given a renewal notice that complies with 
the requirements of this section and Sec. Sec. 1022.24 through 1022.26 
of this part, and a reasonable opportunity and a reasonable and simple 
method to renew the opt-out, and the consumer does not renew the opt-
out; or
    (ii) An exception in Sec. 1022.21(c) of this part applies.

[[Page 426]]

    (2) Renewal period. Each opt-out renewal must be effective for a 
period of at least five years as provided in Sec. 1022.22(b) of this 
part.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By the affiliate that provided the previous opt-out notice, or 
its successor; or
    (ii) As part of a joint renewal notice from two or more members of 
an affiliated group of companies, or their successors, that jointly 
provided the previous opt-out notice.
    (b) Contents of renewal notice. The renewal notice must be clear, 
conspicuous, and concise, and must accurately disclose:
    (1) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies'';
    (2) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies;''
    (3) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (4) That the consumer previously elected to limit the use of certain 
information to make solicitations to the consumer;
    (5) That the consumer's election has expired or is about to expire;
    (6) That the consumer may elect to renew the consumer's previous 
election;
    (7) If applicable, that the consumer's election to renew will apply 
for the specified period of time stated in the notice and that the 
consumer will be allowed to renew the election once that period expires; 
and
    (8) A reasonable and simple method for the consumer to opt out.
    (c) Timing of the renewal notice--(1) In general. A renewal notice 
may be provided to the consumer either:
    (i) A reasonable period of time before the expiration of the opt-out 
period; or
    (ii) Any time after the expiration of the opt-out period but before 
solicitations that would have been prohibited by the expired opt-out are 
made to the consumer.
    (2) Combination with annual privacy notice. If you provide an annual 
privacy notice under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., 
providing a renewal notice with the last annual privacy notice provided 
to the consumer before expiration of the opt-out period is a reasonable 
period of time before expiration of the opt-out in all cases.
    (d) No effect on opt-out period. An opt-out period may not be 
shortened by sending a renewal notice to the consumer before expiration 
of the opt-out

[[Page 427]]

period, even if the consumer does not renew the opt out.



                      Subpart D_Medical Information



Sec. 1022.30  Obtaining or using medical information in connection
with a determination of eligibility for credit.

    (a) Scope. This section applies to any person that participates as a 
creditor in a transaction, except for a person excluded from coverage of 
this part by section 1029 of the Consumer Financial Protection Act of 
2010, title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) General prohibition on obtaining or using medical information--
(1) In general. A creditor may not obtain or use medical information 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit, except as 
provided in this section.
    (2) Definitions. (i) Credit has the same meaning as in section 702 
of the Equal Credit Opportunity Act, 15 U.S.C. 1691a.
    (ii) Creditor has the same meaning as in section 702 of the Equal 
Credit Opportunity Act, 15 U.S.C. 1691a.
    (iii) Eligibility, or continued eligibility, for credit means the 
consumer's qualification or fitness to receive, or continue to receive, 
credit, including the terms on which credit is offered. The term does 
not include:
    (A) Any determination of the consumer's qualification or fitness for 
employment, insurance (other than a credit insurance product), or other 
non-credit products or services;
    (B) Authorizing, processing, or documenting a payment or transaction 
on behalf of the consumer in a manner that does not involve a 
determination of the consumer's eligibility, or continued eligibility, 
for credit; or
    (C) Maintaining or servicing the consumer's account in a manner that 
does not involve a determination of the consumer's eligibility, or 
continued eligibility, for credit.
    (c) Rule of construction for obtaining and using unsolicited medical 
information--(1) In general. A creditor does not obtain medical 
information in violation of the prohibition if it receives medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit without specifically requesting medical information.
    (2) Use of unsolicited medical information. A creditor that receives 
unsolicited medical information in the manner described in paragraph 
(c)(1) of this section may use that information in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit to the extent the creditor can rely on at least one of the 
exceptions in Sec. 1022.30(d) or (e).
    (3) Examples. A creditor does not obtain medical information in 
violation of the prohibition if, for example:
    (i) In response to a general question regarding a consumer's debts 
or expenses, the creditor receives information that the consumer owes a 
debt to a hospital.
    (ii) In a conversation with the creditor's loan officer, the 
consumer informs the creditor that the consumer has a particular medical 
condition.
    (iii) In connection with a consumer's application for an extension 
of credit, the creditor requests a consumer report from a consumer 
reporting agency and receives medical information in the consumer report 
furnished by the agency even though the creditor did not specifically 
request medical information from the consumer reporting agency.
    (d) Financial information exception for obtaining and using medical 
information--(1) In general. A creditor may obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit so long as:
    (i) The information is the type of information routinely used in 
making credit eligibility determinations, such as information relating 
to debts, expenses, income, benefits, assets, collateral, or the purpose 
of the loan, including the use of proceeds;(ii) The creditor uses the 
medical information in a manner and to an extent that is no less 
favorable than it would use comparable information that is not medical 
information in a credit transaction; and

[[Page 428]]

    (iii) The creditor does not take the consumer's physical, mental, or 
behavioral health, condition or history, type of treatment, or prognosis 
into account as part of any such determination.
    (2) Examples--(i) Examples of the types of information routinely 
used in making credit eligibility determinations. Paragraph (d)(1)(i) of 
this section permits a creditor, for example, to obtain and use 
information about:
    (A) The dollar amount, repayment terms, repayment history, and 
similar information regarding medical debts to calculate, measure, or 
verify the repayment ability of the consumer, the use of proceeds, or 
the terms for granting credit;
    (B) The value, condition, and lien status of a medical device that 
may serve as collateral to secure a loan;
    (C) The dollar amount and continued eligibility for disability 
income, workers' compensation income, or other benefits related to 
health or a medical condition that is relied on as a source of 
repayment; or
    (D) The identity of creditors to whom outstanding medical debts are 
owed in connection with an application for credit, including but not 
limited to, a transaction involving the consolidation of medical debts.
    (ii) Examples of uses of medical information consistent with the 
exception. (A) A consumer includes on an application for credit 
information about two $20,000 debts. One debt is to a hospital; the 
other debt is to a retailer. The creditor contacts the hospital and the 
retailer to verify the amount and payment status of the debts. The 
creditor learns that both debts are more than 90 days past due. Any two 
debts of this size that are more than 90 days past due would disqualify 
the consumer under the creditor's established underwriting criteria. The 
creditor denies the application on the basis that the consumer has a 
poor repayment history on outstanding debts. The creditor has used 
medical information in a manner and to an extent no less favorable than 
it would use comparable non-medical information.
    (B) A consumer indicates on an application for a $200,000 mortgage 
loan that she receives $15,000 in long-term disability income each year 
from her former employer and has no other income. Annual income of 
$15,000, regardless of source, would not be sufficient to support the 
requested amount of credit. The creditor denies the application on the 
basis that the projected debt-to-income ratio of the consumer does not 
meet the creditor's underwriting criteria. The creditor has used medical 
information in a manner and to an extent that is no less favorable than 
it would use comparable non-medical information.
    (C) A consumer includes on an application for a $10,000 home equity 
loan that he has a $50,000 debt to a medical facility that specializes 
in treating a potentially terminal disease. The creditor contacts the 
medical facility to verify the debt and obtain the repayment history and 
current status of the loan. The creditor learns that the debt is 
current. The applicant meets the income and other requirements of the 
creditor's underwriting guidelines. The creditor grants the application. 
The creditor has used medical information in accordance with the 
exception.
    (iii) Examples of uses of medical information inconsistent with the 
exception. (A) A consumer applies for $25,000 of credit and includes on 
the application information about a $50,000 debt to a hospital. The 
creditor contacts the hospital to verify the amount and payment status 
of the debt, and learns that the debt is current and that the consumer 
has no delinquencies in her repayment history. If the existing debt were 
instead owed to a retail department store, the creditor would approve 
the application and extend credit based on the amount and repayment 
history of the outstanding debt. The creditor, however, denies the 
application because the consumer is indebted to a hospital. The creditor 
has used medical information, here the identity of the medical creditor, 
in a manner and to an extent that is less favorable than it would use 
comparable non-medical information.
    (B) A consumer meets with a loan officer of a creditor to apply for 
a mortgage loan. While filling out the loan application, the consumer 
informs the loan officer orally that she has a potentially terminal 
disease. The consumer

[[Page 429]]

meets the creditor's established requirements for the requested mortgage 
loan. The loan officer recommends to the credit committee that the 
consumer be denied credit because the consumer has that disease. The 
credit committee follows the loan officer's recommendation and denies 
the application because the consumer has a potentially terminal disease. 
The creditor has used medical information in a manner inconsistent with 
the exception by taking into account the consumer's physical, mental, or 
behavioral health, condition, or history, type of treatment, or 
prognosis as part of a determination of eligibility or continued 
eligibility for credit.
    (C) A consumer who has an apparent medical condition, such as a 
consumer who uses a wheelchair or an oxygen tank, meets with a loan 
officer to apply for a home equity loan. The consumer meets the 
creditor's established requirements for the requested home equity loan 
and the creditor typically does not require consumers to obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product in connection with such loans. However, based on the consumer's 
apparent medical condition, the loan officer recommends to the credit 
committee that credit be extended to the consumer only if the consumer 
obtains a debt cancellation contract, debt suspension agreement, or 
credit insurance product from a nonaffiliated third party. The credit 
committee agrees with the loan officer's recommendation. The loan 
officer informs the consumer that the consumer must obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product from a nonaffiliated third party to qualify for the loan. The 
consumer obtains one of these products and the creditor approves the 
loan. The creditor has used medical information in a manner inconsistent 
with the exception by taking into account the consumer's physical, 
mental, or behavioral health, condition, or history, type of treatment, 
or prognosis in setting conditions on the consumer's eligibility for 
credit.
    (e) Specific exceptions for obtaining and using medical 
information--(1) In general. A creditor may obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit:
    (i) To determine whether the use of a power of attorney or legal 
representative that is triggered by a medical condition or event is 
necessary and appropriate or whether the consumer has the legal capacity 
to contract when a person seeks to exercise a power of attorney or act 
as legal representative for a consumer based on an asserted medical 
condition or event;
    (ii) To comply with applicable requirements of local, state, or 
Federal laws;
    (iii) To determine, at the consumer's request, whether the consumer 
qualifies for a legally permissible special credit program or credit-
related assistance program that is:
    (A) Designed to meet the special needs of consumers with medical 
conditions; and
    (B) Established and administered pursuant to a written plan that:
    (1) Identifies the class of persons that the program is designed to 
benefit; and
    (2) Sets forth the procedures and standards for extending credit or 
providing other credit-related assistance under the program;
    (iv) To the extent necessary for purposes of fraud prevention or 
detection;
    (v) In the case of credit for the purpose of financing medical 
products or services, to determine and verify the medical purpose of a 
loan and the use of proceeds;
    (vi) Consistent with safe and sound practices, if the consumer or 
the consumer's legal representative specifically requests that the 
creditor use medical information in determining the consumer's 
eligibility, or continued eligibility, for credit, to accommodate the 
consumer's particular circumstances, and such request is documented by 
the creditor;
    (vii) Consistent with safe and sound practices, to determine whether 
the provisions of a forbearance practice or program that is triggered by 
a medical condition or event apply to a consumer;
    (viii) To determine the consumer's eligibility for, the triggering 
of, or the

[[Page 430]]

reactivation of a debt cancellation contract or debt suspension 
agreement if a medical condition or event is a triggering event for the 
provision of benefits under the contract or agreement; or
    (ix) To determine the consumer's eligibility for, the triggering of, 
or the reactivation of a credit insurance product if a medical condition 
or event is a triggering event for the provision of benefits under the 
product.
    (2) Example of determining eligibility for a special credit program 
or credit assistance program. A not-for-profit organization establishes 
a credit assistance program pursuant to a written plan that is designed 
to assist disabled veterans in purchasing homes by subsidizing the down 
payment for the home purchase mortgage loans of qualifying veterans. The 
organization works through mortgage lenders and requires mortgage 
lenders to obtain medical information about the disability of any 
consumer that seeks to qualify for the program, use that information to 
verify the consumer's eligibility for the program, and forward that 
information to the organization. A consumer who is a veteran applies to 
a creditor for a home purchase mortgage loan. The creditor informs the 
consumer about the credit assistance program for disabled veterans and 
the consumer seeks to qualify for the program. Assuming that the program 
complies with all applicable law, including applicable fair lending 
laws, the creditor may obtain and use medical information about the 
medical condition and disability, if any, of the consumer to determine 
whether the consumer qualifies for the credit assistance program.
    (3) Examples of verifying the medical purpose of the loan or the use 
of proceeds. (i) If a consumer applies for $10,000 of credit for the 
purpose of financing vision correction surgery, the creditor may verify 
with the surgeon that the procedure will be performed. If the surgeon 
reports that surgery will not be performed on the consumer, the creditor 
may use that medical information to deny the consumer's application for 
credit, because the loan would not be used for the stated purpose.
    (ii) If a consumer applies for $10,000 of credit for the purpose of 
financing cosmetic surgery, the creditor may confirm the cost of the 
procedure with the surgeon. If the surgeon reports that the cost of the 
procedure is $5,000, the creditor may use that medical information to 
offer the consumer only $5,000 of credit.
    (iii) A creditor has an established medical loan program for 
financing particular elective surgical procedures. The creditor receives 
a loan application from a consumer requesting $10,000 of credit under 
the established loan program for an elective surgical procedure. The 
consumer indicates on the application that the purpose of the loan is to 
finance an elective surgical procedure not eligible for funding under 
the guidelines of the established loan program. The creditor may deny 
the consumer's application because the purpose of the loan is not for a 
particular procedure funded by the established loan program.
    (4) Examples of obtaining and using medical information at the 
request of the consumer. (i) If a consumer applies for a loan and 
specifically requests that the creditor consider the consumer's medical 
disability at the relevant time as an explanation for adverse payment 
history information in his credit report, the creditor may consider such 
medical information in evaluating the consumer's willingness and ability 
to repay the requested loan to accommodate the consumer's particular 
circumstances, consistent with safe and sound practices. The creditor 
may also decline to consider such medical information to accommodate the 
consumer, but may evaluate the consumer's application in accordance with 
its otherwise applicable underwriting criteria. The creditor may not 
deny the consumer's application or otherwise treat the consumer less 
favorably because the consumer specifically requested a medical 
accommodation, if the creditor would have extended the credit or treated 
the consumer more favorably under the creditor's otherwise applicable 
underwriting criteria.
    (ii) If a consumer applies for a loan by telephone and explains that 
his income has been and will continue to be interrupted on account of a 
medical condition and that he expects to repay the loan by liquidating 
assets, the

[[Page 431]]

creditor may, but is not required to, evaluate the application using the 
sale of assets as the primary source of repayment, consistent with safe 
and sound practices, provided that the creditor documents the consumer's 
request by recording the oral conversation or making a notation of the 
request in the consumer's file.
    (iii) If a consumer applies for a loan and the application form 
provides a space where the consumer may provide any other information or 
special circumstances, whether medical or non-medical, that the consumer 
would like the creditor to consider in evaluating the consumer's 
application, the creditor may use medical information provided by the 
consumer in that space on that application to accommodate the consumer's 
application for credit, consistent with safe and sound practices, or may 
disregard that information.
    (iv) If a consumer specifically requests that the creditor use 
medical information in determining the consumer's eligibility, or 
continued eligibility, for credit and provides the creditor with medical 
information for that purpose, and the creditor determines that it needs 
additional information regarding the consumer's circumstances, the 
creditor may request, obtain, and use additional medical information 
about the consumer as necessary to verify the information provided by 
the consumer or to determine whether to make an accommodation for the 
consumer. The consumer may decline to provide additional information, 
withdraw the request for an accommodation, and have the application 
considered under the creditor's otherwise applicable underwriting 
criteria.
    (v) If a consumer completes and signs a credit application that is 
not for medical purpose credit and the application contains boilerplate 
language that routinely requests medical information from the consumer 
or that indicates that by applying for credit the consumer authorizes or 
consents to the creditor obtaining and using medical information in 
connection with a determination of the consumer's eligibility, or 
continued eligibility, for credit, the consumer has not specifically 
requested that the creditor obtain and use medical information to 
accommodate the consumer's particular circumstances.
    (5) Example of a forbearance practice or program. After an 
appropriate safety and soundness review, a creditor institutes a program 
that allows consumers who are or will be hospitalized to defer payments 
as needed for up to three months, without penalty, if the credit account 
has been open for more than one year and has not previously been in 
default, and the consumer provides confirming documentation at an 
appropriate time. A consumer is hospitalized and does not pay her bill 
for a particular month. This consumer has had a credit account with the 
creditor for more than one year and has not previously been in default. 
The creditor attempts to contact the consumer and speaks with the 
consumer's adult child, who is not the consumer's legal representative. 
The adult child informs the creditor that the consumer is hospitalized 
and is unable to pay the bill at that time. The creditor defers payments 
for up to three months, without penalty, for the hospitalized consumer 
and sends the consumer a letter confirming this practice and the date on 
which the next payment will be due. The creditor has obtained and used 
medical information to determine whether the provisions of a medically-
triggered forbearance practice or program apply to a consumer.



Sec. 1022.31  Limits on redisclosure of information.

    (a) Scope. This section applies to any person, except for a person 
excluded from coverage of this part by section 1029 of the Consumer 
Financial Protection Act of 2010, title X of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) Limits on redisclosure. If a person described in paragraph (a) 
of this section receives medical information about a consumer from a 
consumer reporting agency or its affiliate, the person must not disclose 
that information to any other person, except as necessary to carry out 
the purpose for which the information was initially disclosed, or as 
otherwise permitted by statute, regulation, or order.

[[Page 432]]



Sec. 1022.32  Sharing medical information with affiliates.

    (a) Scope. This section applies to any person, except for a person 
excluded from coverage of this part by section 1029 of the Consumer 
Financial Protection Act of 2010, title X of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) In general. The exclusions from the term ``consumer report'' in 
section 603(d)(2) of the Act that allow the sharing of information with 
affiliates do not apply to a person described in paragraph (a) of this 
section if that person communicates to an affiliate:
    (1) Medical information;
    (2) An individualized list or description based on the payment 
transactions of the consumer for medical products or services; or
    (3) An aggregate list of identified consumers based on payment 
transactions for medical products or services.
    (c) Exceptions. A person described in paragraph (a) of this section 
may rely on the exclusions from the term ``consumer report'' in section 
603(d)(2) of the Act to communicate the information in paragraph (b) of 
this section to an affiliate:
    (1) In connection with the business of insurance or annuities 
(including the activities described in section 18B of the model Privacy 
of Consumer Financial and Health Information Regulation issued by the 
National Association of Insurance Commissioners, as in effect on January 
1, 2003);
    (2) For any purpose permitted without authorization under the 
regulations promulgated by the Department of Health and Human Services 
pursuant to the Health Insurance Portability and Accountability Act of 
1996 (HIPAA);
    (3) For any purpose referred to in section 1179 of HIPAA;
    (4) For any purpose described in section 502(e) of the Gramm-Leach-
Bliley Act;
    (5) In connection with a determination of the consumer's 
eligibility, or continued eligibility, for credit consistent with 
Sec. 1022.30 of this part; or
    (6) As otherwise permitted by order of the Bureau.



              Subpart E_Duties of Furnishers of Information



Sec. 1022.40  Scope.

    Subpart E of this part applies to any person that furnishes 
information to a consumer reporting agency, except for a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376.



Sec. 1022.41  Definitions.

    For purposes of this subpart and appendix E of this part, the 
following definitions apply:
    (a) Accuracy means that information that a furnisher provides to a 
consumer reporting agency about an account or other relationship with 
the consumer correctly:
    (1) Reflects the terms of and liability for the account or other 
relationship;
    (2) Reflects the consumer's performance and other conduct with 
respect to the account or other relationship; and
    (3) Identifies the appropriate consumer.
    (b) Direct dispute means a dispute submitted directly to a furnisher 
(including a furnisher that is a debt collector) by a consumer 
concerning the accuracy of any information contained in a consumer 
report and pertaining to an account or other relationship that the 
furnisher has or had with the consumer.
    (c) Furnisher means an entity that furnishes information relating to 
consumers to one or more consumer reporting agencies for inclusion in a 
consumer report. An entity is not a furnisher when it:
    (1) Provides information to a consumer reporting agency solely to 
obtain a consumer report in accordance with sections 604(a) and (f) of 
the FCRA;
    (2) Is acting as a ``consumer reporting agency'' as defined in 
section 603(f) of the FCRA;
    (3) Is a consumer to whom the furnished information pertains; or
    (4) Is a neighbor, friend, or associate of the consumer, or another 
individual with whom the consumer is acquainted or who may have 
knowledge about the

[[Page 433]]

consumer, and who provides information about the consumer's character, 
general reputation, personal characteristics, or mode of living in 
response to a specific request from a consumer reporting agency.
    (d) Integrity means that information that a furnisher provides to a 
consumer reporting agency about an account or other relationship with 
the consumer:
    (1) Is substantiated by the furnisher's records at the time it is 
furnished;
    (2) Is furnished in a form and manner that is designed to minimize 
the likelihood that the information may be incorrectly reflected in a 
consumer report; and
    (3) Includes the information in the furnisher's possession about the 
account or other relationship that the Bureau has:
    (i) Determined that the absence of which would likely be materially 
misleading in evaluating a consumer's creditworthiness, credit standing, 
credit capacity, character, general reputation, personal 
characteristics, or mode of living; and
    (ii) Listed in section I(b)(2)(iii) of appendix E of this part.



Sec. 1022.42  Reasonable policies and procedures concerning the
accuracy and integrity of furnished information.

    (a) Policies and procedures. Each furnisher must establish and 
implement reasonable written policies and procedures regarding the 
accuracy and integrity of the information relating to consumers that it 
furnishes to a consumer reporting agency. The policies and procedures 
must be appropriate to the nature, size, complexity, and scope of each 
furnisher's activities.
    (b) Guidelines. Each furnisher must consider the guidelines in 
appendix E of this part in developing its policies and procedures 
required by this section, and incorporate those guidelines that are 
appropriate.
    (c) Reviewing and updating policies and procedures. Each furnisher 
must review its policies and procedures required by this section 
periodically and update them as necessary to ensure their continued 
effectiveness.



Sec. 1022.43  Direct disputes.

    (a) General rule. Except as otherwise provided in this section, a 
furnisher must conduct a reasonable investigation of a direct dispute if 
it relates to:
    (1) The consumer's liability for a credit account or other debt with 
the furnisher, such as direct disputes relating to whether there is or 
has been identity theft or fraud against the consumer, whether there is 
individual or joint liability on an account, or whether the consumer is 
an authorized user of a credit account;
    (2) The terms of a credit account or other debt with the furnisher, 
such as direct disputes relating to the type of account, principal 
balance, scheduled payment amount on an account, or the amount of the 
credit limit on an open-end account;
    (3) The consumer's performance or other conduct concerning an 
account or other relationship with the furnisher, such as direct 
disputes relating to the current payment status, high balance, date a 
payment was made, the amount of a payment made, or the date an account 
was opened or closed; or
    (4) Any other information contained in a consumer report regarding 
an account or other relationship with the furnisher that bears on the 
consumer's creditworthiness, credit standing, credit capacity, 
character, general reputation, personal characteristics, or mode of 
living.
    (b) Exceptions. The requirements of paragraph (a) of this section do 
not apply to a furnisher if:
    (1) The direct dispute relates to:
    (i) The consumer's identifying information (other than a direct 
dispute relating to a consumer's liability for a credit account or other 
debt with the furnisher, as provided in paragraph (a)(1) of this 
section) such as name(s), date of birth, Social Security number, 
telephone number(s), or address(es);
    (ii) The identity of past or present employers;
    (iii) Inquiries or requests for a consumer report;
    (iv) Information derived from public records, such as judgments, 
bankruptcies, liens, and other legal matters (unless provided by a 
furnisher with an account or other relationship with the consumer);

[[Page 434]]

    (v) Information related to fraud alerts or active duty alerts; or
    (vi) Information provided to a consumer reporting agency by another 
furnisher; or
    (2) The furnisher has a reasonable belief that the direct dispute is 
submitted by, is prepared on behalf of the consumer by, or is submitted 
on a form supplied to the consumer by, a credit repair organization, as 
defined in 15 U.S.C. 1679a(3), or an entity that would be a credit 
repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
    (c) Direct dispute address. A furnisher is required to investigate a 
direct dispute only if a consumer submits a dispute notice to the 
furnisher at:
    (1) The address of a furnisher provided by a furnisher and set forth 
on a consumer report relating to the consumer;
    (2) An address clearly and conspicuously specified by the furnisher 
for submitting direct disputes that is provided to the consumer in 
writing or electronically (if the consumer has agreed to the electronic 
delivery of information from the furnisher); or
    (3) Any business address of the furnisher if the furnisher has not 
so specified and provided an address for submitting direct disputes 
under paragraphs (c)(1) or (2) of this section.
    (d) Direct dispute notice contents. A dispute notice must include:
    (1) Sufficient information to identify the account or other 
relationship that is in dispute, such as an account number and the name, 
address, and telephone number of the consumer, if applicable;
    (2) The specific information that the consumer is disputing and an 
explanation of the basis for the dispute; and
    (3) All supporting documentation or other information reasonably 
required by the furnisher to substantiate the basis of the dispute. This 
documentation may include, for example: a copy of the relevant portion 
of the consumer report that contains the allegedly inaccurate 
information; a police report; a fraud or identity theft affidavit; a 
court order; or account statements.
    (e) Duty of furnisher after receiving a direct dispute notice. After 
receiving a dispute notice from a consumer pursuant to paragraphs (c) 
and (d) of this section, the furnisher must:
    (1) Conduct a reasonable investigation with respect to the disputed 
information;
    (2) Review all relevant information provided by the consumer with 
the dispute notice;
    (3) Complete its investigation of the dispute and report the results 
of the investigation to the consumer before the expiration of the period 
under section 611(a)(1) of the FCRA (15 U.S.C. 1681i(a)(1)) within which 
a consumer reporting agency would be required to complete its action if 
the consumer had elected to dispute the information under that section; 
and
    (4) If the investigation finds that the information reported was 
inaccurate, promptly notify each consumer reporting agency to which the 
furnisher provided inaccurate information of that determination and 
provide to the consumer reporting agency any correction to that 
information that is necessary to make the information provided by the 
furnisher accurate.
    (f) Frivolous or irrelevant disputes. (1) A furnisher is not 
required to investigate a direct dispute if the furnisher has reasonably 
determined that the dispute is frivolous or irrelevant. A dispute 
qualifies as frivolous or irrelevant if:
    (i) The consumer did not provide sufficient information to 
investigate the disputed information as required by paragraph (d) of 
this section;
    (ii) The direct dispute is substantially the same as a dispute 
previously submitted by or on behalf of the consumer, either directly to 
the furnisher or through a consumer reporting agency, with respect to 
which the furnisher has already satisfied the applicable requirements of 
the Act or this section; provided, however, that a direct dispute is not 
substantially the same as a dispute previously submitted if the dispute 
includes information listed in paragraph (d) of this section that had 
not previously been provided to the furnisher; or
    (iii) The furnisher is not required to investigate the direct 
dispute because one or more of the exceptions listed in paragraph (b) of 
this section applies.

[[Page 435]]

    (2) Notice of determination. Upon making a determination that a 
dispute is frivolous or irrelevant, the furnisher must notify the 
consumer of the determination not later than five business days after 
making the determination, by mail or, if authorized by the consumer for 
that purpose, by any other means available to the furnisher.
    (3) Contents of notice of determination that a dispute is frivolous 
or irrelevant. A notice of determination that a dispute is frivolous or 
irrelevant must include the reasons for such determination and identify 
any information required to investigate the disputed information, which 
notice may consist of a standardized form describing the general nature 
of such information.



Subpart F_Duties of Users Regarding Obtaining and Using Consumer Reports



Sec. Sec. 1022.50-1022.53  [Reserved]



Sec. 1022.54  Duties of users making written firm offers of credit or
insurance based on information contained in consumer files

    (a) Scope. This subpart applies to any person who uses a consumer 
report on any consumer in connection with any credit or insurance 
transaction that is not initiated by the consumer, and that is provided 
to that person under section 604(c)(1)(B) of the FCRA (15 U.S.C. 
1681b(c)(1)(B)), except for a person excluded from coverage of this part 
by section 1029 of the Consumer Financial Protection Act of 2010, title 
X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 137.
    (b) Definitions. For purposes of this section and appendix D of this 
part, the following definitions apply:
    (1) Simple and easy to understand means:
    (i) A layered format as described in paragraph (c) of this section;
    (ii) Plain language designed to be understood by ordinary consumers; 
and
    (iii) Use of clear and concise sentences, paragraphs, and sections.
    (iv) Examples. For purposes of this part, examples of factors to be 
considered in determining whether a statement is in plain language and 
uses clear and concise sentences, paragraphs, and sections include:
    (A) Use of short explanatory sentences;
    (B) Use of definite, concrete, everyday words;
    (C) Use of active voice;
    (D) Avoidance of multiple negatives;
    (E) Avoidance of legal and technical business terminology;
    (F) Avoidance of explanations that are imprecise and reasonably 
subject to different interpretations; and
    (G) Use of language that is not misleading.
    (2) Principal promotional document means the document designed to be 
seen first by the consumer, such as the cover letter.
    (c) Prescreen opt-out notice. Any person who uses a consumer report 
on any consumer in connection with any credit or insurance transaction 
that is not initiated by the consumer, and that is provided to that 
person under section 604(c)(1)(B) of the FCRA (15 U.S.C. 
1681b(c)(1)(B)), shall, with each written solicitation made to the 
consumer about the transaction, provide the consumer with the following 
statement, consisting of a short portion and a long portion, which shall 
be in the same language as the offer of credit or insurance:
    (1) Short notice. The short notice shall be a clear and conspicuous, 
and simple and easy to understand statement as follows:
    (i) Content. The short notice shall state that the consumer has the 
right to opt out of receiving prescreened solicitations, and shall 
provide the toll-free number the consumer can call to exercise that 
right. The short notice also shall direct the consumer to the existence 
and location of the long notice, and shall state the heading for the 
long notice. The short notice shall not contain any other information.
    (ii) Form. The short notice shall be:
    (A) In a type size that is larger than the type size of the 
principal text on the same page, but in no event smaller than 12 point 
type, or if provided by electronic means, then reasonable steps shall be 
taken to ensure that the type size is larger than the type size of the 
principal text on the same page;

[[Page 436]]

    (B) On the front side of the first page of the principal promotional 
document in the solicitation, or, if provided electronically, on the 
same page and in close proximity to the principal marketing message;
    (C) Located on the page and in a format so that the statement is 
distinct from other text, such as inside a border; and
    (D) In a type style that is distinct from the principal type style 
used on the same page, such as bolded, italicized, underlined, and/or in 
a color that contrasts with the color of the principal text on the page, 
if the solicitation is in more than one color.
    (2) Long notice. The long notice shall be a clear and conspicuous, 
and simple and easy to understand statement as follows:
    (i) Content. The long notice shall state the information required by 
section 615(d) of the Fair Credit Reporting Act (15 U.S.C. 1681m(d)). 
The long notice shall not include any other information that interferes 
with, detracts from, contradicts, or otherwise undermines the purpose of 
the notice.
    (ii) Form. The long notice shall:
    (A) Appear in the solicitation;
    (B) Be in a type size that is no smaller than the type size of the 
principal text on the same page, and, for solicitations provided other 
than by electronic means, the type size shall in no event be smaller 
than 8 point type;
    (C) Begin with a heading in capital letters and underlined, and 
identifying the long notice as the ``PRESCREEN&OPT-OUT NOTICE;''
    (D) Be in a type style that is distinct from the principal type 
style used on the same page, such as bolded, italicized, underlined, 
and/or in a color that contrasts with the color of the principal text on 
the page, if the solicitation is in more than one color; and
    (E) Be set apart from other text on the page, such as by including a 
blank line above and below the statement, and by indenting both the left 
and right margins from other text on the page.



Sec. Sec. 1022.55-1022.59  [Reserved]

Subpart G [Reserved]



         Subpart H_Duties of Users Regarding Risk-Based Pricing



Sec. 1022.70  Scope.

    (a) Coverage--(1) In general. This subpart applies to any person, 
except for a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 137, that both:
    (i) Uses a consumer report in connection with an application for, or 
a grant, extension, or other provision of, credit to a consumer that is 
primarily for personal, family, or household purposes; and
    (ii) Based in whole or in part on the consumer report, grants, 
extends, or otherwise provides credit to the consumer on material terms 
that are materially less favorable than the most favorable material 
terms available to a substantial proportion of consumers from or through 
that person.
    (2) Business credit excluded. This subpart does not apply to an 
application for, or a grant, extension, or other provision of, credit to 
a consumer or to any other applicant primarily for a business purpose.
    (b) Enforcement. The provisions of this subpart will be enforced in 
accordance with the enforcement authority set forth in sections 621(a) 
and (b) of the FCRA.



Sec. 1022.71  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Adverse action has the same meaning as in 15 U.S.C. 
1681a(k)(1)(A).
    (b) Annual percentage rate has the same meaning as in 12 CFR 
1026.14(b) with respect to an open-end credit plan and as in 12 CFR 
1026.22 with respect to closed-end credit.
    (c) Closed-end credit has the same meaning as in 12 CFR 
1026.2(a)(10).
    (d) Consumer has the same meaning as in 15 U.S.C. 1681a(c).
    (e) Consummation has the same meaning as in 12 CFR 1026.2(a)(13).
    (f) Consumer report has the same meaning as in 15 U.S.C. 1681a(d).
    (g) Consumer reporting agency has the same meaning as in 15 U.S.C. 
1681a(f).

[[Page 437]]

    (h) Credit has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (i) Creditor has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (j) Credit card has the same meaning as in 15 U.S.C. 1681a(r)(2).
    (k) Credit card issuer has the same meaning as card issuer, as 
defined in 15 U.S.C. 1681a(r)(1)(A).
    (l) Credit score has the same meaning as in 15 U.S.C. 
1681g(f)(2)(A).
    (m) Firm offer of credit has the same meaning as in 15 U.S.C. 
1681a(l).
    (n) Material terms means:
    (1)(i) Except as otherwise provided in paragraphs (n)(1)(ii) and 
(n)(3) of this section, in the case of credit extended under an open-end 
credit plan, the annual percentage rate required to be disclosed under 
12 CFR 1026.6(a)(1)(ii) or 12 CFR 1026.6(b)(2)(i), excluding any 
temporary initial rate that is lower than the rate that will apply after 
the temporary rate expires, any penalty rate that will apply upon the 
occurrence of one or more specific events, such as a late payment or an 
extension of credit that exceeds the credit limit, and any fixed annual 
percentage rate option for a home equity line of credit;
    (ii) In the case of a credit card (other than a credit card that is 
used to access a home equity line of credit or a charge card), the 
annual percentage rate required to be disclosed under 12 CFR 
1026.6(b)(2)(i) that applies to purchases (``purchase annual percentage 
rate'') and no other annual percentage rate, or in the case of a credit 
card that has no purchase annual percentage rate, the annual percentage 
rate that varies based on information in a consumer report and that has 
the most significant financial impact on consumers;
    (2) In the case of closed-end credit, the annual percentage rate 
required to be disclosed under 12 CFR 1026.17(c) and 1026.18(e); and
    (3) In the case of credit for which there is no annual percentage 
rate, the financial term that varies based on information in a consumer 
report and that has the most significant financial impact on consumers, 
such as a deposit required in connection with credit extended by a 
telephone company or utility or an annual membership fee for a charge 
card.
    (o) Materially less favorable means, when applied to material terms, 
that the terms granted, extended, or otherwise provided to a consumer 
differ from the terms granted, extended, or otherwise provided to 
another consumer from or through the same person such that the cost of 
credit to the first consumer would be significantly greater than the 
cost of credit granted, extended, or otherwise provided to the other 
consumer. For purposes of this definition, factors relevant to 
determining the significance of a difference in cost include the type of 
credit product, the term of the credit extension, if any, and the extent 
of the difference between the material terms granted, extended, or 
otherwise provided to the two consumers.
    (p) Open-end credit plan has the same meaning as in 15 U.S.C. 
1602(i), as interpreted by the Bureau in Regulation Z (12 CFR part 1026) 
and the Official Interpretations to Regulation Z (Supplement I to 12 CFR 
part 1026).
    (q) Person has the same meaning as in 15 U.S.C. 1681a(b).



Sec. 1022.72  General requirements for risk-based pricing notices.

    (a) In general. Except as otherwise provided in this subpart, a 
person must provide to a consumer a notice (``risk-based pricing 
notice'') in the form and manner required by this subpart if the person 
both:
    (1) Uses a consumer report in connection with an application for, or 
a grant, extension, or other provision of, credit to that consumer that 
is primarily for personal, family, or household purposes; and
    (2) Based in whole or in part on the consumer report, grants, 
extends, or otherwise provides credit to that consumer on material terms 
that are materially less favorable than the most favorable material 
terms available to a substantial proportion of consumers from or through 
that person.
    (b) Determining which consumers must receive a notice. A person may 
determine whether paragraph (a) of this section applies by directly 
comparing the material terms offered to each consumer and the material 
terms offered to other consumers for a specific type of credit product. 
For purposes of this

[[Page 438]]

section, a ``specific type of credit product'' means one or more credit 
products with similar features that are designed for similar purposes. 
Examples of a specific type of credit product include student loans, 
unsecured credit cards, secured credit cards, new automobile loans, used 
automobile loans, fixed-rate mortgage loans, and variable-rate mortgage 
loans. As an alternative to making this direct comparison, a person may 
make the determination by using one of the following methods:
    (1) Credit score proxy method-- (i) In general. A person that sets 
the material terms of credit granted, extended, or otherwise provided to 
a consumer, based in whole or in part on a credit score, may comply with 
the requirements of paragraph (a) of this section by:
    (A) Determining the credit score (hereafter referred to as the 
``cutoff score'') that represents the point at which approximately 40 
percent of the consumers to whom it grants, extends, or provides credit 
have higher credit scores and approximately 60 percent of the consumers 
to whom it grants, extends, or provides credit have lower credit scores; 
and
    (B) Providing a risk-based pricing notice to each consumer to whom 
it grants, extends, or provides credit whose credit score is lower than 
the cutoff score.
    (ii) Alternative to the 40/60 cutoff score determination. In the 
case of credit that has been granted, extended, or provided on the most 
favorable material terms to more than 40 percent of consumers, a person 
may, at its option, set its cutoff score at a point at which the 
approximate percentage of consumers who historically have been granted, 
extended, or provided credit on material terms other than the most 
favorable terms would receive risk-based pricing notices under this 
section.
    (iii) Determining the cutoff score--(A) Sampling approach. A person 
that currently uses risk-based pricing with respect to the credit 
products it offers must calculate the cutoff score by considering the 
credit scores of all or a representative sample of the consumers to whom 
it has granted, extended, or provided credit for a specific type of 
credit product.
    (B) Secondary source approach in limited circumstances. A person 
that is a new entrant into the credit business, introduces new credit 
products, or starts to use risk-based pricing with respect to the credit 
products it currently offers may initially determine the cutoff score 
based on information derived from appropriate market research or 
relevant third-party sources for a specific type of credit product, such 
as research or data from companies that develop credit scores. A person 
that acquires a credit portfolio as a result of a merger or acquisition 
may determine the cutoff score based on information from the party which 
it acquired, with which it merged, or from which it acquired the 
portfolio.
    (C) Recalculation of cutoff scores. A person using the credit score 
proxy method must recalculate its cutoff score(s) no less than every two 
years in the manner described in paragraph (b)(1)(iii)(A) of this 
section. A person using the credit score proxy method using market 
research, third-party data, or information from a party which it 
acquired, with which it merged, or from which it acquired the portfolio 
as permitted by paragraph (b)(1)(iii)(B) of this section generally must 
calculate a cutoff score(s) based on the scores of its own consumers in 
the manner described in paragraph (b)(1)(iii)(A) of this section within 
one year after it begins using a cutoff score derived from market 
research, third-party data, or information from a party which it 
acquired, with which it merged, or from which it acquired the portfolio. 
If such a person does not grant, extend, or provide credit to new 
consumers during that one-year period such that it lacks sufficient data 
with which to recalculate a cutoff score based on the credit scores of 
its own consumers, the person may continue to use a cutoff score derived 
from market research, third-party data, or information from a party 
which it acquired, with which it merged, or from which it acquired the 
portfolio as provided in paragraph (b)(1)(iii)(B) until it obtains 
sufficient data on which to base the recalculation. However, the person 
must recalculate its cutoff score(s) in the

[[Page 439]]

manner described in paragraph (b)(1)(iii)(A) of this section within two 
years, if it has granted, extended, or provided credit to some new 
consumers during that two-year period.
    (D) Use of two or more credit scores. A person that generally uses 
two or more credit scores in setting the material terms of credit 
granted, extended, or provided to a consumer must determine the cutoff 
score using the same method the person uses to evaluate multiple scores 
when making credit decisions. These evaluation methods may include, but 
are not limited to, selecting the low, median, high, most recent, or 
average credit score of each consumer to whom it grants, extends, or 
provides credit. If a person that uses two or more credit scores does 
not consistently use the same method for evaluating multiple credit 
scores (e.g., if the person sometimes chooses the median score and other 
times calculates the average score), the person must determine the 
cutoff score using a reasonable means. In such cases, use of any one of 
the methods that the person regularly uses or the average credit score 
of each consumer to whom it grants, extends, or provides credit is 
deemed to be a reasonable means of calculating the cutoff score.
    (iv) Credit score not available. For purposes of this section, a 
person using the credit score proxy method who grants, extends, or 
provides credit to a consumer for whom a credit score is not available 
must assume that the consumer receives credit on material terms that are 
materially less favorable than the most favorable credit terms offered 
to a substantial proportion of consumers from or through that person and 
must provide a risk-based pricing notice to the consumer.
    (v) Examples. (A) A credit card issuer engages in risk-based pricing 
and the annual percentage rates it offers to consumers are based in 
whole or in part on a credit score. The credit card issuer takes a 
representative sample of the credit scores of consumers to whom it 
issued credit cards within the preceding three months. The credit card 
issuer determines that approximately 40 percent of the sampled consumers 
have a credit score at or above 720 (on a scale of 350 to 850) and 
approximately 60 percent of the sampled consumers have a credit score 
below 720. Thus, the card issuer selects 720 as its cutoff score. A 
consumer applies to the credit card issuer for a credit card. The card 
issuer obtains a credit score for the consumer. The consumer's credit 
score is 700. Since the consumer's 700 credit score falls below the 720 
cutoff score, the credit card issuer must provide a risk-based pricing 
notice to the consumer.
    (B) A credit card issuer engages in risk-based pricing, and the 
annual percentage rates it offers to consumers are based in whole or in 
part on a credit score. The credit card issuer takes a representative 
sample of the consumers to whom it issued credit cards over the 
preceding six months. The credit card issuer determines that 
approximately 80 percent of the sampled consumers received credit at its 
lowest annual percentage rate, and 20 percent received credit at a 
higher annual percentage rate. Approximately 80 percent of the sampled 
consumers have a credit score at or above 750 (on a scale of 350 to 
850), and 20 percent have a credit score below 750. Thus, the card 
issuer selects 750 as its cutoff score. A consumer applies to the credit 
card issuer for a credit card. The card issuer obtains a credit score 
for the consumer. The consumer's credit score is 740. Since the 
consumer's 740 credit score falls below the 750 cutoff score, the credit 
card issuer must provide a risk-based pricing notice to the consumer.
    (C) An auto lender engages in risk-based pricing, obtains credit 
scores from one of the nationwide consumer reporting agencies, and uses 
the credit score proxy method to determine which consumers must receive 
a risk-based pricing notice. A consumer applies to the auto lender for 
credit to finance the purchase of an automobile. A credit score about 
that consumer is not available from the consumer reporting agency from 
which the lender obtains credit scores. The lender nevertheless grants, 
extends, or provides credit to the consumer. The lender must provide a 
risk-based pricing notice to the consumer.
    (2) Tiered pricing method--(i) In general. A person that sets the 
material terms of credit granted, extended, or provided to a consumer by 
placing the

[[Page 440]]

consumer within one of a discrete number of pricing tiers for a specific 
type of credit product, based in whole or in part on a consumer report, 
may comply with the requirements of paragraph (a) of this section by 
providing a risk-based pricing notice to each consumer who is not placed 
within the top pricing tier or tiers, as described below.
    (ii) Four or fewer pricing tiers. If a person using the tiered 
pricing method has four or fewer pricing tiers, the person complies with 
the requirements of paragraph (a) of this section by providing a risk-
based pricing notice to each consumer to whom it grants, extends, or 
provides credit who does not qualify for the top tier (that is, the 
lowest-priced tier). For example, a person that uses a tiered pricing 
structure with annual percentage rates of 8, 10, 12, and 14 percent 
would provide the risk-based pricing notice to each consumer to whom it 
grants, extends, or provides credit at annual percentage rates of 10, 
12, and 14 percent.
    (iii) Five or more pricing tiers. If a person using the tiered 
pricing method has five or more pricing tiers, the person complies with 
the requirements of paragraph (a) of this section by providing a risk-
based pricing notice to each consumer to whom it grants, extends, or 
provides credit who does not qualify for the top two tiers (that is, the 
two lowest-priced tiers) and any other tier that, together with the top 
tiers, comprise no less than the top 30 percent but no more than the top 
40 percent of the total number of tiers. Each consumer placed within the 
remaining tiers must receive a risk-based pricing notice. For example, 
if a person has nine pricing tiers, the top three tiers (that is, the 
three lowest-priced tiers) comprise no less than the top 30 percent but 
no more than the top 40 percent of the tiers. Therefore, a person using 
this method would provide a risk-based pricing notice to each consumer 
to whom it grants, extends, or provides credit who is placed within the 
bottom six tiers.
    (c) Application to credit card issuers--(1) In general. A credit 
card issuer subject to the requirements of paragraph (a) of this section 
may use one of the methods set forth in paragraph (b) of this section to 
identify consumers to whom it must provide a risk-based pricing notice. 
Alternatively, a credit card issuer may satisfy its obligations under 
paragraph (a) of this section by providing a risk-based pricing notice 
to a consumer when:
    (i) A consumer applies for a credit card either in connection with 
an application program, such as a direct-mail offer or a take-one 
application, or in response to a solicitation under 12 CFR 1026.60, and 
more than a single possible purchase annual percentage rate may apply 
under the program or solicitation; and
    (ii) Based in whole or in part on a consumer report, the credit card 
issuer provides a credit card to the consumer with an annual percentage 
rate referenced in Sec. 1022.71(n)(1)(ii) that is greater than the 
lowest annual percentage rate referenced in Sec. 1022.71(n)(1)(ii) 
available in connection with the application or solicitation.
    (2) No requirement to compare different offers. A credit card issuer 
is not subject to the requirements of paragraph (a) of this section and 
is not required to provide a risk-based pricing notice to a consumer if:
    (i) The consumer applies for a credit card for which the card issuer 
provides a single annual percentage rate referenced in 
Sec. 1022.71(n)(1)(ii), excluding a temporary initial rate that is lower 
than the rate that will apply after the temporary rate expires and a 
penalty rate that will apply upon the occurrence of one or more specific 
events, such as a late payment or an extension of credit that exceeds 
the credit limit; or
    (ii) The credit card issuer offers the consumer the lowest annual 
percentage rate referenced in Sec. 1022.71(n)(1)(ii) available under the 
credit card offer for which the consumer applied, even if a lower annual 
percentage rate referenced in Sec. 1022.71(n)(1)(ii) is available under 
a different credit card offer issued by the card issuer.
    (3) Examples. (i) A credit card issuer sends a solicitation to the 
consumer that discloses several possible purchase annual percentage 
rates that may apply, such as 10, 12, or 14 percent, or a range of 
purchase annual percentage

[[Page 441]]

rates from 10 to 14 percent. The consumer applies for a credit card in 
response to the solicitation. The card issuer provides a credit card to 
the consumer with a purchase annual percentage rate of 12 percent based 
in whole or in part on a consumer report. Unless an exception applies 
under Sec. 1022.74, the card issuer may satisfy its obligations under 
paragraph (a) of this section by providing a risk-based pricing notice 
to the consumer because the consumer received credit at a purchase 
annual percentage rate greater than the lowest purchase annual 
percentage rate available under that solicitation.
    (ii) The same facts as in the example in paragraph (c)(3)(i) of this 
section, except that the card issuer provides a credit card to the 
consumer at a purchase annual percentage rate of 10 percent. The card 
issuer is not required to provide a risk-based pricing notice to the 
consumer even if, under a different credit card solicitation, that 
consumer or other consumers might qualify for a purchase annual 
percentage rate of 8 percent.
    (d) Account review--(1) In general. Except as otherwise provided in 
this subpart, a person is subject to the requirements of paragraph (a) 
of this section and must provide a risk-based pricing notice to a 
consumer in the form and manner required by this subpart if the person:
    (i) Uses a consumer report in connection with a review of credit 
that has been extended to the consumer; and
    (ii) Based in whole or in part on the consumer report, increases the 
annual percentage rate (the annual percentage rate referenced in 
Sec. 1022.71(n)(1)(ii) in the case of a credit card).
    (2) Example. A credit card issuer periodically obtains consumer 
reports for the purpose of reviewing the terms of credit it has extended 
to consumers in connection with credit cards. As a result of this 
review, the credit card issuer increases the purchase annual percentage 
rate applicable to a consumer's credit card based in whole or in part on 
information in a consumer report. The credit card issuer is subject to 
the requirements of paragraph (a) of this section and must provide a 
risk-based pricing notice to the consumer.



Sec. 1022.73  Content, form, and timing of risk-based pricing notices.

    (a) Content of the notice--(1) In general. The risk-based pricing 
notice required by Sec. 1022.72(a) or (c) must include:
    (i) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that history;
    (ii) A statement that the terms offered, such as the annual 
percentage rate, have been set based on information from a consumer 
report;
    (iii) A statement that the terms offered may be less favorable than 
the terms offered to consumers with better credit histories;
    (iv) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (v) The identity of each consumer reporting agency that furnished a 
consumer report used in the credit decision;
    (vi) A statement that Federal law gives the consumer the right to 
obtain a copy of a consumer report from the consumer reporting agency or 
agencies identified in the notice without charge for 60 days after 
receipt of the notice;
    (vii) A statement informing the consumer how to obtain a consumer 
report from the consumer reporting agency or agencies identified in the 
notice and providing contact information (including a toll-free 
telephone number, where applicable) specified by the consumer reporting 
agency or agencies;
    (viii) A statement directing consumers to the Web site of the Bureau 
to obtain more information about consumer reports; and
    (ix) If a credit score of the consumer to whom a person grants, 
extends, or otherwise provides credit is used in setting the material 
terms of credit:
    (A) A statement that a credit score is a number that takes into 
account information in a consumer report, that the consumer's credit 
score was used to set the terms of credit offered, and that a credit 
score can change over time to reflect changes in the consumer's credit 
history;

[[Page 442]]

    (B) The credit score used by the person in making the credit 
decision;
    (C) The range of possible credit scores under the model used to 
generate the credit score;
    (D) All of the key factors that adversely affected the credit score, 
which shall not exceed four key factors, except that if one of the key 
factors is the number of enquiries made with respect to the consumer 
report, the number of key factors shall not exceed five;
    (E) The date on which the credit score was created; and
    (F) The name of the consumer reporting agency or other person that 
provided the credit score.
    (2) Account review. The risk-based pricing notice required by 
Sec. 1022.72(d) must include:
    (i) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that credit history;
    (ii) A statement that the person has conducted a review of the 
account using information from a consumer report;
    (iii) A statement that as a result of the review, the annual 
percentage rate on the account has been increased based on information 
from a consumer report;
    (iv) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (v) The identity of each consumer reporting agency that furnished a 
consumer report used in the account review;
    (vi) A statement that Federal law gives the consumer the right to 
obtain a copy of a consumer report from the consumer reporting agency or 
agencies identified in the notice without charge for 60 days after 
receipt of the notice;
    (vii) A statement informing the consumer how to obtain a consumer 
report from the consumer reporting agency or agencies identified in the 
notice and providing contact information (including a toll-free 
telephone number, where applicable) specified by the consumer reporting 
agency or agencies;
    (viii) A statement directing consumers to the Web site of the Bureau 
to obtain more information about consumer reports; and
    (ix) If a credit score of the consumer whose extension of credit is 
under review is used in increasing the annual percentage rate:
    (A) A statement that a credit score is a number that takes into 
account information in a consumer report, that the consumer's credit 
score was used to set the terms of credit offered, and that a credit 
score can change over time to reflect changes in the consumer's credit 
history;
    (B) The credit score used by the person in making the credit 
decision;
    (C) The range of possible credit scores under the model used to 
generate the credit score;
    (D) All of the key factors that adversely affected the credit score, 
which shall not exceed four key factors, except that if one of the key 
factors is the number of enquires made with respect to the consumer 
report, the number of key factors shall not exceed five;
    (E) The date on which the credit score was created; and
    (F) The name of the consumer reporting agency or other person that 
provided the credit score.
    (b) Form of the notice--(1) In general. The risk-based pricing 
notice required by Sec. 1022.72(a), (c), or (d) must be:
    (i) Clear and conspicuous; and
    (ii) Provided to the consumer in oral, written, or electronic form.
    (2) Model forms. Model forms of the risk-based pricing notice 
required by Sec. 1022.72(a) and (c) are contained in appendices H-1 and 
H-6 of this part. Appropriate use of Model Form H-1 or H-6 is deemed to 
comply with the requirements of Sec. 1022.72(a) and (c). Model forms of 
the risk-based pricing notice required by Sec. 1022.72(d) are contained 
in appendices H-2 and H-7 of this part. Appropriate use of Model Form H-
2 or H-7 is deemed to comply with the requirements of Sec. 1022.72(d). 
Use of the model forms is optional.
    (c) Timing--(1) General. Except as provided in paragraph (c)(3) of 
this section, a risk-based pricing notice must be provided to the 
consumer:
    (i) In the case of a grant, extension, or other provision of closed-
end credit,

[[Page 443]]

before consummation of the transaction, but not earlier than the time 
the decision to approve an application for, or a grant, extension, or 
other provision of, credit, is communicated to the consumer by the 
person required to provide the notice;
    (ii) In the case of credit granted, extended, or provided under an 
open-end credit plan, before the first transaction is made under the 
plan, but not earlier than the time the decision to approve an 
application for, or a grant, extension, or other provision of, credit is 
communicated to the consumer by the person required to provide the 
notice; or
    (iii) In the case of a review of credit that has been extended to 
the consumer, at the time the decision to increase the annual percentage 
rate (annual percentage rate referenced in Sec. 1022.71(n)(1)(ii) in the 
case of a credit card) based on a consumer report is communicated to the 
consumer by the person required to provide the notice, or if no notice 
of the increase in the annual percentage rate is provided to the 
consumer prior to the effective date of the change in the annual 
percentage rate (to the extent permitted by law), no later than five 
days after the effective date of the change in the annual percentage 
rate.
    (2) Application to certain automobile lending transactions. When a 
person to whom a credit obligation is initially payable grants, extends, 
or provides credit to a consumer for the purpose of financing the 
purchase of an automobile from an auto dealer or other party that is not 
affiliated with the person, any requirement to provide a risk-based 
pricing notice pursuant to this subpart is satisfied if the person:
    (i) Provides a notice described in Sec. Sec. 1022.72(a), 1022.74(e), 
or 1022.74(f) to the consumer within the time periods set forth in 
paragraph (c)(1)(i) of this section, Sec. 1022.74(e)(3), or 
Sec. 1022.74(f)(4), as applicable; or
    (ii) Arranges to have the auto dealer or other party provide a 
notice described in Sec. Sec. 1022.72(a), 1022.74(e), or 1022.74(f) to 
the consumer on its behalf within the time periods set forth in 
paragraph (c)(1)(i) of this section, Sec. 1022.74(e)(3), or 
Sec. 1022.74(f)(4), as applicable, and maintains reasonable policies and 
procedures to verify that the auto dealer or other party provides such 
notice to the consumer within the applicable time periods. If the person 
arranges to have the auto dealer or other party provide a notice 
described in Sec. 1022.74(e), the person's obligation is satisfied if 
the consumer receives a notice containing a credit score obtained by the 
dealer or other party, even if a different credit score is obtained and 
used by the person on whose behalf the notice is provided.
    (3) Timing requirements for contemporaneous purchase credit. When 
credit under an open-end credit plan is granted, extended, or provided 
to a consumer in person or by telephone for the purpose of financing the 
contemporaneous purchase of goods or services, any risk-based pricing 
notice required to be provided pursuant to this subpart (or the 
disclosures permitted under Sec. 1022.74(e) or (f)) may be provided at 
the earlier of:
    (i) The time of the first mailing by the person to the consumer 
after the decision is made to approve the grant, extension, or other 
provision of open-end credit, such as in a mailing containing the 
account agreement or a credit card; or
    (ii) Within 30 days after the decision to approve the grant, 
extension, or other provision of credit.
    (d) Multiple credit scores--(1) In general. When a person obtains or 
creates two or more credit scores and uses one of those credit scores in 
setting the material terms of credit, for example, by using the low, 
middle, high, or most recent score, the notices described in paragraphs 
(a)(1) and (2) of this section must include that credit score and 
information relating to that credit score required by paragraphs 
(a)(1)(ix) and (a)(2)(ix). When a person obtains or creates two or more 
credit scores and uses multiple credit scores in setting the material 
terms of credit by, for example, computing the average of all the credit 
scores obtained or created, the notices described in paragraphs (a)(1) 
and (2) of this section must include one of those credit scores and 
information relating to credit scores required by paragraphs (a)(1)(ix) 
and (a)(2)(ix). The notice may, at the person's option, include more 
than one credit score, along

[[Page 444]]

with the additional information specified in paragraphs (a)(1)(ix) and 
(a)(2)(ix) of this section for each credit score disclosed.
    (2) Examples. (i) A person that uses consumer reports to set the 
material terms of credit cards granted, extended, or provided to 
consumers regularly requests credit scores from several consumer 
reporting agencies and uses the low score when determining the material 
terms it will offer to the consumer. That person must disclose the low 
score in the notices described in paragraphs (a)(1) and (2) of this 
section.
    (ii) A person that uses consumer reports to set the material terms 
of automobile loans granted, extended, or provided to consumers 
regularly requests credit scores from several consumer reporting 
agencies, each of which it uses in an underwriting program in order to 
determine the material terms it will offer to the consumer. That person 
may choose one of these scores to include in the notices described in 
paragraph (a)(1) and (2) of this section.



Sec. 1022.74  Exceptions.

    (a) Application for specific terms--(1) In general. A person is not 
required to provide a risk-based pricing notice to the consumer under 
Sec. 1022.72(a) or (c) if the consumer applies for specific material 
terms and is granted those terms, unless those terms were specified by 
the person using a consumer report after the consumer applied for or 
requested credit and after the person obtained the consumer report. For 
purposes of this section, ``specific material terms'' means a single 
material term, or set of material terms, such as an annual percentage 
rate of 10 percent, and not a range of alternatives, such as an annual 
percentage rate that may be 8, 10, or 12 percent, or between 8 and 12 
percent.
    (2) Example. A consumer receives a firm offer of credit from a 
credit card issuer. The terms of the firm offer are based in whole or in 
part on information from a consumer report that the credit card issuer 
obtained under the FCRA's firm offer of credit provisions. The 
solicitation offers the consumer a credit card with a single purchase 
annual percentage rate of 12 percent. The consumer applies for and 
receives a credit card with an annual percentage rate of 12 percent. 
Other customers with the same credit card have a purchase annual 
percentage rate of 10 percent. The exception applies because the 
consumer applied for specific material terms and was granted those 
terms. Although the credit card issuer specified the annual percentage 
rate in the firm offer of credit based in whole or in part on a consumer 
report, the credit card issuer specified that material term before, not 
after, the consumer applied for or requested credit.
    (b) Adverse action notice. A person is not required to provide a 
risk-based pricing notice to the consumer under Sec. 1022.72(a), (c), or 
(d) if the person provides an adverse action notice to the consumer 
under section 615(a) of the FCRA.
    (c) Prescreened solicitations--(1) In general. A person is not 
required to provide a risk-based pricing notice to the consumer under 
Sec. 1022.72(a) or (c) if the person:
    (i) Obtains a consumer report that is a prescreened list as 
described in section 604(c)(2) of the FCRA; and
    (ii) Uses the consumer report for the purpose of making a firm offer 
of credit to the consumer.
    (2) More favorable material terms. This exception applies to any 
firm offer of credit offered by a person to a consumer, even if the 
person makes other firm offers of credit to other consumers on more 
favorable material terms.
    (3) Example. A credit card issuer obtains two prescreened lists from 
a consumer reporting agency. One list includes consumers with high 
credit scores. The other list includes consumers with low credit scores. 
The issuer mails a firm offer of credit to the high credit score 
consumers with a single purchase annual percentage rate of 10 percent. 
The issuer also mails a firm offer of credit to the low credit score 
consumers with a single purchase annual percentage rate of 14 percent. 
The credit card issuer is not required to provide a risk-based pricing 
notice to the low credit score consumers who receive the 14 percent 
offer because use of a consumer report to make a firm offer of credit 
does not trigger the risk-based pricing notice requirement.

[[Page 445]]

    (d) Loans secured by residential real property--credit score 
disclosure--(1) In general. A person is not required to provide a risk-
based pricing notice to a consumer under Sec. 1022.72(a) or (c) if:
    (i) The consumer requests from the person an extension of credit 
that is or will be secured by one to four units of residential real 
property; and
    (ii) The person provides to each consumer described in paragraph 
(d)(1)(i) of this section a notice that contains the following:
    (A) A statement that a consumer report (or credit report) is a 
record of the consumer's credit history and includes information about 
whether the consumer pays his or her obligations on time and how much 
the consumer owes to creditors;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time to reflect changes in the consumer's credit history;
    (C) A statement that the consumer's credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;
    (D) The information required to be disclosed to the consumer 
pursuant to section 609(g) of the FCRA;
    (E) The distribution of credit scores among consumers who are scored 
under the same scoring model that is used to generate the consumer's 
credit score using the same scale as that of the credit score that is 
provided to the consumer, presented in the form of a bar graph 
containing a minimum of six bars that illustrates the percentage of 
consumers with credit scores within the range of scores reflected in 
each bar or by other clear and readily understandable graphical means, 
or a clear and readily understandable statement informing the consumer 
how his or her credit score compares to the scores of other consumers. 
Use of a graph or statement obtained from the person providing the 
credit score that meets the requirements of this paragraph (d)(1)(ii)(E) 
is deemed to comply with this requirement;
    (F) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (G) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free report from each of the nationwide 
consumer reporting agencies once during any 12-month period;
    (H) Contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (I) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Form of the notice. The notice described in paragraph (d)(1)(ii) 
of this section must be:
    (i) Clear and conspicuous;
    (ii) Provided on or with the notice required by section 609(g) of 
the FCRA;
    (iii) Segregated from other information provided to the consumer, 
except for the notice required by section 609(g) of the FCRA; and
    (iv) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (3) Timing. The notice described in paragraph (d)(1)(ii) of this 
section must be provided to the consumer at the time the disclosure 
required by section 609(g) of the FCRA is provided to the consumer, but 
in any event at or before consummation in the case of closed-end credit 
or before the first transaction is made under an open-end credit plan.
    (4) Multiple credit scores--(i) In general. When a person obtains 
two or more credit scores from consumer reporting agencies and uses one 
of those credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by using the 
low, middle, high, or most recent score, the notice described in 
paragraph (d)(1)(ii) of this section must include that credit score and 
the other information required by that paragraph. When a person obtains 
two or more credit scores from consumer reporting agencies and uses 
multiple credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer,

[[Page 446]]

for example, by computing the average of all the credit scores obtained, 
the notice described in paragraph (d)(1)(ii) of this section must 
include one of those credit scores and the other information required by 
that paragraph. The notice may, at the person's option, include more 
than one credit score, along with the additional information specified 
in paragraph (d)(1)(ii) of this section for each credit score disclosed.
    (ii) Examples. (A) A person that uses consumer reports to set the 
material terms of mortgage credit granted, extended, or provided to 
consumers regularly requests credit scores from several consumer 
reporting agencies and uses the low score when determining the material 
terms it will offer to the consumer. That person must disclose the low 
score in the notice described in paragraph (d)(1)(ii) of this section.
    (B) A person that uses consumer reports to set the material terms of 
mortgage credit granted, extended, or provided to consumers regularly 
requests credit scores from several consumer reporting agencies, each of 
which it uses in an underwriting program in order to determine the 
material terms it will offer to the consumer. That person may choose one 
of these scores to include in the notice described in paragraph 
(d)(1)(ii) of this section.
    (5) Model form. A model form of the notice described in paragraph 
(d)(1)(ii) of this section consolidated with the notice required by 
section 609(g) of the FCRA is contained in appendix H-3 of this part. 
Appropriate use of Model Form H-3 is deemed to comply with the 
requirements of Sec. 1022.74(d). Use of the model form is optional.
    (e) Other extensions of credit--credit score disclosure--(1) In 
general. A person is not required to provide a risk-based pricing notice 
to a consumer under Sec. 1022.72(a) or (c) if:
    (i) The consumer requests from the person an extension of credit 
other than credit that is or will be secured by one to four units of 
residential real property; and
    (ii) The person provides to each consumer described in paragraph 
(e)(1)(i) of this section a notice that contains the following:
    (A) A statement that a consumer report (or credit report) is a 
record of the consumer's credit history and includes information about 
whether the consumer pays his or her obligations on time and how much 
the consumer owes to creditors;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time to reflect changes in the consumer's credit history;
    (C) A statement that the consumer's credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;
    (D) The current credit score of the consumer or the most recent 
credit score of the consumer that was previously calculated by the 
consumer reporting agency for a purpose related to the extension of 
credit;
    (E) The range of possible credit scores under the model used to 
generate the credit score;
    (F) The distribution of credit scores among consumers who are scored 
under the same scoring model that is used to generate the consumer's 
credit score using the same scale as that of the credit score that is 
provided to the consumer, presented in the form of a bar graph 
containing a minimum of six bars that illustrates the percentage of 
consumers with credit scores within the range of scores reflected in 
each bar, or by other clear and readily understandable graphical means, 
or a clear and readily understandable statement informing the consumer 
how his or her credit score compares to the scores of other consumers. 
Use of a graph or statement obtained from the person providing the 
credit score that meets the requirements of this paragraph (e)(1)(ii)(F) 
is deemed to comply with this requirement;
    (G) The date on which the credit score was created;
    (H) The name of the consumer reporting agency or other person that 
provided the credit score;
    (I) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;

[[Page 447]]

    (J) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free report from each of the nationwide 
consumer reporting agencies once during any 12-month period;
    (K) Contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (L) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Form of the notice. The notice described in paragraph (e)(1)(ii) 
of this section must be:
    (i) Clear and conspicuous;
    (ii) Segregated from other information provided to the consumer; and
    (iii) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (3) Timing. The notice described in paragraph (e)(1)(ii) of this 
section must be provided to the consumer as soon as reasonably 
practicable after the credit score has been obtained, but in any event 
at or before consummation in the case of closed-end credit or before the 
first transaction is made under an open-end credit plan.
    (4) Multiple credit scores. (i) In general. When a person obtains 
two or more credit scores from consumer reporting agencies and uses one 
of those credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by using the 
low, middle, high, or most recent score, the notice described in 
paragraph (e)(1)(ii) of this section must include that credit score and 
the other information required by that paragraph. When a person obtains 
two or more credit scores from consumer reporting agencies and uses 
multiple credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by computing 
the average of all the credit scores obtained, the notice described in 
paragraph (e)(1)(ii) of this section must include one of those credit 
scores and the other information required by that paragraph. The notice 
may, at the person's option, include more than one credit score, along 
with the additional information specified in paragraph (e)(1)(ii) of 
this section for each credit score disclosed.
    (ii) Examples. The manner in which multiple credit scores are to be 
disclosed under this section are substantially identical to the manner 
set forth in the examples contained in paragraph (d)(4)(ii) of this 
section.
    (5) Model form. A model form of the notice described in paragraph 
(e)(1)(ii) of this section is contained in appendix H-4 of this part. 
Appropriate use of Model Form H-4 is deemed to comply with the 
requirements of Sec. 1022.74(e). Use of the model form is optional.
    (f) Credit score not available--(1) In general. A person is not 
required to provide a risk-based pricing notice to a consumer under 
Sec. 1022.72(a) or (c) if the person:
    (i) Regularly obtains credit scores from a consumer reporting agency 
and provides credit score disclosures to consumers in accordance with 
paragraphs (d) or (e) of this section, but a credit score is not 
available from the consumer reporting agency from which the person 
regularly obtains credit scores for a consumer to whom the person 
grants, extends, or provides credit;
    (ii) Does not obtain a credit score from another consumer reporting 
agency in connection with granting, extending, or providing credit to 
the consumer; and
    (iii) Provides to the consumer a notice that contains the following:
    (A) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that history;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time in response to changes in the consumer's credit 
history;
    (C) A statement that credit scores are important because consumers 
with higher credit scores generally obtain more favorable credit terms;
    (D) A statement that not having a credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;

[[Page 448]]

    (E) A statement that a credit score about the consumer was not 
available from a consumer reporting agency, which must be identified by 
name, generally due to insufficient information regarding the consumer's 
credit history;
    (F) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the consumer report;
    (G) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free consumer report from each of the 
nationwide consumer reporting agencies once during any 12-month period;
    (H) The contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (I) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Example. A person that uses consumer reports to set the material 
terms of non-mortgage credit granted, extended, or provided to consumers 
regularly requests credit scores from a particular consumer reporting 
agency and provides those credit scores and additional information to 
consumers to satisfy the requirements of paragraph (e) of this section. 
That consumer reporting agency provides to the person a consumer report 
on a particular consumer that contains one trade line, but does not 
provide the person with a credit score on that consumer. If the person 
does not obtain a credit score from another consumer reporting agency 
and, based in whole or in part on information in a consumer report, 
grants, extends, or provides credit to the consumer, the person may 
provide the notice described in paragraph (f)(1)(iii) of this section. 
If, however, the person obtains a credit score from another consumer 
reporting agency, the person may not rely upon the exception in 
paragraph (f) of this section, but may satisfy the requirements of 
paragraph (e) of this section.
    (3) Form of the notice. The notice described in paragraph 
(f)(1)(iii) of this section must be:
    (i) Clear and conspicuous;
    (ii) Segregated from other information provided to the consumer; and
    (iii) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (4) Timing. The notice described in paragraph (f)(1)(iii) of this 
section must be provided to the consumer as soon as reasonably 
practicable after the person has requested the credit score, but in any 
event not later than consummation of a transaction in the case of 
closed-end credit or when the first transaction is made under an open-
end credit plan.
    (5) Model form. A model form of the notice described in paragraph 
(f)(1)(iii) of this section is contained in appendix H-5 of this part. 
Appropriate use of Model Form H-5 is deemed to comply with the 
requirements of Sec. 1022.74(f). Use of the model form is optional.



Sec. 1022.75  Rules of construction.

    For purposes of this subpart, the following rules of construction 
apply:
    (a) One notice per credit extension. A consumer is entitled to no 
more than one risk-based pricing notice under Sec. 1022.72(a) or (c), or 
one notice under Sec. 1022.74(d), (e), or (f), for each grant, 
extension, or other provision of credit. Notwithstanding the foregoing, 
even if a consumer has previously received a risk-based pricing notice 
in connection with a grant, extension, or other provision of credit, 
another risk-based pricing notice is required if the conditions set 
forth in Sec. 1022.72(d) have been met.
    (b) Multi-party transactions--(1) Initial creditor. The person to 
whom a credit obligation is initially payable must provide the risk-
based pricing notice described in Sec. 1022.72(a) or (c), or satisfy the 
requirements for and provide the notice required under one of the 
exceptions in Sec. 1022.74(d), (e), or (f), even if that person 
immediately assigns the credit agreement to a third party and is not the 
source of funding for the credit.
    (2) Purchasers or assignees. A purchaser or assignee of a credit 
contract with a consumer is not subject to the requirements of this 
subpart and is not

[[Page 449]]

required to provide the risk-based pricing notice described in 
Sec. 1022.72(a) or (c), or satisfy the requirements for and provide the 
notice required under one of the exceptions in Sec. 1022.74(d), (e), or 
(f).
    (3) Example. A consumer obtains credit to finance the purchase of an 
automobile. If a bank or finance company is the person to whom the loan 
obligation is initially payable, the bank or finance company must 
provide the risk-based pricing notice to the consumer (or satisfy the 
requirements for and provide the notice required under one of the 
exceptions noted above) based on the terms offered by that bank or 
finance company only. The auto dealer has no duty to provide a risk-
based pricing notice to the consumer. However, the bank or finance 
company may comply with this rule if the auto dealer has agreed to 
provide notices to consumers before consummation pursuant to an 
arrangement with the bank or finance company, as permitted under 
Sec. 1022.73(c).
    (c) Multiple consumers--(1) Risk-based pricing notices. In a 
transaction involving two or more consumers who are granted, extended, 
or otherwise provided credit, a person must provide a notice to each 
consumer to satisfy the requirements of Sec. 1022.72(a) or (c). Whether 
the consumers have the same address or not, the person must provide a 
separate notice to each consumer if a notice includes a credit score(s). 
Each separate notice that includes a credit score(s) must contain only 
the credit score(s) of the consumer to whom the notice is provided, and 
not the credit score(s) of the other consumer. If the consumers have the 
same address, and the notice does not include a credit score(s), a 
person may satisfy the requirements by providing a single notice 
addressed to both consumers.
    (2) Credit score disclosure notices. In a transaction involving two 
or more consumers who are granted, extended, or otherwise provided 
credit, a person must provide a separate notice to each consumer to 
satisfy the exceptions in Sec. 1022.74(d), (e), or (f). Whether the 
consumers have the same address or not, the person must provide a 
separate notice to each consumer. Each separate notice must contain only 
the credit score(s) of the consumer to whom the notice is provided, and 
not the credit score(s) of the other consumer.
    (3) Examples. (i) Two consumers jointly apply for credit with a 
creditor. The creditor obtains credit scores on both consumers. Based in 
part on the credit scores, the creditor grants credit to the consumers 
on material terms that are materially less favorable than the most 
favorable terms available to other consumers from the creditor. The 
creditor provides risk-based pricing notices to satisfy its obligations 
under this subpart. The creditor must provide a separate risk-based 
pricing notice to each consumer whether the consumers have the same 
address or not. Each risk-based pricing notice must contain only the 
credit score(s) of the consumer to whom the notice is provided.
    (ii) Two consumers jointly apply for credit with a creditor. The two 
consumers reside at the same address. The creditor obtains credit scores 
on each of the two consumer applicants. The creditor grants credit to 
the consumers. The creditor provides credit score disclosure notices to 
satisfy its obligations under this subpart. Even though the two 
consumers reside at the same address, the creditor must provide a 
separate credit score disclosure notice to each of the consumers. Each 
notice must contain only the credit score of the consumer to whom the 
notice is provided.



 Subpart I_Duties of Users of Consumer Reports Regarding Identity Theft



Sec. Sec. 1022.80-1022.81  [Reserved]



Sec. 1022.82  Duties of users regarding address discrepancies.

    (a) Scope. This section applies to a user of consumer reports (user) 
that receives a notice of address discrepancy from a consumer reporting 
agency described in 15 U.S.C. 1681a(p), except for a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) Definition. For purposes of this section, a notice of address 
discrepancy

[[Page 450]]

means a notice sent to a user by a consumer reporting agency described 
in 15 U.S.C. 1681a(p) pursuant to 15 U.S.C. 1681c(h)(1), that informs 
the user of a substantial difference between the address for the 
consumer that the user provided to request the consumer report and the 
address(es) in the agency's file for the consumer.
    (c) Reasonable belief--(1) Requirement to form a reasonable belief. 
A user must develop and implement reasonable policies and procedures 
designed to enable the user to form a reasonable belief that a consumer 
report relates to the consumer about whom it has requested the report, 
when the user receives a notice of address discrepancy.
    (2) Examples of reasonable policies and procedures. (i) Comparing 
the information in the consumer report provided by the consumer 
reporting agency with information the user:
    (A) Obtains and uses to verify the consumer's identity in accordance 
with the requirements of the Customer Identification Program (CIP) rules 
implementing 31 U.S.C. 5318(l) (31 CFR 1020.220);
    (B) Maintains in its own records, such as applications, change of 
address notifications, other customer account records, or retained CIP 
documentation; or
    (C) Obtains from third-party sources; or
    (ii) Verifying the information in the consumer report provided by 
the consumer reporting agency with the consumer.
    (d) Consumer's address--(1) Requirement to furnish consumer's 
address to a consumer reporting agency. A user must develop and 
implement reasonable policies and procedures for furnishing an address 
for the consumer that the user has reasonably confirmed is accurate to 
the consumer reporting agency described in 15 U.S.C. 1681a(p) from whom 
it received the notice of address discrepancy when the user:
    (i) Can form a reasonable belief that the consumer report relates to 
the consumer about whom the user requested the report;
    (ii) Establishes a continuing relationship with the consumer; and
    (iii) Regularly and in the ordinary course of business furnishes 
information to the consumer reporting agency from which the notice of 
address discrepancy relating to the consumer was obtained.
    (2) Examples of confirmation methods. The user may reasonably 
confirm an address is accurate by:
    (i) Verifying the address with the consumer about whom it has 
requested the report;
    (ii) Reviewing its own records to verify the address of the 
consumer;
    (iii) Verifying the address through third-party sources; or
    (iv) Using other reasonable means.
    (3) Timing. The policies and procedures developed in accordance with 
paragraph (d)(1) of this section must provide that the user will furnish 
the consumer's address that the user has reasonably confirmed is 
accurate to the consumer reporting agency described in 15 U.S.C. 
1681a(p) as part of the information it regularly furnishes for the 
reporting period in which it establishes a relationship with the 
consumer.

Subparts J-L [Reserved]



Subpart M_Duties of Consumer Reporting Agencies Regarding Identity Theft



Sec. 1022.120  [Reserved]



Sec. 1022.121  Active duty alerts.

    (a) Duration. The duration of an active duty alert shall be twelve 
months.



Sec. 1022.122  [Reserved]



Sec. 1022.123  Appropriate proof of identity.

    (a) Consumer reporting agencies shall develop and implement 
reasonable requirements for what information consumers shall provide to 
constitute proof of identity for purposes of sections 605A, 605B, and 
609(a)(1) of the FCRA. In developing these requirements, the consumer 
reporting agencies must:
    (1) Ensure that the information is sufficient to enable the consumer 
reporting agency to match consumers with their files; and
    (2) Adjust the information to be commensurate with an identifiable 
risk of

[[Page 451]]

harm arising from misidentifying the consumer.
    (b) Examples of information that might constitute reasonable 
information requirements for proof of identity are provided for 
illustrative purposes only, as follows:
    (1) Consumer file match. The identification information of the 
consumer including his or her full name (first, middle initial, last, 
suffix), any other or previously used names, current and/or recent full 
address (street number and name, apt. no., city, state, and zip code), 
full nine digits of Social Security number, and/or date of birth.
    (2) Additional proof of identity. Copies of government issued 
identification documents, utility bills, and/or other methods of 
authentication of a person's identity which may include, but would not 
be limited to, answering questions to which only the consumer might be 
expected to know the answer.



Sec. Sec. 1022.124-1022.129  [Reserved]



Subpart N_Duties of Consumer Reporting Agencies Regarding Disclosures to 
                                Consumers



Sec. 1022.130  Definitions

    For purposes of this subpart, the following definitions apply:
    (a) Annual file disclosure means a file disclosure that is provided 
to a consumer, upon consumer request and without charge, once in any 
twelve month period, in compliance with section 612(a) of the FCRA, 15 
U.S.C. 1681j(a).
    (b) Associated consumer reporting agency means a consumer reporting 
agency that owns or maintains consumer files housed within systems 
operated by one or more nationwide consumer reporting agencies.
    (c) Consumer report has the meaning provided in section 603(d) of 
the FCRA, 15 U.S.C. 1681a(d).
    (d) Consumer reporting agency has the meaning provided in section 
603(f) of the FCRA, 15 U.S.C. 1681a(f).
    (e) Extraordinary request volume occurs when the number of consumers 
requesting or attempting to request file disclosures during any twenty-
four hour period is more than 175 percent of the rolling ninety-day 
daily average of consumers requesting or attempting to request file 
disclosures. For example, if over the previous ninety days an average of 
one hundred consumers per day requested or attempted to request file 
disclosures, then extraordinary request volume would be any volume 
greater than 175 percent of one hundred, i.e., 176 or more requests in a 
single twenty-four hour period.
    (f) File disclosure means a disclosure by a consumer reporting 
agency pursuant to section 609 of the FCRA, 15 U.S.C. 1681g.
    (g) High request volume occurs when the number of consumers 
requesting or attempting to request file disclosures during any twenty-
four hour period is more than 125 percent of the rolling ninety-day 
daily average of consumers requesting or attempting to request file 
disclosures. For example, if over the previous ninety days an average of 
one hundred consumers per day requested or attempted to request file 
disclosures, then high request volume would be any volume greater than 
125 percent of one hundred, i.e., 126 or more requests in a single 
twenty-four hour period.
    (h) Nationwide consumer reporting agency means a consumer reporting 
agency that compiles and maintains files on consumers on a nationwide 
basis as defined in section 603(p) of the FCRA, 15 U.S.C. 1681a(p).
    (i) Nationwide specialty consumer reporting agency has the meaning 
provided in section 603(w) of the FCRA, 15 U.S.C. 1681a(w).
    (j) Request method means the method by which a consumer chooses to 
communicate a request for an annual file disclosure.



Sec. Sec. 1022.131-1022.135  [Reserved]



Sec. 1022.136  Centralized source for requesting annual file 
disclosures from nationwide consumer reporting agencies.

    (a) Purpose. The purpose of the centralized source is to enable 
consumers to make a single request to obtain annual file disclosures 
from all nationwide consumer reporting agencies, as required under 
section 612(a) of the FCRA, 15 U.S.C. 1681j(a).

[[Page 452]]

    (b) Establishment and operation. All nationwide consumer reporting 
agencies shall jointly design, fund, implement, maintain, and operate a 
centralized source for the purpose described in Paragraph (a) of this 
section. The centralized source required by this part shall:
    (1) Enable consumers to request annual file disclosures by any of 
the following request methods, at the consumers' option:
    (i) A single, dedicated Web site,
    (ii) A single, dedicated toll-free telephone number; and
    (iii) Mail directed to a single address;
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the centralized source 
through each request method, as determined in accordance with Paragraph 
(c) of this section;
    (ii) Collects only as much personally identifiable information as is 
reasonably necessary to properly identify the consumer as required under 
the FCRA, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other applicable 
laws and regulations, and to process the transaction(s) requested by the 
consumer;
    (iii) Provides information through the centralized source Web site 
and telephone number regarding how to make a request by all request 
methods required under paragraph (b)(1) of this section; and
    (iv) Provides clear and easily understandable information and 
instructions to consumers, including, but not necessarily limited to:
    (A) Providing information on the progress of the consumer's request 
while the consumer is engaged in the process of requesting a file 
disclosure;
    (B) For a Web site request method, providing access to a ``help'' or 
``frequently asked questions'' screen, which includes specific 
information that consumers might reasonably need to request file 
disclosures, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
centralized source and with the Bureau;
    (C) In the event that a consumer requesting a file disclosure 
through the centralized source cannot be properly identified in 
accordance with the FCRA, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and 
other applicable laws and regulations, providing a statement that the 
consumers' identity cannot be verified; and directions on how to 
complete the request, including what additional information or 
documentation will be required to complete the request, and how to 
submit such information; and
    (D) A statement indicating that the consumer has reached the Web 
site or telephone number for ordering free annual credit reports as 
required by Federal law; and
    (3) Make available to consumers a standardized form established 
jointly by the nationwide consumer reporting agencies, which consumers 
may use to make a request for an annual file disclosure, either by mail 
or on the Web site required under paragraph (b)(1) of this section, from 
the centralized source required by this part. The form provided at 
appendix L to part 1022, may be used to comply with this section.
    (c) Requirement to anticipate. The nationwide consumer reporting 
agencies shall implement reasonable procedures to anticipate, and to 
respond to, the volume of consumers who will contact the centralized 
source through each request method, to request, or attempt to request, a 
file disclosure, including developing and implementing contingency plans 
to address circumstances that are reasonably likely to occur and that 
may materially and adversely impact the operation of the nationwide 
consumer reporting agency, a centralized source request method, or the 
centralized source.
    (1) The contingency plans required by this section shall include 
reasonable measures to minimize the impact of such circumstances on the 
operation of the centralized source and on consumers contacting, or 
attempting to contact, the centralized source.
    (i) Such reasonable measures to minimize impact shall include, but 
are not necessarily limited to:

[[Page 453]]

    (A) The extent reasonably practicable under the circumstances, 
providing information to consumers on how to use another available 
request method;
    (B) The extent reasonably practicable under the circumstances, 
communicating, to a consumer who attempts but is unable to make a 
request, the fact that a condition exists that has precluded the 
centralized source from accepting all requests, and the period of time 
after which the centralized source is reasonably anticipated to be able 
to accept the consumers' request for an annual file disclosure; and
    (C) Taking all reasonable steps to restore the centralized source to 
normal operating status as quickly as reasonably practicable under the 
circumstances.
    (ii) Reasonable measures to minimize impact may also include, as 
appropriate, collecting request information but declining to accept the 
request for processing until a reasonable later time, provided that the 
consumer is clearly and prominently informed, to the extent reasonably 
practicable under the circumstances, of when the request will be 
accepted for processing.
    (2) A nationwide consumer reporting agency shall not be deemed in 
violation of paragraph (b)(2)(i) of this section if a centralized source 
request method is unavailable to accept requests for a reasonable period 
of time for purposes of conducting maintenance on the request method, 
provided that the other required request methods remain available during 
such time.
    (d) Disclosures required. If a nationwide consumer reporting agency 
has the ability to provide a consumer report to a third party relating 
to a consumer, regardless of whether the consumer report is owned by 
that nationwide consumer reporting agency or by an associated consumer 
reporting agency, that nationwide consumer reporting agency shall, upon 
proper identification in compliance with section 610(a)(1) of the FCRA, 
15 U.S.C. 1681h(a)(1), provide an annual file disclosure to such 
consumer if the consumer makes a request through the centralized source.
    (e) High request volume and extraordinary request volume--(1) High 
request volume. Provided that a nationwide consumer reporting agency has 
implemented reasonable procedures developed in accordance with Paragraph 
(c) of this section, entitled ``requirement to anticipate,'' the 
nationwide consumer reporting agency shall not be deemed in violation of 
Paragraph (b)(2)(i) of this section for any period of time in which a 
centralized source request method, the centralized source, or the 
nationwide consumer reporting agency experiences high request volume, if 
the nationwide consumer reporting agency:
    (i) Collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (ii) Clearly and prominently informs the consumer of when the 
request will be accepted for processing.
    (2) Extraordinary request volume. Provided that the nationwide 
consumer reporting agency has implemented reasonable procedures 
developed in compliance with Paragraph (c) of this section, entitled 
``requirement to anticipate,'' the nationwide consumer reporting agency 
shall not be deemed in violation of Paragraph (b)(2)(i) of this section 
for any period of time during which a particular centralized source 
request method, the centralized source, or the nationwide consumer 
reporting agency experiences extraordinary request volume.
    (f) Information use and disclosure. Any personally identifiable 
information collected from consumers as a result of a request for annual 
file disclosure, or other disclosure required by the FCRA, made through 
the centralized source, may be used or disclosed by the centralized 
source or a nationwide consumer reporting agency only:
    (1) To provide the annual file disclosure or other disclosure 
required under the FCRA requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for annual file disclosure or other disclosure;
    (3) To comply with applicable legal requirements, including those 
imposed by the FCRA and this part; and

[[Page 454]]

    (4) To update personally identifiable information already maintained 
by the nationwide consumer reporting agency for the purpose of providing 
consumer reports, provided that the nationwide consumer reporting agency 
uses and discloses the updated personally identifiable information 
subject to the same restrictions that would apply, under any applicable 
provision of law or regulation, to the information updated or replaced.
    (g) Communications provided through centralized source. (1) Any 
advertising or marketing for products or services, any communications or 
instructions that advertise or market any products or services, or any 
request to establish an account through the centralized source must be 
delayed until after the consumer has obtained his or her annual file 
disclosure.
    (i) In the case of requests made by mail or telephone, the consumer 
``has obtained his or her annual file disclosure'' when the file 
disclosure is mailed, and the nationwide consumer reporting agency may 
include advertising for other products or services with the file 
disclosure.
    (ii) In the case of requests made through the centralized source Web 
site, the consumer ``has obtained his or her annual file disclosure'' 
when the file disclosure is delivered to the consumer through the 
Internet, and the nationwide consumer reporting agency may include 
advertising for other products or services with the file disclosure.
    (2) Any communications, instructions, or permitted advertising or 
marketing shall not interfere with, detract from, contradict, or 
otherwise undermine the purpose of the centralized source stated in 
Paragraph (a) of this section.
    (3) Examples of interfering, detracting, inconsistent, and/or 
undermining communications include:
    (i) Centralized source materials that represent, expressly or by 
implication, that a consumer must purchase a paid product or service in 
order to receive or to understand the annual file disclosure;
    (ii) Centralized source materials that represent, expressly or by 
implication, that annual file disclosures are not free, or that 
obtaining an annual file disclosure will have a negative impact on the 
consumers' credit standing; and
    (iii) Centralized source materials that falsely represent, expressly 
or by implication, that a product or service offered ancillary to 
receipt of a file disclosure, such as a credit score or credit 
monitoring service, is free, or fail to clearly and prominently disclose 
that consumers must cancel a service, advertised as free for an initial 
period of time, to avoid being charged, if such is the case.
    (h) Other practices prohibited through the centralized source. The 
centralized source shall not:
    (1) Contain hyperlinks to commercial or proprietary Web sites until 
after the consumer has obtained his or her annual file disclosure, 
except for technical transfers to a Web page on which consumers can 
request their free annual file disclosure; provided, however, that no 
hyperlinks to commercial Web sites shall appear on the initial page of 
the centralized source.
    (2) Require consumers to set up an account in connection with 
obtaining an annual file disclosure; or
    (3) Ask or require consumers to agree to terms or conditions in 
connection with obtaining an annual file disclosure.



Sec. 1022.137  Streamlined process for requesting annual file
disclosures from nationwide specialty consumer reporting agencies.

    (a) Streamlined process requirements. Any nationwide specialty 
consumer reporting agency shall have a streamlined process for accepting 
and processing consumer requests for annual file disclosures. The 
streamlined process required by this part shall:
    (1) Enable consumers to request annual file disclosures by a toll-
free telephone number that:
    (i) Provides clear and prominent instructions for requesting 
disclosures by any additional available request methods, that do not 
interfere with, detract from, contradict, or otherwise undermine the 
ability of consumers to obtain annual file disclosures through the 
streamlined process required by this part;

[[Page 455]]

    (ii) Is published, in conjunction with all other published numbers 
for the nationwide specialty consumer reporting agency, in any telephone 
directory in which any telephone number for the nationwide specialty 
consumer reporting agency is published; and(iii) Is clearly and 
prominently posted on any Web site owned or maintained by the nationwide 
specialty consumer reporting agency that is related to consumer 
reporting, along with instructions for requesting disclosures by any 
additional available request methods; and
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the nationwide specialty 
consumer reporting agency through the streamlined process, as determined 
in compliance with Paragraph (b) of this section;
    (ii) Collects only as much personal information as is reasonably 
necessary to properly identify the consumer as required under the FCRA, 
section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other applicable laws and 
regulations; and
    (iii) Provides clear and easily understandable information and 
instructions to consumers, including but not necessarily limited to:
    (A) Providing information on the status of the consumers request 
while the consumer is in the process of making a request;
    (B) For a Web site request method, providing access to a ``help'' or 
``frequently asked questions'' screen, which includes more specific 
information that consumers might reasonably need to order their file 
disclosure, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
nationwide specialty consumer reporting agency and with the Bureau; and
    (C) In the event that a consumer requesting a file disclosure cannot 
be properly identified in accordance with the FCRA, section 610(a)(1), 
15 U.S.C. 1681h(a)(1), and other applicable laws and regulations, 
providing a statement that the consumers identity cannot be verified; 
and directions on how to complete the request, including what additional 
information or documentation will be required to complete the request, 
and how to submit such information.
    (b) Requirement to anticipate. A nationwide specialty consumer 
reporting agency shall implement reasonable procedures to anticipate, 
and respond to, the volume of consumers who will contact the nationwide 
specialty consumer reporting agency through the streamlined process to 
request, or attempt to request, file disclosures, including developing 
and implementing contingency plans to address circumstances that are 
reasonably likely to occur and that may materially and adversely impact 
the operation of the nationwide specialty consumer reporting agency, a 
request method, or the streamlined process.
    (1) The contingency plans required by this section shall include 
reasonable measures to minimize the impact of such circumstances on the 
operation of the streamlined process and on consumers contacting, or 
attempting to contact, the nationwide specialty consumer reporting 
agency through the streamlined process.
    (i) Such reasonable measures to minimize impact shall include, but 
are not necessarily limited to:
    (A) To the extent reasonably practicable under the circumstances, 
providing information to consumers on how to use another available 
request method;
    (B) To the extent reasonably practicable under the circumstances, 
communicating, to a consumer who attempts but is unable to make a 
request, the fact that a condition exists that has precluded the 
nationwide specialty consumer reporting agency from accepting all 
requests, and the period of time after which the agency is reasonably 
anticipated to be able to accept the consumers request for an annual 
file disclosure; and
    (C) Taking all reasonable steps to restore the streamlined process 
to normal operating status as quickly as reasonably practicable under 
the circumstances.
    (ii) Measures to minimize impact may also include, as appropriate, 
collecting request information but declining to accept the request for 
processing

[[Page 456]]

until a reasonable later time, provided that the consumer is clearly and 
prominently informed, to the extent reasonably practicable under the 
circumstances, of when the request will be accepted for processing.
    (2) A nationwide specialty consumer reporting agency shall not be 
deemed in violation of paragraph (a)(2)(i) of this section if the toll-
free telephone number required by this part is unavailable to accept 
requests for a reasonable period of time for purposes of conducting 
maintenance on the request method, provided that the nationwide 
specialty consumer reporting agency makes other request methods 
available to consumers during such time.
    (c) High request volume and extraordinary request volume--(1) High 
request volume. Provided that the nationwide specialty consumer 
reporting agency has implemented reasonable procedures developed in 
accordance with Paragraph (b) of this section, entitled ``requirement to 
anticipate,'' a nationwide specialty consumer reporting agency shall not 
be deemed in violation of Paragraph (a)(2)(i) of this section for any 
period of time during which a streamlined process request method or the 
nationwide specialty consumer reporting agency experiences high request 
volume, if the nationwide specialty consumer reporting agency:
    (i) Collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (ii) Clearly and prominently informs the consumer of when the 
request will be accepted for processing.
    (2) Extraordinary request volume. Provided that the nationwide 
specialty consumer reporting agency has implemented reasonable 
procedures developed in accordance with Paragraph (b) of this section, 
entitled ``requirement to anticipate,'' a nationwide specialty consumer 
reporting agency shall not be deemed in violation of Paragraph (a)(2)(i) 
of this section for any period of time during which a streamlined 
process request method or the nationwide specialty consumer reporting 
agency experiences extraordinary request volume.
    (d) Information use and disclosure. Any personally identifiable 
information collected from consumers as a result of a request for annual 
file disclosure, or other disclosure required by the FCRA, made through 
the streamlined process, may be used or disclosed by the nationwide 
specialty consumer reporting agency only:
    (1) To provide the annual file disclosure or other disclosure 
required under the FCRA requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for annual file disclosure or other disclosure;
    (3) To comply with applicable legal requirements, including those 
imposed by the FCRA and this part; and
    (4) To update personally identifiable information already maintained 
by the nationwide specialty consumer reporting agency for the purpose of 
providing consumer reports, provided that the nationwide specialty 
consumer reporting agency uses and discloses the updated personally 
identifiable information subject to the same restrictions that would 
apply, under any applicable provision of law or regulation, to the 
information updated or replaced.
    (e) Requirement to accept or redirect requests. If a consumer 
requests an annual file disclosure through a method other than the 
streamlined process established by the nationwide specialty consumer 
reporting agency in compliance with this part, a nationwide specialty 
consumer reporting agency shall:
    (1) Accept the consumers request; or
    (2) Instruct the consumer how to make the request using the 
streamlined process required by this part.



Sec. 1022.138  Prevention of deceptive marketing of free credit reports.

    (a) For purposes of this section:
    (1) AnnualCreditReport.com and (877) 322-8228 means the Uniform 
Resource Locator address ``AnnualCreditReport.com'' and toll-free 
telephone number, (877) 322-8228. These are the locator address and 
toll-free telephone number currently used by the centralized source. If 
the locator address or toll-free telephone number changes in the future, 
the new address or telephone number shall be substituted within a 
reasonable time.

[[Page 457]]

    (2) Free credit report means a file disclosure prepared by or 
obtained from, directly or indirectly, a nationwide consumer reporting 
agency (as defined in section 603(p) of the FCRA), that is represented, 
either expressly or impliedly, to be available to the consumer at no 
cost if the consumer purchases a product or service, or agrees to 
purchase a product or service subject to cancellation.
    (3) General requirements for disclosures. The disclosures covered by 
Paragraph (b) of this section shall contain only the prescribed content 
and comply with the following requirements:
    (i) All disclosures shall be prominent;
    (ii) All disclosures shall be made in the same language as that 
principally used in the advertisement;
    (iii) Visual disclosures shall be easily readable; in a high degree 
of contrast from the immediate background on which it appears; in a 
format so that the disclosure is distinct from other text, such as 
inside a border; in a distinct type style, such as bold; and parallel to 
the base of the advertisement or screen;
    (iv) Audio disclosures shall be delivered in a slow and deliberate 
manner and in a reasonably understandable volume and pitch;
    (v) Program-length television, radio, or Internet-hosted multimedia 
advertisement disclosures shall be made at the beginning, near the 
middle, and at the end of the advertisement; and
    (vi) Nothing contrary to, inconsistent with, or that undermines the 
required disclosures shall be used in any advertisement in any medium, 
nor shall any audio, visual, or print technique be used that is likely 
to detract significantly from the communication of any disclosure.
    (b) Medium-specific disclosures. All offers of free credit reports 
shall prominently include the disclosures required by this section.
    (1) Television advertisements. (i) All advertisements for free 
credit reports broadcast on television shall include the following 
disclosure in close proximity to the first mention of a free credit 
report: ``This is not the free credit report provided for by Federal 
law.''
    (ii) The disclosure shall appear at the same time in the audio and 
visual part of the advertisement. The visual disclosure shall be at 
least four percent of the vertical picture height and appear for a 
minimum of four seconds.
    (2) Radio advertisements. All advertisements for free credit reports 
broadcast on radio shall include the following disclosure in close 
proximity to the first mention of a free credit report: ``This is not 
the free credit report provided for by Federal law.''
    (3) Print advertisements. All advertisements for free credit reports 
in print shall include the following disclosure in the form specified 
below and in close proximity to the first mention of a free credit 
report. The first line of the disclosure shall be centered and contain 
only the following language: ``THIS NOTICE IS REQUIRED BY LAW.'' 
Immediately below the first line of the disclosure the following 
language shall appear: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' Each letter of the disclosure text shall be, at 
minimum, one-half the size of the largest character used in the 
advertisement.
    (4) Web sites. Any Web site offering free credit reports must 
display the disclosure set forth in paragraphs (b)(4)(i), (ii), and (v) 
of this section on each page that mentions a free credit report and on 
each page of the ordering process. This disclosure shall be visible 
across the top of each page where the disclosure is required to appear; 
shall appear inside a box; and shall appear in the form specified below:
    (i) The first element of the disclosure shall be a header that is 
centered and shall consist of the following text: ``THIS NOTICE IS 
REQUIRED BY LAW. Read more at consumerfinance.gov/learnmore.'' Each 
letter of the header shall be one-half the size of the largest character 
of the disclosure text required by paragraph (b)(4)(ii) of this section. 
The reference to consumerfinance.gov/learnmore shall be an operational 
hyperlink, underlined, and in a color that is a high degree of contrast 
from the color of the other disclosure text and background color of the 
box. Until January 1, 2013,

[[Page 458]]

``www.ftc.gov'' and the corresponding hyperlink may be substituted for 
``consumerfinance.gov/learmore'' and the corresponding hyperlink;
    (ii) The second element of the disclosure shall appear below the 
header required by paragraph (b)(4)(i) and shall consist of the 
following text: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' The reference to AnnualCreditReport.com shall be an 
operational hyperlink to the centralized source, underlined, and in the 
same color as the hyperlink to consumerfinance.gov/learnmore required in 
Sec. 1022.138(b)(4)(i);
    (iii) The color of the text required by Sec. 1022.138(b)(4)(i) and 
(ii) shall be in a high degree of contrast with the background color of 
the box;
    (iv) The background of the box shall be a solid color in a high 
degree of contrast from the background of the page and the color shall 
not appear elsewhere on the page;
    (v) The third element of the disclosure shall appear below the text 
required by paragraph (b)(4)(ii) and shall be an operational hyperlink 
to AnnualCreditReport.com that appears as a centered button containing 
the following language: ``Take me to the authorized source.'' The 
background of this button shall be the same color as the hyperlinks 
required by Sec. 1022.138(b)(4)(i) and (ii) and the text shall be in a 
high degree of contrast to the background of the button;
    (vi) Each character of the text required in paragraph (b)(4)(ii) and 
(v) of this section shall be, at minimum, the same size as the largest 
character on the page, including characters in an image or graphic 
banner;
    (vii) Each character of the disclosure shall be displayed as plain 
text and in a sans serif font, such as Arial; and
    (viii) The space between each element of the disclosure required in 
paragraph (b)(i), (ii), and (v) of this section shall be, at minimum, 
the same size as the largest character on the page, including characters 
in an image or graphic banner. The space between the boundaries of the 
box and the text or button required in Sec. 1022.138(b)(i), (ii), and 
(v) shall be, at minimum, twice the size of the vertical height of the 
largest character on the page, including characters in an image or 
graphic banner.
    (5) Internet-hosted multimedia advertising. All advertisements for 
free credit reports disseminated through Internet-hosted multimedia in 
both audio and visual formats shall include the following disclosure in 
the form specified below and in close proximity to the first mention of 
a free credit report. The first line of the disclosure shall be centered 
and contain only the following language: ``THIS NOTICE IS REQUIRED BY 
LAW.'' Immediately below the first line of the disclosure the following 
language shall appear: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' The disclosure shall appear at the same time in the 
audio and visual part of the advertisement. If the advertisement 
contains characters, the visual disclosure shall be, at minimum, the 
same size as the largest character on the advertisement.
    (6) Telephone requests. When consumers call any telephone number, 
other than the number of the centralized source, appearing in an 
advertisement that represents free credit reports are available at the 
number, consumers must receive the following audio disclosure at the 
first mention of a free credit report: ``The following notice is 
required by law. You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the only authorized source 
under Federal law.''
    (7) Telemarketing solicitations. When telemarketing sales calls are 
made that include offers of free credit reports, the call must include 
at the first mention of a free credit report the following disclosure: 
``The following notice is required by law. You have the right to a free 
credit report from AnnualCreditReport.com or (877) 322-8228, the only 
authorized source under Federal law.''

[[Page 459]]



Sec. 1022.139  [Reserved]



      Subpart O_Miscellaneous Duties of Consumer Reporting Agencies



Sec. 1022.140  Prohibition against circumventing or evading treatment
as a consumer reporting agency

    (a) A consumer reporting agency shall not circumvent or evade 
treatment as a ``consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis,'' as defined under section 
603(p) of the FCRA, 15 U.S.C. 1681a(p), by any means, including, but not 
limited to:
    (1) Corporate organization, reorganization, structure, or 
restructuring, including merger, acquisition, dissolution, divestiture, 
or asset sale of a consumer reporting agency; or
    (2) Maintaining or merging public record and credit account 
information in a manner that is substantially equivalent to that 
described in Paragraphs (1) and (2) of section 603(p) of the FCRA, 15 
U.S.C. 1681a(p).
    (b) Examples:
    (1) Circumvention through reorganization by data type. XYZ Inc. is a 
consumer reporting agency that compiles and maintains files on consumers 
on a nationwide basis. It restructures its operations so that public 
record information is assembled and maintained only by its corporate 
affiliate, ABC Inc. XYZ continues operating as a consumer reporting 
agency but ceases to comply with the FCRA obligations of a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis, asserting that it no longer meets the definition found 
in FCRA section 603(p), because it no longer maintains public record 
information. XYZ's conduct is a circumvention or evasion of treatment as 
a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis, and thus violates this section.
    (2) Circumvention through reorganization by regional operations. PDQ 
Inc. is a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis. It restructures its operations so that 
corporate affiliates separately assemble and maintain all information on 
consumers residing in each state. PDQ continues to operate as a consumer 
reporting agency but ceases to comply with the FCRA obligations of a 
consumer reporting agency that compiles and maintains files on consumers 
on a nationwide basis, asserting that it no longer meets the definition 
found in FCRA section 603(p), because it no longer operates on a 
nationwide basis. PDQ's conduct is a circumvention or evasion of 
treatment as a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis, and thus violates this 
section.
    (3) Circumvention by a newly formed entity. Smith Co. is a new 
entrant in the marketplace for consumer reports that bear on a 
consumer's credit worthiness, standing and capacity. Smith Co. organizes 
itself into two affiliated companies: Smith Credit Co. and Smith Public 
Records Co. Smith Credit Co. assembles and maintains credit account 
information from persons who furnish that information regularly and in 
the ordinary course of business on consumers residing nationwide. Smith 
Public Records Co. assembles and maintains public record information on 
consumers nationwide. Neither Smith Co. nor its affiliated organizations 
comply with FCRA obligations of consumer reporting agencies that compile 
and maintain files on consumers on a nationwide basis. Smith Co.'s 
conduct is a circumvention or evasion of treatment as a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis, and thus violates this section.
    (4) Bona fide, arm's length transaction with unaffiliated party. 
Foster Ltd. is a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis. Foster Ltd. sells its public 
record information business to an unaffiliated company in a bona fide, 
arm's length transaction. Foster Ltd. ceases to assemble, evaluate and 
maintain public record information on consumers residing nationwide, and 
ceases to offer reports containing public record information. Foster 
Ltd.'s conduct is not a circumvention or evasion of treatment as a 
consumer reporting agency that compiles and

[[Page 460]]

maintains files on consumers on a nationwide basis. Foster Ltd.'s 
conduct does not violate this part.
    (c) Limitation on applicability. Any person who is otherwise in 
violation of paragraph (a) of this section shall be deemed to be in 
compliance with this part if such person is in compliance with all 
obligations imposed upon consumer reporting agencies that compile and 
maintain files on consumers on a nationwide basis under the FCRA, 15 
U.S.C. 1681 et seq.



                 Sec. Appendix A to Part 1022 [Reserved]



   Sec. Appendix B to Part 1022--Model Notices of Furnishing Negative 
                               Information

    a. Although use of the model notices is not required, a financial 
institution that is subject to section 623(a)(7) of the FCRA shall be 
deemed to be in compliance with the notice requirement in section 
623(a)(7) of the FCRA if the institution properly uses the model notices 
in this appendix (as applicable).
    b. A financial institution may use Model Notice B-1 if the 
institution provides the notice prior to furnishing negative information 
to a nationwide consumer reporting agency.
    c. A financial institution may use Model Notice B-2 if the 
institution provides the notice after furnishing negative information to 
a nationwide consumer reporting agency.
    d. Financial institutions may make certain changes to the language 
or format of the model notices without losing the safe harbor from 
liability provided by the model notices. The changes to the model 
notices may not be so extensive as to affect the substance, clarity, or 
meaningful sequence of the language in the model notices. Financial 
institutions making such extensive revisions will lose the safe harbor 
from liability that this appendix provides. Acceptable changes include, 
for example,
    1. Rearranging the order of the references to ``late payment(s),'' 
or ``missed payment(s).''
    2. Pluralizing the terms ``credit bureau,'' ``credit report,'' and 
``account.''
    3. Specifying the particular type of account on which information 
may be furnished, such as ``credit card account.''
    4. Rearranging in Model Notice B-1 the phrases ``information about 
your account'' and ``to credit bureaus'' such that it would read ``We 
may report to credit bureaus information about your account.''

                            Model Notice B-1

    We may report information about your account to credit bureaus. Late 
payments, missed payments, or other defaults on your account may be 
reflected in your credit report.

                            Model Notice B-2

    We have told a credit bureau about a late payment, missed payment or 
other default on your account. This information may be reflected in your 
credit report.



      Sec. Appendix C to Part 1022--Model Forms for Opt-Out Notices

    a. Although use of the model forms is not required, use of the model 
forms in this appendix (as applicable) complies with the requirement in 
section 624 of the Act for clear, conspicuous, and concise notices.
    b. Certain changes may be made to the language or format of the 
model forms without losing the protection from liability afforded by use 
of the model forms. These changes may not be so extensive as to affect 
the substance, clarity, or meaningful sequence of the language in the 
model forms. Persons making such extensive revisions will lose the safe 
harbor that this appendix provides. Acceptable changes include, for 
example:
    1. Rearranging the order of the references to ``your income,'' 
``your account history,'' and ``your credit score.''
    2. Substituting other types of information for ``income,'' ``account 
history,'' or ``credit score'' for accuracy, such as ``payment 
history,'' ``credit history,'' ``payoff status,'' or ``claims history.''
    3. Substituting a clearer and more accurate description of the 
affiliates providing or covered by the notice for phrases such as ``the 
[ABC] group of companies,'' including without limitation a statement 
that the entity providing the notice recently purchased the consumer's 
account.
    4. Substituting other types of affiliates covered by the notice for 
``credit card,'' ``insurance,'' or ``securities'' affiliates.
    5. Omitting items that are not accurate or applicable. For example, 
if a person does not limit the duration of the opt-out period, the 
notice may omit information about the renewal notice.
    6. Adding a statement informing consumers how much time they have to 
opt out before shared eligibility information may be used to make 
solicitations to them.
    7. Adding a statement that the consumer may exercise the right to 
opt out at any time.
    8. Adding the following statement, if accurate: ``If you previously 
opted out, you do not need to do so again.''
    9. Providing a place on the form for the consumer to fill in 
identifying information, such as his or her name and address.
    10. Adding disclosures regarding the treatment of opt-outs by joint 
consumers to comply with Sec. 1022.23(a)(2) of this part.


[[Page 461]]


C-1 Model Form for Initial Opt-out Notice (Single-Affiliate Notice)
C-2 Model Form for Initial Opt-out Notice (Joint Notice)
C-3 Model Form for Renewal Notice (Single-Affiliate Notice)
C-4 Model Form for Renewal Notice (Joint Notice)
C-5 Model Form for Voluntary ``No Marketing'' Notice

 C-1--Model Form for Initial Opt-Out Notice (Single-Affiliate Notice)--
          [Your Choice To Limit Marketing]/[Marketing Opt-Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You may limit our affiliates in the [ABC] group 
of companies, such as our [credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that we collect and share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice to limit marketing offers from our 
affiliates will apply [until you tell us to change your choice]/[for x 
years from when you tell us your choice]/[for at least 5 years from when 
you tell us your choice]. [Include if the opt-out period expires.] Once 
that period expires, you will receive a renewal notice that will allow 
you to continue to limit marketing offers from our affiliates for 
[another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
our affiliates, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:

 By telephone: 1-(877) -
          
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Do not allow your affiliates to use my personal information to 
market to me.

C-2--Model Form for Initial Opt-Out Notice (Joint Notice)--[Your Choice 
                 To Limit Marketing]/[Marketing Opt-Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You may limit the [ABC] companies, such as the 
[ABC credit card, insurance, and securities] affiliates, from marketing 
their products or services to you based on your personal information 
that they receive from other [ABC] companies. This information includes 
your [income], your [account history], and your [credit score].
     Your choice to limit marketing offers from the 
[ABC] companies will apply [until you tell us to change your choice]/
[for x years from when you tell us your choice]/[for at least 5 years 
from when you tell us your choice]. [Include if the opt-out period 
expires.] Once that period expires, you will receive a renewal notice 
that will allow you to continue to limit marketing offers from the [ABC] 
companies for [another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
the [ABC] companies, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:

 By telephone: 1-(877) -
          
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Do not allow any company [in the ABC group of companies] to use my 
personal information to market to me.

C-3--Model Form for Renewal Notice (Single-Affiliate Notice)--[Renewing 
    Your Choice To Limit Marketing]/[Renewing Your Marketing Opt-Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You previously chose to limit our affiliates in 
the [ABC] group of companies, such as our [credit card, insurance, and 
securities] affiliates, from marketing their products or services to you 
based on your personal information that we share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].

[[Page 462]]

     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:

 By telephone: 1-(877) -
          
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Renew my choice to limit marketing for [x] more years.

C-4--Model Form for Renewal Notice (Joint Notice)--[Renewing Your Choice 
          To Limit Marketing]/[Renewing Your Marketing Opt-Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You previously chose to limit the [ABC] 
companies, such as the [ABC credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that they receive from other ABC companies. 
This information includes your [income], your [account history], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:

 By telephone: 1-(877) -
          
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

--Renew my choice to limit marketing for [x] more years.

 C-5--Model Form for Voluntary ``No Marketing'' Notice--[Your Choice To 
                             Stop Marketing]

     [Name of Affiliate] is providing this notice.
     You may choose to stop all marketing from us and 
our affiliates.
     [Your choice to stop marketing from us and our 
affiliates will apply until you tell us to change your choice.]
    To stop all marketing, contact us [include all that apply]:

 By telephone: 1 (877) -
          
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

--Do not market to me.



 Sec. Appendix D to Part 1022--Model Forms for Firm Offers of Credit or 
                                Insurance

    In order to comply with Sec. 1022.54, the following model notices 
may be used:
    (a) English language model notice--(1) Short notice.

[[Page 463]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.000

    (2) Long notice.

[[Page 464]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.001

    (b) Spanish language model notice--(1) Short notice.

[[Page 465]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.002

    (2) Long notice.

[[Page 466]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.003



  Sec. Appendix E to Part 1022--Interagency Guidelines Concerning the 
 Accuracy and Integrity of Information Furnished to Consumer Reporting 
                                Agencies

    The Bureau encourages voluntary furnishing of information to 
consumer reporting agencies. Section 1022.42 of this part requires each 
furnisher to establish and implement reasonable written policies and 
procedures concerning the accuracy and integrity of the information it 
furnishes to consumer reporting agencies. Under Sec. 1022.42(b) of this

[[Page 467]]

part, a furnisher must consider the guidelines set forth below in 
developing its policies and procedures. In establishing these policies 
and procedures, a furnisher may include any of its existing policies and 
procedures that are relevant and appropriate. Section 1022.42(c) 
requires each furnisher to review its policies and procedures 
periodically and update them as necessary to ensure their continued 
effectiveness.

       I. Nature, Scope, and Objectives of Policies and Procedures

    (a) Nature and Scope. Section 1022.42(a) of this part requires that 
a furnisher's policies and procedures be appropriate to the nature, 
size, complexity, and scope of the furnisher's activities. In developing 
its policies and procedures, a furnisher should consider, for example:
    (1) The types of business activities in which the furnisher engages;
    (2) The nature and frequency of the information the furnisher 
provides to consumer reporting agencies; and
    (3) The technology used by the furnisher to furnish information to 
consumer reporting agencies.
    (b) Objectives. A furnisher's policies and procedures should be 
reasonably designed to promote the following objectives:
    (1) To furnish information about accounts or other relationships 
with a consumer that is accurate, such that the furnished information:
    (i) Identifies the appropriate consumer;
    (ii) Reflects the terms of and liability for those accounts or other 
relationships; and
    (iii) Reflects the consumer's performance and other conduct with 
respect to the account or other relationship;
    (2) To furnish information about accounts or other relationships 
with a consumer that has integrity, such that the furnished information:
    (i) Is substantiated by the furnisher's records at the time it is 
furnished;
    (ii) Is furnished in a form and manner that is designed to minimize 
the likelihood that the information may be incorrectly reflected in a 
consumer report; thus, the furnished information should:
    (A) Include appropriate identifying information about the consumer 
to whom it pertains; and
    (B) Be furnished in a standardized and clearly understandable form 
and manner and with a date specifying the time period to which the 
information pertains; and
    (iii) Includes the credit limit, if applicable and in the 
furnisher's possession;
    (3) To conduct reasonable investigations of consumer disputes and 
take appropriate actions based on the outcome of such investigations; 
and
    (4) To update the information it furnishes as necessary to reflect 
the current status of the consumer's account or other relationship, 
including, for example:
    (i) Any transfer of an account (e.g., by sale or assignment for 
collection) to a third party; and
    (ii) Any cure of the consumer's failure to abide by the terms of the 
account or other relationship.

        II. Establishing and Implementing Policies and Procedures

    In establishing and implementing its policies and procedures, a 
furnisher should:
    (a) Identify practices or activities of the furnisher that can 
compromise the accuracy or integrity of information furnished to 
consumer reporting agencies, such as by:
    (1) Reviewing its existing practices and activities, including the 
technological means and other methods it uses to furnish information to 
consumer reporting agencies and the frequency and timing of its 
furnishing of information;
    (2) Reviewing its historical records relating to accuracy or 
integrity or to disputes; reviewing other information relating to the 
accuracy or integrity of information provided by the furnisher to 
consumer reporting agencies; and considering the types of errors, 
omissions, or other problems that may have affected the accuracy or 
integrity of information it has furnished about consumers to consumer 
reporting agencies;
    (3) Considering any feedback received from consumer reporting 
agencies, consumers, or other appropriate parties;
    (4) Obtaining feedback from the furnisher's staff; and
    (5) Considering the potential impact of the furnisher's policies and 
procedures on consumers.
    (b) Evaluate the effectiveness of existing policies and procedures 
of the furnisher regarding the accuracy and integrity of information 
furnished to consumer reporting agencies; consider whether new, 
additional, or different policies and procedures are necessary; and 
consider whether implementation of existing policies and procedures 
should be modified to enhance the accuracy and integrity of information 
about consumers furnished to consumer reporting agencies.
    (c) Evaluate the effectiveness of specific methods (including 
technological means) the furnisher uses to provide information to 
consumer reporting agencies; how those methods may affect the accuracy 
and integrity of the information it provides to consumer reporting 
agencies; and whether new, additional, or different methods (including 
technological means) should be used to provide information to consumer 
reporting agencies to enhance the accuracy and integrity of that 
information.

[[Page 468]]

           III. Specific Components of Policies and Procedures

    In developing its policies and procedures, a furnisher should 
address the following, as appropriate:
    (a) Establishing and implementing a system for furnishing 
information about consumers to consumer reporting agencies that is 
appropriate to the nature, size, complexity, and scope of the 
furnisher's business operations.
    (b) Using standard data reporting formats and standard procedures 
for compiling and furnishing data, where feasible, such as the 
electronic transmission of information about consumers to consumer 
reporting agencies.
    (c) Maintaining records for a reasonable period of time, not less 
than any applicable recordkeeping requirement, in order to substantiate 
the accuracy of any information about consumers it furnishes that is 
subject to a direct dispute.
    (d) Establishing and implementing appropriate internal controls 
regarding the accuracy and integrity of information about consumers 
furnished to consumer reporting agencies, such as by implementing 
standard procedures and verifying random samples of information provided 
to consumer reporting agencies.
    (e) Training staff that participates in activities related to the 
furnishing of information about consumers to consumer reporting agencies 
to implement the policies and procedures.
    (f) Providing for appropriate and effective oversight of relevant 
service providers whose activities may affect the accuracy or integrity 
of information about consumers furnished to consumer reporting agencies 
to ensure compliance with the policies and procedures.
    (g) Furnishing information about consumers to consumer reporting 
agencies following mergers, portfolio acquisitions or sales, or other 
acquisitions or transfers of accounts or other obligations in a manner 
that prevents re-aging of information, duplicative reporting, or other 
problems that may similarly affect the accuracy or integrity of the 
information furnished.
    (h) Deleting, updating, and correcting information in the 
furnisher's records, as appropriate, to avoid furnishing inaccurate 
information.
    (i) Conducting reasonable investigations of disputes.
    (j) Designing technological and other means of communication with 
consumer reporting agencies to prevent duplicative reporting of 
accounts, erroneous association of information with the wrong 
consumer(s), and other occurrences that may compromise the accuracy or 
integrity of information provided to consumer reporting agencies.
    (k) Providing consumer reporting agencies with sufficient 
identifying information in the furnisher's possession about each 
consumer about whom information is furnished to enable the consumer 
reporting agency properly to identify the consumer.
    (l) Conducting a periodic evaluation of its own practices, consumer 
reporting agency practices of which the furnisher is aware, 
investigations of disputed information, corrections of inaccurate 
information, means of communication, and other factors that may affect 
the accuracy or integrity of information furnished to consumer reporting 
agencies.
    (m) Complying with applicable requirements under the FCRA and its 
implementing regulations.



               Sec. Appendixes F-G to Part 1022 [Reserved]



  Sec. Appendix H to Part 1022--Appendix H--Model Forms for Risk-Based 
          Pricing and Credit Score Disclosure Exception Notices

    1. This appendix contains four model forms for risk-based pricing 
notices and three model forms for use in connection with the credit 
score disclosure exceptions. Each of the model forms is designated for 
use in a particular set of circumstances as indicated by the title of 
that model form.
    2. Model form H-1 is for use in complying with the general risk-
based pricing notice requirements in Sec. 1022.72 if a credit score is 
not used in setting the material terms of credit. Model form H-2 is for 
risk-based pricing notices given in connection with account review if a 
credit score is not used in increasing the annual percentage rate. Model 
form H-3 is for use in connection with the credit score disclosure 
exception for loans secured by residential real property. Model form H-4 
is for use in connection with the credit score disclosure exception for 
loans that are not secured by residential real property. Model form H-5 
is for use in connection with the credit score disclosure exception when 
no credit score is available for a consumer. Model form H-6 is for use 
in complying with the general risk-based pricing notice requirements in 
Sec. 1022.72 if a credit score is used in setting the material terms of 
credit. Model form H-7 is for risk-based pricing notices given in 
connection with account review if a credit score is used in increasing 
the annual percentage rate. All forms contained in this appendix are 
models; their use is optional.
    3. A person may change the forms by rearranging the format or by 
making technical modifications to the language of the forms, in each 
case without modifying the substance of the disclosures. Any such 
rearrangement or modification of the language

[[Page 469]]

of the model forms may not be so extensive as to materially affect the 
substance, clarity, comprehensibility, or meaningful sequence of the 
forms. Persons making revisions with that effect will lose the benefit 
of the safe harbor for appropriate use of appendix H model forms. A 
person is not required to conduct consumer testing when rearranging the 
format of the model forms.
    a. Acceptable changes include, for example:
    i. Corrections or updates to telephone numbers, mailing addresses, 
or Web site addresses that may change over time.
    ii. The addition of graphics or icons, such as the person's 
corporate logo.
    iii. Alteration of the shading or color contained in the model 
forms.
    iv. Use of a different form of graphical presentation to depict the 
distribution of credit scores.
    v. Substitution of the words ``credit'' and ``creditor'' or 
``finance'' and ``finance company'' for the terms ``loan'' and 
``lender.''
    vi. Including pre-printed lists of the sources of consumer reports 
or consumer reporting agencies in a ``check-the-box'' format.
    vii. Including the name of the consumer, transaction identification 
numbers, a date, and other information that will assist in identifying 
the transaction to which the form pertains.
    viii. Including the name of an agent, such as an auto dealer or 
other party, when providing the ``Name of the Entity Providing the 
Notice.''
    ix. Until January 1, 2013, substituting ``For more information about 
credit reports and your rights under Federal law, visit the Federal 
Reserve Board's Web site at www.federalreserve.gov, or the Federal Trade 
Commission's Web site at www.ftc.gov.'' for ``For more information about 
credit reports and your rights under Federal law, visit the Consumer 
Financial Protection Bureau's Web site at www.consumerfinance.gov/
learnmore.''
    b. Unacceptable changes include, for example:
    i. Providing model forms on register receipts or interspersed with 
other disclosures.
    ii. Eliminating empty lines and extra spaces between sentences 
within the same section.
    4. If a person uses an appropriate appendix H model form, or 
modifies a form in accordance with the above instructions, that person 
shall be deemed to be acting in compliance with the provisions of 
Sec. 1022.73 or Sec. 1022.74, as applicable, of this part. It is 
intended that appropriate use of Model Form H-3 also will comply with 
the disclosure that may be required under section 609(g) of the FCRA. 
Optional language in model forms H-6 and H-7 may be used to direct the 
consumer to the entity (which may be a consumer reporting agency or the 
creditor itself, for a proprietary score that meets the definition of a 
credit score) that provided the credit score for any questions about the 
credit score, along with the entity's contact information. Creditors may 
use or not use the additional language without losing the safe harbor, 
since the language is optional.
    H-1 Model form for risk-based pricing notice.
    H-2 Model form for account review risk-based pricing notice.
    H-3 Model form for credit score disclosure exception for credit 
secured by one to four units of residential real property.
    H-4 Model form for credit score disclosure exception for loans not 
secured by residential real property.
    H-5 Model form for credit score disclosure exception for loans where 
credit score is not available.
    H-6 Model form for risk-based pricing notice with credit score 
information.
    H-7 Model form for account review risk-based pricing notice with 
credit score information.

[[Page 470]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.004


[[Page 471]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.005


[[Page 472]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.006


[[Page 473]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.007


[[Page 474]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.008


[[Page 475]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.009


[[Page 476]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.010


[[Page 477]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.011


[[Page 478]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.012


[[Page 479]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.013


[[Page 480]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.014


[[Page 481]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.015


[[Page 482]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.016



 Sec. Appendix I to Part 1022--Summary of Consumer Identity Theft Rights

    The prescribed form for this summary is a disclosure that is 
substantially similar to the Bureau's model summary with all information 
clearly and prominently displayed. A summary should accurately reflect 
changes to those items that may change over time (such as telephone 
numbers) to remain in compliance. Translations of this summary will be 
in compliance with the Bureau's prescribed model, provided that the 
translation is accurate and that it is provided in a language used by 
the recipient consumer.

[[Page 483]]

[GRAPHIC] [TIFF OMITTED] TR14NO12.039


[[Page 484]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.040


[77 FR 67745, Nov. 14, 2012]



                 Sec. Appendix J to Part 1022 [Reserved]



        Sec. Appendix K to Part 1022--Summary of Consumer Rights

    The prescribed form for this summary is a disclosure that is 
substantially similar to the Bureau's model summary with all information 
clearly and prominently displayed. The list of Federal regulators that 
is included in the Bureau's prescribed summary may be provided 
separately so long as this is done in a clear and conspicuous way. A 
summary should accurately reflect changes to those items that may change 
over time (e.g., dollar amounts, or telephone numbers and

[[Page 485]]

addresses of Federal agencies) to remain in compliance. Translations of 
this summary will be in compliance with the Bureau's prescribed model, 
provided that the translation is accurate and that it is provided in a 
language used by the recipient consumer.
[GRAPHIC] [TIFF OMITTED] TR14NO12.041


[[Page 486]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.042


[[Page 487]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.043


[77 FR 67747, Nov. 14, 2012]

[[Page 488]]

 Appendix L to Part 1022--Standardized Form for Requesting Annual File 
                               Disclosures
[GRAPHIC] [TIFF OMITTED] TR21DE11.022


[[Page 489]]


[GRAPHIC] [TIFF OMITTED] TR21DE11.023



   Sec. Appendix M to Part 1022--Notice of Furnisher Responsibilities

    The prescribed form for this disclosure is a separate document that 
is substantially similar to the Bureau's model notice with all 
information clearly and prominently displayed. Consumer reporting 
agencies may limit the disclosure to only those items that they know are 
relevant to the furnisher that will receive the notice.

[[Page 490]]

[GRAPHIC] [TIFF OMITTED] TR14NO12.044


[[Page 491]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.045


[[Page 492]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.046


[[Page 493]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.047


[77 FR 67750, Nov. 14, 2012]



      Sec. Appendix N to Part 1022--Notice of User Responsibilities

    The prescribed form for this disclosure is a separate document that 
is substantially similar to the Bureau's notice with all information 
clearly and prominently displayed. Consumer reporting agencies may limit 
the disclosure to only those items that they know are relevant to the 
user that will receive the notice.

[[Page 494]]

[GRAPHIC] [TIFF OMITTED] TR14NO12.048


[[Page 495]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.049


[[Page 496]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.050


[[Page 497]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.051


[[Page 498]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.052


[[Page 499]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.053


[[Page 500]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.054


[[Page 501]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.055


[[Page 502]]


[GRAPHIC] [TIFF OMITTED] TR14NO12.056


[77 FR 67754, Nov. 14, 2012]



PART 1024_REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)--
Table of Contents



                      Subpart A_General Provisions

Sec.
1024.1 Designation.
1024.2 Definitions.
1024.3 E-Sign applicability.
1024.4 Reliance upon rule, regulation, or interpretation by the Bureau.
1024.5 Coverage of RESPA.

            Subpart B_Mortgage Settlement and Escrow Accounts

1024.6 Special information booklet at time of loan application.
1024.7 Good faith estimate.
1024.8 Use of HUD-1 or HUD-1A settlement statements.
1024.9 Reproduction of settlement statements.
1024.10 One-day advance inspection of HUD-1 or HUD-1A settlement 
          statement; delivery; recordkeeping.
1024.11 Mailing.
1024.12 No fee.
1024.13 [Reserved]
1024.14 Prohibition against kickbacks and unearned fees.
1024.15 Affiliated business arrangements.
1024.16 Title companies.
1024.17 Escrow accounts.
1024.18-1024.19 [Reserved]
1024.20 List of homeownership counseling organizations.

                      Subpart C_Mortgage Servicing

1024.30 Scope.
1024.31 Definitions.
1024.32 General disclosure requirements.
1024.33 Mortgage servicing transfers.
1024.34 Timely escrow payments and treatment of escrow account balances.
1024.35 Error resolution procedures.
1024.36 Requests for information.
1024.37 Force-placed insurance.
1024.38 General servicing policies, procedures, and requirements.
1024.39 Early intervention requirements for certain borrowers.
1024.40 Continuity of contact.
1024.41 Loss mitigation procedures.

Appendix A to Part 1024--Instructions for Completing HUD-1 and HUD-1A 
          Settlement Statements; Sample HUD-1 and HUD-1A Statements
Appendix B to Part 1024--Illustrations of Requirements of RESPA
Appendix C to Part 1024--Instructions for Completing Good Faith Estimate 
          (GFE) Form
Appendix D to Part 1024--Affiliated Business Arrangement Disclosure 
          Statement Format
Appendix E to Part 1024--Arithmetic Steps
Appendix MS--Mortgage Servicing
Appendix MS-1 to Part 1024--Servicing Disclosure Statement
Appendix MS-2 to Part 1024--Notice of Servicing Transfer
Appendix MS-3 to Part 1024--Model Force-Placed Insurance Notice Forms

[[Page 503]]

Appendix MS-4 to Part 1024--Model Clauses for the Written Early 
          Intervention Notice
Supplement I to Part 1024--Official Bureau Interpretations

    Authority: 12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 5581.

    Source: 76 FR 78981, Dec. 20, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 1024.1  Designation.

    This part, known as Regulation X, is issued by the Bureau of 
Consumer Financial Protection to implement the Real Estate Settlement 
Procedures Act of 1974, as amended, 12 U.S.C. 2601 et. seq.



Sec. 1024.2  Definitions.

    (a) Statutory terms. All terms defined in RESPA (12 U.S.C. 2602) are 
used in accordance with their statutory meaning unless otherwise defined 
in paragraph (b) of this section or elsewhere in this part.
    (b) Other terms. As used in this part:
    Application means the submission of a borrower's financial 
information in anticipation of a credit decision relating to a federally 
related mortgage loan, which shall include the borrower's name, the 
borrower's monthly income, the borrower's social security number to 
obtain a credit report, the property address, an estimate of the value 
of the property, the mortgage loan amount sought, and any other 
information deemed necessary by the loan originator. An application may 
either be in writing or electronically submitted, including a written 
record of an oral application.
    Balloon payment has the same meaning as ``balloon payment'' under 
Regulation Z (12 CFR part 1026).
    Bureau means the Bureau of Consumer Financial Protection.
    Business day means a day on which the offices of the business entity 
are open to the public for carrying on substantially all of the entity's 
business functions.
    Changed circumstances means:
    (1)(i) Acts of God, war, disaster, or other emergency;
    (ii) Information particular to the borrower or transaction that was 
relied on in providing the GFE and that changes or is found to be 
inaccurate after the GFE has been provided. This may include information 
about the credit quality of the borrower, the amount of the loan, the 
estimated value of the property, or any other information that was used 
in providing the GFE;
    (iii) New information particular to the borrower or transaction that 
was not relied on in providing the GFE; or
    (iv) Other circumstances that are particular to the borrower or 
transaction, including boundary disputes, the need for flood insurance, 
or environmental problems.
    (2) Changed circumstances do not include:
    (i) The borrower's name, the borrower's monthly income, the property 
address, an estimate of the value of the property, the mortgage loan 
amount sought, and any information contained in any credit report 
obtained by the loan originator prior to providing the GFE, unless the 
information changes or is found to be inaccurate after the GFE has been 
provided; or
    (ii) Market price fluctuations by themselves.
    Dealer means, in the case of property improvement loans, a seller, 
contractor, or supplier of goods or services. In the case of 
manufactured home loans, ``dealer'' means one who engages in the 
business of manufactured home retail sales.
    Dealer loan or dealer consumer credit contract means, generally, any 
arrangement in which a dealer assists the borrower in obtaining a 
federally related mortgage loan from the funding lender and then assigns 
the dealer's legal interests to the funding lender and receives the net 
proceeds of the loan. The funding lender is the lender for the purposes 
of the disclosure requirements of this part. If a dealer is a 
``creditor'' as defined under the definition of ``federally related 
mortgage loan'' in this part, the dealer is the lender for purposes of 
this part.
    Effective date of transfer is defined in section 6(i)(1) of RESPA 
(12 U.S.C. 2605(i)(1)). In the case of a home equity conversion mortgage 
or reverse mortgage as referenced in this section, the effective date of 
transfer is the transfer

[[Page 504]]

date agreed upon by the transferee servicer and the transferor servicer.
    Federally related mortgage loan means:
    (1) Any loan (other than temporary financing, such as a construction 
loan):
    (i) That is secured by a first or subordinate lien on residential 
real property, including a refinancing of any secured loan on 
residential real property, upon which there is either:
    (A) Located or, following settlement, will be constructed using 
proceeds of the loan, a structure or structures designed principally for 
occupancy of from one to four families (including individual units of 
condominiums and cooperatives and including any related interests, such 
as a share in the cooperative or right to occupancy of the unit); or
    (B) Located or, following settlement, will be placed using proceeds 
of the loan, a manufactured home; and
    (ii) For which one of the following paragraphs applies. The loan:
    (A) Is made in whole or in part by any lender that is either 
regulated by or whose deposits or accounts are insured by any agency of 
the Federal Government;
    (B) Is made in whole or in part, or is insured, guaranteed, 
supplemented, or assisted in any way:
    (1) By the Secretary of the Department of Housing and Urban 
Development (HUD) or any other officer or agency of the Federal 
Government; or
    (2) Under or in connection with a housing or urban development 
program administered by the Secretary of HUD or a housing or related 
program administered by any other officer or agency of the Federal 
Government;
    (C) Is intended to be sold by the originating lender to the Federal 
National Mortgage Association, the Government National Mortgage 
Association, the Federal Home Loan Mortgage Corporation (or its 
successors), or a financial institution from which the loan is to be 
purchased by the Federal Home Loan Mortgage Corporation (or its 
successors);
    (D) Is made in whole or in part by a ``creditor,'' as defined in 
section 103(g) of the Consumer Credit Protection Act (15 U.S.C. 
1602(g)), that makes or invests in residential real estate loans 
aggregating more than $1,000,000 per year. For purposes of this 
definition, the term ``creditor'' does not include any agency or 
instrumentality of any State, and the term ``residential real estate 
loan'' means any loan secured by residential real property, including 
single-family and multifamily residential property;
    (E) Is originated either by a dealer or, if the obligation is to be 
assigned to any maker of mortgage loans specified in paragraphs 
(1)(ii)(A) through (D) of this definition, by a mortgage broker; or
    (F) Is the subject of a home equity conversion mortgage, also 
frequently called a ``reverse mortgage,'' issued by any maker of 
mortgage loans specified in paragraphs (1)(ii)(A) through (D) of this 
definition.
    (2) Any installment sales contract, land contract, or contract for 
deed on otherwise qualifying residential property is a federally related 
mortgage loan if the contract is funded in whole or in part by proceeds 
of a loan made by any maker of mortgage loans specified in paragraphs 
(1)(ii) (A) through (D) of this definition.
    (3) If the residential real property securing a mortgage loan is not 
located in a State, the loan is not a federally related mortgage loan.
    Good faith estimate or GFE means an estimate of settlement charges a 
borrower is likely to incur, as a dollar amount, and related loan 
information, based upon common practice and experience in the locality 
of the mortgaged property, as provided on the form prescribed in 
Sec. 1024.7 and prepared in accordance with the Instructions in appendix 
C to this part.
    HUD means the Department of Housing and Urban Development.
    HUD-1 or HUD-1A settlement statement (also HUD-1 or HUD-1A) means 
the statement that is prescribed in this part for setting forth 
settlement charges in connection with either the purchase or the 
refinancing (or other subordinate lien transaction) of 1- to 4-family 
residential property.
    Lender means, generally, the secured creditor or creditors named in 
the debt obligation and document creating the lien. For loans originated 
by a mortgage broker that closes a federally related mortgage loan in 
its own name in

[[Page 505]]

a table funding transaction, the lender is the person to whom the 
obligation is initially assigned at or after settlement. A lender, in 
connection with dealer loans, is the lender to whom the loan is 
assigned, unless the dealer meets the definition of creditor as defined 
under ``federally related mortgage loan'' in this section. See also 
Sec. 1024.5(b)(7), secondary market transactions.
    Loan originator means a lender or mortgage broker.
    Manufactured home is defined in HUD regulation 24 CFR 3280.2.
    Mortgage broker means a person (other than an employee of a lender) 
that renders origination services and serves as an intermediary between 
a borrower and a lender in a transaction involving a federally related 
mortgage loan, including such a person that closes the loan in its own 
name in a table-funded transaction.
    Mortgaged property means the real property that is security for the 
federally related mortgage loan.
    Origination service means any service involved in the creation of a 
federally related mortgage loan, including but not limited to the taking 
of the loan application, loan processing, the underwriting and funding 
of the loan, and the processing and administrative services required to 
perform these functions.
    Person is defined in section 3(5) of RESPA (12 U.S.C. 2602(5)).
    Prepayment penalty has the same meaning as ``prepayment penalty'' 
under Regulation Z (12 CFR part 1026).
    Public Guidance Documents means Federal Register documents adopted 
or published, that the Bureau may amend from time-to-time by publication 
in the Federal Register. These documents are also available from the 
Bureau. Requests for copies of Public Guidance Documents should be 
directed to the Associate Director, Research, Markets, and Regulations, 
Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, 
DC 20552.
    Refinancing means a transaction in which an existing obligation that 
was subject to a secured lien on residential real property is satisfied 
and replaced by a new obligation undertaken by the same borrower and 
with the same or a new lender. The following shall not be treated as a 
refinancing, even when the existing obligation is satisfied and replaced 
by a new obligation with the same lender (this definition of 
``refinancing'' as to transactions with the same lender is similar to 
Regulation Z, 12 CFR 1026.20(a)):
    (1) A renewal of a single payment obligation with no change in the 
original terms;
    (2) A reduction in the annual percentage rate as computed under the 
Truth in Lending Act with a corresponding change in the payment 
schedule;
    (3) An agreement involving a court proceeding;
    (4) A workout agreement, in which a change in the payment schedule 
or change in collateral requirements is agreed to as a result of the 
consumer's default or delinquency, unless the rate is increased or the 
new amount financed exceeds the unpaid balance plus earned finance 
charges and premiums for continuation of allowable insurance; and
    (5) The renewal of optional insurance purchased by the consumer that 
is added to an existing transaction, if disclosures relating to the 
initial purchase were provided.
    Regulation Z means the regulations issued by the Bureau (12 CFR part 
1026) to implement the Federal Truth in Lending Act (15 U.S.C. 1601 et 
seq.), and includes the Commentary on Regulation Z.
    Required use means a situation in which a person must use a 
particular provider of a settlement service in order to have access to 
some distinct service or property, and the person will pay for the 
settlement service of the particular provider or will pay a charge 
attributable, in whole or in part, to the settlement service. However, 
the offering of a package (or combination of settlement services) or the 
offering of discounts or rebates to consumers for the purchase of 
multiple settlement services does not constitute a required use. Any 
package or discount must be optional to the purchaser. The discount must 
be a true discount below the prices that are otherwise generally 
available, and must not be made up by

[[Page 506]]

higher costs elsewhere in the settlement process.
    RESPA means the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2601 et seq.).
    Servicer means a person responsible for the servicing of a federally 
related mortgage loan (including the person who makes or holds such loan 
if such person also services the loan). The term does not include:
    (1) The Federal Deposit Insurance Corporation (FDIC), in connection 
with assets acquired, assigned, sold, or transferred pursuant to section 
13(c) of the Federal Deposit Insurance Act or as receiver or conservator 
of an insured depository institution;
    (2) The National Credit Union Administration (NCUA), in connection 
with assets acquired, assigned, sold, or transferred pursuant to section 
208 of the Federal Credit Union Act or as conservator or liquidating 
agent of an insured credit union; and
    (3) The Federal National Mortgage Corporation (FNMA); the Federal 
Home Loan Mortgage Corporation (Freddie Mac); the FDIC; HUD, including 
the Government National Mortgage Association (GNMA) and the Federal 
Housing Administration (FHA) (including cases in which a mortgage 
insured under the National Housing Act (12 U.S.C. 1701 et seq.) is 
assigned to HUD); the NCUA; the Farm Service Agency; and the Department 
of Veterans Affairs (VA), in any case in which the assignment, sale, or 
transfer of the servicing of the federally related mortgage loan is 
preceded by termination of the contract for servicing the loan for 
cause, commencement of proceedings for bankruptcy of the servicer, 
commencement of proceedings by the FDIC for conservatorship or 
receivership of the servicer (or an entity by which the servicer is 
owned or controlled), or commencement of proceedings by the NCUA for 
appointment of a conservator or liquidating agent of the servicer (or an 
entity by which the servicer is owned or controlled).
    Servicing means receiving any scheduled periodic payments from a 
borrower pursuant to the terms of any federally related mortgage loan, 
including amounts for escrow accounts under section 10 of RESPA (12 
U.S.C. 2609), and making the payments to the owner of the loan or other 
third parties of principal and interest and such other payments with 
respect to the amounts received from the borrower as may be required 
pursuant to the terms of the mortgage servicing loan documents or 
servicing contract. In the case of a home equity conversion mortgage or 
reverse mortgage as referenced in this section, servicing includes 
making payments to the borrower.
    Settlement means the process of executing legally binding documents 
regarding a lien on property that is subject to a federally related 
mortgage loan. This process may also be called ``closing'' or ``escrow'' 
in different jurisdictions.
    Settlement service means any service provided in connection with a 
prospective or actual settlement, including, but not limited to, any one 
or more of the following:
    (1) Origination of a federally related mortgage loan (including, but 
not limited to, the taking of loan applications, loan processing, and 
the underwriting and funding of such loans);
    (2) Rendering of services by a mortgage broker (including 
counseling, taking of applications, obtaining verifications and 
appraisals, and other loan processing and origination services, and 
communicating with the borrower and lender);
    (3) Provision of any services related to the origination, processing 
or funding of a federally related mortgage loan;
    (4) Provision of title services, including title searches, title 
examinations, abstract preparation, insurability determinations, and the 
issuance of title commitments and title insurance policies;
    (5) Rendering of services by an attorney;
    (6) Preparation of documents, including notarization, delivery, and 
recordation;
    (7) Rendering of credit reports and appraisals;
    (8) Rendering of inspections, including inspections required by 
applicable law or any inspections required by the sales contract or 
mortgage documents prior to transfer of title;

[[Page 507]]

    (9) Conducting of settlement by a settlement agent and any related 
services;
    (10) Provision of services involving mortgage insurance;
    (11) Provision of services involving hazard, flood, or other 
casualty insurance or homeowner's warranties;
    (12) Provision of services involving mortgage life, disability, or 
similar insurance designed to pay a mortgage loan upon disability or 
death of a borrower, but only if such insurance is required by the 
lender as a condition of the loan;
    (13) Provision of services involving real property taxes or any 
other assessments or charges on the real property;
    (14) Rendering of services by a real estate agent or real estate 
broker; and
    (15) Provision of any other services for which a settlement service 
provider requires a borrower or seller to pay.
    Special information booklet means the booklet adopted pursuant to 
section 5 of RESPA (12 U.S.C. 2604) to help persons understand the 
nature and costs of settlement services. The Bureau publishes the form 
of the special information booklet in the Federal Register or by other 
public notice. The Bureau may issue or approve additional booklets or 
alternative booklets by publication of a Notice in the Federal Register.
    State means any state of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, and any territory or 
possession of the United States.
    Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds. A table-funded transaction is not a 
secondary market transaction (see Sec. 1024.5(b)(7)).
    Third party means a settlement service provider other than a loan 
originator.
    Title company means any institution, or its duly authorized agent, 
that is qualified to issue title insurance.
    Title service means any service involved in the provision of title 
insurance (lender's or owner's policy), including but not limited to: 
Title examination and evaluation; preparation and issuance of title 
commitment; clearance of underwriting objections; preparation and 
issuance of a title insurance policy or policies; and the processing and 
administrative services required to perform these functions. The term 
also includes the service of conducting a settlement.
    Tolerance means the maximum amount by which the charge for a 
category or categories of settlement costs may exceed the amount of the 
estimate for such category or categories on a GFE.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10873, Feb. 14, 2013]



Sec. 1024.3  E-Sign applicability.

    The disclosures required by this part may be provided in electronic 
form, subject to compliance with the consumer consent and other 
applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).

[78 FR 10873, Feb. 14, 2013]



Sec. 1024.4  Reliance upon rule, regulation or interpretation by the
Bureau.  Reliance upon rule, regulation, or interpretation by the Bureau.

    (a) Rule, regulation or interpretation. (1) For purposes of sections 
19(a) and (b) of RESPA (12 U.S.C. 2617(a) and (b)), only the following 
constitute a rule, regulation or interpretation of the Bureau:
    (i) All provisions, including appendices and supplements, of this 
part. Any other document referred to in this part is not incorporated in 
this part unless it is specifically set out in this part;
    (ii) Any other document that is published in the Federal Register by 
the Bureau and states that it is an ``interpretation,'' ``interpretive 
rule,'' ``commentary,'' or a ``statement of policy'' for purposes of 
section 19(a) of RESPA. Except in unusual circumstances, interpretations 
will not be issued separately but will be incorporated in an official 
interpretation to this part, which will be amended periodically.
    (2) A ``rule, regulation, or interpretation thereof by the Bureau'' 
for purposes of section 19(b) of RESPA (12 U.S.C. 2617(b)) shall not 
include the special information booklet prescribed by the Bureau or any 
other statement or issuance, whether oral or written, by

[[Page 508]]

an officer or representative of the Bureau, letter or memorandum by the 
Director, General Counsel, or other officer or employee of the Bureau, 
preamble to a regulation or other issuance of the Bureau, Public 
Guidance Document, report to Congress, pleading, affidavit or other 
document in litigation, pamphlet, handbook, guide, telegraphic 
communication, explanation, instructions to forms, speech or other 
material of any nature which is not specifically included in paragraph 
(a)(1) of this section.
    (b) All informal counsel's opinions and staff interpretations issued 
by HUD before November 2, 1992, were withdrawn as of that date. Courts 
and administrative agencies, however, may use previous opinions to 
determine the validity of conduct under the previous Regulation X.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10874, Feb. 14, 2013]



Sec. 1024.5  Coverage of RESPA.

    (a) Applicability. RESPA and this part apply to all federally 
related mortgage loans, except for the exemptions provided in paragraph 
(b) of this section.
    (b) Exemptions. (1) A loan on property of 25 acres or more.
    (2) Business purpose loans. An extension of credit primarily for a 
business, commercial, or agricultural purpose, as defined by 12 CFR 
1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in 
determining whether the exemption applies.
    (3) Temporary financing. Temporary financing, such as a construction 
loan. The exemption for temporary financing does not apply to a loan 
made to finance construction of 1- to 4-family residential property if 
the loan is used as, or may be converted to, permanent financing by the 
same lender or is used to finance transfer of title to the first user. 
If a lender issues a commitment for permanent financing, with or without 
conditions, the loan is covered by this part. Any construction loan for 
new or rehabilitated 1- to 4-family residential property, other than a 
loan to a bona fide builder (a person who regularly constructs 1- to 4-
family residential structures for sale or lease), is subject to this 
part if its term is for two years or more. A ``bridge loan'' or ``swing 
loan'' in which a lender takes a security interest in otherwise covered 
1- to 4-family residential property is not covered by RESPA and this 
part.
    (4) Vacant land. Any loan secured by vacant or unimproved property, 
unless within two years from the date of the settlement of the loan, a 
structure or a manufactured home will be constructed or placed on the 
real property using the loan proceeds. If a loan for a structure or 
manufactured home to be placed on vacant or unimproved property will be 
secured by a lien on that property, the transaction is covered by this 
part.
    (5) Assumption without lender approval. Any assumption in which the 
lender does not have the right expressly to approve a subsequent person 
as the borrower on an existing federally related mortgage loan. Any 
assumption in which the lender's permission is both required and 
obtained is covered by RESPA and this part, whether or not the lender 
charges a fee for the assumption.
    (6) Loan conversions. Any conversion of a federally related mortgage 
loan to different terms that are consistent with provisions of the 
original mortgage instrument, as long as a new note is not required, 
even if the lender charges an additional fee for the conversion.
    (7) Secondary market transactions. A bona fide transfer of a loan 
obligation in the secondary market is not covered by RESPA and this 
part, except with respect to RESPA (12 U.S.C. 2605) and subpart C of 
this part (Sec. Sec. 1024.30-1024.41). In determining what constitutes a 
bona fide transfer, the Bureau will consider the real source of funding 
and the real interest of the funding lender. Mortgage broker 
transactions that are table-funded are not secondary market 
transactions. Neither the creation of a dealer loan or dealer consumer 
credit contract, nor the first assignment of such loan or contract to a 
lender, is a secondary market transaction (see Sec. 1024.2).
    (c) Relation to State laws. (1) State laws that are inconsistent 
with RESPA or this part are preempted to the extent of the 
inconsistency. However, RESPA and these regulations do not

[[Page 509]]

annul, alter, affect, or exempt any person subject to their provisions 
from complying with the laws of any State with respect to settlement 
practices, except to the extent of the inconsistency.
    (2) Upon request by any person, the Bureau is authorized to 
determine if inconsistencies with State law exist; in doing so, the 
Bureau shall consult with appropriate Federal agencies.
    (i) The Bureau may not determine that a State law or regulation is 
inconsistent with any provision of RESPA or this part, if the Bureau 
determines that such law or regulation gives greater protection to the 
consumer.
    (ii) In determining whether provisions of State law or regulations 
concerning affiliated business arrangements are inconsistent with RESPA 
or this part, the Bureau may not construe those provisions that impose 
more stringent limitations on affiliated business arrangements as 
inconsistent with RESPA so long as they give more protection to 
consumers and/or competition.
    (3) Any person may request the Bureau to determine whether an 
inconsistency exists by submitting to the address established by the 
Bureau to request an official interpretation, a copy of the State law in 
question, any other law or judicial or administrative opinion that 
implements, interprets or applies the relevant provision, and an 
explanation of the possible inconsistency. A determination by the Bureau 
that an inconsistency with State law exists will be made by publication 
of a notice in the Federal Register. ``Law'' as used in this section 
includes regulations and any enactment which has the force and effect of 
law and is issued by a State or any political subdivision of a State.
    (4) A specific preemption of conflicting State laws regarding 
notices and disclosures of mortgage servicing transfers is set forth in 
Sec. 1024.33(d).

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10874, Feb. 14, 2013; 
78 FR 44717, July 24, 2013]

    Effective Date Note: At 78 FR 80104, Dec. 31, 2013, Sec. 1024.5 was 
amended by revising paragraph (a), removing and reserving paragraph 
(b)(1), and adding paragraph (d), effective Aug. 1, 2015. For the 
convenience of the user, the added and revised text is set forth as 
follows:



Sec. 1024.5  Coverage of RESPA.

    (a) Applicability. RESPA and this part apply to federally related 
mortgage loans, except as provided in paragraphs (b) and (d) of this 
section.

                                * * * * *

    (d) Partial exemptions for certain mortgage loans. Sections 1024.6, 
1024.7, 1024.8, 1024.10, and 1024.21(b) and (c) do not apply to a 
federally related mortgage loan:
    (1) That is subject to the special disclosure requirements for 
certain consumer credit transactions secured by real property set forth 
in Regulation Z, 12 CFR 1026.19(e), (f), and (g); or
    (2) That satisfies the criteria in Regulation Z, 12 CFR 1026.3(h).

                                * * * * *



            Subpart B_Mortgage Settlement and Escrow Accounts



Sec. 1024.6  Special information booklet at time of loan application.

    (a) Lender to provide special information booklet. Subject to the 
exceptions set forth in this paragraph, the lender shall provide a copy 
of the special information booklet to a person from whom the lender 
receives, or for whom the lender prepares, a written application for a 
federally related mortgage loan. When two or more persons apply together 
for a loan, the lender is in compliance if the lender provides a copy of 
the booklet to one of the persons applying.
    (1) The lender shall provide the special information booklet by 
delivering it or placing it in the mail to the applicant not later than 
three business days (as that term is defined in Sec. 1024.2) after the 
application is received or prepared. However, if the lender denies the 
borrower's application for credit before the end of the three-business-
day period, then the lender need not provide the booklet to the 
borrower. If a borrower uses a mortgage broker, the mortgage broker 
shall distribute the special information booklet and the lender need not 
do so. The intent of this provision is that the applicant receive the 
special information booklet at the earliest possible date.

[[Page 510]]

    (2) In the case of a federally related mortgage loan involving an 
open-ended credit plan, as defined in Regulation Z, 12 CFR 
1026.2(a)(20), a lender or mortgage broker that provides the borrower 
with a copy of the brochure entitled ``When Your Home is On the Line: 
What You Should Know About Home Equity Lines of Credit'', or any 
successor brochure issued by the Bureau, is deemed to be in compliance 
with this section.
    (3) In the categories of transactions set forth at the end of this 
paragraph, the lender or mortgage broker does not have to provide the 
booklet to the borrower. Under the authority of section 19(a) of RESPA 
(12 U.S.C. 2617(a)), the Bureau may issue a revised or separate special 
information booklet that deals with these transactions, or the Bureau 
may choose to endorse the forms or booklets of other Federal agencies. 
In such an event, the requirements for delivery by lenders and the 
availability of the booklet or alternate materials for these 
transactions will be set forth in a Notice in the Federal Register. This 
paragraph shall apply to the following transactions:
    (i) Refinancing transactions;
    (ii) Closed-end loans, as defined in 12 CFR 1026.2(a)(10) of 
Regulation Z, when the lender takes a subordinate lien;
    (iii) Reverse mortgages; and
    (iv) Any other federally related mortgage loan whose purpose is not 
the purchase of a 1- to 4-family residential property.
    (b) Revision. The Bureau may from time to time revise the special 
information booklet, publishing a notice in the Federal Register.
    (c) Reproduction. The special information booklet may be reproduced 
in any form, provided that no change is made other than as provided 
under paragraph (d) of this section. The special information booklet may 
not be made a part of a larger document for purposes of distribution 
under RESPA and this section. Any color, size and quality of paper, type 
of print, and method of reproduction may be used so long as the booklet 
is clearly legible.
    (d) Permissible changes. (1)(i) No changes to, deletions from, or 
additions to the special information booklet currently prescribed by the 
Bureau shall be made other than the permissible changes specified in 
paragraphs (d)(1)(ii) through (d)(3) of this section or changes as 
otherwise approved in writing by the Bureau in accordance with the 
procedures described in this paragraph. A request to the Bureau for 
approval of any changes other than the permissible changes specified in 
paragraphs (d)(1)(ii) through (d)(3) of this section shall be submitted 
in writing to the address indicated in Sec. 1024.3, stating the reasons 
why the applicant believes such changes, deletions or additions are 
necessary.
    (ii)(A) In the Complaints section of the booklet, it is a 
permissible change to substitute ``the Bureau of Consumer Financial 
Protection'' for ``HUD's Office of RESPA'' and ``the RESPA office.''
    (B) In the Avoiding Foreclosure section of the booklet, it is a 
permissible change to inform homeowners that they may find information 
on and assistance in avoiding foreclosures at http://
www.consumerfinance.gov. The deletion of the reference to the HUD Web 
page, http://www.hud.gov/foreclosure/, in the Avoiding Foreclosure 
section of the booklet is not a permissible change.
    (C) In the appendix to the booklet, it is a permissible change to 
substitute ``the Bureau of Consumer Financial Protection'' for the 
reference to the ``Board of Governors of the Federal Reserve System'' in 
the No Discrimination section of the appendix to the booklet. In the 
Contact Information section of the appendix to the booklet, it is a 
permissible change to add the following contact information for the 
Bureau: ``Bureau of Consumer Financial Protection, 1700 G Street NW., 
Washington, DC 20006; www.consumerfinance.gov/learnmore''. It is also a 
permissible change to remove the contact information for HUD's Office of 
RESPA and Interstate Land Sales from the Contact Information section of 
the appendix to the booklet.
    (2) The cover of the booklet may be in any form and may contain any 
drawings, pictures or artwork, provided that the words ``settlement 
costs'' are used in the title. Names, addresses and telephone numbers of 
the lender or others and similar information may appear on the cover, 
but no discussion of

[[Page 511]]

the matters covered in the booklet shall appear on the cover. References 
to HUD on the cover of the booklet may be changed to references to the 
Bureau.
    (3) The special information booklet may be translated into languages 
other than English.



Sec. 1024.7  Good faith estimate.

    (a) Lender to provide. (1) Except as otherwise provided in 
paragraphs (a), (b), or (h) of this section, not later than 3 business 
days after a lender receives an application, or information sufficient 
to complete an application, the lender must provide the applicant with a 
GFE. In the case of dealer loans, the lender must either provide the GFE 
or ensure that the dealer provides the GFE.
    (2) The lender must provide the GFE to the loan applicant by hand 
delivery, by placing it in the mail, or, if the applicant agrees, by 
fax, email, or other electronic means.
    (3) The lender is not required to provide the applicant with a GFE 
if, before the end of the 3-business-day period:
    (i) The lender denies the application; or
    (ii) The applicant withdraws the application.
    (4) The lender is not permitted to charge, as a condition for 
providing a GFE, any fee for an appraisal, inspection, or other similar 
settlement service. The lender may, at its option, charge a fee limited 
to the cost of a credit report. The lender may not charge additional 
fees until after the applicant has received the GFE and indicated an 
intention to proceed with the loan covered by that GFE. If the GFE is 
mailed to the applicant, the applicant is considered to have received 
the GFE 3 calendar days after it is mailed, not including Sundays and 
the legal public holidays specified in 5 U.S.C. 6103(a).
    (5) The lender may at any time collect from the loan applicant any 
information that it requires in addition to the required application 
information. However, the lender is not permitted to require, as a 
condition for providing a GFE, that an applicant submit supplemental 
documentation to verify the information provided on the application.
    (b) Mortgage broker to provide. (1) Except as otherwise provided in 
paragraphs (a), (b), or (h) of this section, either the lender or the 
mortgage broker must provide a GFE not later than 3 business days after 
a mortgage broker receives either an application or information 
sufficient to complete an application. The lender is responsible for 
ascertaining whether the GFE has been provided. If the mortgage broker 
has provided a GFE, the lender is not required to provide an additional 
GFE.
    (2) The mortgage broker must provide the GFE by hand delivery, by 
placing it in the mail, or, if the applicant agrees, by fax, email, or 
other electronic means.
    (3) The mortgage broker is not required to provide the applicant 
with a GFE if, before the end of the 3-business-day period:
    (i) The mortgage broker or lender denies the application; or
    (ii) The applicant withdraws the application.
    (4) The mortgage broker is not permitted to charge, as a condition 
for providing a GFE, any fee for an appraisal, inspection, or other 
similar settlement service. The mortgage broker may, at its option, 
charge a fee limited to the cost of a credit report. The mortgage broker 
may not charge additional fees until after the applicant has received 
the GFE and indicated an intention to proceed with the loan covered by 
that GFE. If the GFE is mailed to the applicant, the applicant is 
considered to have received the GFE 3 calendar days after it is mailed, 
not including Sundays and the legal public holidays specified in 5 
U.S.C. 6103(a).
    (5) The mortgage broker may at any time collect from the loan 
applicant any information that it requires in addition to the required 
application information. However, the mortgage broker is not permitted 
to require, as a condition for providing a GFE, that an applicant submit 
supplemental documentation to verify the information provided on the 
application.
    (c) Availability of GFE terms. Except as provided in this paragraph, 
the estimate of the charges and terms for all settlement services must 
be available for at least 10 business days from when

[[Page 512]]

the GFE is provided, but it may remain available longer, if the loan 
originator extends the period of availability. The estimate for the 
following charges are excepted from this requirement: the interest rate, 
charges and terms dependent upon the interest rate, which includes the 
charge or credit for the interest rate chosen, the adjusted origination 
charges, and per diem interest.
    (d) Content and form of GFE. The GFE form is set out in appendix C 
to this part. The loan originator must prepare the GFE in accordance 
with the requirements of this section and the Instructions in appendix C 
to this part. The instructions in appendix C to this part allow for 
flexibility in the preparation and distribution of the GFE in hard copy 
and electronic format.
    (e) Tolerances for amounts included on GFE. (1) Except as provided 
in paragraph (f) of this section, the actual charges at settlement may 
not exceed the amounts included on the GFE for:
    (i) The origination charge;
    (ii) While the borrower's interest rate is locked, the credit or 
charge for the interest rate chosen;
    (iii) While the borrower's interest rate is locked, the adjusted 
origination charge; and
    (iv) Transfer taxes.
    (2) Except as provided in paragraph (f) of this section, the sum of 
the charges at settlement for the following services may not be greater 
than 10 percent above the sum of the amounts included on the GFE:
    (i) Lender-required settlement services, where the lender selects 
the third party settlement service provider;
    (ii) Lender-required services, title services and required title 
insurance, and owner's title insurance, when the borrower uses a 
settlement service provider identified by the loan originator; and
    (iii) Government recording charges.
    (3) The amounts charged for all other settlement services included 
on the GFE may change at settlement.
    (f) Binding GFE. The loan originator is bound, within the tolerances 
provided in paragraph (e) of this section, to the settlement charges and 
terms listed on the GFE provided to the borrower, unless a revised GFE 
is provided prior to settlement consistent with this paragraph (f) or 
the GFE expires in accordance with paragraph (f)(4) of this section. If 
a loan originator provides a revised GFE consistent with this paragraph, 
the loan originator must document the reason that a revised GFE was 
provided. Loan originators must retain documentation of any reason for 
providing a revised GFE for no less than 3 years after settlement.
    (1) Changed circumstances affecting settlement costs. If changed 
circumstances result in increased costs for any settlement services such 
that the charges at settlement would exceed the tolerances for those 
charges, the loan originator may provide a revised GFE to the borrower. 
If a revised GFE is to be provided, the loan originator must do so 
within 3 business days of receiving information sufficient to establish 
changed circumstances. The revised GFE may increase charges for services 
listed on the GFE only to the extent that the changed circumstances 
actually resulted in higher charges.
    (2) Changed circumstances affecting loan. If changed circumstances 
result in a change in the borrower's eligibility for the specific loan 
terms identified in the GFE, the loan originator may provide a revised 
GFE to the borrower. If a revised GFE is to be provided, the loan 
originator must do so within 3 business days of receiving information 
sufficient to establish changed circumstances. The revised GFE may 
increase charges for services listed on the GFE only to the extent that 
the changed circumstances affecting the loan actually resulted in higher 
charges.
    (3) Borrower-requested changes. If a borrower requests changes to 
the federally related mortgage loan identified in the GFE that change 
the settlement charges or the terms of the loan, the loan originator may 
provide a revised GFE to the borrower. If a revised GFE is to be 
provided, the loan originator must do so within three business days of 
the borrower's request. The revised GFE may increase charges for 
services listed on the GFE only to the extent that the borrower-
requested changes to the mortgage loan identified on the GFE actually 
resulted in higher charges.

[[Page 513]]

    (4) Expiration of GFE. If a borrower does not express an intent to 
continue with an application within 10 business days after the GFE is 
provided, or such longer time specified by the loan originator pursuant 
to paragraph (c) of this section, the loan originator is no longer bound 
by the GFE.
    (5) Interest rate-dependent charges and terms. If the interest rate 
has not been locked, or a locked interest rate has expired, the charge 
or credit for the interest rate chosen, the adjusted origination 
charges, per diem interest, and loan terms related to the interest rate 
may change. When the interest rate is later locked, a revised GFE must 
be provided showing the revised interest rate-dependent charges and 
terms. The loan originator must provide the revised GFE within 3 
business days of the interest rate being locked or, for an expired 
interest rate, re-locked. All other charges and terms must remain the 
same as on the original GFE, except as otherwise provided in paragraph 
(f) of this section.
    (6) New construction home purchases. In transactions involving new 
construction home purchases, where settlement is anticipated to occur 
more than 60 calendar days from the time a GFE is provided, the loan 
originator may provide the GFE to the borrower with a clear and 
conspicuous disclosure stating that at any time up until 60 calendar 
days prior to closing, the loan originator may issue a revised GFE. If 
no such separate disclosure is provided, the loan originator cannot 
issue a revised GFE, except as otherwise provided in paragraph (f) of 
this section.
    (g) GFE is not a loan commitment. Nothing in this section shall be 
interpreted to require a loan originator to make a loan to a particular 
borrower. The loan originator is not required to provide a GFE if the 
loan originator does not have available a loan for which the borrower is 
eligible.
    (h) Open-end lines of credit (home-equity plans) under Truth in 
Lending Act. In the case of a federally related mortgage loan involving 
an open-end line of credit (home-equity plan) covered under the Truth in 
Lending Act and Regulation Z, a lender or mortgage broker that provides 
the borrower with the disclosures required by 12 CFR 1026.40 of 
Regulation Z at the time the borrower applies for such loan shall be 
deemed to satisfy the requirements of this section.
    (i) Violations of section 5 of RESPA (12 U.S.C. 2604). A loan 
originator that violates the requirements of this section shall be 
deemed to have violated section 5 of RESPA. If any charges at settlement 
exceed the charges listed on the GFE by more than the permitted 
tolerances, the loan originator may cure the tolerance violation by 
reimbursing to the borrower the amount by which the tolerance was 
exceeded, at settlement or within 30 calendar days after settlement. A 
borrower will be deemed to have received timely reimbursement if the 
loan originator delivers or places the payment in the mail within 30 
calendar days after settlement.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10875, Feb. 14, 2013]



Sec. 1024.8  Use of HUD-1 or HUD-1A settlement statements.

    (a) Use by settlement agent. The settlement agent shall use the HUD-
1 settlement statement in every settlement involving a federally related 
mortgage loan in which there is a borrower and a seller. For 
transactions in which there is a borrower and no seller, such as 
refinancing loans or subordinate lien loans, the HUD-1 may be utilized 
by using the borrower's side of the HUD-1 statement. Alternatively, the 
form HUD-1A may be used for these transactions. The HUD-1 or HUD-1A may 
be modified as permitted under this part. Either the HUD-1 or the HUD-
1A, as appropriate, shall be used for every RESPA-covered transaction, 
unless its use is specifically exempted. The use of the HUD-1 or HUD-1A 
is exempted for open-end lines of credit (home-equity plans) covered by 
the Truth in Lending Act and Regulation Z.
    (b) Charges to be stated. The settlement agent shall complete the 
HUD-1 or HUD-1A, in accordance with the instructions set forth in 
appendix A to this part. The loan originator must transmit to the 
settlement agent all information necessary to complete the HUD-1 or HUD-
1A.
    (1) In general. The settlement agent shall state the actual charges 
paid by

[[Page 514]]

the borrower and seller on the HUD-1, or by the borrower on the HUD-1A. 
The settlement agent must separately itemize each third party charge 
paid by the borrower and seller. All origination services performed by 
or on behalf of the loan originator must be included in the loan 
originator's own charge. Administrative and processing services related 
to title services must be included in the title underwriter's or title 
agent's own charge. The amount stated on the HUD-1 or HUD-1A for any 
itemized service cannot exceed the amount actually received by the 
settlement service provider for that itemized service, unless the charge 
is an average charge in accordance with paragraph (b)(2) of this 
section.
    (2) Use of average charge. (i) The average charge for a settlement 
service shall be no more than the average amount paid for a settlement 
service by one settlement service provider to another settlement service 
provider on behalf of borrowers and sellers for a particular class of 
transactions involving federally related mortgage loans. The total 
amounts paid by borrowers and sellers for a settlement service based on 
the use of an average charge may not exceed the total amounts paid to 
the providers of that service for the particular class of transactions.
    (ii) The settlement service provider shall define the particular 
class of transactions for purposes of calculating the average charge as 
all transactions involving federally related mortgage loans for:
    (A) A period of time as determined by the settlement service 
provider, but not less than 30 calendar days and not more than 6 months;
    (B) A geographic area as determined by the settlement service 
provider; and
    (C) A type of loan as determined by the settlement service provider.
    (iii) A settlement service provider may use an average charge in the 
same class of transactions for which the charge was calculated. If the 
settlement service provider uses the average charge for any transaction 
in the class, the settlement service provider must use the same average 
charge in every transaction within that class for which a GFE was 
provided.
    (iv) The use of an average charge is not permitted for any 
settlement service if the charge for the service is based on the loan 
amount or property value. For example, an average charge may not be used 
for transfer taxes, interest charges, reserves or escrow, or any type of 
insurance, including mortgage insurance, title insurance, or hazard 
insurance.
    (v) The settlement service provider must retain all documentation 
used to calculate the average charge for a particular class of 
transactions for at least 3 years after any settlement for which that 
average charge was used.
    (c) Violations of section 4 of RESPA (12 U.S.C. 2603). A violation 
of any of the requirements of this section will be deemed to be a 
violation of section 4 of RESPA. An inadvertent or technical error in 
completing the HUD-1 or HUD-1A shall not be deemed a violation of 
section 4 of RESPA if a revised HUD-1 or HUD-1A is provided in 
accordance with the requirements of this section within 30 calendar days 
after settlement.



Sec. 1024.9  Reproduction of settlement statements.

    (a) Permissible changes--HUD-1. The following changes and insertions 
are permitted when the HUD-1 settlement statement is reproduced:
    (1) The person reproducing the HUD-1 may insert its business name 
and logo in section A and may rearrange, but not delete, the other 
information that appears in section A.
    (2) The name, address, and other information regarding the lender 
and settlement agent may be printed in sections F and H, respectively.
    (3) Reproduction of the HUD-1 must conform to the terminology, 
sequence, and numbering of line items as presented in lines 100-1400. 
However, blank lines or items listed in lines 100-1400 that are not used 
locally or in connection with mortgages by the lender may be deleted, 
except for the following: Lines 100, 120, 200, 220, 300, 301, 302, 303, 
400, 420, 500, 520, 600, 601, 602, 603, 700, 800, 900, 1000, 1100, 1200, 
1300, and 1400. The form may be shortened correspondingly. The number of 
a deleted item shall not be used for a substitute or new item, but the 
number of a blank

[[Page 515]]

space on the HUD-1 may be used for a substitute or new item.
    (4) Charges not listed on the HUD-1, but that are customary locally 
or pursuant to the lender's practice, may be inserted in blank spaces. 
Where existing blank spaces on the HUD-1 are insufficient, additional 
lines and spaces may be added and numbered in sequence with spaces on 
the HUD-1.
    (5) The following variations in layout and format are within the 
discretion of persons reproducing the HUD-1 and do not require prior HUD 
approval: size of pages; tint or color of pages; size and style of type 
or print; vertical spacing between lines or provision for additional 
horizontal space on lines (for example, to provide sufficient space for 
recording time periods used in prorations); printing of the HUD-1 
contents on separate pages, on the front and back of a single page, or 
on one continuous page; use of multicopy tear-out sets; printing on 
rolls for computer purposes; reorganization of sections B through I, 
when necessary to accommodate computer printing; and manner of placement 
of the HUD number, but not the OMB approval number, neither of which may 
be deleted. The expiration date associated with the OMB number listed on 
the form may be deleted. Any changes in the HUD number or OMB approval 
number may be announced by notice in the Federal Register, rather than 
by amendment of this part.
    (6) The borrower's information and the seller's information may be 
provided on separate pages.
    (7) Signature lines may be added.
    (8) The HUD-1 may be translated into languages other than English.
    (9) An additional page may be attached to the HUD-1 for the purpose 
of including customary recitals and information used locally in real 
estate settlements; for example, breakdown of payoff figures, a 
breakdown of the borrower's total monthly mortgage payments, check 
disbursements, a statement indicating receipt of funds, applicable 
special stipulations between buyer and seller, and the date funds are 
transferred. If space permits, such information may be added at the end 
of the HUD-1.
    (10) As required by HUD/FHA in FHA-insured loans.
    (11) As allowed by Sec. 1024.17, relating to an initial escrow 
account statement.
    (b) Permissible changes--HUD-1A. The changes and insertions on the 
HUD-1 permitted under paragraph (a) of this section are also permitted 
when the HUD-1A settlement statement is reproduced, except the changes 
described in paragraphs (a)(3) and (6) of this section.
    (c) Written approval. Any other deviation in the HUD-1 or HUD-1A 
forms is permissible only upon receipt of written approval of the 
Bureau; provided, however, that notwithstanding contrary instructions in 
this section or appendix A, reproducing the HUD-1 or HUD-1A forms with 
the Bureau's OMB approval number displayed in place of HUD's OMB 
approval number does not require the written approval of the Bureau. A 
request to the Bureau for approval shall be submitted in writing to the 
address indicated in Sec. 1024.3 and shall state the reasons why the 
applicant believes such deviation is needed. The prescribed form(s) must 
be used until approval is received.



Sec. 1024.10  One-day advance inspection of HUD-1 or HUD-1A settlement
statement; delivery; recordkeeping.

    (a) Inspection one day prior to settlement upon request by the 
borrower. The settlement agent shall permit the borrower to inspect the 
HUD-1 or HUD-1A settlement statement, completed to set forth those items 
that are known to the settlement agent at the time of inspection, during 
the business day immediately preceding settlement. Items related only to 
the seller's transaction may be omitted from the HUD-1.
    (b) Delivery. The settlement agent shall provide a completed HUD-1 
or HUD-1A to the borrower, the seller (if there is one), the lender (if 
the lender is not the settlement agent), and/or their agents. When the 
borrower's and seller's copies of the HUD-1 or HUD-1A differ as 
permitted by the instructions in appendix A to this part, both copies 
shall be provided to the lender (if the lender is not the settlement 
agent). The settlement agent shall deliver the completed HUD-1 or HUD-1A 
at or before the settlement, except as provided

[[Page 516]]

in paragraphs (c) and (d) of this section.
    (c) Waiver. The borrower may waive the right to delivery of the 
completed HUD-1 or HUD-1A no later than at settlement by executing a 
written waiver at or before settlement. In such case, the completed HUD-
1 or HUD-1A shall be mailed or delivered to the borrower, seller, and 
lender (if the lender is not the settlement agent) as soon as 
practicable after settlement.
    (d) Exempt transactions. When the borrower or the borrower's agent 
does not attend the settlement, or when the settlement agent does not 
conduct a meeting of the parties for that purpose, the transaction shall 
be exempt from the requirements of paragraphs (a) and (b) of this 
section, except that the HUD-1 or HUD-1A shall be mailed or delivered as 
soon as practicable after settlement.
    (e) Recordkeeping. The lender shall retain each completed HUD-1 or 
HUD-1A and related documents for five years after settlement, unless the 
lender disposes of its interest in the mortgage and does not service the 
mortgage. In that case, the lender shall provide its copy of the HUD-1 
or HUD-1A to the owner or servicer of the mortgage as a part of the 
transfer of the loan file. Such owner or servicer shall retain the HUD-1 
or HUD-1A for the remainder of the five-year period. The Bureau shall 
have the right to inspect or require copies of records covered by this 
paragraph (e).



Sec. 1024.11  Mailing.

    The provisions of this part requiring or permitting mailing of 
documents shall be deemed to be satisfied by placing the document in the 
mail (whether or not received by the addressee) addressed to the 
addresses stated in the loan application or in other information 
submitted to or obtained by the lender at the time of loan application 
or submitted or obtained by the lender or settlement agent, except that 
a revised address shall be used where the lender or settlement agent has 
been expressly informed in writing of a change in address.



Sec. 1024.12  No fee.

    No fee shall be imposed or charge made upon any other person, as a 
part of settlement costs or otherwise, by a lender in connection with a 
federally related mortgage loan made by it (or a loan for the purchase 
of a manufactured home), or by a servicer (as that term is defined under 
12 U.S.C. 2605(i)(2)) for or on account of the preparation and 
distribution of the HUD-1 or HUD-1A settlement statement, escrow account 
statements required pursuant to section 10 of RESPA (12 U.S.C. 2609), or 
statements required by the Truth in Lending Act (15 U.S.C. 1601 et 
seq.).



Sec. 1024.13  [Reserved]



Sec. 1024.14  Prohibition against kickbacks and unearned fees.

    (a) Section 8 violation. Any violation of this section is a 
violation of section 8 of RESPA (12 U.S.C. 2607).
    (b) No referral fees. No person shall give and no person shall 
accept any fee, kickback or other thing of value pursuant to any 
agreement or understanding, oral or otherwise, that business incident to 
or part of a settlement service involving a federally related mortgage 
loan shall be referred to any person. Any referral of a settlement 
service is not a compensable service, except as set forth in 
Sec. 1024.14(g)(1). A company may not pay any other company or the 
employees of any other company for the referral of settlement service 
business.
    (c) No split of charges except for actual services performed. No 
person shall give and no person shall accept any portion, split, or 
percentage of any charge made or received for the rendering of a 
settlement service in connection with a transaction involving a 
federally related mortgage loan other than for services actually 
performed. A charge by a person for which no or nominal services are 
performed or for which duplicative fees are charged is an unearned fee 
and violates this section. The source of the payment does not determine 
whether or not a service is compensable. Nor may the prohibitions of 
this part be avoided by creating an arrangement wherein the purchaser of 
services splits the fee.

[[Page 517]]

    (d) Thing of value. This term is broadly defined in section 3(2) of 
RESPA (12 U.S.C. 2602(2)). It includes, without limitation, monies, 
things, discounts, salaries, commissions, fees, duplicate payments of a 
charge, stock, dividends, distributions of partnership profits, 
franchise royalties, credits representing monies that may be paid at a 
future date, the opportunity to participate in a money-making program, 
retained or increased earnings, increased equity in a parent or 
subsidiary entity, special bank deposits or accounts, special or unusual 
banking terms, services of all types at special or free rates, sales or 
rentals at special prices or rates, lease or rental payments based in 
whole or in part on the amount of business referred, trips and payment 
of another person's expenses, or reduction in credit against an existing 
obligation. The term ``payment'' is used throughout Sec. Sec. 1024.14 
and 1024.15 as synonymous with the giving or receiving of any ``thing of 
value'' and does not require transfer of money.
    (e) Agreement or understanding. An agreement or understanding for 
the referral of business incident to or part of a settlement service 
need not be written or verbalized but may be established by a practice, 
pattern or course of conduct. When a thing of value is received 
repeatedly and is connected in any way with the volume or value of the 
business referred, the receipt of the thing of value is evidence that it 
is made pursuant to an agreement or understanding for the referral of 
business.
    (f) Referral. (1) A referral includes any oral or written action 
directed to a person which has the effect of affirmatively influencing 
the selection by any person of a provider of a settlement service or 
business incident to or part of a settlement service when such person 
will pay for such settlement service or business incident thereto or pay 
a charge attributable in whole or in part to such settlement service or 
business.
    (2) A referral also occurs whenever a person paying for a settlement 
service or business incident thereto is required to use (see 
Sec. 1024.2, ``required use'') a particular provider of a settlement 
service or business incident thereto.
    (g) Fees, salaries, compensation, or other payments. (1) Section 8 
of RESPA permits:
    (i) A payment to an attorney at law for services actually rendered;
    (ii) A payment by a title company to its duly appointed agent for 
services actually performed in the issuance of a policy of title 
insurance;
    (iii) A payment by a lender to its duly appointed agent or 
contractor for services actually performed in the origination, 
processing, or funding of a loan;
    (iv) A payment to any person of a bona fide salary or compensation 
or other payment for goods or facilities actually furnished or for 
services actually performed;
    (v) A payment pursuant to cooperative brokerage and referral 
arrangements or agreements between real estate agents and real estate 
brokers. (The statutory exemption restated in this paragraph refers only 
to fee divisions within real estate brokerage arrangements when all 
parties are acting in a real estate brokerage capacity, and has no 
applicability to any fee arrangements between real estate brokers and 
mortgage brokers or between mortgage brokers.);
    (vi) Normal promotional and educational activities that are not 
conditioned on the referral of business and that do not involve the 
defraying of expenses that otherwise would be incurred by persons in a 
position to refer settlement services or business incident thereto; or
    (vii) An employer's payment to its own employees for any referral 
activities.
    (2) The Bureau may investigate high prices to see if they are the 
result of a referral fee or a split of a fee. If the payment of a thing 
of value bears no reasonable relationship to the market value of the 
goods or services provided, then the excess is not for services or goods 
actually performed or provided. These facts may be used as evidence of a 
violation of section 8 and may serve as a basis for a RESPA 
investigation. High prices standing alone are not proof of a RESPA 
violation. The value of a referral (i.e., the value of any additional 
business obtained thereby) is not

[[Page 518]]

to be taken into account in determining whether the payment exceeds the 
reasonable value of such goods, facilities or services. The fact that 
the transfer of the thing of value does not result in an increase in any 
charge made by the person giving the thing of value is irrelevant in 
determining whether the act is prohibited.
    (3) Multiple services. When a person in a position to refer 
settlement service business, such as an attorney, mortgage lender, real 
estate broker or agent, or developer or builder, receives a payment for 
providing additional settlement services as part of a real estate 
transaction, such payment must be for services that are actual, 
necessary and distinct from the primary services provided by such 
person. For example, for an attorney of the buyer or seller to receive 
compensation as a title agent, the attorney must perform core title 
agent services (for which liability arises) separate from attorney 
services, including the evaluation of the title search to determine the 
insurability of the title, the clearance of underwriting objections, the 
actual issuance of the policy or policies on behalf of the title 
insurance company, and, where customary, issuance of the title 
commitment, and the conducting of the title search and closing.
    (h) Recordkeeping. Any documents provided pursuant to this section 
shall be retained for five (5) years from the date of execution.
    (i) Appendix B of this part. Illustrations in appendix B of this 
part demonstrate some of the requirements of this section.



Sec. 1024.15  Affiliated business arrangements.

    (a) General. An affiliated business arrangement is defined in 
section 3(7) of RESPA (12 U.S.C. 2602(7)).
    (b) Violation and exemption. An affiliated business arrangement is 
not a violation of section 8 of RESPA (12 U.S.C. 2607) and of 
Sec. 1024.14 if the conditions set forth in this section are satisfied. 
Paragraph (b)(1) of this section shall not apply to the extent it is 
inconsistent with section 8(c)(4)(A) of RESPA (12 U.S.C. 2607(c)(4)(A)).
    (1) The person making each referral has provided to each person 
whose business is referred a written disclosure, in the format of the 
Affiliated Business Arrangement Disclosure Statement set forth in 
appendix D of this part, of the nature of the relationship (explaining 
the ownership and financial interest) between the provider of settlement 
services (or business incident thereto) and the person making the 
referral and of an estimated charge or range of charges generally made 
by such provider (which describes the charge using the same terminology, 
as far as practical, as section L of the HUD-1 settlement statement). 
The disclosures must be provided on a separate piece of paper no later 
than the time of each referral or, if the lender requires use of a 
particular provider, the time of loan application, except that:
    (i) Where a lender makes the referral to a borrower, the condition 
contained in paragraph (b)(1) of this section may be satisfied at the 
time that the good faith estimate or a statement under Sec. 1024.7(d) is 
provided; and
    (ii) Whenever an attorney or law firm requires a client to use a 
particular title insurance agent, the attorney or law firm shall provide 
the disclosures no later than the time the attorney or law firm is 
engaged by the client.
    (iii) Failure to comply with the disclosure requirements of this 
section may be overcome if the person making a referral can prove by a 
preponderance of the evidence that procedures reasonably adopted to 
result in compliance with these conditions have been maintained and that 
any failure to comply with these conditions was unintentional and the 
result of a bona fide error. An error of legal judgment with respect to 
a person's obligations under RESPA is not a bona fide error. 
Administrative and judicial interpretations of section 130(c) of the 
Truth in Lending Act shall not be binding interpretations of the 
preceding sentence or section 8(d)(3) of RESPA (12 U.S.C. 2607(d)(3)).
    (2) No person making a referral has required (as defined in 
Sec. 1024.2, ``required use'') any person to use any particular provider 
of settlement services or business incident thereto, except if such 
person is a lender, for requiring a buyer, borrower or seller to pay for 
the

[[Page 519]]

services of an attorney, credit reporting agency, or real estate 
appraiser chosen by the lender to represent the lender's interest in a 
real estate transaction, or except if such person is an attorney or law 
firm for arranging for issuance of a title insurance policy for a 
client, directly as agent or through a separate corporate title 
insurance agency that may be operated as an adjunct to the law practice 
of the attorney or law firm, as part of representation of that client in 
a real estate transaction.
    (3) The only thing of value that is received from the arrangement 
other than payments listed in Sec. 1024.14(g) is a return on an 
ownership interest or franchise relationship.
    (i) In an affiliated business arrangement:
    (A) Bona fide dividends, and capital or equity distributions, 
related to ownership interest or franchise relationship, between 
entities in an affiliate relationship, are permissible; and
    (B) Bona fide business loans, advances, and capital or equity 
contributions between entities in an affiliate relationship (in any 
direction), are not prohibited--so long as they are for ordinary 
business purposes and are not fees for the referral of settlement 
service business or unearned fees.
    (ii) A return on an ownership interest does not include:
    (A) Any payment which has as a basis of calculation no apparent 
business motive other than distinguishing among recipients of payments 
on the basis of the amount of their actual, estimated or anticipated 
referrals;
    (B) Any payment which varies according to the relative amount of 
referrals by the different recipients of similar payments; or
    (C) A payment based on an ownership, partnership or joint venture 
share which has been adjusted on the basis of previous relative 
referrals by recipients of similar payments.
    (iii) Neither the mere labeling of a thing of value, nor the fact 
that it may be calculated pursuant to a corporate or partnership 
organizational document or a franchise agreement, will determine whether 
it is a bona fide return on an ownership interest or franchise 
relationship. Whether a thing of value is such a return will be 
determined by analyzing facts and circumstances on a case by case basis.
    (iv) A return on franchise relationship may be a payment to or from 
a franchisee but it does not include any payment which is not based on 
the franchise agreement, nor any payment which varies according to the 
number or amount of referrals by the franchisor or franchisee or which 
is based on a franchise agreement which has been adjusted on the basis 
of a previous number or amount of referrals by the franchiser or 
franchisees. A franchise agreement may not be constructed to insulate 
against kickbacks or referral fees.
    (c) Definitions. As used in this section:
    Associate is defined in section 3(8) of RESPA (12 U.S.C. 2602(8)).
    Affiliate relationship means the relationship among business 
entities where one entity has effective control over the other by virtue 
of a partnership or other agreement or is under common control with the 
other by a third entity or where an entity is a corporation related to 
another corporation as parent to subsidiary by an identity of stock 
ownership.
    Beneficial ownership means the effective ownership of an interest in 
a provider of settlement services or the right to use and control the 
ownership interest involved even though legal ownership or title may be 
held in another person's name.
    Control, as used in the definitions of ``associate'' and ``affiliate 
relationship,'' means that a person:
    (i) Is a general partner, officer, director, or employer of another 
person;
    (ii) Directly or indirectly or acting in concert with others, or 
through one or more subsidiaries, owns, holds with power to vote, or 
holds proxies representing, more than 20 percent of the voting interests 
of another person;
    (iii) Affirmatively influences in any manner the election of a 
majority of the directors of another person; or
    (iv) Has contributed more than 20 percent of the capital of the 
other person.
    Direct ownership means the holding of legal title to an interest in 
a provider of settlement service except where

[[Page 520]]

title is being held for the beneficial owner.
    Franchise is defined in FTC regulation 16 CFR 436.1(h).
    Franchisor is defined in FTC regulation 16 CFR 436.1(k).
    Franchisee is defined in FTC regulation 16 CFR 436.1(i).
    FTC means the Federal Trade Commission.
    Person who is in a position to refer settlement service business 
means any real estate broker or agent, lender, mortgage broker, builder 
or developer, attorney, title company, title agent, or other person 
deriving a significant portion of his or her gross income from providing 
settlement services.
    (d) Recordkeeping. Any documents provided pursuant to this section 
shall be retained for 5 years after the date of execution.
    (e) Appendix B of this part. Illustrations in appendix B of this 
part demonstrate some of the requirements of this section.



Sec. 1024.16  Title companies.

    No seller of property that will be purchased with the assistance of 
a federally related mortgage loan shall violate section 9 of RESPA (12 
U.S.C. 2608). Section 1024.2 defines ``required use'' of a provider of a 
settlement service.



Sec. 1024.17  Escrow accounts.

    (a) General. This section sets out the requirements for an escrow 
account that a lender establishes in connection with a federally related 
mortgage loan. It sets limits for escrow accounts using calculations 
based on monthly payments and disbursements within a calendar year. If 
an escrow account involves biweekly or any other payment period, the 
requirements in this section shall be modified accordingly. A Public 
Guidance Document entitled ``Biweekly Payments--Example'' provides 
examples of biweekly accounting and a Public Guidance Document entitled 
``Annual Escrow Account Disclosure Statement--Example'' provides 
examples of a 3-year accounting cycle that may be used in accordance 
with paragraph (c)(9) of this section. A Public Guidance Document 
entitled ``Consumer Disclosure for Voluntary Escrow Account Payments'' 
provides a model disclosure format that originators and servicers are 
encouraged, but not required, to provide to consumers when the 
originator or servicer anticipates a substantial increase in 
disbursements from the escrow account after the first year of the loan. 
The disclosures in that model format may be combined with or included in 
the Initial Escrow Account Statement required in Sec. 1024.17(g).
    (b) Definitions. As used in this section:
    Aggregate (or) composite analysis, hereafter called aggregate 
analysis, means an accounting method a servicer uses in conducting an 
escrow account analysis by computing the sufficiency of escrow account 
funds by analyzing the account as a whole. Appendix E to this part sets 
forth examples of aggregate escrow account analyses.
    Annual escrow account statement means a statement containing all of 
the information set forth in Sec. 1024.17(i). As noted in 
Sec. 1024.17(i), a servicer shall submit an annual escrow account 
statement to the borrower within 30 calendar days of the end of the 
escrow account computation year, after conducting an escrow account 
analysis.
    Cushion or reserve (hereafter cushion) means funds that a servicer 
may require a borrower to pay into an escrow account to cover 
unanticipated disbursements or disbursements made before the borrower's 
payments are available in the account, as limited by Sec. 1024.17(c).
    Deficiency is the amount of a negative balance in an escrow account. 
As noted in Sec. 1024.17(f), if a servicer advances funds for a 
borrower, then the servicer must perform an escrow account analysis 
before seeking repayment of the deficiency.
    Delivery means the placing of a document in the United States mail, 
first-class postage paid, addressed to the last known address of the 
recipient. Hand delivery also constitutes delivery.
    Disbursement date means the date on which the servicer actually pays 
an escrow item from the escrow account.
    Escrow account means any account that a servicer establishes or 
controls on behalf of a borrower to pay taxes,

[[Page 521]]

insurance premiums (including flood insurance), or other charges with 
respect to a federally related mortgage loan, including charges that the 
borrower and servicer have voluntarily agreed that the servicer should 
collect and pay. The definition encompasses any account established for 
this purpose, including a ``trust account'', ``reserve account'', 
``impound account'', or other term in different localities. An ``escrow 
account'' includes any arrangement where the servicer adds a portion of 
the borrower's payments to principal and subsequently deducts from 
principal the disbursements for escrow account items. For purposes of 
this section, the term ``escrow account'' excludes any account that is 
under the borrower's total control.
    Escrow account analysis means the accounting that a servicer 
conducts in the form of a trial running balance for an escrow account 
to:
    (1) Determine the appropriate target balances;
    (2) Compute the borrower's monthly payments for the next escrow 
account computation year and any deposits needed to establish or 
maintain the account; and
    (3) Determine whether shortages, surpluses or deficiencies exist.
    Escrow account computation year is a 12-month period that a servicer 
establishes for the escrow account beginning with the borrower's initial 
payment date. The term includes each 12-month period thereafter, unless 
a servicer chooses to issue a short year statement under the conditions 
stated in Sec. 1024.17(i)(4).
    Escrow account item or separate item means any separate expenditure 
category, such as ``taxes'' or ``insurance'', for which funds are 
collected in the escrow account for disbursement. An escrow account item 
with installment payments, such as local property taxes, remains one 
escrow account item regardless of multiple disbursement dates to the tax 
authority.
    Initial escrow account statement means the first disclosure 
statement that the servicer delivers to the borrower concerning the 
borrower's escrow account. The initial escrow account statement shall 
meet the requirements of Sec. 1024.17(g) and be in substantially the 
format set forth in Sec. 1024.17(h).
    Installment payment means one of two or more payments payable on an 
escrow account item during an escrow account computation year. An 
example of an installment payment is where a jurisdiction bills 
quarterly for taxes.
    Payment due date means the date each month when the borrower's 
monthly payment to an escrow account is due to the servicer. The initial 
payment date is the borrower's first payment due date to an escrow 
account.
    Penalty means a late charge imposed by the payee for paying after 
the disbursement is due. It does not include any additional charge or 
fee imposed by the payee associated with choosing installment payments 
as opposed to annual payments or for choosing one installment plan over 
another.
    Pre-accrual is a practice some servicers use to require borrowers to 
deposit funds, needed for disbursement and maintenance of a cushion, in 
the escrow account some period before the disbursement date. Pre-accrual 
is subject to the limitations of Sec. 1024.17(c).
    Shortage means an amount by which a current escrow account balance 
falls short of the target balance at the time of escrow analysis.
    Single-item analysis means an accounting method servicers use in 
conducting an escrow account analysis by computing the sufficiency of 
escrow account funds by considering each escrow item separately. 
Appendix E to this part sets forth examples of single-item analysis.
    Submission (of an escrow account statement) means the delivery of 
the statement.
    Surplus means an amount by which the current escrow account balance 
exceeds the target balance for the account.
    System of recordkeeping means the servicer's method of keeping 
information that reflects the facts relating to that servicer's handling 
of the borrower's escrow account, including, but not limited to, the 
payment of amounts from the escrow account and the submission of initial 
and annual escrow account statements to borrowers.

[[Page 522]]

    Target balance means the estimated month end balance in an escrow 
account that is just sufficient to cover the remaining disbursements 
from the escrow account in the escrow account computation year, taking 
into account the remaining scheduled periodic payments, and a cushion, 
if any.
    Trial running balance means the accounting process that derives the 
target balances over the course of an escrow account computation year. 
Section 1024.17(d) provides a description of the steps involved in 
performing a trial running balance.
    (c) Limits on payments to escrow accounts. (1) A lender or servicer 
(hereafter servicer) shall not require a borrower to deposit into any 
escrow account, created in connection with a federally related mortgage 
loan, more than the following amounts:
    (i) Charges at settlement or upon creation of an escrow account. At 
the time a servicer creates an escrow account for a borrower, the 
servicer may charge the borrower an amount sufficient to pay the charges 
respecting the mortgaged property, such as taxes and insurance, which 
are attributable to the period from the date such payment(s) were last 
paid until the initial payment date. The ``amount sufficient to pay'' is 
computed so that the lowest month end target balance projected for the 
escrow account computation year is zero (-0-) (see Step 2 in appendix E 
to this part). In addition, the servicer may charge the borrower a 
cushion that shall be no greater than one-sixth (\1/6\) of the estimated 
total annual payments from the escrow account.
    (ii) Charges during the life of the escrow account. Throughout the 
life of an escrow account, the servicer may charge the borrower a 
monthly sum equal to one-twelfth (\1/12\) of the total annual escrow 
payments which the servicer reasonably anticipates paying from the 
account. In addition, the servicer may add an amount to maintain a 
cushion no greater than one-sixth (\1/6\) of the estimated total annual 
payments from the account. However, if a servicer determines through an 
escrow account analysis that there is a shortage or deficiency, the 
servicer may require the borrower to pay additional deposits to make up 
the shortage or eliminate the deficiency, subject to the limitations set 
forth in Sec. 1024.17(f).
    (2) Escrow analysis at creation of escrow account. Before 
establishing an escrow account, the servicer must conduct an escrow 
account analysis to determine the amount the borrower must deposit into 
the escrow account (subject to the limitations of paragraph (c)(1)(i) of 
this section), and the amount of the borrower's periodic payments into 
the escrow account (subject to the limitations of paragraph (c)(1)(ii) 
of this section). In conducting the escrow account analysis, the 
servicer must estimate the disbursement amounts according to paragraph 
(c)(7) of this section. Pursuant to paragraph (k) of this section, the 
servicer must use a date on or before the deadline to avoid a penalty as 
the disbursement date for the escrow item and comply with any other 
requirements of paragraph (k) of this section. Upon completing the 
initial escrow account analysis, the servicer must prepare and deliver 
an initial escrow account statement to the borrower, as set forth in 
paragraph (g) of this section. The servicer must use the escrow account 
analysis to determine whether a surplus, shortage, or deficiency exists 
and must make any adjustments to the account pursuant to paragraph (f) 
of this section.
    (3) Subsequent escrow account analyses. For each escrow account, the 
servicer must conduct an escrow account analysis at the completion of 
the escrow account computation year to determine the borrower's monthly 
escrow account payments for the next computation year, subject to the 
limitations of paragraph (c)(1)(ii) of this section. In conducting the 
escrow account analysis, the servicer must estimate the disbursement 
amounts according to paragraph (c)(7) of this section. Pursuant to 
paragraph (k) of this section, the servicer must use a date on or before 
the deadline to avoid a penalty as the disbursement date for the escrow 
item and comply with any other requirements of paragraph (k) of this 
section. The servicer must use the escrow account analysis to determine 
whether a surplus, shortage, or deficiency exists, and must make any 
adjustments

[[Page 523]]

to the account pursuant to paragraph (f) of this section. Upon 
completing an escrow account analysis, the servicer must prepare and 
submit an annual escrow account statement to the borrower, as set forth 
in paragraph (i) of this section.
    (4) Aggregate accounting required. All servicers must use the 
aggregate accounting method in conducting escrow account analyses.
    (5) Cushion. The cushion must be no greater than one-sixth (\1/6\) 
of the estimated total annual disbursements from the escrow account.
    (6) Restrictions on pre-accrual. A servicer must not practice pre-
accrual.
    (7) Servicer estimates of disbursement amounts. To conduct an escrow 
account analysis, the servicer shall estimate the amount of escrow 
account items to be disbursed. If the servicer knows the charge for an 
escrow item in the next computation year, then the servicer shall use 
that amount in estimating disbursement amounts. If the charge is unknown 
to the servicer, the servicer may base the estimate on the preceding 
year's charge, or the preceding year's charge as modified by an amount 
not exceeding the most recent year's change in the national Consumer 
Price Index for all urban consumers (CPI, all items). In cases of 
unassessed new construction, the servicer may base an estimate on the 
assessment of comparable residential property in the market area.
    (8) Provisions in federally related mortgage documents. The servicer 
must examine the federally related mortgage loan documents to determine 
the applicable cushion for each escrow account. If any such documents 
provide for lower cushion limits, then the terms of the loan documents 
apply. Where the terms of any such documents allow greater payments to 
an escrow account than allowed by this section, then this section 
controls the applicable limits. Where such documents do not specifically 
establish an escrow account, whether a servicer may establish an escrow 
account for the loan is a matter for determination by other Federal or 
State law. If such documents are silent on the escrow account limits and 
a servicer establishes an escrow account under other Federal or State 
law, then the limitations of this section apply unless applicable 
Federal or State law provides for a lower amount. If such documents 
provide for escrow accounts up to the RESPA limits, then the servicer 
may require the maximum amounts consistent with this section, unless an 
applicable Federal or State law sets a lesser amount.
    (9) Assessments for periods longer than one year. Some escrow 
account items may be billed for periods longer than one year. For 
example, servicers may need to collect flood insurance or water 
purification escrow funds for payment every three years. In such cases, 
the servicer shall estimate the borrower's payments for a full cycle of 
disbursements. For a flood insurance premium payable every 3 years, the 
servicer shall collect the payments reflecting 36 equal monthly amounts. 
For two out of the three years, however, the account balance may not 
reach its low monthly balance because the low point will be on a three-
year cycle, as compared to an annual one. The annual escrow account 
statement shall explain this situation (see example in the Public 
Guidance Document entitled ``Annual Escrow Account Disclosure 
Statement--Example'', available in accordance with Sec. 1024.3).
    (d) Methods of escrow account analysis. (1) The following sets forth 
the steps servicers must use to determine whether their use of aggregate 
analysis conforms with the limitations in Sec. 1024.17(c)(1). The steps 
set forth in this section result in maximum limits. Servicers may use 
accounting procedures that result in lower target balances. In 
particular, servicers may use a cushion less than the permissible 
cushion or no cushion at all. This section does not require the use of a 
cushion.
    (2) Aggregate analysis. (i) In conducting the escrow account 
analysis using aggregate analysis, the target balances may not exceed 
the balances computed according to the following arithmetic operations:
    (A) The servicer first projects a trial balance for the account as a 
whole over the next computation year (a trial running balance). In doing 
so the servicer assumes that it will make estimated disbursements on or 
before the earlier

[[Page 524]]

of the deadline to take advantage of discounts, if available, or the 
deadline to avoid a penalty. The servicer does not use pre-accrual on 
these disbursement dates. The servicer also assumes that the borrower 
will make monthly payments equal to one-twelfth of the estimated total 
annual escrow account disbursements.
    (B) The servicer then examines the monthly trial balances and adds 
to the first monthly balance an amount just sufficient to bring the 
lowest monthly trial balance to zero, and adjusts all other monthly 
balances accordingly.
    (C) The servicer then adds to the monthly balances the permissible 
cushion. The cushion is two months of the borrower's escrow payments to 
the servicer or a lesser amount specified by state law or the mortgage 
document (net of any increases or decreases because of prior year 
shortages or surpluses, respectively).
    (ii) Lowest monthly balance. Under aggregate analysis, the lowest 
monthly target balance for the account shall be less than or equal to 
one-sixth of the estimated total annual escrow account disbursements or 
a lesser amount specified by state law or the mortgage document. The 
target balances that the servicer derives using these steps yield the 
maximum limit for the escrow account. Appendix E to this part 
illustrates these steps.
    (e) Transfer of servicing. (1) If the new servicer changes either 
the monthly payment amount or the accounting method used by the 
transferor (old) servicer, then the new servicer shall provide the 
borrower with an initial escrow account statement within 60 days of the 
date of servicing transfer.
    (i) Where a new servicer provides an initial escrow account 
statement upon the transfer of servicing, the new servicer shall use the 
effective date of the transfer of servicing to establish the new escrow 
account computation year.
    (ii) Where the new servicer retains the monthly payments and 
accounting method used by the transferor servicer, then the new servicer 
may continue to use the escrow account computation year established by 
the transferor servicer or may choose to establish a different 
computation year using a short-year statement. At the completion of the 
escrow account computation year or any short year, the new servicer 
shall perform an escrow analysis and provide the borrower with an annual 
escrow account statement.
    (2) The new servicer shall treat shortages, surpluses and 
deficiencies in the transferred escrow account according to the 
procedures set forth in Sec. 1024.17(f).
    (f) Shortages, surpluses, and deficiencies requirements--(1) Escrow 
account analysis. For each escrow account, the servicer shall conduct an 
escrow account analysis to determine whether a surplus, shortage or 
deficiency exists.
    (i) As noted in Sec. 1024.17(c)(2) and (3), the servicer shall 
conduct an escrow account analysis upon establishing an escrow account 
and at completion of the escrow account computation year.
    (ii) The servicer may conduct an escrow account analysis at other 
times during the escrow computation year. If a servicer advances funds 
in paying a disbursement, which is not the result of a borrower's 
payment default under the underlying mortgage document, then the 
servicer shall conduct an escrow account analysis to determine the 
extent of the deficiency before seeking repayment of the funds from the 
borrower under this paragraph (f).
    (2) Surpluses. (i) If an escrow account analysis discloses a 
surplus, the servicer shall, within 30 days from the date of the 
analysis, refund the surplus to the borrower if the surplus is greater 
than or equal to 50 dollars ($50). If the surplus is less than 50 
dollars ($50), the servicer may refund such amount to the borrower, or 
credit such amount against the next year's escrow payments.
    (ii) These provisions regarding surpluses apply if the borrower is 
current at the time of the escrow account analysis. A borrower is 
current if the servicer receives the borrower's payments within 30 days 
of the payment due date. If the servicer does not receive the borrower's 
payment within 30 days of the payment due date, then the servicer may 
retain the surplus in the escrow account pursuant to the terms of the 
federally related mortgage loan documents.

[[Page 525]]

    (iii) After an initial or annual escrow analysis has been performed, 
the servicer and the borrower may enter into a voluntary agreement for 
the forthcoming escrow accounting year for the borrower to deposit funds 
into the escrow account for that year greater than the limits 
established under paragraph (c) of this section. Such an agreement shall 
cover only one escrow accounting year, but a new voluntary agreement may 
be entered into after the next escrow analysis is performed. The 
voluntary agreement may not alter how surpluses are to be treated when 
the next escrow analysis is performed at the end of the escrow 
accounting year covered by the voluntary agreement.
    (3) Shortages. (i) If an escrow account analysis discloses a 
shortage of less than one month's escrow account payment, then the 
servicer has three possible courses of action:
    (A) The servicer may allow a shortage to exist and do nothing to 
change it;
    (B) The servicer may require the borrower to repay the shortage 
amount within 30 days; or
    (C) The servicer may require the borrower to repay the shortage 
amount in equal monthly payments over at least a 12-month period.
    (ii) If an escrow account analysis discloses a shortage that is 
greater than or equal to one month's escrow account payment, then the 
servicer has two possible courses of action:
    (A) The servicer may allow a shortage to exist and do nothing to 
change it; or
    (B) The servicer may require the borrower to repay the shortage in 
equal monthly payments over at least a 12-month period.
    (4) Deficiency. If the escrow account analysis confirms a 
deficiency, then the servicer may require the borrower to pay additional 
monthly deposits to the account to eliminate the deficiency.
    (i) If the deficiency is less than one month's escrow account 
payment, then the servicer:
    (A) May allow the deficiency to exist and do nothing to change it;
    (B) May require the borrower to repay the deficiency within 30 days; 
or
    (C) May require the borrower to repay the deficiency in 2 or more 
equal monthly payments.
    (ii) If the deficiency is greater than or equal to 1 month's escrow 
payment, the servicer may allow the deficiency to exist and do nothing 
to change it or may require the borrower to repay the deficiency in two 
or more equal monthly payments.
    (iii) These provisions regarding deficiencies apply if the borrower 
is current at the time of the escrow account analysis. A borrower is 
current if the servicer receives the borrower's payments within 30 days 
of the payment due date. If the servicer does not receive the borrower's 
payment within 30 days of the payment due date, then the servicer may 
recover the deficiency pursuant to the terms of the federally related 
mortgage loan documents.
    (5) Notice of shortage or deficiency in escrow account. The servicer 
shall notify the borrower at least once during the escrow account 
computation year if there is a shortage or deficiency in the escrow 
account. The notice may be part of the annual escrow account statement 
or it may be a separate document.
    (g) Initial escrow account statement--(1) Submission at settlement, 
or within 45 calendar days of settlement. As noted in 
Sec. 1024.17(c)(2), the servicer shall conduct an escrow account 
analysis before establishing an escrow account to determine the amount 
the borrower shall deposit into the escrow account, subject to the 
limitations of Sec. 1024.17(c)(1)(i). After conducting the escrow 
account analysis for each escrow account, the servicer shall submit an 
initial escrow account statement to the borrower at settlement or within 
45 calendar days of settlement for escrow accounts that are established 
as a condition of the loan.
    (i) The initial escrow account statement shall include the amount of 
the borrower's monthly mortgage payment and the portion of the monthly 
payment going into the escrow account and shall itemize the estimated 
taxes, insurance premiums, and other charges

[[Page 526]]

that the servicer reasonably anticipates to be paid from the escrow 
account during the escrow account computation year and the anticipated 
disbursement dates of those charges. The initial escrow account 
statement shall indicate the amount that the servicer selects as a 
cushion. The statement shall include a trial running balance for the 
account.
    (ii) Pursuant to Sec. 1024.17(h)(2), the servicer may incorporate 
the initial escrow account statement into the HUD-1 or HUD-1A settlement 
statement. If the servicer does not incorporate the initial escrow 
account statement into the HUD-1 or HUD-1A settlement statement, then 
the servicer shall submit the initial escrow account statement to the 
borrower as a separate document.
    (2) Time of submission of initial escrow account statement for an 
escrow account established after settlement. For escrow accounts 
established after settlement (and which are not a condition of the 
loan), a servicer shall submit an initial escrow account statement to a 
borrower within 45 calendar days of the date of establishment of the 
escrow account.
    (h) Format for initial escrow account statement. (1) The format and 
a completed example for an initial escrow account statement are set out 
in Public Guidance Documents entitled ``Initial Escrow Account 
Disclosure Statement--Format'' and ``Initial Escrow Account Disclosure 
Statement--Example'', available in accordance with Sec. 1024.3.
    (2) Incorporation of initial escrow account statement into HUD-1 or 
HUD-1A settlement statement. Pursuant to Sec. 1024.9(a)(11), a servicer 
may add the initial escrow account statement to the HUD-1 or HUD-1A 
settlement statement. The servicer may include the initial escrow 
account statement in the basic text or may attach the initial escrow 
account statement as an additional page to the HUD-1 or HUD-1A 
settlement statement.
    (3) Identification of payees. The initial escrow account statement 
need not identify a specific payee by name if it provides sufficient 
information to identify the use of the funds. For example, appropriate 
entries include: county taxes, hazard insurance, condominium dues, etc. 
If a particular payee, such as a taxing body, receives more than one 
payment during the escrow account computation year, the statement shall 
indicate each payment and disbursement date. If there are several taxing 
authorities or insurers, the statement shall identify each taxing body 
or insurer (e.g., ``City Taxes'', ``School Taxes'', ``Hazard 
Insurance'', or ``Flood Insurance,'' etc.).
    (i) Annual escrow account statements. For each escrow account, a 
servicer shall submit an annual escrow account statement to the borrower 
within 30 days of the completion of the escrow account computation year. 
The servicer shall also submit to the borrower the previous year's 
projection or initial escrow account statement. The servicer shall 
conduct an escrow account analysis before submitting an annual escrow 
account statement to the borrower.
    (1) Contents of annual escrow account statement. The annual escrow 
account statement shall provide an account history, reflecting the 
activity in the escrow account during the escrow account computation 
year, and a projection of the activity in the account for the next year. 
In preparing the statement, the servicer may assume scheduled payments 
and disbursements will be made for the final 2 months of the escrow 
account computation year. The annual escrow account statement must 
include, at a minimum, the following (the items in paragraphs (i)(1)(i) 
through (i)(1)(iv) must be clearly itemized):
    (i) The amount of the borrower's current monthly mortgage payment 
and the portion of the monthly payment going into the escrow account;
    (ii) The amount of the past year's monthly mortgage payment and the 
portion of the monthly payment that went into the escrow account;
    (iii) The total amount paid into the escrow account during the past 
computation year;
    (iv) The total amount paid out of the escrow account during the same 
period for taxes, insurance premiums, and other charges (as separately 
identified);

[[Page 527]]

    (v) The balance in the escrow account at the end of the period;
    (vi) An explanation of how any surplus is being handled by the 
servicer;
    (vii) An explanation of how any shortage or deficiency is to be paid 
by the borrower; and
    (viii) If applicable, the reason(s) why the estimated low monthly 
balance was not reached, as indicated by noting differences between the 
most recent account history and last year's projection. Public Guidance 
Documents entitled ``Annual Escrow Account Disclosure Statement--
Format'' and ``Annual Escrow Account Disclosure Statement--Example'' set 
forth an acceptable format and methodology for conveying this 
information.
    (2) No annual statements in the case of default, foreclosure, or 
bankruptcy. This paragraph (i)(2) contains an exemption from the 
provisions of Sec. 1024.17(i)(1). If at the time the servicer conducts 
the escrow account analysis the borrower is more than 30 days overdue, 
then the servicer is exempt from the requirements of submitting an 
annual escrow account statement to the borrower under Sec. 1024.17(i). 
This exemption also applies in situations where the servicer has brought 
an action for foreclosure under the underlying federally related 
mortgage loan, or where the borrower is in bankruptcy proceedings. If 
the servicer does not issue an annual statement pursuant to this 
exemption and the loan subsequently is reinstated or otherwise becomes 
current, the servicer shall provide a history of the account since the 
last annual statement (which may be longer than 1 year) within 90 days 
of the date the account became current.
    (3) Delivery with other material. The servicer may deliver the 
annual escrow account statement to the borrower with other statements or 
materials, including the Substitute 1098, which is provided for Federal 
income tax purposes.
    (4) Short year statements. A servicer may issue a short year annual 
escrow account statement (``short year statement'') to change one escrow 
account computation year to another. By using a short year statement a 
servicer may adjust its production schedule or alter the escrow account 
computation year for the escrow account.
    (i) Effect of short year statement. The short year statement shall 
end the ``escrow account computation year'' for the escrow account and 
establish the beginning date of the new escrow account computation year. 
The servicer shall deliver the short year statement to the borrower 
within 60 days from the end of the short year.
    (ii) Short year statement upon servicing transfer. Upon the transfer 
of servicing, the transferor (old) servicer shall submit a short year 
statement to the borrower within 60 days of the effective date of 
transfer.
    (iii) Short year statement upon loan payoff. If a borrower pays off 
a federally related mortgage loan during the escrow account computation 
year, the servicer shall submit a short year statement to the borrower 
within 60 days after receiving the payoff funds.
    (j) Formats for annual escrow account statement. The formats and 
completed examples for annual escrow account statements using single-
item analysis (pre-rule accounts) and aggregate analysis are set out in 
Public Guidance Documents entitled ``Annual Escrow Account Disclosure 
Statement--Format'' and ``Annual Escrow Account Disclosure Statement--
Example''.
    (k) Timely payments. (1) If the terms of any federally related 
mortgage loan require the borrower to make payments to an escrow 
account, the servicer must pay the disbursements in a timely manner, 
that is, on or before the deadline to avoid a penalty, as long as the 
borrower's payment is not more than 30 days overdue.
    (2) The servicer must advance funds to make disbursements in a 
timely manner as long as the borrower's payment is not more than 30 days 
overdue. Upon advancing funds to pay a disbursement, the servicer may 
seek repayment from the borrower for the deficiency pursuant to 
paragraph (f) of this section.
    (3) For the payment of property taxes from the escrow account, if a 
taxing jurisdiction offers a servicer a choice between annual and 
installment disbursements, the servicer must also comply with this 
paragraph (k)(3). If the taxing jurisdiction neither offers a discount

[[Page 528]]

for disbursements on a lump sum annual basis nor imposes any additional 
charge or fee for installment disbursements, the servicer must make 
disbursements on an installment basis. If, however, the taxing 
jurisdiction offers a discount for disbursements on a lump sum annual 
basis or imposes any additional charge or fee for installment 
disbursements, the servicer may, at the servicer's discretion (but is 
not required by RESPA to), make lump sum annual disbursements in order 
to take advantage of the discount for the borrower or avoid the 
additional charge or fee for installments, as long as such method of 
disbursement complies with paragraphs (k)(1) and (k)(2) of this section. 
The Bureau encourages, but does not require, the servicer to follow the 
preference of the borrower, if such preference is known to the servicer.
    (4) Notwithstanding paragraph (k)(3) of this section, a servicer and 
borrower may mutually agree, on an individual case basis, to a different 
disbursement basis (installment or annual) or disbursement date for 
property taxes from that required under paragraph (k)(3) of this 
section, so long as the agreement meets the requirements of paragraphs 
(k)(1) and (k)(2) of this section. The borrower must voluntarily agree; 
neither loan approval nor any term of the loan may be conditioned on the 
borrower's agreeing to a different disbursement basis or disbursement 
date.
    (5) Timely payment of hazard insurance--(i) In general. Except as 
provided in paragraph (k)(5)(iii) of this section, with respect to a 
borrower whose mortgage payment is more than 30 days overdue, but who 
has established an escrow account for the payment for hazard insurance, 
as defined in Sec. 1024.31, a servicer may not purchase force-placed 
insurance, as that term is defined in Sec. 1024.37(a), unless a servicer 
is unable to disburse funds from the borrower's escrow account to ensure 
that the borrower's hazard insurance premium charges are paid in a 
timely manner.
    (ii) Inability to disburse funds--(A) When inability exists. A 
servicer is considered unable to disburse funds from a borrower's escrow 
account to ensure that the borrower's hazard insurance premiums are paid 
in a timely manner only if the servicer has a reasonable basis to 
believe either that the borrower's hazard insurance has been canceled 
(or was not renewed) for reasons other than nonpayment of premium 
charges or that the borrower's property is vacant.
    (B) When inability does not exist. A servicer shall not be 
considered unable to disburse funds from the borrower's escrow account 
because the escrow account contains insufficient funds for paying hazard 
insurance premium charges.
    (C) Recoupment of advances. If a servicer advances funds to an 
escrow account to ensure that the borrower's hazard insurance premium 
charges are paid in a timely manner, a servicer may seek repayment from 
the borrower for the funds the servicer advanced, unless otherwise 
prohibited by applicable law.
    (iii) Small servicers. Notwithstanding paragraphs (k)(5)(i) and 
(k)(5)(ii)(B) of this section and subject to the requirements in 
Sec. 1024.37, a servicer that qualifies as a small servicer pursuant to 
12 CFR 1026.41(e)(4) may purchase force-placed insurance and charge the 
cost of that insurance to the borrower if the cost to the borrower of 
the force-placed insurance is less than the amount the small servicer 
would need to disburse from the borrower's escrow account to ensure that 
the borrower's hazard insurance premium charges were paid in a timely 
manner.
    (l) Discretionary payments. Any borrower's discretionary payment 
(such as credit life or disability insurance) made as part of a monthly 
mortgage payment is to be noted on the initial and annual statements. If 
a discretionary payment is established or terminated during the escrow 
account computation year, this change should be noted on the next annual 
statement. A discretionary payment is not part of the escrow account 
unless the payment is required by the lender, in accordance with the 
definition of ``settlement service'' in Sec. 1024.2, or the servicer 
chooses to place the discretionary payment in the escrow account. If a 
servicer has not established an escrow account for a federally related 
mortgage loan and

[[Page 529]]

only receives payments for discretionary items, this section is not 
applicable.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10875, Feb. 14, 2013]



Sec. Sec. 1024.18--1024.19  [Reserved]



Sec. 1024.20  List of homeownership counseling organizations.

    (a) Provision of list. (1) Except as otherwise provided in this 
section, not later than three business days after a lender, mortgage 
broker, or dealer receives an application, or information sufficient to 
complete an application, the lender must provide the loan applicant with 
a clear and conspicuous written list of homeownership counseling 
organizations that provide relevant counseling services in the loan 
applicant's location. The list of homeownership counseling organizations 
distributed to each loan applicant under this section shall be obtained 
no earlier than 30 days prior to the time when the list is provided to 
the loan applicant from either:
    (i) The Web site maintained by the Bureau for lenders to use in 
complying with the requirements of this section; or
    (ii) Data made available by the Bureau or HUD for lenders to use in 
complying with the requirements of this section, provided that the data 
is used in accordance with instructions provided with the data.
    (2) The list of homeownership counseling organizations provided 
under this section may be combined and provided with other mortgage loan 
disclosures required pursuant to Regulation Z, 12 CFR part 1026, or this 
part unless prohibited by Regulation Z or this part.
    (3) A mortgage broker or dealer may provide the list of 
homeownership counseling organizations required under this section to 
any loan applicant from whom it receives or for whom it prepares an 
application. If the mortgage broker or dealer has provided the required 
list of homeownership counseling organizations, the lender is not 
required to provide an additional list. The lender is responsible for 
ensuring that the list of homeownership counseling organizations is 
provided to a loan applicant in accordance with this section.
    (4) If the lender, mortgage broker, or dealer does not provide the 
list of homeownership counseling organizations required under this 
section to the loan applicant in person, the lender must mail or deliver 
the list to the loan applicant by other means. The list may be provided 
in electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act), 15 U.S.C. 7001 et seq.
    (5) The lender is not required to provide the list of homeownership 
counseling organizations required under this section if, before the end 
of the three-business-day period provided in paragraph (a)(1) of this 
section, the lender denies the application or the loan applicant 
withdraws the application.
    (6) If a mortgage loan transaction involves more than one lender, 
only one list of homeownership counseling organizations required under 
this section shall be given to the loan applicant and the lenders shall 
agree among themselves which lender will comply with the requirements 
that this section imposes on any or all of them. If there is more than 
one loan applicant, the required list of homeownership counseling 
organizations may be provided to any loan applicant with primary 
liability on the mortgage loan obligation.
    (b) Open-end lines of credit (home-equity plans) under Regulation Z. 
For a federally related mortgage loan that is a home-equity line of 
credit subject to Regulation Z, 12 CFR 1026.40, a lender or mortgage 
broker that provides the loan applicant with the list of homeownership 
organizations required under this section may comply with the timing and 
delivery requirements set out in either paragraph (a) of this section or 
12 CFR 1026.40(b).
    (c) Exemptions--(1) Reverse mortgage transactions. A lender is not 
required to provide an applicant for a reverse mortgage transaction 
subject to 12 CFR 1026.33(a) the list of homeownership counseling 
organizations required under this section.

[[Page 530]]

    (2) Timeshare plans. A lender is not required to provide an 
applicant for a mortgage loan secured by a timeshare, as described under 
11 U.S.C. 101(53D), the list of homeownership counseling organizations 
required under this section.

[78 FR 6961, Jan. 31, 2013]



                      Subpart C_Mortgage Servicing

    Source: 78 FR 10876, Feb. 14, 2013, unless otherwise noted.



Sec. 1024.30  Scope.

    (a) In general. Except as provided in paragraphs (b) and (c) of this 
section, this subpart applies to any mortgage loan, as that term is 
defined in Sec. 1024.31.
    (b) Exemptions. Except as otherwise provided in Sec. 1024.41(j), 
Sec. Sec. 1024.38 through 1024.41 of this subpart shall not apply to the 
following:
    (1) A servicer that qualifies as a small servicer pursuant to 12 CFR 
1026.41(e)(4);
    (2) A servicer with respect to any reverse mortgage transaction as 
that term is defined in Sec. 1024.31; and
    (3) A servicer with respect to any mortgage loan for which the 
servicer is a qualified lender as that term is defined in 12 CFR 
617.7000.
    (c) Scope of certain sections. (1) Section 1024.33(a) only applies 
to mortgage loans that are secured by a first lien.
    (2) The procedures set forth in Sec. Sec. 1024.39 through 1024.41 of 
this subpart only apply to a mortgage loan that is secured by a property 
that is a borrower's principal residence.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013]

    Effective Date Note: At 78 FR 80104, Dec. 31, 2013, Sec. 1024.30 was 
amended by revising paragraph (c)(1), effective Aug. 1, 2015. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 1024.30  Scope.

                                * * * * *

    (c) Scope of certain sections. (1) Section 1024.33(a) only applies 
to reverse mortgage transactions.

                                * * * * *



Sec. 1024.31  Definitions.

    For purposes of this subpart:
    Consumer reporting agency has the meaning set forth in section 603 
of the Fair Credit Reporting Act, 15 U.S.C. 1681a.
    Day means calendar day.
    Hazard insurance means insurance on the property securing a mortgage 
loan that protects the property against loss caused by fire, wind, 
flood, earthquake, theft, falling objects, freezing, and other similar 
hazards for which the owner or assignee of such loan requires insurance.
    Loss mitigation application means an oral or written request for a 
loss mitigation option that is accompanied by any information required 
by a servicer for evaluation for a loss mitigation option.
    Loss mitigation option means an alternative to foreclosure offered 
by the owner or assignee of a mortgage loan that is made available 
through the servicer to the borrower.
    Master servicer means the owner of the right to perform servicing. A 
master servicer may perform the servicing itself or do so through a 
subservicer.
    Mortgage loan means any federally related mortgage loan, as that 
term is defined in Sec. 1024.2 subject to the exemptions in 
Sec. 1024.5(b), but does not include open-end lines of credit (home 
equity plans).
    Qualified written request means a written correspondence from the 
borrower to the servicer that includes, or otherwise enables the 
servicer to identify, the name and account of the borrower, and either:
    (1) States the reasons the borrower believes the account is in 
error; or
    (2) Provides sufficient detail to the servicer regarding information 
relating to the servicing of the mortgage loan sought by the borrower.
    Reverse mortgage transaction has the meaning set forth in 12 CFR 
1026.33(a).
    Service provider means any party retained by a servicer that 
interacts with a borrower or provides a service to the servicer for 
which a borrower may incur a fee.
    Subservicer means a servicer that does not own the right to perform 
servicing, but that performs servicing on behalf of the master servicer.

[[Page 531]]

    Transferee servicer means a servicer that obtains or will obtain the 
right to perform servicing pursuant to an agreement or understanding.
    Transferor servicer means a servicer, including a table-funding 
mortgage broker or dealer on a first- lien dealer loan, that transfers 
or will transfer the right to perform servicing pursuant to an agreement 
or understanding.



Sec. 1024.32  General disclosure requirements.

    (a) Disclosure requirements. (1) Form of disclosures. Except as 
otherwise provided in this subpart, disclosures required under this 
subpart must be clear and conspicuous, in writing, and in a form that a 
recipient may keep. The disclosures required by this subpart may be 
provided in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act, as set forth 
in Sec. 1024.3. A servicer may use commonly accepted or readily 
understandable abbreviations in complying with the disclosure 
requirements of this subpart.
    (2) Foreign language disclosures. Disclosures required under this 
subpart may be made in a language other than English, provided that the 
disclosures are made available in English upon a recipient's request.
    (b) Additional information; disclosures required by other laws. 
Unless expressly prohibited in this subpart, by other applicable law, 
such as the Truth in Lending Act (15 U.S.C. 1601 et seq.) or the Truth 
in Savings Act (12 U.S.C. 4301 et seq.), or by the terms of an agreement 
with a Federal or State regulatory agency, a servicer may include 
additional information in a disclosure required under this subpart or 
combine any disclosure required under this subpart with any disclosure 
required by such other law.



Sec. 1024.33  Mortgage servicing transfers.

    (a) Servicing disclosure statement. Within three days (excluding 
legal public holidays, Saturdays, and Sundays) after a person applies 
for a first-lien mortgage loan, the lender, mortgage broker who 
anticipates using table funding, or dealer in a first-lien dealer loan 
shall provide to the person a servicing disclosure statement that states 
whether the servicing of the mortgage loan may be assigned, sold, or 
transferred to any other person at any time. Appendix MS-1 of this part 
contains a model form for the disclosures required under this paragraph 
(a). If a person who applies for a first-lien mortgage loan is denied 
credit within the three-day period, a servicing disclosure statement is 
not required to be delivered.
    (b) Notices of transfer of loan servicing--(1) Requirement for 
notice. Except as provided in paragraph (b)(2) of this section, each 
transferor servicer and transferee servicer of any mortgage loan shall 
provide to the borrower a notice of transfer for any assignment, sale, 
or transfer of the servicing of the mortgage loan. The notice must 
contain the information described in paragraph (b)(4) of this section. 
Appendix MS-2 of this part contains a model form for the disclosures 
required under this paragraph (b).
    (2) Certain transfers excluded. (i) The following transfers are not 
assignments, sales, or transfers of mortgage loan servicing for purposes 
of this section if there is no change in the payee, address to which 
payment must be delivered, account number, or amount of payment due:
    (A) A transfer between affiliates;
    (B) A transfer that results from mergers or acquisitions of 
servicers or subservicers;
    (C) A transfer that occurs between master servicers without changing 
the subservicer;
    (ii) The Federal Housing Administration (FHA) is not required to 
provide to the borrower a notice of transfer where a mortgage insured 
under the National Housing Act is assigned to the FHA.
    (3) Time of notice--(i) In general. Except as provided in paragraphs 
(b)(3)(ii) and (iii) of this section, the transferor servicer shall 
provide the notice of transfer to the borrower not less than 15 days 
before the effective date of the transfer of the servicing of the 
mortgage loan. The transferee servicer shall provide the notice of 
transfer to the borrower not more than 15 days after the effective date 
of the transfer. The transferor and transferee servicers may provide a 
single notice, in which case the notice shall be provided not less

[[Page 532]]

than 15 days before the effective date of the transfer of the servicing 
of the mortgage loan.
    (ii) Extended time. The notice of transfer shall be provided to the 
borrower by the transferor servicer or the transferee servicer not more 
than 30 days after the effective date of the transfer of the servicing 
of the mortgage loan in any case in which the transfer of servicing is 
preceded by:
    (A) Termination of the contract for servicing the loan for cause;
    (B) Commencement of proceedings for bankruptcy of the servicer;
    (C) Commencement of proceedings by the FDIC for conservatorship or 
receivership of the servicer or an entity that owns or controls the 
servicer; or
    (D) Commencement of proceedings by the NCUA for appointment of a 
conservator or liquidating agent of the servicer or an entity that owns 
or controls the servicer.
    (iii) Notice provided at settlement. Notices of transfer provided at 
settlement by the transferor servicer and transferee servicer, whether 
as separate notices or as a combined notice, satisfy the timing 
requirements of paragraph (b)(3) of this section.
    (4) Contents of notice. The notices of transfer shall include the 
following information:
    (i) The effective date of the transfer of servicing;
    (ii) The name, address, and a collect call or toll-free telephone 
number for an employee or department of the transferee servicer that can 
be contacted by the borrower to obtain answers to servicing transfer 
inquiries;
    (iii) The name, address, and a collect call or toll-free telephone 
number for an employee or department of the transferor servicer that can 
be contacted by the borrower to obtain answers to servicing transfer 
inquiries;
    (iv) The date on which the transferor servicer will cease to accept 
payments relating to the loan and the date on which the transferee 
servicer will begin to accept such payments. These dates shall either be 
the same or consecutive days;
    (v) Whether the transfer will affect the terms or the continued 
availability of mortgage life or disability insurance, or any other type 
of optional insurance, and any action the borrower must take to maintain 
such coverage; and
    (vi) A statement that the transfer of servicing does not affect any 
term or condition of the mortgage loan other than terms directly related 
to the servicing of the loan.
    (c) Borrower payments during transfer of servicing--(1) Payments not 
considered late. During the 60-day period beginning on the effective 
date of transfer of the servicing of any mortgage loan, if the 
transferor servicer (rather than the transferee servicer that should 
properly receive payment on the loan) receives payment on or before the 
applicable due date (including any grace period allowed under the 
mortgage loan instruments), a payment may not be treated as late for any 
purpose.
    (2) Treatment of payments. Beginning on the effective date of 
transfer of the servicing of any mortgage loan, with respect to payments 
received incorrectly by the transferor servicer (rather than the 
transferee servicer that should properly receive the payment on the 
loan), the transferor servicer shall promptly either:
    (i) Transfer the payment to the transferee servicer for application 
to a borrower's mortgage loan account, or
    (ii) Return the payment to the person that made the payment and 
notify such person of the proper recipient of the payment.
    (d) Preemption of State laws. A lender who makes a mortgage loan or 
a servicer shall be considered to have complied with the provisions of 
any State law or regulation requiring notice to a borrower at the time 
of application for a loan or transfer of servicing of a loan if the 
lender or servicer complies with the requirements of this section. Any 
State law requiring notice to the borrower at the time of application or 
at the time of transfer of servicing of the loan is preempted, and there 
shall be no additional borrower disclosure requirements. Provisions of 
State law, such as those requiring additional notices to insurance 
companies or taxing authorities, are not preempted by section 6 of RESPA 
or this section, and this additional information may be added to a 
notice provided

[[Page 533]]

under this section, if permitted under State law.

    Effective Date Note: At 78 FR 80104, Dec. 31, 2013, Sec. 1024.33 was 
amended by revising paragraph (a), effective Aug. 1, 2015. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 1024.33  Mortgage servicing transfers.

    (a) Servicing disclosure statement. Within three days (excluding 
legal public holidays, Saturdays, and Sundays) after a person applies 
for a reverse mortgage transaction, the lender, mortgage broker who 
anticipates using table funding, or dealer in a first-lien dealer loan 
shall provide to the person a servicing disclosure statement that states 
whether the servicing of the mortgage loan may be assigned, sold, or 
transferred to any other person at any time. Appendix MS-1 of this part 
contains a model form for the disclosures required under this paragraph 
(a). If a person who applies for a reverse mortgage transaction is 
denied credit within the three-day period, a servicing disclosure 
statement is not required to be delivered.

                                * * * * *



Sec. 1024.34  Timely escrow payments and treatment of escrow account
balances.

    (a) Timely escrow disbursements required. If the terms of a mortgage 
loan require the borrower to make payments to the servicer of the 
mortgage loan for deposit into an escrow account to pay taxes, insurance 
premiums, and other charges for the mortgaged property, the servicer 
shall make payments from the escrow account in a timely manner, that is, 
on or before the deadline to avoid a penalty, as governed by the 
requirements in Sec. 1024.17(k).
    (b) Refund of escrow balance--(1) In general. Except as provided in 
paragraph (b)(2) of this section, within 20 days (excluding legal public 
holidays, Saturdays, and Sundays) of a borrower's payment of a mortgage 
loan in full, a servicer shall return to the borrower any amounts 
remaining in an escrow account that is within the servicer's control.
    (2) Servicer may credit funds to a new escrow account. 
Notwithstanding paragraph (b)(1) of this section, if the borrower 
agrees, a servicer may credit any amounts remaining in an escrow account 
that is within the servicer's control to an escrow account for a new 
mortgage loan as of the date of the settlement of the new mortgage loan 
if the new mortgage loan is provided to the borrower by a lender that:
    (i) Was also the lender to whom the prior mortgage loan was 
initially payable;
    (ii) Is the owner or assignee of the prior mortgage loan; or
    (iii) Uses the same servicer that serviced the prior mortgage loan 
to service the new mortgage loan.



Sec. 1024.35  Error resolution procedures.

    (a) Notice of error. A servicer shall comply with the requirements 
of this section for any written notice from the borrower that asserts an 
error and that includes the name of the borrower, information that 
enables the servicer to identify the borrower's mortgage loan account, 
and the error the borrower believes has occurred. A notice on a payment 
coupon or other payment form supplied by the servicer need not be 
treated by the servicer as a notice of error. A qualified written 
request that asserts an error relating to the servicing of a mortgage 
loan is a notice of error for purposes of this section, and a servicer 
must comply with all requirements applicable to a notice of error with 
respect to such qualified written request.
    (b) Scope of error resolution. For purposes of this section, the 
term ``error'' refers to the following categories of covered errors:
    (1) Failure to accept a payment that conforms to the servicer's 
written requirements for the borrower to follow in making payments.
    (2) Failure to apply an accepted payment to principal, interest, 
escrow, or other charges under the terms of the mortgage loan and 
applicable law.
    (3) Failure to credit a payment to a borrower's mortgage loan 
account as of the date of receipt in violation of 12 CFR 1026.36(c)(1).
    (4) Failure to pay taxes, insurance premiums, or other charges, 
including charges that the borrower and servicer have voluntarily agreed 
that the servicer should collect and pay, in a timely manner as required 
by Sec. 1024.34(a), or to refund an escrow account balance as required 
by Sec. 1024.34(b).

[[Page 534]]

    (5) Imposition of a fee or charge that the servicer lacks a 
reasonable basis to impose upon the borrower.
    (6) Failure to provide an accurate payoff balance amount upon a 
borrower's request in violation of section 12 CFR 1026.36(c)(3).
    (7) Failure to provide accurate information to a borrower regarding 
loss mitigation options and foreclosure, as required by Sec. 1024.39.
    (8) Failure to transfer accurately and timely information relating 
to the servicing of a borrower's mortgage loan account to a transferee 
servicer.
    (9) Making the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process in violation of 
Sec. 1024.41(f) or (j).
    (10) Moving for foreclosure judgment or order of sale, or conducting 
a foreclosure sale in violation of Sec. 1024.41(g) or (j).
    (11) Any other error relating to the servicing of a borrower's 
mortgage loan.
    (c) Contact information for borrowers to assert errors. A servicer 
may, by written notice provided to a borrower, establish an address that 
a borrower must use to submit a notice of error in accordance with the 
procedures in this section. The notice shall include a statement that 
the borrower must use the established address to assert an error. If a 
servicer designates a specific address for receiving notices of error, 
the servicer shall designate the same address for receiving information 
requests pursuant to Sec. 1024.36(b). A servicer shall provide a written 
notice to a borrower before any change in the address used for receiving 
a notice of error. A servicer that designates an address for receipt of 
notices of error must post the designated address on any Web site 
maintained by the servicer if the Web site lists any contact address for 
the servicer.
    (d) Acknowledgment of receipt. Within five days (excluding legal 
public holidays, Saturdays, and Sundays) of a servicer receiving a 
notice of error from a borrower, the servicer shall provide to the 
borrower a written response acknowledging receipt of the notice of 
error.
    (e) Response to notice of error--(1) Investigation and response 
requirements--(i) In general. Except as provided in paragraphs (f) and 
(g) of this section, a servicer must respond to a notice of error by 
either:
    (A) Correcting the error or errors identified by the borrower and 
providing the borrower with a written notification of the correction, 
the effective date of the correction, and contact information, including 
a telephone number, for further assistance; or
    (B) Conducting a reasonable investigation and providing the borrower 
with a written notification that includes a statement that the servicer 
has determined that no error occurred, a statement of the reason or 
reasons for this determination, a statement of the borrower's right to 
request documents relied upon by the servicer in reaching its 
determination, information regarding how the borrower can request such 
documents, and contact information, including a telephone number, for 
further assistance.
    (ii) Different or additional error. If during a reasonable 
investigation of a notice of error, a servicer concludes that errors 
occurred other than, or in addition to, the error or errors alleged by 
the borrower, the servicer shall correct all such additional errors and 
provide the borrower with a written notification that describes the 
errors the servicer identified, the action taken to correct the errors, 
the effective date of the correction, and contact information, including 
a telephone number, for further assistance.
    (2) Requesting information from borrower. A servicer may request 
supporting documentation from a borrower in connection with the 
investigation of an asserted error, but may not:
    (i) Require a borrower to provide such information as a condition of 
investigating an asserted error; or
    (ii) Determine that no error occurred because the borrower failed to 
provide any requested information without conducting a reasonable 
investigation pursuant to paragraph (e)(1)(i)(B) of this section.
    (3) Time limits--(i) In general. A servicer must comply with the 
requirements of paragraph (e)(1) of this section:

[[Page 535]]

    (A) Not later than seven days (excluding legal public holidays, 
Saturdays, and Sundays) after the servicer receives the notice of error 
for errors asserted under paragraph (b)(6) of this section.
    (B) Prior to the date of a foreclosure sale or within 30 days 
(excluding legal public holidays, Saturdays, and Sundays) after the 
servicer receives the notice of error, whichever is earlier, for errors 
asserted under paragraphs (b)(9) and (10) of this section.
    (C) For all other asserted errors, not later than 30 days (excluding 
legal public holidays, Saturdays, and Sundays) after the servicer 
receives the applicable notice of error.
    (ii) Extension of time limit. For asserted errors governed by the 
time limit set forth in paragraph (e)(3)(i)(C) of this section, a 
servicer may extend the time period for responding by an additional 15 
days (excluding legal public holidays, Saturdays, and Sundays) if, 
before the end of the 30-day period, the servicer notifies the borrower 
of the extension and the reasons for the extension in writing. A 
servicer may not extend the time period for responding to errors 
asserted under paragraph (b)(6), (9), or (10) of this section.
    (4) Copies of documentation. A servicer shall provide to the 
borrower, at no charge, copies of documents and information relied upon 
by the servicer in making its determination that no error occurred 
within 15 days (excluding legal public holidays, Saturdays, and Sundays) 
of receiving the borrower's request for such documents. A servicer is 
not required to provide documents relied upon that constitute 
confidential, proprietary or privileged information. If a servicer 
withholds documents relied upon because it has determined that such 
documents constitute confidential, proprietary or privileged 
information, the servicer must notify the borrower of its determination 
in writing within 15 days (excluding legal public holidays, Saturdays, 
and Sundays) of receipt of the borrower's request for such documents.
    (f) Alternative compliance--(1) Early correction. A servicer is not 
required to comply with paragraphs (d) and (e) of this section if the 
servicer corrects the error or errors asserted by the borrower and 
notifies the borrower of that correction in writing within five days 
(excluding legal public holidays, Saturdays, and Sundays) of receiving 
the notice of error.
    (2) Error asserted before foreclosure sale. A servicer is not 
required to comply with the requirements of paragraphs (d) and (e) of 
this section for errors asserted under paragraph (b)(9) or (10) of this 
section if the servicer receives the applicable notice of an error seven 
or fewer days before a foreclosure sale. For any such notice of error, a 
servicer shall make a good faith attempt to respond to the borrower, 
orally or in writing, and either correct the error or state the reason 
the servicer has determined that no error has occurred.
    (g) Requirements not applicable--(1) In general. A servicer is not 
required to comply with the requirements of paragraphs (d), (e), and (i) 
of this section if the servicer reasonably determines that any of the 
following apply:
    (i) Duplicative notice of error. The asserted error is substantially 
the same as an error previously asserted by the borrower for which the 
servicer has previously complied with its obligation to respond pursuant 
to paragraphs (d) and (e) of this section, unless the borrower provides 
new and material information to support the asserted error. New and 
material information means information that was not reviewed by the 
servicer in connection with investigating a prior notice of the same 
error and is reasonably likely to change the servicer's prior 
determination about the error.
    (ii) Overbroad notice of error. The notice of error is overbroad. A 
notice of error is overbroad if the servicer cannot reasonably determine 
from the notice of error the specific error that the borrower asserts 
has occurred on a borrower's account. To the extent a servicer can 
reasonably identify a valid assertion of an error in a notice of error 
that is otherwise overbroad, the servicer shall comply with the 
requirements of paragraphs (d), (e) and (i) of this section with respect 
to that asserted error.
    (iii) Untimely notice of error. A notice of error is delivered to 
the servicer more than one year after:

[[Page 536]]

    (A) Servicing for the mortgage loan that is the subject of the 
asserted error was transferred from the servicer receiving the notice of 
error to a transferee servicer; or
    (B) The mortgage loan is discharged.
    (2) Notice to borrower. If a servicer determines that, pursuant to 
this paragraph (g), the servicer is not required to comply with the 
requirements of paragraphs (d), (e), and (i) of this section, the 
servicer shall notify the borrower of its determination in writing not 
later than five days (excluding legal public holidays, Saturdays, and 
Sundays) after making such determination. The notice to the borrower 
shall set forth the basis under paragraph (g)(1) of this section upon 
which the servicer has made such determination.
    (h) Payment requirements prohibited. A servicer shall not charge a 
fee, or require a borrower to make any payment that may be owed on a 
borrower's account, as a condition of responding to a notice of error.
    (i) Effect on servicer remedies--(1) Adverse information. After 
receipt of a notice of error, a servicer may not, for 60 days, furnish 
adverse information to any consumer reporting agency regarding any 
payment that is the subject of the notice of error.
    (2) Remedies permitted. Except as set forth in this section with 
respect to an assertion of error under paragraph (b)(9) or (10) of this 
section, nothing in this section shall limit or restrict a lender or 
servicer from pursuing any remedy it has under applicable law, including 
initiating foreclosure or proceeding with a foreclosure sale.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013]



Sec. 1024.36  Requests for information.

    (a) Information request. A servicer shall comply with the 
requirements of this section for any written request for information 
from a borrower that includes the name of the borrower, information that 
enables the servicer to identify the borrower's mortgage loan account, 
and states the information the borrower is requesting with respect to 
the borrower's mortgage loan. A request on a payment coupon or other 
payment form supplied by the servicer need not be treated by the 
servicer as a request for information. A request for a payoff balance 
need not be treated by the servicer as a request for information. A 
qualified written request that requests information relating to the 
servicing of the mortgage loan is a request for information for purposes 
of this section, and a servicer must comply with all requirements 
applicable to a request for information with respect to such qualified 
written request.
    (b) Contact information for borrowers to request information. A 
servicer may, by written notice provided to a borrower, establish an 
address that a borrower must use to request information in accordance 
with the procedures in this section. The notice shall include a 
statement that the borrower must use the established address to request 
information. If a servicer designates a specific address for receiving 
information requests, a servicer shall designate the same address for 
receiving notices of error pursuant to Sec. 1024.35(c). A servicer shall 
provide a written notice to a borrower before any change in the address 
used for receiving an information request. A servicer that designates an 
address for receipt of information requests must post the designated 
address on any Web site maintained by the servicer if the Web site lists 
any contact address for the servicer.
    (c) Acknowledgment of receipt. Within five days (excluding legal 
public holidays, Saturdays, and Sundays) of a servicer receiving an 
information request from a borrower, the servicer shall provide to the 
borrower a written response acknowledging receipt of the information 
request.
    (d) Response to information request--(1) Investigation and response 
requirements. Except as provided in paragraphs (e) and (f) of this 
section, a servicer must respond to an information request by either:
    (i) Providing the borrower with the requested information and 
contact information, including a telephone number, for further 
assistance in writing; or
    (ii) Conducting a reasonable search for the requested information 
and providing the borrower with a written notification that states that 
the servicer has determined that the requested information is not 
available to the

[[Page 537]]

servicer, provides the basis for the servicer's determination, and 
provides contact information, including a telephone number, for further 
assistance.
    (2) Time limits--(i) In general. A servicer must comply with the 
requirements of paragraph (d)(1) of this section:
    (A) Not later than 10 days (excluding legal public holidays, 
Saturdays, and Sundays) after the servicer receives an information 
request for the identity of, and address or other relevant contact 
information for, the owner or assignee of a mortgage loan; and
    (B) For all other requests for information, not later than 30 days 
(excluding legal public holidays, Saturdays, and Sundays) after the 
servicer receives the information request.
    (ii) Extension of time limit. For requests for information governed 
by the time limit set forth in paragraph (d)(2)(i)(B) of this section, a 
servicer may extend the time period for responding by an additional 15 
days (excluding legal public holidays, Saturdays, and Sundays) if, 
before the end of the 30-day period, the servicer notifies the borrower 
of the extension and the reasons for the extension in writing. A 
servicer may not extend the time period for requests for information 
governed by paragraph (d)(2)(i)(A) of this section.
    (e) Alternative compliance. A servicer is not required to comply 
with paragraphs (c) and (d) of this section if the servicer provides the 
borrower with the information requested and contact information, 
including a telephone number, for further assistance in writing within 
five days (excluding legal public holidays, Saturdays, and Sundays) of 
receiving an information request.
    (f) Requirements not applicable--(1) In general. A servicer is not 
required to comply with the requirements of paragraphs (c) and (d) of 
this section if the servicer reasonably determines that any of the 
following apply:
    (i) Duplicative information. The information requested is 
substantially the same as information previously requested by the 
borrower for which the servicer has previously complied with its 
obligation to respond pursuant to paragraphs (c) and (d) of this 
section.
    (ii) Confidential, proprietary or privileged information. The 
information requested is confidential, proprietary or privileged.
    (iii) Irrelevant information. The information requested is not 
directly related to the borrower's mortgage loan account.
    (iv) Overbroad or unduly burdensome information request. The 
information request is overbroad or unduly burdensome. An information 
request is overbroad if a borrower requests that the servicer provide an 
unreasonable volume of documents or information to a borrower. An 
information request is unduly burdensome if a diligent servicer could 
not respond to the information request without either exceeding the 
maximum time limit permitted by paragraph (d)(2) of this section or 
incurring costs (or dedicating resources) that would be unreasonable in 
light of the circumstances. To the extent a servicer can reasonably 
identify a valid information request in a submission that is otherwise 
overbroad or unduly burdensome, the servicer shall comply with the 
requirements of paragraphs (c) and (d) of this section with respect to 
that requested information.
    (v) Untimely information request. The information request is 
delivered to a servicer more than one year after:
    (A) Servicing for the mortgage loan that is the subject of the 
information request was transferred from the servicer receiving the 
request for information to a transferee servicer; or
    (B) The mortgage loan is discharged.
    (2) Notice to borrower. If a servicer determines that, pursuant to 
this paragraph (f), the servicer is not required to comply with the 
requirements of paragraphs (c) and (d) of this section, the servicer 
shall notify the borrower of its determination in writing not later than 
five days (excluding legal public holidays, Saturdays, and Sundays) 
after making such determination. The notice to the borrower shall set 
forth the basis under paragraph (f)(1) of this section upon which the 
servicer has made such determination.
    (g) Payment requirement limitations--(1) Fees prohibited. Except as 
set forth in paragraph (g)(2) of this section, a servicer shall not 
charge a fee, or require a borrower to make any payment

[[Page 538]]

that may be owed on a borrower's account, as a condition of responding 
to an information request.
    (2) Fee permitted. Nothing in this section shall prohibit a servicer 
from charging a fee for providing a beneficiary notice under applicable 
State law, if such a fee is not otherwise prohibited by applicable law.
    (h) Servicer remedies. Nothing in this section shall prohibit a 
servicer from furnishing adverse information to any consumer reporting 
agency or pursuing any of its remedies, including initiating foreclosure 
or proceeding with a foreclosure sale, allowed by the underlying 
mortgage loan instruments, during the time period that response to an 
information request notice is outstanding.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013]



Sec. 1024.37  Force-placed insurance.

    (a) Definition of force-placed insurance--(1) In general. For the 
purposes of this section, the term ``force-placed insurance'' means 
hazard insurance obtained by a servicer on behalf of the owner or 
assignee of a mortgage loan that insures the property securing such 
loan.
    (2) Types of insurance not considered force-placed insurance. The 
following insurance does not constitute ``force-placed insurance'' under 
this section:
    (i) Hazard insurance required by the Flood Disaster Protection Act 
of 1973.
    (ii) Hazard insurance obtained by a borrower but renewed by the 
borrower's servicer as described in Sec. 1024.17(k)(1), (2), or (5).
    (iii) Hazard insurance obtained by a borrower but renewed by the 
borrower's servicer at its discretion, if the borrower agrees.
    (b) Basis for charging borrower for force-placed insurance. A 
servicer may not assess on a borrower a premium charge or fee related to 
force-placed insurance unless the servicer has a reasonable basis to 
believe that the borrower has failed to comply with the mortgage loan 
contract's requirement to maintain hazard insurance.
    (c) Requirements before charging borrower for force-placed 
insurance--(1) In general. Before a servicer assesses on a borrower any 
premium charge or fee related to force-placed insurance, the servicer 
must:
    (i) Deliver to a borrower or place in the mail a written notice 
containing the information required by paragraph (c)(2) of this section 
at least 45 days before a servicer assesses on a borrower such charge or 
fee;
    (ii) Deliver to the borrower or place in the mail a written notice 
in accordance with paragraph (d)(1) of this section; and
    (iii) By the end of the 15-day period beginning on the date the 
written notice described in paragraph (c)(1)(ii) of this section was 
delivered to the borrower or placed in the mail, not have received, from 
the borrower or otherwise, evidence demonstrating that the borrower has 
had in place, continuously, hazard insurance coverage that complies with 
the loan contract's requirements to maintain hazard insurance.
    (2) Content of notice. The notice required by paragraph (c)(1)(i) of 
this section shall set forth the following information:
    (i) The date of the notice;
    (ii) The servicer's name and mailing address;
    (iii) The borrower's name and mailing address;
    (iv) A statement that requests the borrower to provide hazard 
insurance information for the borrower's property and identifies the 
property by its physical address;
    (v) A statement that the borrower's hazard insurance is expiring or 
has expired, as applicable, and that the servicer does not have evidence 
that the borrower has hazard insurance coverage past the expiration 
date, and that, if applicable, identifies the type of hazard insurance 
for which the servicer lacks evidence of coverage;
    (vi) A statement that hazard insurance is required on the borrower's 
property, and that the servicer has purchased or will purchase, as 
applicable, such insurance at the borrower's expense;
    (vii) A statement requesting the borrower to promptly provide the 
servicer with insurance information;
    (viii) A description of the requested insurance information and how 
the

[[Page 539]]

borrower may provide such information, and if applicable, a statement 
that the requested information must be in writing;
    (ix) A statement that insurance the servicer has purchased or 
purchases:
    (A) May cost significantly more than hazard insurance purchased by 
the borrower;
    (B) Not provide as much coverage as hazard insurance purchased by 
the borrower;
    (x) The servicer's telephone number for borrower inquiries; and
    (xi) If applicable, a statement advising the borrower to review 
additional information provided in the same transmittal.
    (3) Format. A servicer must set the information required by 
paragraphs (c)(2)(iv), (vi), and (ix)(A) and (B) in bold text, except 
that the information about the physical address of the borrower's 
property required by paragraph (c)(2)(iv) of this section may be set in 
regular text. A servicer may use form MS-3A in appendix MS-3 of this 
part to comply with the requirements of paragraphs (c)(1)(i) and (2) of 
this section.
    (4) Additional information. A servicer may not include any 
information other than information required by paragraphs (c)(2) of this 
section in the written notice required by paragraph (c)(1)(i) of this 
section. However, a servicer may provide such additional information to 
a borrower on separate pieces of paper in the same transmittal.
    (d) Reminder notice--(1) In general. The notice required by 
paragraph (c)(1)(ii) of this section shall be delivered to the borrower 
or placed in the mail at least 15 days before a servicer assesses on a 
borrower a premium charge or fee related to force-placed insurance. A 
servicer may not deliver to a borrower or place in the mail the notice 
required by paragraph (c)(1)(ii) of this section until at least 30 days 
after delivering to the borrower or placing in the mail the written 
notice required by paragraph (c)(1)(i) of this section.
    (2) Content of the reminder notice--(i) Servicer receiving no 
insurance information. A servicer that receives no hazard insurance 
information after delivering to the borrower or placing in the mail the 
notice required by paragraph (c)(1)(i) of this section must set forth in 
the notice required by paragraph (c)(1)(ii) of this section:
    (A) The date of the notice;
    (B) A statement that the notice is the second and final notice;
    (C) The information required by paragraphs (c)(2)(ii) through (xi) 
of this section; and
    (D) The cost of the force-placed insurance, stated as an annual 
premium, except if a servicer does not know the cost of force-placed 
insurance, a reasonable estimate shall be disclosed and identified as 
such.
    (ii) Servicer not receiving demonstration of continuous coverage. A 
servicer that has received hazard insurance information after delivering 
to a borrower or placing in the mail the notice required by paragraph 
(c)(1)(i) of this section, but has not received, from the borrower or 
otherwise, evidence demonstrating that the borrower has had hazard 
insurance coverage in place continuously, must set forth in the notice 
required by paragraph (c)(1)(ii) of this section the following 
information:
    (A) The date of the notice;
    (B) The information required by paragraphs (c)(2)(ii) through (iv), 
(x), (xi), and (d)(2)(i)(B) and (D) of this section;
    (C) A statement that the servicer has received the hazard insurance 
information that the borrower provided;
    (D) A statement that requests the borrower to provide the 
information that is missing;
    (E) A statement that the borrower will be charged for insurance the 
servicer has purchased or purchases for the period of time during which 
the servicer is unable to verify coverage;
    (3) Format. A servicer must set the information required by 
paragraphs (d)(2)(i)(B) and (D) of this section in bold text. A servicer 
may use form MS-3B in appendix MS-3 of this part to comply with the 
requirements of paragraphs (d)(1) and (d)(2)(i) of this section. A 
servicer may use form MS-3C in appendix MS-3 of this part to comply with 
the requirements of paragraphs (d)(1) and (d)(2)(ii) of this section.
    (4) Additional information. As applicable, a servicer may not 
include any information other than information required by paragraph 
(d)(2)(i) or (ii) of

[[Page 540]]

this section in the written notice required by paragraph (c)(1)(ii) of 
this section. However, a servicer may provide such additional 
information to a borrower on separate pieces of paper in the same 
transmittal.
    (5) Updating notice with borrower information. If a servicer 
receives new information about a borrower's hazard insurance after a 
written notice required by paragraph (c)(1)(ii) of this section has been 
put into production, the servicer is not required to update such notice 
based on the new information so long as the notice was put into 
production a reasonable time prior to the servicer delivering the notice 
to the borrower or placing the notice in the mail.
    (e) Renewing or replacing force-placed insurance--(1) In general. 
Before a servicer assesses on a borrower a premium charge or fee related 
to renewing or replacing existing force-placed insurance, a servicer 
must:
    (i) Deliver to the borrower or place in the mail a written notice 
containing the information set forth in paragraph (e)(2) of this section 
at least 45 days before assessing on a borrower such charge or fee; and
    (ii) By the end of the 45-day period beginning on the date the 
written notice required by paragraph (e)(1)(i) of this section was 
delivered to the borrower or placed in the mail, not have received, from 
the borrower or otherwise, evidence demonstrating that the borrower has 
purchased hazard insurance coverage that complies with the loan 
contract's requirements to maintain hazard insurance.
    (iii) Charging a borrower before end of notice period. 
Notwithstanding paragraphs (e)(1)(i) and (ii) of this section, if not 
prohibited by State or other applicable law, if a servicer has renewed 
or replaced existing force-placed insurance and receives evidence 
demonstrating that the borrower lacked insurance coverage for some 
period of time following the expiration of the existing force-placed 
insurance (including during the notice period prescribed by paragraph 
(e)(1) of this section), the servicer may, promptly upon receiving such 
evidence, assess on the borrower a premium charge or fee related to 
renewing or replacing existing force-placed insurance for that period of 
time.
    (2) Content of renewal notice. The notice required by paragraph 
(e)(1)(i) of this section shall set forth the following information:
    (i) The date of the notice;
    (ii) The servicer's name and mailing address;
    (iii) The borrower's name and mailing address;
    (iv) A statement that requests the borrower to update the hazard 
insurance information for the borrower's property and identifies the 
borrower's property by its physical address;
    (v) A statement that the servicer previously purchased insurance on 
the borrower's property and assessed the cost of the insurance to the 
borrower because the servicer did not have evidence that the borrower 
had hazard insurance coverage for the property;
    (vi) A statement that:
    (A) The insurance the servicer purchased previously has expired or 
is expiring, as applicable; and
    (B) Because hazard insurance is required on the borrower's property, 
the servicer intends to maintain insurance on the property by renewing 
or replacing the insurance it previously purchased;
    (vii) A statement informing the borrower:
    (A) That insurance the servicer purchases may cost significantly 
more than hazard insurance purchased by the borrower;
    (B) That such insurance may not provide as much coverage as hazard 
insurance purchased by the borrower; and
    (C) The cost of the force-placed insurance, stated as an annual 
premium, except if a servicer does not know the cost of force-placed 
insurance, a reasonable estimate shall be disclosed and identified as 
such.
    (viii) A statement that if the borrower purchases hazard insurance, 
the borrower should promptly provide the servicer with insurance 
information.
    (ix) A description of the requested insurance information and how 
the borrower may provide such information, and if applicable, a 
statement that the requested information must be in writing;

[[Page 541]]

    (x) The servicer's telephone number for borrower inquiries; and
    (xi) If applicable, a statement advising a borrower to review 
additional information provided in the same transmittal.
    (3) Format. A servicer must set the information required by 
paragraphs (e)(2)(iv), (vi)(B), and (vii)(A) through (C) of this section 
in bold text, except that the information about the physical address of 
the borrower's property required by paragraph (e)(2)(iv) may be set in 
regular text. A servicer may use form MS-3D in appendix MS-3 of this 
part to comply with the requirements of paragraphs (e)(1)(i) and (2) of 
this section.
    (4) Additional information. As applicable, a servicer may not 
include any information other than information required by paragraph 
(e)(2) of this section in the written notice required by paragraph 
(e)(1) of this section. However, a servicer may provide such additional 
information to a borrower on separate pieces of paper in same 
transmittal.
    (5) Frequency of renewal notices. Before each anniversary of a 
servicer purchasing force-placed insurance on a borrower's property, the 
servicer shall deliver to the borrower or place in the mail the written 
notice required by paragraph (e)(1) of this section. A servicer is not 
required to provide the written notice required by paragraph (e)(1) of 
this section more than once a year.
    (f) Mailing the notices. If a servicer mails a written notice 
required by paragraphs (c)(1)(i), (c)(1)(ii), or (e)(1) of this section, 
the servicer must use a class of mail not less than first-class mail.
    (g) Cancellation of force-placed insurance. Within 15 days of 
receiving, from the borrower or otherwise, evidence demonstrating that 
the borrower has had in place hazard insurance coverage that complies 
with the loan contract's requirements to maintain hazard insurance, a 
servicer must:
    (1) Cancel the force-placed insurance the servicer purchased to 
insure the borrower's property; and
    (2) Refund to such borrower all force-placed insurance premium 
charges and related fees paid by such borrower for any period of 
overlapping insurance coverage and remove from the borrower's account 
all force-placed insurance charges and related fees for such period that 
the servicer has assessed to the borrower.
    (h) Limitations on force-placed insurance charges--(1) In general. 
Except for charges subject to State regulation as the business of 
insurance and charges authorized by the Flood Disaster Protection Act of 
1973, all charges related to force-placed insurance assessed to a 
borrower by or through the servicer must be bona fide and reasonable.
    (2) Bona fide and reasonable charge. A bona fide and reasonable 
charge is a charge for a service actually performed that bears a 
reasonable relationship to the servicer's cost of providing the service, 
and is not otherwise prohibited by applicable law.
    (i) Relationship to Flood Disaster Protection Act of 1973. If 
permitted by regulation under section 102(e) of the Flood Disaster 
Protection Act of 1973, a servicer subject to the requirements of this 
section may deliver to the borrower or place in the mail any notice 
required by this section and the notice required by section 102(e) of 
the Flood Disaster Protection Act of 1973 on separate pieces of paper in 
the same transmittal.



Sec. 1024.38  General servicing policies, procedures, and requirements.

    (a) Reasonable policies and procedures. A servicer shall maintain 
policies and procedures that are reasonably designed to achieve the 
objectives set forth in paragraph (b) of this section.
    (b) Objectives--(1) Accessing and providing timely and accurate 
information. The policies and procedures required by paragraph (a) of 
this section shall be reasonably designed to ensure that the servicer 
can:
    (i) Provide accurate and timely disclosures to a borrower as 
required by this subpart or other applicable law;
    (ii) Investigate, respond to, and, as appropriate, make corrections 
in response to complaints asserted by a borrower;

[[Page 542]]

    (iii) Provide a borrower with accurate and timely information and 
documents in response to the borrower's requests for information with 
respect to the borrower's mortgage loan;
    (iv) Provide owners or assignees of mortgage loans with accurate and 
current information and documents about all mortgage loans they own;
    (v) Submit documents or filings required for a foreclosure process, 
including documents or filings required by a court of competent 
jurisdiction, that reflect accurate and current information and that 
comply with applicable law; and
    (vi) Upon notification of the death of a borrower, promptly identify 
and facilitate communication with the successor in interest of the 
deceased borrower with respect to the property secured by the deceased 
borrower's mortgage loan.
    (2) Properly evaluating loss mitigation applications. The policies 
and procedures required by paragraph (a) of this section shall be 
reasonably designed to ensure that the servicer can:
    (i) Provide accurate information regarding loss mitigation options 
available to a borrower from the owner or assignee of the borrower's 
mortgage loan;
    (ii) Identify with specificity all loss mitigation options for which 
borrowers may be eligible pursuant to any requirements established by an 
owner or assignee of the borrower's mortgage loan;
    (iii) Provide prompt access to all documents and information 
submitted by a borrower in connection with a loss mitigation option to 
servicer personnel that are assigned to assist the borrower pursuant to 
Sec. 1024.40;
    (iv) Identify documents and information that a borrower is required 
to submit to complete a loss mitigation application and facilitate 
compliance with the notice required pursuant to 
Sec. 1024.41(b)(2)(i)(B); and
    (v) Properly evaluate a borrower who submits an application for a 
loss mitigation option for all loss mitigation options for which the 
borrower may be eligible pursuant to any requirements established by the 
owner or assignee of the borrower's mortgage loan and, where applicable, 
in accordance with the requirements of Sec. 1024.41.
    (3) Facilitating oversight of, and compliance by, service providers. 
The policies and procedures required by paragraph (a) of this section 
shall be reasonably designed to ensure that the servicer can:
    (i) Provide appropriate servicer personnel with access to accurate 
and current documents and information reflecting actions performed by 
service providers;
    (ii) Facilitate periodic reviews of service providers, including by 
providing appropriate servicer personnel with documents and information 
necessary to audit compliance by service providers with the servicer's 
contractual obligations and applicable law; and
    (iii) Facilitate the sharing of accurate and current information 
regarding the status of any evaluation of a borrower's loss mitigation 
application and the status of any foreclosure proceeding among 
appropriate servicer personnel, including any personnel assigned to a 
borrower's mortgage loan account as described in Sec. 1024.40, and 
appropriate service provider personnel, including service provider 
personnel responsible for handling foreclosure proceedings.
    (4) Facilitating transfer of information during servicing transfers. 
The policies and procedures required by paragraph (a) of this section 
shall be reasonably designed to ensure that the servicer can:
    (i) As a transferor servicer, timely transfer all information and 
documents in the possession or control of the servicer relating to a 
transferred mortgage loan to a transferee servicer in a form and manner 
that ensures the accuracy of the information and documents transferred 
and that enables a transferee servicer to comply with the terms of the 
transferee servicer's obligations to the owner or assignee of the 
mortgage loan and applicable law; and
    (ii) As a transferee servicer, identify necessary documents or 
information that may not have been transferred by a transferor servicer 
and obtain such documents from the transferor servicer.

[[Page 543]]

    (iii) For the purposes of this paragraph (b)(4), transferee servicer 
means a servicer, including a master servicer or a subservicer, that 
performs or will perform servicing of a mortgage loan and transferor 
servicer means a servicer, including a master servicer or a subservicer, 
that transfers or will transfer the servicing of a mortgage loan.
    (5) Informing borrowers of the written error resolution and 
information request procedures. The policies and procedures required by 
paragraph (a) of this section shall be reasonably designed to ensure 
that the servicer informs borrowers of the procedures for submitting 
written notices of error set forth in Sec. 1024.35 and written 
information requests set forth in Sec. 1024.36.
    (c) Standard requirements--(1) Record retention. A servicer shall 
retain records that document actions taken with respect to a borrower's 
mortgage loan account until one year after the date a mortgage loan is 
discharged or servicing of a mortgage loan is transferred by the 
servicer to a transferee servicer.
    (2) Servicing file. A servicer shall maintain the following 
documents and data on each mortgage loan account serviced by the 
servicer in a manner that facilitates compiling such documents and data 
into a servicing file within five days:
    (i) A schedule of all transactions credited or debited to the 
mortgage loan account, including any escrow account as defined in 
Sec. 1024.17(b) and any suspense account;
    (ii) A copy of the security instrument that establishes the lien 
securing the mortgage loan;
    (iii) Any notes created by servicer personnel reflecting 
communications with the borrower about the mortgage loan account;
    (iv) To the extent applicable, a report of the data fields relating 
to the borrower's mortgage loan account created by the servicer's 
electronic systems in connection with servicing practices; and
    (v) Copies of any information or documents provided by the borrower 
to the servicer in accordance with the procedures set forth in 
Sec. 1024.35 or Sec. 1024.41.



Sec. 1024.39  Early intervention requirements for certain borrowers.

    (a) Live contact. A servicer shall establish or make good faith 
efforts to establish live contact with a delinquent borrower not later 
than the 36th day of the borrower's delinquency and, promptly after 
establishing live contact, inform such borrower about the availability 
of loss mitigation options if appropriate.
    (b) Written notice--(1) Notice required. Except as otherwise 
provided in this section, a servicer shall provide to a delinquent 
borrower a written notice with the information set forth in paragraph 
(b)(2) of this section not later than the 45th day of the borrower's 
delinquency. A servicer is not required to provide the written notice 
more than once during any 180-day period.
    (2) Content of the written notice. The notice required by paragraph 
(b)(1) of this section shall include:
    (i) A statement encouraging the borrower to contact the servicer;
    (ii) The telephone number to access servicer personnel assigned 
pursuant to Sec. 1024.40(a) and the servicer's mailing address;
    (iii) If applicable, a statement providing a brief description of 
examples of loss mitigation options that may be available from the 
servicer;
    (iv) If applicable, either application instructions or a statement 
informing the borrower how to obtain more information about loss 
mitigation options from the servicer; and
    (v) The Web site to access either the Bureau list or the HUD list of 
homeownership counselors or counseling organizations, and the HUD toll-
free telephone number to access homeownership counselors or counseling 
organizations.
    (3) Model clauses. Model clauses MS-4(A), MS-4(B), and MS-4(C), in 
appendix MS-4 to this part may be used to comply with the requirements 
of this paragraph (b).
    (c) Conflicts with other law. Nothing in this section shall require 
a servicer to communicate with a borrower in a manner otherwise 
prohibited by applicable law.
    (d) Exemptions--(1) Borrowers in bankruptcy. A servicer is exempt 
from the requirements of this section for a

[[Page 544]]

mortgage loan while the borrower is a debtor in bankruptcy under Title 
11 of the United States Code.
    (2) Fair Debt Collections Practices Act. A servicer subject to the 
Fair Debt Collections Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) 
with respect to a borrower is exempt from the requirements of this 
section with regard to a mortgage loan for which the borrower has sent a 
notification pursuant to FDCPA section 805(c) (15 U.S.C. 1692c(c)).

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 78 
FR 63004, Oct. 23, 2013]



Sec. 1024.40  Continuity of contact.

    (a) In general. A servicer shall maintain policies and procedures 
that are reasonably designed to achieve the following objectives:
    (1) Assign personnel to a delinquent borrower by the time the 
servicer provides the borrower with the written notice required by 
Sec. 1024.39(b), but in any event, not later than the 45th day of the 
borrower's delinquency.
    (2) Make available to a delinquent borrower, via telephone, 
personnel assigned to the borrower as described in paragraph (a)(1) of 
this section to respond to the borrower's inquiries, and as applicable, 
assist the borrower with available loss mitigation options until the 
borrower has made, without incurring a late charge, two consecutive 
mortgage payments in accordance with the terms of a permanent loss 
mitigation agreement.
    (3) If a borrower contacts the personnel assigned to the borrower as 
described in paragraph (a)(1) of this section and does not immediately 
receive a live response from such personnel, ensure that the servicer 
can provide a live response in a timely manner.
    (b) Functions of servicer personnel. A servicer shall maintain 
policies and procedures reasonably designed to ensure that servicer 
personnel assigned to a delinquent borrower as described in paragraph 
(a) of this section perform the following functions:
    (1) Provide the borrower with accurate information about:
    (i) Loss mitigation options available to the borrower from the owner 
or assignee of the borrower's mortgage loan;
    (ii) Actions the borrower must take to be evaluated for such loss 
mitigation options, including actions the borrower must take to submit a 
complete loss mitigation application, as defined in Sec. 1024.41, and, 
if applicable, actions the borrower must take to appeal the servicer's 
determination to deny a borrower's loss mitigation application for any 
trial or permanent loan modification program offered by the servicer;
    (iii) The status of any loss mitigation application that the 
borrower has submitted to the servicer;
    (iv) The circumstances under which the servicer may make a referral 
to foreclosure; and
    (v) Applicable loss mitigation deadlines established by an owner or 
assignee of the borrower's mortgage loan or Sec. 1024.41.
    (2) Retrieve, in a timely manner:
    (i) A complete record of the borrower's payment history; and
    (ii) All written information the borrower has provided to the 
servicer, and if applicable, to prior servicers, in connection with a 
loss mitigation application;
    (3) Provide the documents and information identified in paragraph 
(b)(2) of this section to other persons required to evaluate a borrower 
for loss mitigation options made available by the servicer, if 
applicable; and
    (4) Provide a delinquent borrower with information about the 
procedures for submitting a notice of error pursuant to Sec. 1024.35 or 
an information request pursuant to Sec. 1024.36.



Sec. 1024.41  Loss mitigation procedures.

    (a) Enforcement and limitations. A borrower may enforce the 
provisions of this section pursuant to section 6(f) of RESPA (12 U.S.C. 
2605(f)). Nothing in Sec. 1024.41 imposes a duty on a servicer to 
provide any borrower with any specific loss mitigation option. Nothing 
in Sec. 1024.41 should be construed to create a right for a borrower to 
enforce the terms of any agreement between a servicer and the owner or 
assignee of a mortgage loan, including with respect to the evaluation 
for, or offer of, any loss mitigation option or to eliminate any such 
right that may exist pursuant to applicable law.

[[Page 545]]

    (b) Receipt of a loss mitigation application--(1) Complete loss 
mitigation application. A complete loss mitigation application means an 
application in connection with which a servicer has received all the 
information that the servicer requires from a borrower in evaluating 
applications for the loss mitigation options available to the borrower. 
A servicer shall exercise reasonable diligence in obtaining documents 
and information to complete a loss mitigation application.
    (2) Review of loss mitigation application submission--(i) 
Requirements. If a servicer receives a loss mitigation application 45 
days or more before a foreclosure sale, a servicer shall:
    (A) Promptly upon receipt of a loss mitigation application, review 
the loss mitigation application to determine if the loss mitigation 
application is complete; and
    (B) Notify the borrower in writing within 5 days (excluding legal 
public holidays, Saturdays, and Sundays) after receiving the loss 
mitigation application that the servicer acknowledges receipt of the 
loss mitigation application and that the servicer has determined that 
the loss mitigation application is either complete or incomplete. If a 
loss mitigation application is incomplete, the notice shall state the 
additional documents and information the borrower must submit to make 
the loss mitigation application complete and the applicable date 
pursuant to paragraph (b)(2)(ii) of this section. The notice to the 
borrower shall include a statement that the borrower should consider 
contacting servicers of any other mortgage loans secured by the same 
property to discuss available loss mitigation options.
    (ii) Time period disclosure. The notice required pursuant to 
paragraph (b)(2)(i)(B) of this section must include a reasonable date by 
which the borrower should submit the documents and information necessary 
to make the loss mitigation application complete.
    (3) Determining protections. To the extent a determination of 
whether protections under this section apply to a borrower is made on 
the basis of the number of days between when a complete loss mitigation 
application is received and when a foreclosure sale occurs, such 
determination shall be made as of the date a complete loss mitigation 
application is received.
    (c) Evaluation of loss mitigation applications--(1) Complete loss 
mitigation application. If a servicer receives a complete loss 
mitigation application more than 37 days before a foreclosure sale, 
then, within 30 days of receiving a borrower's complete loss mitigation 
application, a servicer shall:
    (i) Evaluate the borrower for all loss mitigation options available 
to the borrower; and
    (ii) Provide the borrower with a notice in writing stating the 
servicer's determination of which loss mitigation options, if any, it 
will offer to the borrower on behalf of the owner or assignee of the 
mortgage. The servicer shall include in this notice the amount of time 
the borrower has to accept or reject an offer of a loss mitigation 
program as provided for in paragraph (e) of this section, if applicable, 
and a notification, if applicable, that the borrower has the right to 
appeal the denial of any loan modification option as well as the amount 
of time the borrower has to file such an appeal and any requirements for 
making an appeal, as provided for in paragraph (h) of this section.
    (2) Incomplete loss mitigation application evaluation--(i) In 
general. Except as set forth in paragraphs (c)(2)(ii) and (iii) of this 
section, a servicer shall not evade the requirement to evaluate a 
complete loss mitigation application for all loss mitigation options 
available to the borrower by offering a loss mitigation option based 
upon an evaluation of any information provided by a borrower in 
connection with an incomplete loss mitigation application.
    (ii) Reasonable time. Notwithstanding paragraph (c)(2)(i) of this 
section, if a servicer has exercised reasonable diligence in obtaining 
documents and information to complete a loss mitigation application, but 
a loss mitigation application remains incomplete for a significant 
period of time under the circumstances without further progress by a 
borrower to make the loss mitigation application complete, a servicer 
may, in its discretion, evaluate an incomplete loss mitigation 
application and offer a borrower a loss mitigation

[[Page 546]]

option. Any such evaluation and offer is not subject to the requirements 
of this section and shall not constitute an evaluation of a single 
complete loss mitigation application for purposes of paragraph (i) of 
this section.
    (iii) Payment forbearance. Notwithstanding paragraph (c)(2)(i) of 
this section, a servicer may offer a short-term payment forbearance 
program to a borrower based upon an evaluation of an incomplete loss 
mitigation application. A servicer shall not make the first notice or 
filing required by applicable law for any judicial or non-judicial 
foreclosure process, and shall not move for foreclosure judgment or 
order of sale, or conduct a foreclosure sale, if a borrower is 
performing pursuant to the terms of a payment forbearance program 
offered pursuant to this section.
    (iv) Facially complete application. If a borrower submits all the 
missing documents and information as stated in the notice required 
pursuant to Sec. 1026.41(b)(2)(i)(B), or no additional information is 
requested in such notice, the application shall be considered facially 
complete. If the servicer later discovers additional information or 
corrections to a previously submitted document are required to complete 
the application, the servicer must promptly request the missing 
information or corrected documents and treat the application as complete 
for the purposes of paragraphs (f)(2) and (g) of this section until the 
borrower is given a reasonable opportunity to complete the application. 
If the borrower completes the application within this period, the 
application shall be considered complete as of the date it was facially 
complete, for the purposes of paragraphs (d), (e), (f)(2), (g), and (h) 
of this section, and as of the date the application was actually 
complete for the purposes of paragraph (c). A servicer that complies 
with this paragraph will be deemed to have fulfilled its obligation to 
provide an accurate notice under paragraph (b)(2)(i)(B).
    (d) Denial of loan modification options. If a borrower's complete 
loss mitigation application is denied for any trial or permanent loan 
modification option available to the borrower pursuant to paragraph (c) 
of this section, a servicer shall state in the notice sent to the 
borrower pursuant to paragraph (c)(1)(ii) of this section the specific 
reason or reasons for the servicer's determination for each such trial 
or permanent loan modification option and, if applicable, that the 
borrower was not evaluated on other criteria.
    (e) Borrower response--(1) In general. Subject to paragraphs 
(e)(2)(ii) and (iii) of this section, if a complete loss mitigation 
application is received 90 days or more before a foreclosure sale, a 
servicer may require that a borrower accept or reject an offer of a loss 
mitigation option no earlier than 14 days after the servicer provides 
the offer of a loss mitigation option to the borrower. If a complete 
loss mitigation application is received less than 90 days before a 
foreclosure sale, but more than 37 days before a foreclosure sale, a 
servicer may require that a borrower accept or reject an offer of a loss 
mitigation option no earlier than 7 days after the servicer provides the 
offer of a loss mitigation option to the borrower.
    (2) Rejection--(i) In general. Except as set forth in paragraphs 
(e)(2)(ii) and (iii) of this section, a servicer may deem a borrower 
that has not accepted an offer of a loss mitigation option within the 
deadline established pursuant to paragraph (e)(1) of this section to 
have rejected the offer of a loss mitigation option.
    (ii) Trial Loan Modification Plan. A borrower who does not satisfy 
the servicer's requirements for accepting a trial loan modification 
plan, but submits the payments that would be owed pursuant to any such 
plan within the deadline established pursuant to paragraph (e)(1) of 
this section, shall be provided a reasonable period of time to fulfill 
any remaining requirements of the servicer for acceptance of the trial 
loan modification plan beyond the deadline established pursuant to 
paragraph (e)(1) of this section.
    (iii) Interaction with appeal process. If a borrower makes an appeal 
pursuant to paragraph (h) of this section, the borrower's deadline for 
accepting a loss mitigation option offered pursuant to paragraph 
(c)(1)(ii) of this section shall be extended until 14 days after the 
servicer provides the notice required

[[Page 547]]

pursuant to paragraph (h)(4) of this section.
    (f) Prohibition on foreclosure referral--(1) Pre-foreclosure review 
period. A servicer shall not make the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process 
unless:
    (i) A borrower's mortgage loan obligation is more than 120 days 
delinquent;
    (ii) The foreclosure is based on a borrower's violation of a due-on-
sale clause; or
    (iii) The servicer is joining the foreclosure action of a 
subordinate lienholder.
    (2) Application received before foreclosure referral. If a borrower 
submits a complete loss mitigation application during the pre-
foreclosure review period set forth in paragraph (f)(1) of this section 
or before a servicer has made the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process, a 
servicer shall not make the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process 
unless:
    (i) The servicer has sent the borrower a notice pursuant to 
paragraph (c)(1)(ii) of this section that the borrower is not eligible 
for any loss mitigation option and the appeal process in paragraph (h) 
of this section is not applicable, the borrower has not requested an 
appeal within the applicable time period for requesting an appeal, or 
the borrower's appeal has been denied;
    (ii) The borrower rejects all loss mitigation options offered by the 
servicer; or
    (iii) The borrower fails to perform under an agreement on a loss 
mitigation option.
    (g) Prohibition on foreclosure sale. If a borrower submits a 
complete loss mitigation application after a servicer has made the first 
notice or filing required by applicable law for any judicial or non-
judicial foreclosure process but more than 37 days before a foreclosure 
sale, a servicer shall not move for foreclosure judgment or order of 
sale, or conduct a foreclosure sale, unless:
    (1) The servicer has sent the borrower a notice pursuant to 
paragraph (c)(1)(ii) of this section that the borrower is not eligible 
for any loss mitigation option and the appeal process in paragraph (h) 
of this section is not applicable, the borrower has not requested an 
appeal within the applicable time period for requesting an appeal, or 
the borrower's appeal has been denied;
    (2) The borrower rejects all loss mitigation options offered by the 
servicer; or
    (3) The borrower fails to perform under an agreement on a loss 
mitigation option.
    (h) Appeal process--(1) Appeal process required for loan 
modification denials. If a servicer receives a complete loss mitigation 
application 90 days or more before a foreclosure sale or during the 
period set forth in paragraph (f) of this section, a servicer shall 
permit a borrower to appeal the servicer's determination to deny a 
borrower's loss mitigation application for any trial or permanent loan 
modification program available to the borrower.
    (2) Deadlines. A servicer shall permit a borrower to make an appeal 
within 14 days after the servicer provides the offer of a loss 
mitigation option to the borrower pursuant to paragraph (c)(1)(ii) of 
this section.
    (3) Independent evaluation. An appeal shall be reviewed by different 
personnel than those responsible for evaluating the borrower's complete 
loss mitigation application.
    (4) Appeal determination. Within 30 days of a borrower making an 
appeal, the servicer shall provide a notice to the borrower stating the 
servicer's determination of whether the servicer will offer the borrower 
a loss mitigation option based upon the appeal and, if applicable, how 
long the borrower has to accept or reject such an offer or a prior offer 
of a loss mitigation option. A servicer may require that a borrower 
accept or reject an offer of a loss mitigation option after an appeal no 
earlier than 14 days after the servicer provides the notice to a 
borrower. A servicer's determination under this paragraph is not subject 
to any further appeal.
    (i) Duplicative requests. A servicer is only required to comply with 
the requirements of this section for a single complete loss mitigation 
application

[[Page 548]]

for a borrower's mortgage loan account.
    (j) Small servicer requirements. A small servicer shall be subject 
to the prohibition on foreclosure referral in paragraph (f)(1) of this 
section. A small servicer shall not make the first notice or filing 
required by applicable law for any judicial or non-judicial foreclosure 
process and shall not move for foreclosure judgment or order of sale, or 
conduct a foreclosure sale, if a borrower is performing pursuant to the 
terms of an agreement on a loss mitigation option.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013]



Sec. Appendix A to Part 1024--Instructions for Completing HUD-1 and HUD-
      1a Settlement Statements; Sample HUD-1 and HUD-1a Statements

    The following are instructions for completing the HUD-1 settlement 
statement, required under section 4 of RESPA and 12 CFR part 1024 
(Regulation X) of the Bureau of Consumer Financial Protection (Bureau) 
regulations. This form is to be used as a statement of actual charges 
and adjustments paid by the borrower and the seller, to be given to the 
parties in connection with the settlement. The instructions for 
completion of the HUD-1 are primarily for the benefit of the settlement 
agents who prepare the statements and need not be transmitted to the 
parties as an integral part of the HUD-1. There is no objection to the 
use of the HUD-1 in transactions in which its use is not legally 
required. Refer to the definitions section of the regulations (12 CFR 
1024.2) for specific definitions of many of the terms that are used in 
these instructions.

                          General Instructions

    Information and amounts may be filled in by typewriter, hand 
printing, computer printing, or any other method producing clear and 
legible results. Refer to the Bureau's regulations (Regulation X) 
regarding rules applicable to reproduction of the HUD-1 for the purpose 
of including customary recitals and information used locally in 
settlements; for example, a breakdown of payoff figures, a breakdown of 
the Borrower's total monthly mortgage payments, check disbursements, a 
statement indicating receipt of funds, applicable special stipulations 
between Borrower and Seller, and the date funds are transferred.
    The settlement agent shall complete the HUD-1 to itemize all charges 
imposed upon the Borrower and the Seller by the loan originator and all 
sales commissions, whether to be paid at settlement or outside of 
settlement, and any other charges which either the Borrower or the 
Seller will pay at settlement. Charges for loan origination and title 
services should not be itemized except as provided in these 
instructions. For each separately identified settlement service in 
connection with the transaction, the name of the person ultimately 
receiving the payment must be shown together with the total amount paid 
to such person. Items paid to and retained by a loan originator are 
disclosed as required in the instructions for lines in the 800-series of 
the HUD-1 (and for per diem interest, in the 900-series of the HUD-1).
    As a general rule, charges that are paid for by the seller must be 
shown in the seller's column on page 2 of the HUD-1 (unless paid outside 
closing), and charges that are paid for by the borrower must be shown in 
the borrower's column (unless paid outside closing). However, in order 
to promote comparability between the charges on the GFE and the charges 
on the HUD-1, if a seller pays for a charge that was included on the 
GFE, the charge should be listed in the borrower's column on page 2 of 
the HUD-1. That charge should also be offset by listing a credit in that 
amount to the borrower on lines 204-209 on page 1 of the HUD-1, and by a 
charge to the seller in lines 506-509 on page 1 of the HUD-1. If a loan 
originator (other than for no-cost loans), real estate agent, other 
settlement service provider, or other person pays for a charge that was 
included on the GFE, the charge should be listed in the borrower's 
column on page 2 of the HUD-1, with an offsetting credit reported on 
page 1 of the HUD-1, identifying the party paying the charge.
    Charges paid outside of settlement by the borrower, seller, loan 
originator, real estate agent, or any other person, must be included on 
the HUD-1 but marked ``P.O.C.'' for ``Paid Outside of Closing'' 
(settlement) and must not be included in computing totals. However, 
indirect payments from a lender to a mortgage broker may not be 
disclosed as P.O.C., and must be included as a credit on Line 802. 
P.O.C. items must not be placed in the Borrower or Seller columns, but 
rather on the appropriate line outside the columns. The settlement agent 
must indicate whether P.O.C. items are paid for by the Borrower, Seller, 
or some other party by marking the items paid for by whoever made the 
payment as ``P.O.C.'' with the party making the payment identified in 
parentheses, such as ``P.O.C. (borrower)'' or ``P.O.C. (seller)''.
    In the case of ``no cost'' loans where ``no cost'' encompasses third 
party fees as well as the upfront payment to the loan originator,

[[Page 549]]

the third party services covered by the ``no cost'' provisions must be 
itemized and listed in the borrower's column on the HUD-1/1A with the 
charge for the third party service. These itemized charges must be 
offset with a negative adjusted origination charge on Line 803 and 
recorded in the columns.
    Blank lines are provided in section L for any additional settlement 
charges. Blank lines are also provided for additional insertions in 
sections J and K. The names of the recipients of the settlement charges 
in section L and the names of the recipients of adjustments described in 
section J or K should be included on the blank lines.
    Lines and columns in section J which relate to the Borrower's 
transaction may be left blank on the copy of the HUD-1 which will be 
furnished to the Seller. Lines and columns in section K which relate to 
the Seller's transaction may be left blank on the copy of the HUD-1 
which will be furnished to the Borrower.

                         Line Item Instructions

    Instructions for completing the individual items on the HUD-1 
follow.
    Section A. This section requires no entry of information.
    Section B. Check appropriate loan type and complete the remaining 
items as applicable.
    Section C. This section provides a notice regarding settlement costs 
and requires no additional entry of information.
    Sections D and E. Fill in the names and current mailing addresses 
and zip codes of the Borrower and the Seller. Where there is more than 
one Borrower or Seller, the name and address of each one is required. 
Use a supplementary page if needed to list multiple Borrowers or 
Sellers.
    Section F. Fill in the name, current mailing address and zip code of 
the Lender.
    Section G. The street address of the property being sold should be 
listed. If there is no street address, a brief legal description or 
other location of the property should be inserted. In all cases give the 
zip code of the property.
    Section H. Fill in name, address, zip code and telephone number of 
settlement agent, and address and zip code of ``place of settlement.''
    Section I. Fill in date of settlement.
    Section J. Summary of Borrower's Transaction. Line 101 is for the 
contract sales price of the property being sold, excluding the price of 
any items of tangible personal property if Borrower and Seller have 
agreed to a separate price for such items.
    Line 102 is for the sales price of any items of tangible personal 
property excluded from Line 101. Personal property could include such 
items as carpets, drapes, stoves, refrigerators, etc. What constitutes 
personal property varies from state to state. Manufactured homes are not 
considered personal property for this purpose.
    Line 103 is used to record the total charges to Borrower detailed in 
section L and totaled on Line 1400.
    Lines 104 and 105 are for additional amounts owed by the Borrower, 
such as charges that were not listed on the GFE or items paid by the 
Seller prior to settlement but reimbursed by the Borrower at settlement. 
For example, the balance in the Seller's reserve account held in 
connection with an existing loan, if assigned to the Borrower in a loan 
assumption case, will be entered here. These lines will also be used 
when a tenant in the property being sold has not yet paid the rent, 
which the Borrower will collect, for a period of time prior to the 
settlement. The lines will also be used to indicate the treatment for 
any tenant security deposit. The Seller will be credited on Lines 404-
405.
    Lines 106 through 112 are for items which the Seller had paid in 
advance, and for which the Borrower must therefore reimburse the Seller. 
Examples of items for which adjustments will be made may include taxes 
and assessments paid in advance for an entire year or other period, when 
settlement occurs prior to the expiration of the year or other period 
for which they were paid. Additional examples include flood and hazard 
insurance premiums, if the Borrower is being substituted as an insured 
under the same policy; mortgage insurance in loan assumption cases; 
planned unit development or condominium association assessments paid in 
advance; fuel or other supplies on hand, purchased by the Seller, which 
the Borrower will use when Borrower takes possession of the property; 
and ground rent paid in advance.
    Line 120 is for the total of Lines 101 through 112.
    Line 201 is for any amount paid against the sales price prior to 
settlement.
    Line 202 is for the amount of the new loan made by the Lender when a 
loan to finance construction of a new structure constructed for sale is 
used as or converted to a loan to finance purchase. Line 202 should also 
be used for the amount of the first user loan, when a loan to purchase a 
manufactured home for resale is converted to a loan to finance purchase 
by the first user. For other loans covered by 12 CFR part 1024 
(Regulation X) which finance construction of a new structure or purchase 
of a manufactured home, list the sales price of the land on Line 104, 
the construction cost or purchase price of manufactured home on Line 105 
(Line 101 would be left blank in this instance) and amount of the loan 
on Line 202. The remainder of the form should be completed taking

[[Page 550]]

into account adjustments and charges related to the temporary financing 
and permanent financing and which are known at the date of settlement.
    Line 203 is used for cases in which the Borrower is assuming or 
taking title subject to an existing loan or lien on the property.
    Lines 204-209 are used for other items paid by or on behalf of the 
Borrower. Lines 204-209 should be used to indicate any financing 
arrangements or other new loan not listed in Line 202. For example, if 
the Borrower is using a second mortgage or note to finance part of the 
purchase price, whether from the same lender, another lender or the 
Seller, insert the principal amount of the loan with a brief explanation 
on Lines 204-209. Lines 204-209 should also be used where the Borrower 
receives a credit from the Seller for closing costs, including seller-
paid GFE charges. They may also be used in cases in which a Seller 
(typically a builder) is making an ``allowance'' to the Borrower for 
items that the Borrower is to purchase separately.
    Lines 210 through 219 are for items which have not yet been paid, 
and which the Borrower is expected to pay, but which are attributable in 
part to a period of time prior to the settlement. In jurisdictions in 
which taxes are paid late in the tax year, most cases will show the 
proration of taxes in these lines. Other examples include utilities used 
but not paid for by the Seller, rent collected in advance by the Seller 
from a tenant for a period extending beyond the settlement date, and 
interest on loan assumptions.
    Line 220 is for the total of Lines 201 through 219.
    Lines 301 and 302 are summary lines for the Borrower. Enter total in 
Line 120 on Line 301. Enter total in Line 220 on Line 302.
    Line 303 must indicate either the cash required from the Borrower at 
settlement (the usual case in a purchase transaction), or cash payable 
to the Borrower at settlement (if, for example, the Borrower's earnest 
money exceeds the Borrower's cash obligations in the transaction or 
there is a cash-out refinance). Subtract Line 302 from Line 301 and 
enter the amount of cash due to or from the Borrower at settlement on 
Line 303. The appropriate box should be checked. If the Borrower's 
earnest money is applied toward the charge for a settlement service, the 
amount so applied should not be included on Line 303 but instead should 
be shown on the appropriate line for the settlement service, marked 
``P.O.C. (Borrower)'', and must not be included in computing totals.
    Section K. Summary of Seller's Transaction. Instructions for the use 
of Lines 101 and 102 and 104-112 above, apply also to Lines 401-412. 
Line 420 is for the total of Lines 401 through 412.
    Line 501 is used if the Seller's real estate broker or other party 
who is not the settlement agent has received and holds a deposit against 
the sales price (earnest money) which exceeds the fee or commission owed 
to that party. If that party will render the excess deposit directly to 
the Seller, rather than through the settlement agent, the amount of 
excess deposit should be entered on Line 501 and the amount of the total 
deposit (including commissions) should be entered on Line 201.
    Line 502 is used to record the total charges to the Seller detailed 
in section L and totaled on Line 1400.
    Line 503 is used if the Borrower is assuming or taking title subject 
to existing liens which are to be deducted from sales price.
    Lines 504 and 505 are used for the amounts (including any accrued 
interest) of any first and/or second loans which will be paid as part of 
the settlement.
    Line 506 is used for deposits paid by the Borrower to the Seller or 
other party who is not the settlement agent. Enter the amount of the 
deposit in Line 201 on Line 506 unless Line 501 is used or the party who 
is not the settlement agent transfers all or part of the deposit to the 
settlement agent, in which case the settlement agent will note in 
parentheses on Line 507 the amount of the deposit that is being 
disbursed as proceeds and enter in the column for Line 506 the amount 
retained by the above-described party for settlement services. If the 
settlement agent holds the deposit, insert a note in Line 507 which 
indicates that the deposit is being disbursed as proceeds.
    Lines 506 through 509 may be used to list additional liens which 
must be paid off through the settlement to clear title to the property. 
Other Seller obligations should be shown on Lines 506-509, including 
charges that were disclosed on the GFE but that are actually being paid 
for by the Seller. These Lines may also be used to indicate funds to be 
held by the settlement agent for the payment of either repairs, or 
water, fuel, or other utility bills that cannot be prorated between the 
parties at settlement because the amounts used by the Seller prior to 
settlement are not yet known. Subsequent disclosure of the actual amount 
of these post-settlement items to be paid from settlement funds is 
optional. Any amounts entered on Lines 204-209 including Seller 
financing arrangements should also be entered on Lines 506-509.
    Instructions for the use of Lines 510 through 519 are the same as 
those for Lines 210 to 219 above.
    Line 520 is for the total of Lines 501 through 519.
    Lines 601 and 602 are summary lines for the Seller. Enter the total 
in Line 420 on Line 601. Enter the total in Line 520 on Line 602.
    Line 603 must indicate either the cash required to be paid to the 
Seller at settlement (the usual case in a purchase transaction), or the 
cash payable by the Seller at settlement.

[[Page 551]]

Subtract Line 602 from Line 601 and enter the amount of cash due to or 
from the Seller at settlement on Line 603. The appropriate box should be 
checked.

                      Section L. Settlement Charges

    Line 700 is used to enter the sales commission charged by the sales 
agent or real estate broker.
    Lines 701-702 are to be used to state the split of the commission 
where the settlement agent disburses portions of the commission to two 
or more sales agents or real estate brokers.
    Line 703 is used to enter the amount of sales commission disbursed 
at settlement. If the sales agent or real estate broker is retaining a 
part of the deposit against the sales price (earnest money) to apply 
towards the sales agent's or real estate broker's commission, include in 
Line 703 only that part of the commission being disbursed at settlement 
and insert a note on Line 704 indicating the amount the sales agent or 
real estate broker is retaining as a ``P.O.C.'' item.
    Line 704 may be used for additional charges made by the sales agent 
or real estate broker, or for a sales commission charged to the 
Borrower, which will be disbursed by the settlement agent.
    Line 801 is used to record ``Our origination charge,'' which 
includes all charges received by the loan originator, except any charge 
for the specific interest rate chosen (points). This number must not be 
listed in either the buyer's or seller's column. The amount shown in 
Line 801 must include any amounts received for origination services, 
including administrative and processing services, performed by or on 
behalf of the loan originator.
    Line 802 is used to record ``Your credit or charge (points) for the 
specific interest rate chosen,'' which states the charge or credit 
adjustment as applied to ``Our origination charge,'' if applicable. This 
number must not be listed in either column or shown on page one of the 
HUD-1.
    For a mortgage broker originating a loan in its own name, the amount 
shown on Line 802 will be the difference between the initial loan amount 
and the total payment to the mortgage broker from the lender. The total 
payment to the mortgage broker will be the sum of the price paid for the 
loan by the lender and any other payments to the mortgage broker from 
the lender, including any payments based on the loan amount or loan 
terms, and any flat rate payments. For a mortgage broker originating a 
loan in another entity's name, the amount shown on Line 802 will be the 
sum of all payments to the mortgage broker from the lender, including 
any payments based on the loan amount or loan terms, and any flat rate 
payments.
    In either case, when the amount paid to the mortgage broker exceeds 
the initial loan amount, there is a credit to the borrower and it is 
entered as a negative amount. When the initial loan amount exceeds the 
amount paid to the mortgage broker, there is a charge to the borrower 
and it is entered as a positive amount. For a lender, the amount shown 
on Line 802 may include any credit or charge (points) to the Borrower.
    Line 803 is used to record ``Your adjusted origination charges,'' 
which states the net amount of the loan origination charges, the sum of 
the amounts shown in Lines 801 and 802. This amount must be listed in 
the columns as either a positive number (for example, where the 
origination charge shown in Line 801 exceeds any credit for the interest 
rate shown in Line 802 or where there is an origination charge in Line 
801 and a charge for the interest rate (points) is shown on Line 802) or 
as a negative number (for example, where the credit for the interest 
rate shown in Line 802 exceeds the origination charges shown in Line 
801).
    In the case of ``no cost'' loans, where ``no cost'' refers only to 
the loan originator's fees, the amounts shown in Lines 801 and 802 
should offset, so that the charge shown on Line 803 is zero. Where ``no 
cost'' includes third party settlement services, the credit shown in 
Line 802 will more than offset the amount shown in Line 801. The amount 
shown in Line 803 will be a negative number to offset the settlement 
charges paid indirectly through the loan originator.
    Lines 804-808 may be used to record each of the ``Required services 
that we select.'' Each settlement service provider must be identified by 
name and the amount paid recorded either inside the columns or as paid 
to the provider outside closing (``P.O.C.''), as described in the 
General Instructions.
    Line 804 is used to record the appraisal fee.
    Line 805 is used to record the fee for all credit reports.
    Line 806 is used to record the fee for any tax service.
    Line 807 is used to record any flood certification fee.
    Lines 808 and additional sequentially numbered lines, as needed, are 
used to record other third party services required by the loan 
originator. These Lines may also be used to record other required 
disclosures from the loan originator. Any such disclosures must be 
listed outside the columns.
    Lines 901-904. This series is used to record the items which the 
Lender requires to be paid at the time of settlement, but which are not 
necessarily paid to the lender (e.g., FHA mortgage insurance premium), 
other than reserves collected by the Lender and recorded in the 1000-
series.
    Line 901 is used if interest is collected at settlement for a part 
of a month or other period between settlement and the date from which 
interest will be collected with the first regular monthly payment. Enter 
that

[[Page 552]]

amount here and include the per diem charges. If such interest is not 
collected until the first regular monthly payment, no entry should be 
made on Line 901.
    Line 902 is used for mortgage insurance premiums due and payable at 
settlement, including any monthly amounts due at settlement and any 
upfront mortgage insurance premium, but not including any reserves 
collected by the Lender and recorded in the 1000-series. If a lump sum 
mortgage insurance premium paid at settlement is included on Line 902, a 
note should indicate that the premium is for the life of the loan.
    Line 903 is used for homeowner's insurance premiums that the Lender 
requires to be paid at the time of settlement, except reserves collected 
by the Lender and recorded in the 1000-series.
    Lines 904 and additional sequentially numbered lines are used to 
list additional items required by the Lender (except for reserves 
collected by the Lender and recorded in the 1000-series), including 
premiums for flood or other insurance. These lines are also used to list 
amounts paid at settlement for insurance not required by the Lender.
    Lines 1000-1007. This series is used for amounts collected by the 
Lender from the Borrower and held in an account for the future payment 
of the obligations listed as they fall due. Include the time period 
(number of months) and the monthly assessment. In many jurisdictions 
this is referred to as an ``escrow'', ``impound'', or ``trust'' account. 
In addition to the property taxes and insurance listed, some Lenders may 
require reserves for flood insurance, condominium owners' association 
assessments, etc. The amount in line 1001 must be listed in the columns, 
and the itemizations in lines 1002 through 1007 must be listed outside 
the columns.
    After itemizing individual deposits in the 1000 series, the servicer 
shall make an adjustment based on aggregate accounting. This adjustment 
equals the difference between the deposit required under aggregate 
accounting and the sum of the itemized deposits. The computation steps 
for aggregate accounting are set out in 12 CFR 1024.17(d). The 
adjustment will always be a negative number or zero (-0-), except for 
amounts due to rounding. The settlement agent shall enter the aggregate 
adjustment amount outside the columns on a final line of the 1000 series 
of the HUD-1 or HUD-1A statement. Appendix E to this part sets out an 
example of aggregate analysis.
    Lines 1100-1108. This series covers title charges and charges by 
attorneys and closing or settlement agents. The title charges include a 
variety of services performed by title companies or others, and include 
fees directly related to the transfer of title (title examination, title 
search, document preparation), fees for title insurance, and fees for 
conducting the closing. The legal charges include fees for attorneys 
representing the lender, seller, or borrower, and any attorney preparing 
title work. The series also includes any settlement, notary, and 
delivery fees related to the services covered in this series. 
Disbursements to third parties must be broken out in the appropriate 
lines or in blank lines in the series, and amounts paid to these third 
parties must be shown outside of the columns if included in Line 1101. 
Charges not included in Line 1101 must be listed in the columns.
    Line 1101 is used to record the total for the category of ``Title 
services and lender's title insurance.'' This amount must be listed in 
the columns.
    Line 1102 is used to record the settlement or closing fee.
    Line 1103 is used to record the charges for the owner's title 
insurance and related endorsements. This amount must be listed in the 
columns.
    Line 1104 is used to record the lender's title insurance premium and 
related endorsements.
    Line 1105 is used to record the amount of the lender's title policy 
limit. This amount is recorded outside of the columns.
    Line 1106 is used to record the amount of the owner's title policy 
limit. This amount is recorded outside of the columns.
    Line 1107 is used to record the amount of the total title insurance 
premium, including endorsements, that is retained by the title agent. 
This amount is recorded outside of the columns.
    Line 1108 used to record the amount of the total title insurance 
premium, including endorsements, that is retained by the title 
underwriter. This amount is recorded outside of the columns.
    Additional sequentially numbered lines in the 1100-series may be 
used to itemize title charges paid to other third parties, as identified 
by name and type of service provided.
    Lines 1200-1206. This series covers government recording and 
transfer charges. Charges paid by the borrower must be listed in the 
columns as described for lines 1201 and 1203, with itemizations shown 
outside the columns. Any amounts that are charged to the seller and that 
were not included on the Good Faith Estimate must be listed in the 
columns.
    Line 1201 is used to record the total ``Government recording 
charges,'' and the amount must be listed in the columns.
    Line 1202 is used to record, outside of the columns, the itemized 
recording charges.
    Line 1203 is used to record the transfer taxes, and the amount must 
be listed in the columns.
    Line 1204 is used to record, outside of the columns, the amounts for 
local transfer taxes and stamps.

[[Page 553]]

    Line 1205 is used to record, outside of the columns, the amounts for 
state transfer taxes and stamps.
    Line 1206 and additional sequentially numbered lines may be used to 
record specific itemized third party charges for government recording 
and transfer services, but the amounts must be listed outside the 
columns.
    Line 1301 and additional sequentially numbered lines must be used to 
record required services that the borrower can shop for, such as fees 
for survey, pest inspection, or other similar inspections. These lines 
may also be used to record additional itemized settlement charges that 
are not included in a specific category, such as fees for structural and 
environmental inspections; pre-sale inspections of heating, plumbing or 
electrical equipment; or insurance or warranty coverage. The amounts 
must be listed in either the borrower's or seller's column.
    Line 1400 must state the total settlement charges as calculated by 
adding the amounts within each column.

                                 Page 3

      Comparison of Good Faith Estimate (GFE) and HUD-1/1A Charges

    The HUD-1/1-A is a statement of actual charges and adjustments. The 
comparison chart on page 3 of the HUD-1 must be prepared using the exact 
information and amounts for the services that were purchased or provided 
as part of the transaction, as that information and those amounts are 
shown on the GFE and in the HUD-1. If a service that was listed on the 
GFE was not obtained in connection with the transaction, pages 1 and 2 
of the HUD-1 should not include any amount for that service, and the 
estimate on the GFE of the charge for the service should not be included 
in any amounts shown on the comparison chart on Page 3 of the HUD-1. The 
comparison chart is comprised of three sections: ``Charges That Cannot 
Increase'', ``Charges That Cannot Increase More Than 10%'', and 
``Charges That Can Change''.
    ``Charges That Cannot Increase''. The amounts shown in Blocks 1 and 
2, in Line A, and in Block 8 on the borrower's GFE must be entered in 
the appropriate line in the Good Faith Estimate column. The amounts 
shown on Lines 801, 802, 803 and 1203 of the HUD-1/1A must be entered in 
the corresponding line in the HUD-1/1A column. The HUD-1/1A column must 
include any amounts shown on page 2 of the HUD-1 in the column as paid 
for by the borrower, plus any amounts that are shown as P.O.C. by or on 
behalf of the borrower. If there is a credit in Block 2 of the GFE or 
Line 802 of the HUD-1/1A, the credit should be entered as a negative 
number.
    ``Charges That Cannot Increase More Than 10%''. A description of 
each charge included in Blocks 3 and 7 on the borrower's GFE must be 
entered on separate lines in this section, with the amount shown on the 
borrower's GFE for each charge entered in the corresponding line in the 
Good Faith Estimate column. For each charge included in Blocks 4, 5 and 
6 on the borrower's GFE for which the loan originator selected the 
provider or for which the borrower selected a provider identified by the 
loan originator, a description must be entered on a separate line in 
this section, with the amount shown on the borrower's GFE for each 
charge entered in the corresponding line in the Good Faith Estimate 
column. The loan originator must identify any third party settlement 
services for which the borrower selected a provider other than one 
identified by the loan originator so that the settlement agent can 
include those charges in the appropriate category. Additional lines may 
be added if necessary. The amounts shown on the HUD-1/1A for each line 
must be entered in the HUD-1/1A column next to the corresponding charge 
from the GFE, along with the appropriate HUD-1/1A line number. The HUD-
1/1A column must include any amounts shown on page 2 of the HUD-1 in the 
column as paid for by the borrower, plus any amounts that are shown as 
P.O.C. by or on behalf of the borrower.
    The amounts shown in the Good Faith Estimate and HUD-1/1A columns 
for this section must be separately totaled and entered in the 
designated line. If the total for the HUD-1/1A column is greater than 
the total for the Good Faith Estimate column, then the amount of the 
increase must be entered both as a dollar amount and as a percentage 
increase in the appropriate line.
    ``Charges That Can Change''. The amounts shown in Blocks 9, 10 and 
11 on the borrower's GFE must be entered in the appropriate lines in the 
Good Faith Estimate column. Any third party settlement services for 
which the borrower selected a provider other than one identified by the 
loan originator must also be included in this section. The amounts shown 
on the HUD-1/1A for each charge in this section must be entered in the 
corresponding line in the HUD-1/1A column, along with the appropriate 
HUD-1/1A line number. The HUD-1/1A column must include any amounts shown 
on page 2 of the HUD-1 in the column as paid for by the borrower, plus 
any amounts that are shown as P.O.C. by or on behalf of the borrower. 
Additional lines may be added if necessary.

                               Loan Terms

    This section must be completed in accordance with the information 
and instructions provided by the lender. The lender must provide this 
information in a format that permits the settlement agent to simply 
enter the necessary information in the appropriate

[[Page 554]]

spaces, without the settlement agent having to refer to the loan 
documents themselves.

                   Instructions for Completing HUD-1A

    Note: The HUD-1A is an optional form that may be used for 
refinancing and subordinate-lien federally related mortgage loans, as 
well as for any other one-party transaction that does not involve the 
transfer of title to residential real property. The HUD-1 form may also 
be used for such transactions, by utilizing the borrower's side of the 
HUD-1 and following the relevant parts of the instructions as set forth 
above. The use of either the HUD-1 or HUD-1A is not mandatory for open-
end lines of credit (home-equity plans), as long as the provisions of 
Regulation Z are followed.

                               Background

    The HUD-1A settlement statement is to be used as a statement of 
actual charges and adjustments to be given to the borrower at 
settlement, as defined in this part. The instructions for completion of 
the HUD-1A are for the benefit of the settlement agent who prepares the 
statement; the instructions are not a part of the statement and need not 
be transmitted to the borrower. There is no objection to using the HUD-
1A in transactions in which it is not required, and its use in open-end 
lines of credit transactions (home-equity plans) is encouraged. It may 
not be used as a substitute for a HUD-1 in any transaction that has a 
seller.
    Refer to the ``definitions'' section (Sec. 1024.2) of 12 CFR part 
1024 (Regulation X) for specific definitions of terms used in these 
instructions.

                          General Instructions

    Information and amounts may be filled in by typewriter, hand 
printing, computer printing, or any other method producing clear and 
legible results. Refer to 12 CFR 1024.9 regarding rules for reproduction 
of the HUD-1A. Additional pages may be attached to the HUD-1A for the 
inclusion of customary recitals and information used locally for 
settlements or if there are insufficient lines on the HUD-1A. The 
settlement agent shall complete the HUD-1A in accordance with the 
instructions for the HUD-1 to the extent possible, including the 
instructions for disclosing items paid outside closing and for no cost 
loans.
    Blank lines are provided in section L for any additional settlement 
charges. Blank lines are also provided in section M for recipients of 
all or portions of the loan proceeds. The names of the recipients of the 
settlement charges in section L and the names of the recipients of the 
loan proceeds in section M should be set forth on the blank lines.

                         Line-Item Instructions

                                 Page 1

    The identification information at the top of the HUD-1A should be 
completed as follows: The borrower's name and address is entered in the 
space provided. If the property securing the loan is different from the 
borrower's address, the address or other location information on the 
property should be entered in the space provided. The loan number is the 
lender's identification number for the loan. The settlement date is the 
date of settlement in accordance with 12 CFR 1024.2, not the end of any 
applicable rescission period. The name and address of the lender should 
be entered in the space provided.
    Section L. Settlement Charges. This section of the HUD-1A is similar 
to section L of the HUD-1, with minor changes or omissions, including 
deletion of lines 700 through 704, relating to real estate broker 
commissions. The instructions for section L in the HUD-1 should be 
followed insofar as possible. Inapplicable charges should be ignored, as 
should any instructions regarding seller items.
    Line 1400 in the HUD-1A is for the total settlement charges charged 
to the borrower. Enter this total on line 1601. This total should 
include section L amounts from additional pages, if any are attached to 
this HUD-1A.
    Section M. Disbursement to Others. This section is used to list 
payees, other than the borrower, of all or portions of the loan proceeds 
(including the lender, if the loan is paying off a prior loan made by 
the same lender), when the payee will be paid directly out of the 
settlement proceeds. It is not used to list payees of settlement 
charges, nor to list funds disbursed directly to the borrower, even if 
the lender knows the borrower's intended use of the funds.
    For example, in a refinancing transaction, the loan proceeds are 
used to pay off an existing loan. The name of the lender for the loan 
being paid off and the pay-off balance would be entered in section M. In 
a home improvement transaction when the proceeds are to be paid to the 
home improvement contractor, the name of the contractor and the amount 
paid to the contractor would be entered in section M. In a consolidation 
loan, or when part of the loan proceeds is used to pay off other 
creditors, the name of each creditor and the amount paid to that 
creditor would be entered in section M. If the proceeds are to be given 
directly to the borrower and the borrower will use the proceeds to pay 
off existing obligations, this would not be reflected in section M.
    Section N. Net Settlement. Line 1600 normally sets forth the 
principal amount of the loan as it appears on the related note for this 
loan. In the event this form is used for an open-ended home equity line 
whose approved amount is greater than the initial amount

[[Page 555]]

advanced at settlement, the amount shown on Line 1600 will be the loan 
amount advanced at settlement. Line 1601 is used for all settlement 
charges that both are included in the totals for lines 1400 and 1602, 
and are not financed as part of the principal amount of the loan. This 
is the amount normally received by the lender from the borrower at 
settlement, which would occur when some or all of the settlement charges 
were paid in cash by the borrower at settlement, instead of being 
financed as part of the principal amount of the loan. Failure to include 
any such amount in line 1601 will result in an error in the amount 
calculated on line 1604. Items paid outside of closing (P.O.C.) should 
not be included in Line 1601.
    Line 1602 is the total amount from line 1400.
    Line 1603 is the total amount from line 1520.
    Line 1604 is the amount disbursed to the borrower. This is 
determined by adding together the amounts for lines 1600 and 1601, and 
then subtracting any amounts listed on lines 1602 and 1603.

                                 Page 2

    This section of the HUD-1A is similar to page 3 of the HUD-1. The 
instructions for page 3 of the HUD-1 should be followed insofar as 
possible. The HUD-1/1A Column should include any amounts shown on page 1 
of the HUD-1A in the column as paid for by the borrower, plus any 
amounts that are shown as P.O.C. by the borrower. Inapplicable charges 
should be ignored.

[[Page 556]]

[GRAPHIC] [TIFF OMITTED] TR20DE11.001


[[Page 557]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.002


[[Page 558]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.003


[[Page 559]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.004


[[Page 560]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.005


    Effective Date Note: At 78 FR 80104, Dec. 31, 2013, appendix A to 
part 1024 was amended under the heading Line Item Instructions, Section 
J. Summary of Borrower's Transaction, Line 102, the third sentence is 
amended by capitalizing ``State'' wherever it appears; under the heading 
Line Item Instructions, Section J. Summary of Borrower's Transaction,

[[Page 561]]

 paragraph 6 containing instructions for Line 202 is amended by adding 
at the end of the paragraph ``For reverse mortgage transactions, the 
amount disclosed on Line 202 is the initial principal limit.''; under 
the heading Line Item Instructions, Section J. Summary of Borrower's 
Transaction, paragraph 7 containing instructions for Lines 204-209, is 
amended by adding at the end of the paragraph ``For reverse mortgages, 
the amount of any initial draw at settlement is disclosed on Line 
204.''; under the heading Line Item Instructions, the heading Section L. 
Settlement Charges is amended by adding a period after ``Charges.''; 
under the heading Line Item Instructions, Section L. Settlement Charges, 
sentence three of paragraph 22 containing instructions for Line 1000-
1007 is amended by removing ``'escrow', and impound','' and adding in 
its place `` 'escrow,' and 'impound,' ''; under the heading Line Item 
Instructions, Comparison of Good Faith Estimate (GFE) and HUD-1/1A 
Charges, the last sentence of paragraph 1 is amended by removing `` 
'Charges that Cannot Increase', 'Charges that Cannot Increase More Than 
10%', and 'Charges that Can Change','' and adding in its place `` 
'Charges that Cannot Increase,' 'Charges that Cannot Increase More Than 
10%,' and 'Charges that Can Change,' ''; under the heading Line Item 
Instructions, Comparison of Good Faith Estimate (GFE) and HUD-1/1A 
Charges, the first sentence of paragraph 2 is amended by removing `` 
'Charges that Cannot Increase'.'' and adding in its place `` 'Charges 
that Cannot Increase.' ''; under the heading, Comparison of Good Faith 
Estimate (GFE) and HUD-1/1A Charges, the first sentence of paragraph 3 
is amended by removing `` 'Charges That Cannot Increase More Than 
10%'.'' and adding in its place `` 'Charges That Cannot Increase More 
Than 10%.' ''; under the heading, Comparison of Good Faith Estimate 
(GFE) and HUD-1/1A Charges, the first sentence of paragraph 5 is amended 
by removing `` 'Charges That Can Change'.'' adding in its place `` 
'Charges That Can Change.' ''; removing the paragraph under the heading 
Loan terms and adding two new paragraphs in its place, effective Aug. 1, 
2015. For the convenience of the user, the added and revised text is set 
forth as follows:



Sec. Appendix A to Part 1024--Instructions for Completing HUD-1 And HUD-
      1A Settlement Statements; Sample HUD-1 And HUD-1A Statements

                                * * * * *

                               Loan Terms

    This section must be completed in accordance with the information 
and instructions provided by the lender. The lender must provide this 
information in a format that permits the settlement agent to simply 
enter the necessary information in the appropriate spaces, without the 
settlement agent having to refer to the loan documents themselves. For 
reverse mortgages, the initial monthly amount owed for principal, 
interest, and any mortgage insurance must read ``N/A'' and the loan term 
is disclosed as ``N/A'' when the loan term is conditioned upon the 
occurrence of a specified event, such as the death of the borrower or 
the borrower no longer occupying the property for a certain period of 
time. Additionally, for reverse mortgages the question ``Even if you 
make payments on time, can your loan balance rise?'' must be answered as 
``Yes'' and the maximum amount disclosed as ``Unknown.''
    For reverse mortgages that establish an arrangement for the payment 
of property taxes, homeowner's insurance, or other recurring charges 
through draws from the principal limit, the second box in the ``Total 
monthly amount owed including escrow payments'' section must be checked. 
The blank following the first $ must be completed with ``0'' and an 
asterisk, and all items that will be paid using draws from the principal 
limit, such as for property taxes, must also be indicated. An asterisk 
must also be placed in this section with the following statement: ``Paid 
by or through draws from the principal limit.'' Reverse mortgage 
transactions are not considered to be balloon transactions for the 
purposes of the loan terms disclosed on page 3 of the HUD-1.

                                * * * * *



  Sec. Appendix B to Part 1024--Illustrations of Requirements of RESPA

    The following illustrations provide additional guidance on the 
meaning and coverage of the provisions of RESPA. Other provisions of 
Federal or state law may also be applicable to the practices and 
payments discussed in the following illustrations.
    1. Facts: A, a provider of settlement services, provides settlement 
services at abnormally low rates or at no charge at all to B, a builder, 
in connection with a subdivision being developed by B. B agrees to refer 
purchasers of the completed homes in the subdivision to A for the 
purchase of settlement services in connection with the sale of 
individual lots by B.
    Comments: The rendering of services by A to B at little or no charge 
constitutes a thing of value given by A to B in return for the referral 
of settlement services business, and both A and B are in violation of 
section 8 of RESPA.
    2. Facts: B, a lender, encourages persons who receive federally 
related mortgage loans

[[Page 562]]

from it to employ A, an attorney, to perform title searches and related 
settlement services in connection with their transaction. B and A have 
an understanding that in return for the referral of this business A 
provides legal services to B or B's officers or employees at abnormally 
low rates or for no charge.
    Comments: Both A and B are in violation of section 8 of RESPA. 
Similarly, if an attorney gives a portion of his or her fees to another 
attorney, a lender, a real estate broker or any other provider of 
settlement services, who had referred prospective clients to the 
attorney, section 8 would be violated by both persons.
    3. Facts: A, a real estate broker, obtains all necessary licenses 
under state law to act as a title insurance agent. A refers individuals 
who are purchasing homes in transactions in which A participates as a 
broker to B, an unaffiliated title company, for the purchase of title 
insurance services. A performs minimal, if any, title services in 
connection with the issuance of the title insurance policy (such as 
placing an application with the title company). B pays A a commission 
(or A retains a portion of the title insurance premium) for the 
transactions or alternatively B receives a portion of the premium paid 
directly from the purchaser.
    Comments: The payment of a commission or portion of the title 
insurance premium by B to A, or receipt of a portion of the payment for 
title insurance under circumstances where no substantial services are 
being performed by A, is a violation of section 8 of RESPA. It makes no 
difference whether the payment comes from B or the purchaser. The amount 
of the payment must bear a reasonable relationship to the services 
rendered. Here A really is being compensated for a referral of business 
to B.
    4. Facts: A is an attorney who, as a part of his legal 
representation of clients in residential real estate transactions, 
orders and reviews title insurance policies for his clients. A enters 
into a contract with B, a title company, to be an agent of B under a 
program set up by B. Under the agreement, A agrees to prepare and 
forward title insurance applications to B, to re-examine the preliminary 
title commitment for accuracy and if he chooses to attempt to clear 
exceptions to the title policy before closing. A agrees to assume 
liability for waiving certain exceptions to title, but never exercises 
this authority. B performs the necessary title search and examination 
work, determines insurability of title, prepares documents containing 
substantive information in title commitments, handles closings for A's 
clients and issues title policies. A receives a fee from his client for 
legal services and an additional fee for his title agent ``services'' 
from the client's title insurance premium to B.
    Comments: A and B are violating section 8 of RESPA. Here, A's 
clients are being double billed because the work A performs as a ``title 
agent'' is that which he already performs for his client in his capacity 
as an attorney. For A to receive a separate payment as a title agent, A 
must perform necessary core title work and may not contract out the 
work. To receive additional compensation as a title agent for this 
transaction, A must provide his client with core title agent services 
for which he assumes liability, and which includes at a minimum, the 
evaluation of the title search to determine insurability of the title, 
and the issuance of a title commitment where customary, the clearance of 
underwriting objections, and the actual issuance of the policy or 
policies on behalf of the title company. A may not be compensated for 
the mere re-examination of work performed by B. Here, A is not 
performing these services and may not be compensated as a title agent 
under section 8(c)(1)(B). Referral fees or splits of fees may not be 
disguised as title agent commissions when the core title agent work is 
not performed. Further, because B created the program and gave A the 
opportunity to collect fees (a thing of value) in exchange for the 
referral of settlement service business, it has violated section 8 of 
RESPA.
    5. Facts: A, a ``mortgage originator,'' receives loan applications, 
funds the loans with its own money or with a wholesale line of credit 
for which A is liable, and closes the loans in A's own name. 
Subsequently, B, a mortgage lender, purchases the loans and compensates 
A for the value of the loans, as well as for any mortgage servicing 
rights.
    Comments: Compensation for the sale of a mortgage loan and servicing 
rights constitutes a secondary market transaction, rather than a 
referral fee, and is beyond the scope of section 8 of RESPA. For 
purposes of section 8, in determining whether a bona fide transfer of 
the loan obligation has taken place, the Bureau examines the real source 
of funding, and the real interest of the named settlement lender.
    6. Facts. A, a credit reporting company, places a facsimile 
transmission machine (FAX) in the office of B, a mortgage lender, so 
that B can easily transmit requests for credit reports and A can 
respond. A supplies the FAX machine at no cost or at a reduced rental 
rate based on the number of credit reports ordered.
    Comments: Either situation violates section 8 of RESPA. The FAX 
machine is a thing of value that A provides in exchange for the referral 
of business from B. Copying machines, computer terminals, printers, or 
other like items which have general use to the recipient and which are 
given in exchange for referrals of business also violate RESPA.
    7. Facts: A, a real estate broker, refers title business to B, a 
company that is a licensed title agent for C, a title insurance company. 
A owns more than 1% of B. B performs the

[[Page 563]]

title search and examination, makes determinations of insurability, 
issues the commitment, clears underwriting objections, and issues a 
policy of title insurance on behalf of C, for which C pays B a 
commission. B pays annual dividends to its owners, including A, based on 
the relative amount of business each of its owners refers to B.
    Comments: The facts involve an affiliated business arrangement. The 
payment of a commission by C to B is not a violation of section 8 of 
RESPA if the amount of the commission constitutes reasonable 
compensation for the services performed by B for C. The payment of a 
dividend or the giving of any other thing of value by B to A that is 
based on the amount of business referred to B by A does not meet the 
affiliated business agreement exemption provisions and such actions 
violate section 8. Similarly, if the amount of stock held by A in B (or, 
if B were a partnership, the distribution of partnership profits by B to 
A) varies based on the amount of business referred or expected to be 
referred, or if B retained any funds for subsequent distribution to A 
where such funds were generally in proportion to the amount of business 
A referred to B relative to the amount referred by other owners, such 
arrangements would violate section 8. The exemption for controlled 
business arrangements would not be available because the payments here 
would not be considered returns on ownership interests. Further, the 
required disclosure of the affiliated business arrangement and estimated 
charges have not been provided.
    8. Facts: Same as illustration 7, but B pays annual dividends in 
proportion to the amount of stock held by its owners, including A, and 
the distribution of annual dividends is not based on the amount of 
business referred or expected to be referred.
    Comments: If A and B meet the requirements of the affiliated 
business arrangement exemption there is not a violation of RESPA. Since 
the payment is a return on ownership interests, A and B will be exempt 
from section 8 if (1) A also did not require anyone to use the services 
of B, and (2) A disclosed its ownership interest in B on a separate 
disclosure form and provided an estimate of B's charges to each person 
referred by A to B (see appendix D of this part), and (3) B makes no 
payment (nor is there any other thing of value exchanged) to A other 
than dividends.
    9. Facts: A, a franchisor for franchised real estate brokers, owns 
B, a provider of settlement services. C, a franchisee of A, refers 
business to B.
    Comments: This is an affiliated business arrangement. A, B and C 
will all be exempt from section 8 if C discloses its franchise 
relationship with the owner of B on a separate disclosure form and 
provides an estimate of B's charges to each person referred to B (see 
appendix D of this part) and C does not require anyone to use B's 
services and A gives no thing a value to C under the franchise agreement 
(such as an adjusted level of franchise payment based on the referrals), 
and B makes no payments to A other than dividends representing a return 
on ownership interest (rather than, e.g., an adjusted level of payment 
being based on the referrals). Nor may B pay C anything of value for the 
referral.
    10. Facts: A is a real estate broker who refers business to its 
affiliate title company B. A makes all required written disclosures to 
the homebuyer of the arrangement and estimated charges and the homebuyer 
is not required to use B. B refers or contracts out business to C who 
does all the title work and splits the fee with B. B passes its fee to A 
in the form of dividends, a return on ownership interest.
    Comments: The relationship between A and B is an affiliated business 
arrangement. However, the affiliated business arrangement exemption does 
not provide exemption between an affiliated entity, B, and a third 
party, C. Here, B is a mere ``shell'' and provides no substantive 
services for its portion of the fee. The arrangement between B and C 
would be in violation of section 8(a) and (b). Even if B had an 
affiliate relationship with C, the required exemption criteria have not 
been met and the relationship would be subject to section 8.
    11. Facts: A, a mortgage lender is affiliated with B, a title 
company, and C, an escrow company and offers consumers a package of 
mortgage title and escrow services at a discount from the prices at 
which such services would be sold if purchased separately. Neither A, B, 
nor C requires consumers to purchase the services of their sister 
companies and each company sells such services separately and as part of 
the package. A also pays its employees (e.g., loan officers, 
secretaries, etc.) a bonus for each loan, title insurance or closing 
that A's employees generate for A, B, or C respectively. A pays such 
employee bonuses out of its own funds and receives no payments or 
reimbursements for such bonuses from B or C. At or before the time that 
customers are told by A or its employees about the services offered by B 
and C and/or the package of services that is available, the customers 
are provided with an affiliated business disclosure form.
    Comments: A's selling of a package of settlement services at a 
discount to a settlement service purchaser does not violate section 8 of 
RESPA. A's employees are making appropriate affiliated business 
disclosures and since the services are available separately and as part 
of a package, there is not ``required use'' of the additional services. 
A's payments of bonuses to its employees for the referral of business to 
A or A's affiliates, B and C, are exempt from section 8 under

[[Page 564]]

Sec. 1024.14(g)(1). However, if B or C reimbursed A for any bonuses that 
A paid to its employees for referring business to B or C, such 
reimbursements would violate section 8. Similarly, if B or C paid 
bonuses to A's employees directly for generating business for them, such 
payments would violate section 8.
    12. Facts. A is a mortgage broker who provides origination services 
to submit a loan to a Lender for approval. The mortgage broker charges 
the borrower a uniform fee for the total origination services, as well 
as a direct up-front charge for reimbursement of credit reporting, 
appraisal services or similar charges.
    Comment. The mortgage broker's fee must be itemized in the Good 
Faith Estimate and on the HUD-1 Settlement Statement. Other charges 
which are paid for by the borrower and paid in advance are listed as 
P.O.C. on the HUD-1 Settlement Statement, and reflect the actual 
provider charge for such services. Also, any other fee or payment 
received by the mortgage broker from either the lender or the borrower 
arising from the initial funding transaction, including a servicing 
release premium or yield spread premium, is to be noted on the Good 
Faith Estimate and listed in the 800 series of the HUD-1 Settlement 
Statement.
    13. Facts. A is a dealer in home improvements who has established 
funding arrangements with several lenders. Customers for home 
improvements receive a proposed contract from A. The proposal requires 
that customers both execute forms authorizing a credit check and 
employment verification, and frequently, execute a dealer consumer 
credit contract secured by a lien on the customer's (borrower's) 1- to 
4-family residential property. Simultaneously with the completion and 
certification of the home improvement work, the note is assigned by the 
dealer to a funding lender.
    Comments. The loan that is assigned to the funding lender is a loan 
covered by RESPA, when a lien is placed on the borrower's 1- to 4-family 
residential structure. The dealer loan or consumer credit contract 
originated by a dealer is also a RESPA-covered transaction, except when 
the dealer is not a ``creditor'' under the definition of ``federally 
related mortgage loan'' in Sec. 1024.2. The lender to whom the loan will 
be assigned is responsible for assuring that the lender or the dealer 
delivers to the borrower a Good Faith Estimate of closing costs 
consistent with Regulation X, and that the HUD-1 or HUD-1A Settlement 
Statement is used in conjunction with the settlement of the loan to be 
assigned. A dealer who, under Sec. 1024.2, is covered by RESPA as a 
creditor is responsible for the Good Faith Estimate of Closing Costs and 
the use of the appropriate settlement statement in connection with the 
loan.

    Effective Date Note: At 78 FR 80105, Dec. 31, 2013, appendix B to 
part 1024 was amended by revising paragraph 12, effective Aug. 1, 2015. 
For the convenience of the user, the revised text is set forth as 
follows:



  Sec. Appendix B to Part 1024--Illustrations of Requirements of RESPA

                                * * * * *

    12. Facts. A is a mortgage broker who provides origination services 
to submit a loan to a lender for approval. The mortgage broker charges 
the borrower a uniform fee for the total origination services, as well 
as a direct up-front charge for reimbursement of credit reporting, 
appraisal services, or similar charges.
    Comment. The mortgage broker's fee must be reflected in the Good 
Faith Estimate and on the HUD-1 Settlement Statement. Other charges 
which are paid for by the borrower and paid in advance are listed as 
P.O.C. on the HUD-1 Settlement Statement, and reflect the actual 
provider charge for such services.

                                * * * * *



  Sec. Appendix C to Part 1024--Instructions for Completing Good Faith 
                           Estimate (GFE) Form

    The following are instructions for completing the GFE required under 
section 5 of RESPA and 12 CFR 1024.7 of the Bureau regulations. The 
standardized form set forth in this appendix is the required GFE form 
and must be provided exactly as specified; provided, however, preparers 
may replace HUD's OMB approval number listed on the form with the 
Bureau's OMB approval number when they reproduce the GFE form. The 
instructions for completion of the GFE are primarily for the benefit of 
the loan originator who prepares the form and need not be transmitted to 
the borrower(s) as an integral part of the GFE. The required 
standardized GFE form must be prepared completely and accurately. A 
separate GFE must be provided for each loan where a transaction will 
involve more than one mortgage loan.

                          General Instructions

    The loan originator preparing the GFE may fill in information and 
amounts on the form by typewriter, hand printing, computer printing, or 
any other method producing clear and legible results. Under these 
instructions, the ``form'' refers to the required standardized GFE form. 
Although the standardized GFE is a prescribed form, Blocks 3, 6, and 11 
on page 2 may be adapted for use in particular loan situations, so that 
additional

[[Page 565]]

lines may be inserted there, and unused lines may be deleted.
    All fees for categories of charges shall be disclosed in U.S. dollar 
and cent amounts.

                          Specific Instructions

                                 Page 1

    Top of the Form--The loan originator must enter its name, business 
address, telephone number, and email address, if any, on the top of the 
form, along with the applicant's name, the address or location of the 
property for which financing is sought, and the date of the GFE.
    ``Purpose.''--This section describes the general purpose of the GFE 
as well as additional information available to the applicant.
    ``Shopping for your loan.''--This section requires no loan 
originator action.
    ``Important dates.''--This section briefly states important 
deadlines after which the loan terms that are the subject of the GFE may 
not be available to the applicant. In Line 1, the loan originator must 
state the date and, if necessary, time until which the interest rate for 
the GFE will be available. In Line 2, the loan originator must state the 
date until which the estimate of all other settlement charges for the 
GFE will be available. This date must be at least 10 business days from 
the date of the GFE. In Line 3, the loan originator must state how many 
calendar days within which the applicant must go to settlement once the 
interest rate is locked. In Line 4, the loan originator must state how 
many calendar days prior to settlement the interest rate would have to 
be locked, if applicable.
    ``Summary of your loan''--In this section, for all loans the loan 
originator must fill in, where indicated:
    (i) The initial loan amount;
    (ii) The loan term; and
    (iii) The initial interest rate.
    The loan originator must fill in the initial monthly amount owed for 
principal, interest, and any mortgage insurance. The amount shown must 
be the greater of: (1) The required monthly payment for principal and 
interest for the first regularly scheduled payment, plus any monthly 
mortgage insurance payment; or (2) the accrued interest for the first 
regularly scheduled payment, plus any monthly mortgage insurance 
payment.
    The loan originator must indicate whether the interest rate can 
rise, and, if it can, must insert the maximum rate to which it can rise 
over the life of the loan. The loan originator must also indicate the 
period of time after which the interest rate can first change.
    The loan originator must indicate whether the loan balance can rise 
even if the borrower makes payments on time, for example in the case of 
a loan with negative amortization. If it can, the loan originator must 
insert the maximum amount to which the loan balance can rise over the 
life of the loan. For Federal, state, local, or tribal housing programs 
that provide payment assistance, any repayment of such program 
assistance should be excluded from consideration in completing this 
item. If the loan balance will increase only because escrow items are 
being paid through the loan balance, the loan originator is not required 
to check the box indicating that the loan balance can rise.
    The loan originator must indicate whether the monthly amount owed 
for principal, interest, and any mortgage insurance can rise even if the 
borrower makes payments on time. If the monthly amount owed can rise 
even if the borrower makes payments on time, the loan originator must 
indicate the period of time after which the monthly amount owed can 
first change, the maximum amount to which the monthly amount owed can 
rise at the time of the first change, and the maximum amount to which 
the monthly amount owed can rise over the life of the loan. The amount 
used for the monthly amount owed must be the greater of: (1) The 
required monthly payment for principal and interest for that month, plus 
any monthly mortgage insurance payment; or (2) the accrued interest for 
that month, plus any monthly mortgage insurance payment.
    The loan originator must indicate whether the loan includes a 
prepayment penalty, and, if so, the maximum amount that it could be.
    The loan originator must indicate whether the loan requires a 
balloon payment and, if so, the amount of the payment and in how many 
years it will be due.
    ``Escrow account information.''--The loan originator must indicate 
whether the loan includes an escrow account for property taxes and other 
financial obligations. The amount shown in the ``Summary of your loan'' 
section for ``Your initial monthly amount owed for principal, interest, 
and any mortgage insurance'' must be entered in the space for the 
monthly amount owed in this section.
    ``Summary of your settlement charges.''--On this line, the loan 
originator must state the Adjusted Origination Charges from subtotal A 
of page 2, the Charges for All Other Settlement Services from subtotal B 
of page 2, and the Total Estimated Settlement Charges from the bottom of 
page 2.

                                 Page 2

    ``Understanding your estimated settlement charges.''--This section 
details 11 settlement cost categories and amounts associated with the 
mortgage loan. For purposes of determining whether a tolerance has been 
met, the amount on the GFE should be compared with the total of any 
amounts shown on the HUD-1 in the borrower's column and any amounts paid 
outside closing by or on behalf of the borrower.

[[Page 566]]

                  ``Your Adjusted Origination Charges''

    Block 1, ``Our origination charge.''--The loan originator must state 
here all charges that all loan originators involved in this transaction 
will receive, except for any charge for the specific interest rate 
chosen (points). A loan originator may not separately charge any 
additional fees for getting this loan, including for application, 
processing, or underwriting. The amount stated in Block 1 is subject to 
zero tolerance, i.e., the amount may not increase at settlement.
    Block 2, ``Your credit or charge (points) for the specific interest 
rate chosen.''--For transactions involving mortgage brokers, the 
mortgage broker must indicate through check boxes whether there is a 
credit to the borrower for the interest rate chosen on the loan, the 
interest rate, and the amount of the credit, or whether there is an 
additional charge (points) to the borrower for the interest rate chosen 
on the loan, the interest rate, and the amount of that charge. Only one 
of the boxes may be checked; a credit and charge cannot occur together 
in the same transaction.
    For transactions without a mortgage broker, the lender may choose 
not to separately disclose in this block any credit or charge for the 
interest rate chosen on the loan; however, if this block does not 
include any positive or negative figure, the lender must check the first 
box to indicate that ``The credit or charge for the interest rate you 
have chosen'' is included in ``Our origination charge'' above (see Block 
1 instructions above), must insert the interest rate, and must also 
insert ``0'' in Block 2. Only one of the boxes may be checked; a credit 
and charge cannot occur together in the same transaction.
    For a mortgage broker, the credit or charge for the specific 
interest rate chosen is the net payment to the mortgage broker from the 
lender (i.e., the sum of all payments to the mortgage broker from the 
lender, including payments based on the loan amount, a flat rate, or any 
other computation, and in a table funded transaction, the loan amount 
less the price paid for the loan by the lender). When the net payment to 
the mortgage broker from the lender is positive, there is a credit to 
the borrower and it is entered as a negative amount in Block 2 of the 
GFE. When the net payment to the mortgage broker from the lender is 
negative, there is a charge to the borrower and it is entered as a 
positive amount in Block 2 of the GFE. If there is no net payment (i.e., 
the credit or charge for the specific interest rate chosen is zero), the 
mortgage broker must insert ``0'' in Block 2 and may check either the 
box indicating there is a credit of ``0'' or the box indicating there is 
a charge of ``0''.
    The amount stated in Block 2 is subject to zero tolerance while the 
interest rate is locked, i.e., any credit for the interest rate chosen 
cannot decrease in absolute value terms and any charge for the interest 
rate chosen cannot increase. (Note: An increase in the credit is allowed 
since this increase is a reduction in cost to the borrower. A decrease 
in the credit is not allowed since it is an increase in cost to the 
borrower.)
    Line A, ``Your Adjusted Origination Charges.''--The loan originator 
must add the numbers in Blocks 1 and 2 and enter this subtotal at 
highlighted Line A. The subtotal at Line A will be a negative number if 
there is a credit in Block 2 that exceeds the charge in Block 1. The 
amount stated in Line A is subject to zero tolerance while the interest 
rate is locked.
    In the case of ``no cost'' loans, where ``no cost'' refers only to 
the loan originator's fees, Line A must show a zero charge as the 
adjusted origination charge. In the case of ``no cost'' loans where ``no 
cost'' encompasses third party fees as well as the upfront payment to 
the loan originator, all of the third party fees listed in Block 3 
through Block 11 to be paid for by the loan originator (or borrower, if 
any) must be itemized and listed on the GFE. The credit for the interest 
rate chosen must be large enough that the total for Line A will result 
in a negative number to cover the third party fees.

           ``Your Charges for All Other Settlement Services''

    There is a 10 percent tolerance applied to the sum of the prices of 
each service listed in Block 3, Block 4, Block 5, Block 6, and Block 7, 
where the loan originator requires the use of a particular provider or 
the borrower uses a provider selected or identified by the loan 
originator. Any services in Block 4, Block 5, or Block 6 for which the 
borrower selects a provider other than one identified by the loan 
originator are not subject to any tolerance and, at settlement, would 
not be included in the sum of the charges on which the 10 percent 
tolerance is based. Where a loan originator permits a borrower to shop 
for third party settlement services, the loan originator must provide 
the borrower with a written list of settlement services providers at the 
time of the GFE, on a separate sheet of paper.
    Block 3, ``Required services that we select.''--In this block, the 
loan originator must identify each third party settlement service 
required and selected by the loan originator (excluding title services), 
along with the estimated price to be paid to the provider of each 
service. Examples of such third party settlement services might include 
provision of credit reports, appraisals, flood checks, tax services, and 
any upfront mortgage insurance premium. The loan originator must 
identify the specific required services and provide an estimate of the 
price of each service. Loan originators are also required to add

[[Page 567]]

the individual charges disclosed in this block and place that total in 
the column of this block. The charge shown in this block is subject to 
an overall 10 percent tolerance as described above.
    Block 4, ``Title services and lender's title insurance.''--In this 
block, the loan originator must state the estimated total charge for 
third party settlement service providers for all closing services, 
regardless of whether the providers are selected or paid for by the 
borrower, seller, or loan originator. The loan originator must also 
include any lender's title insurance premiums, when required, regardless 
of whether the provider is selected or paid for by the borrower, seller, 
or loan originator. All fees for title searches, examinations, and 
endorsements, for example, would be included in this total. The charge 
shown in this block is subject to an overall 10 percent tolerance as 
described above.
    Block 5, ``Owner's title insurance.''--In this block, for all 
purchase transactions the loan originator must provide an estimate of 
the charge for the owner's title insurance and related endorsements, 
regardless of whether the providers are selected or paid for by the 
borrower, seller, or loan originator. For non-purchase transactions, the 
loan originator may enter ``NA'' or ``Not Applicable'' in this Block. 
The charge shown in this block is subject to an overall 10 percent 
tolerance as described above.
    Block 6, ``Required services that you can shop for.''--In this 
block, the loan originator must identify each third party settlement 
service required by the loan originator where the borrower is permitted 
to shop for and select the settlement service provider (excluding title 
services), along with the estimated charge to be paid to the provider of 
each service. The loan originator must identify the specific required 
services (e.g., survey, pest inspection) and provide an estimate of the 
charge of each service. The loan originator must also add the individual 
charges disclosed in this block and place the total in the column of 
this block. The charge shown in this block is subject to an overall 10 
percent tolerance as described above.
    Block 7, ``Government recording charge.''--In this block, the loan 
originator must estimate the state and local government fees for 
recording the loan and title documents that can be expected to be 
charged at settlement. The charge shown in this block is subject to an 
overall 10 percent tolerance as described above.
    Block 8, ``Transfer taxes.''--In this block, the loan originator 
must estimate the sum of all state and local government fees on 
mortgages and home sales that can be expected to be charged at 
settlement, based upon the proposed loan amount or sales price and on 
the property address. A zero tolerance applies to the sum of these 
estimated fees.
    Block 9, ``Initial deposit for your escrow account.''--In this 
block, the loan originator must estimate the amount that it will require 
the borrower to place into a reserve or escrow account at settlement to 
be applied to recurring charges for property taxes, homeowner's and 
other similar insurance, mortgage insurance, and other periodic charges. 
The loan originator must indicate through check boxes if the reserve or 
escrow account will cover future payments for all tax, all hazard 
insurance, and other obligations that the loan originator requires to be 
paid as they fall due. If the reserve or escrow account includes some, 
but not all, property taxes or hazard insurance, or if it includes 
mortgage insurance, the loan originator should check ``other'' and then 
list the items included.
    Block 10, ``Daily interest charges.''--In this block, the loan 
originator must estimate the total amount that will be due at settlement 
for the daily interest on the loan from the date of settlement until the 
first day of the first period covered by scheduled mortgage payments. 
The loan originator must also indicate how this total amount is 
calculated by providing the amount of the interest charges per day and 
the number of days used in the calculation, based on a stated projected 
closing date.
    Block 11, ``Homeowner's insurance.''--The loan originator must 
estimate in this block the total amount of the premiums for any hazard 
insurance policy and other similar insurance, such as fire or flood 
insurance that must be purchased at or before settlement to meet the 
loan originator's requirements. The loan originator must also separately 
indicate the nature of each type of insurance required along with the 
charges. To the extent a loan originator requires that such insurance be 
part of an escrow account, the amount of the initial escrow deposit must 
be included in Block 9.
    Line B, ``Your Charges for All Other Settlement Services.''--The 
loan originator must add the numbers in Blocks 3 through 11 and enter 
this subtotal in the column at highlighted Line B.
    Line A+B, ``Total Estimated Settlement Charges.''--The loan 
originator must add the subtotals in the right-hand column at 
highlighted Lines A and B and enter this total in the column at 
highlighted Line A+B.

                                 Page 3

                            ``Instructions''

    ``Understanding which charges can change at settlement.''--This 
section informs the applicant about which categories of settlement 
charges can increase at closing, and by how much, and which categories 
of settlement charges cannot increase at closing. This section requires 
no loan originator action.

[[Page 568]]

    ``Using the tradeoff table.''--This section is designed to make 
borrowers aware of the relationship between their total estimated 
settlement charges on one hand, and the interest rate and resulting 
monthly payment on the other hand. The loan originator must complete the 
left hand column using the loan amount, interest rate, monthly payment 
figure, and the total estimated settlement charges from page 1 of the 
GFE. The loan originator, at its option, may provide the borrower with 
the same information for two alternative loans, one with a higher 
interest rate, if available, and one with a lower interest rate, if 
available, from the loan originator. The loan originator should list in 
the tradeoff table only alternative loans for which it would presently 
issue a GFE based on the same information the loan originator considered 
in issuing this GFE. The alternative loans must use the same loan amount 
and be otherwise identical to the loan in the GFE. The alternative loans 
must have, for example, the identical number of payment periods; the 
same margin, index, and adjustment schedule if the loans are adjustable 
rate mortgages; and the same requirements for prepayment penalty and 
balloon payments. If the loan originator fills in the tradeoff table, 
the loan originator must show the borrower the loan amount, alternative 
interest rate, alternative monthly payment, the change in the monthly 
payment from the loan in this GFE to the alternative loan, the change in 
the total settlement charges from the loan in this GFE to the 
alternative loan, and the total settlement charges for the alternative 
loan. If these options are available, an applicant may request a new 
GFE, and a new GFE must be provided by the loan originator.
    ``Using the shopping chart.''--This chart is a shopping tool to be 
provided by the loan originator for the borrower to complete, in order 
to compare GFEs.
    ``If your loan is sold in the future.''--This section requires no 
loan originator action.

[[Page 569]]

[GRAPHIC] [TIFF OMITTED] TR20DE11.006


[[Page 570]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.007


[[Page 571]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.008


[[Page 572]]



    Effective Date Note: At 78 FR 80105, Dec. 31, 2013, appendix C to 
part 1024 was amended in second sentence of the first paragraph 
following the Appendix heading is amended by capitalizing ``Appendix'' 
where it appears; revise the paragraphs under Specific Instructions, 
Summary of your loan.; under the heading Specific Instructions, Escrow 
account information, the paragraph is amended by adding at the end of 
the paragraph ``For reverse mortgage transactions where the lender will 
establish an arrangement to pay for such items as property taxes and 
homeowner's insurance through draws from the principal limit, the loan 
originator must indicate that an escrow account is included and the 
amount shown in this section must be disclosed as `N/A.' ''; under the 
heading Specific Instructions, Your Adjusted Origination Charges, Block 
2, Your credit or charge (points) for the specific interest rate chosen, 
paragraph 3 is amended by removing the last sentence ``If there is no 
net payment (i.e., the credit or charge for the specific interest rate 
chosen is zero), the mortgage broker must insert `0' in Block 2 and may 
check either the box indicating there is a credit of `0' or the box 
indicating there is a charge of `0'.'' and replacing it with ``If there 
is no net payment (i.e., the credit or charge for the specific interest 
rate chosen is zero), the mortgage broker must insert `0' in Block 2 and 
may check either the box indicating there is a credit of `0' or the box 
indicating there is a charge of `0.' ''; under the heading Specific 
Instructions Your Adjusted Origination Charges, Block 7, Government 
recording charge, the first sentence is amended by capitalizing 
``State'' where it appears; under the heading Specific Instructions, 
Your Adjusted Origination Charges, Block 8, Transfer taxes, the first 
sentence is amended by capitalizing ``State'' where it appears, 
effective Aug. 1, 2015. For the convenience of the user, the revised 
text is set forth as follows:



  Sec. Appendix C to Part 1024--Instructions for Completing Good Faith 
                           Estimate (GFE) Form

                                * * * * *

    Summary of your loan.''--In this section, for all loans the loan 
originator must fill in, where indicated:
    (i) The initial loan amount;
    (ii) The loan term; and
    (iii) The initial interest rate.
    For reverse mortgage transactions:
    (i) The initial loan amount disclosed on the GFE is the amount of 
the initial principal limit of the loan;
    (ii) The loan term is disclosed as ``N/A'' when the loan term is 
conditioned upon the occurrence of a specified event, such as the death 
of the borrower or the borrower no longer occupying the property for a 
certain period of time; and
    (iii) The initial interest rate is the interest rate indicated on 
the legal obligation.
    The loan originator must fill in the initial monthly amount owed for 
principal, interest, and any mortgage insurance. The amount shown must 
be the greater of: (1) The required monthly payment for principal and 
interest for the first regularly scheduled payment, plus any monthly 
mortgage insurance payment; or (2) the accrued interest for the first 
regularly scheduled payment, plus any monthly mortgage insurance 
payment. For reverse mortgage transactions where there are no regular 
payment periods, the loan originator must disclose ``Not Applicable'' or 
``N/A'' for the initial monthly amount owed for principal, interest, and 
any mortgage insurance.
    The loan originator must indicate whether the interest rate can 
rise, and, if it can, must insert the maximum rate to which it can rise 
over the life of the loan. The loan originator must also indicate the 
period of time after which the interest rate can first change.
    The loan originator must indicate whether the loan balance can rise 
even if the borrower makes payments on time, for example in the case of 
a loan with negative amortization. If it can, the loan originator must 
insert the maximum amount to which the loan balance can rise over the 
life of the loan. For Federal, State, local, or tribal housing programs 
that provide payment assistance, any repayment of such program 
assistance should be excluded from consideration in completing this 
item. If the loan balance will increase only because escrow items are 
being paid through the loan balance, the loan originator is not required 
to check the box indicating that the loan balance can rise. For reverse 
mortgage transactions, the loan originator must indicate that the loan 
balance can rise even if the borrower makes payments on time and the 
maximum amount to which the loan balance can rise must be disclosed as 
``Unknown.''
    The loan originator must indicate whether the monthly amount owed 
for principal, interest, and any mortgage insurance can rise even if the 
borrower makes payments on time. If the monthly amount owed can rise 
even if the borrower makes payments on time, the loan originator must 
indicate the period of time after which the monthly amount owed can 
first change, the maximum amount to which the monthly amount owed can 
rise at the time of the first change, and the maximum amount to which 
the monthly amount owed can rise over the life of the loan. The amount 
used for the monthly amount owed must be the greater of: (1) The 
required monthly payment for principal and interest for that month, plus 
any monthly mortgage insurance payment; or (2) the accrued interest for 
that month, plus any

[[Page 573]]

 monthly mortgage insurance payment. For reverse mortgage transactions, 
the loan originator must disclose that the monthly amount owed for 
principal, interest, and any mortgage insurance cannot rise.
    The loan originator must indicate whether the loan includes a 
prepayment penalty, and, if so, the maximum amount that it could be.
    The loan originator must indicate whether the loan requires a 
balloon payment and, if so, the amount of the payment and in how many 
years it will be due. Reverse mortgage transactions are not considered 
to be balloon transactions for the purposes of this disclosure on the 
GFE.

                                * * * * *



Sec. Appendix D to Part 1024--Affiliated Business Arrangement Disclosure 
                         Statement Format Notice

 To:____________________________________________________________________
 From:__________________________________________________________________
 (Entity Making Statement)
 Property:______________________________________________________________
 Date:__________________________________________________________________

    This is to give you notice that [referring party] has a business 
relationship with [settlement services provider(s)]. [Describe the 
nature of the relationship between the referring party and the 
provider(s), including percentage of ownership interest, if applicable.] 
Because of this relationship, this referral may provide [referring 
party] a financial or other benefit.
    [A.] Set forth below is the estimated charge or range of charges for 
the settlement services listed. You are NOT required to use the listed 
provider(s) as a condition for [settlement of your loan on] [or] 
[purchase, sale, or refinance of] the subject property. THERE ARE 
FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR 
SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE 
RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.

 [provider and settlement service]______________________________________
________________________________________________________________________
________________________________________________________________________
 [charge or range of charges]___________________________________________
________________________________________________________________________
________________________________________________________________________

    [B.] Set forth below is the estimated charge or range of charges for 
the settlement services of an attorney, credit reporting agency, or real 
estate appraiser that we, as your lender, will require you to use, as a 
condition of your loan on this property, to represent our interests in 
the transaction.

 [provider and settlement service]______________________________________
________________________________________________________________________
________________________________________________________________________
 [charge or range of charges]___________________________________________
________________________________________________________________________
________________________________________________________________________

                             ACKNOWLEDGMENT

    I/we have read this disclosure form, and understand that referring 
party is referring me/us to purchase the above-described settlement 
service(s) and may receive a financial or other benefit as the result of 
this referral.
________________________________________________________________________
Signature

[INSTRUCTIONS TO PREPARER:] [Use paragraph A for referrals other than 
those by a lender to an attorney, a credit reporting agency, or a real 
estate appraiser that a lender is requiring a borrower to use to 
represent the lender's interests in the transaction. Use paragraph B for 
those referrals to an attorney, credit reporting agency, or real estate 
appraiser that a lender is requiring a borrower to use to represent the 
lender's interests in the transaction. When applicable, use both 
paragraphs. Specific timing rules for delivery of the affiliated 
business disclosure statement are set forth in 12 CFR 1024.15(b)(1) of 
Regulation X). These INSTRUCTIONS TO PREPARER should not appear on the 
statement.]



             Sec. Appendix E to Part 1024--Arithmetic Steps

               I. Example Illustrating Aggregate Analysis

                               Assumptions

                             Disbursements:

$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10

          Cushion: One-sixth of estimated annual disbursements

                           Settlement: May 15

                          First Payment: July 1

                      Step 1--Initial Trial Balance
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0        0
Jul..........................................      130      500     -370
Aug..........................................      130        0     -240
Sep..........................................      130      360     -470
Oct..........................................      130        0     -340
Nov..........................................      130        0     -210
Dec..........................................      130      700     -780
Jan..........................................      130        0     -650
Feb..........................................      130        0     -520
Mar..........................................      130        0     -390
Apr..........................................      130        0     -260
May..........................................      130        0     -130

[[Page 574]]

 
Jun..........................................      130        0        0
------------------------------------------------------------------------


                     Step 2--Adjusted Trial Balance
       [Increase monthly balances to eliminate negative balances]
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0      780
Jul..........................................      130      500      410
Aug..........................................      130        0      540
Sep..........................................      130      360      310
Oct..........................................      130        0      440
Nov..........................................      130        0      570
Dec..........................................      130      700        0
Jan..........................................      130        0      130
Feb..........................................      130        0      260
Mar..........................................      130        0      390
Apr..........................................      130        0      520
May..........................................      130        0      650
Jun..........................................      130        0      780
------------------------------------------------------------------------


                   Step 3--Trial Balance With Cushion
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0     1040
Jul..........................................      130      500      670
Aug..........................................      130        0      800
Sep..........................................      130      360      570
Oct..........................................      130        0      700
Nov..........................................      130        0      830
Dec..........................................      130      700      260
Jan..........................................      130        0      390
Feb..........................................      130        0      520
Mar..........................................      130        0      650
Apr..........................................      130        0      780
May..........................................      130        0      910
Jun..........................................      130        0     1040
------------------------------------------------------------------------

              II. Example Illustrating Single-Item Analysis

                               Assumptions

                             Disbursements:

$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10

          Cushion: One-sixth of estimated annual disbursements

                           Settlement: May 15

                          First Payment: July 1

                                          Step 1--Initial Trial Balance
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
June..............................            0            0            0            0            0            0
July..............................          100          500         -400           30            0           30
August............................          100            0         -300           30            0           60
September.........................          100            0         -200           30          360         -270
October...........................          100            0         -100           30            0         -240
November..........................          100            0            0           30            0         -210
December..........................          100          700         -600           30            0         -180
January...........................          100            0         -500           30            0         -150
February..........................          100            0         -400           30            0         -120
March.............................          100            0         -300           30            0          -90
April.............................          100            0         -200           30            0          -60
May...............................          100            0         -100           30            0          -30
June..............................          100            0            0           30            0            0
----------------------------------------------------------------------------------------------------------------


                                         Step 2--Adjusted Trial Balance
                           [Increase monthly balances to eliminate negative balances]
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
Jun...............................            0            0          600            0            0          270
Jul...............................          100          500          200           30            0          300
Aug...............................          100            0          300           30            0          330
Sep...............................          100            0          400           30          360            0
Oct...............................          100            0          500           30            0           30

[[Page 575]]

 
Nov...............................          100            0          600           30            0           60
Dec...............................          100          700            0           30            0           90
Jan...............................          100            0          100           30            0          120
Feb...............................          100            0          200           30            0          150
Mar...............................          100            0          300           30            0          180
Apr...............................          100            0          400           30            0          210
May...............................          100            0          500           30            0          240
Jun...............................          100            0          600           30            0          270
----------------------------------------------------------------------------------------------------------------


                                       Step 3--Trial Balance With Cushion
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
Jun...............................            0            0          800            0            0          330
Jul...............................          100          500          400           30            0          360
Aug...............................          100            0          500           30            0          390
Sep...............................          100            0          600           30          360           60
Oct...............................          100            0          700           30            0           90
Nov...............................          100            0          800           30            0          120
Dec...............................          100          700          200           30            0          150
Jan...............................          100            0          300           30            0          180
Feb...............................          100            0          400           30            0          210
Mar...............................          100            0          500           30            0          240
Apr...............................          100            0          600           30            0          270
May...............................          100            0          700           30            0          300
Jun...............................          100            0          800           30            0          330
----------------------------------------------------------------------------------------------------------------



                  Sec. Appendix MS--Mortgage Servicing





                     Sec. Appendix MS-1 to Part 1024

    [Sample language; use business stationery or similar heading]
    [Date]

   SERVICING DISCLOSURE STATEMENT NOTICE TO FIRST LIEN MORTGAGE LOAN 
  APPLICANTS: THE RIGHT TO COLLECT YOUR MORTGAGE LOAN PAYMENTS MAY BE 
                               TRANSFERRED

    You are applying for a mortgage loan covered by the Real Estate 
Settlement Procedures Act (RESPA) (12 U.S.C. 2601 et seq.). RESPA gives 
you certain rights under Federal law. This statement describes whether 
the servicing for this loan may be transferred to a different loan 
servicer. ``Servicing'' refers to collecting your principal, interest, 
and escrow payments, if any, as well as sending any monthly or annual 
statements, tracking account balances, and handling other aspects of 
your loan. You will be given advance notice before a transfer occurs.

                     Servicing Transfer Information

    [We may assign, sell, or transfer the servicing of your loan while 
the loan is outstanding.]
    [or]
    [We do not service mortgage loans of the type for which you applied. 
We intend to assign, sell, or transfer the servicing of your mortgage 
loan before the first payment is due.]
    [or]
    [The loan for which you have applied will be serviced at this 
financial institution and we do not intend to sell, transfer, or assign 
the servicing of the loan.]
    [INSTRUCTIONS TO PREPARER: Insert the date and select the 
appropriate language under ``Servicing Transfer Information.'' The model 
format may be annotated with further information that clarifies or 
enhances the model language.]



                     Sec. Appendix MS-2 to Part 1024

                      Notice of Servicing Transfer

    The servicing of your mortgage loan is being transferred, effective 
[Date]. This means that after this date, a new servicer

[[Page 576]]

will be collecting your mortgage loan payments from you. Nothing else 
about your mortgage loan will change.
    [Name of present servicer] is now collecting your payments. [Name of 
present servicer] will stop accepting payments received from you after 
[Date].
    [Name of new servicer] will collect your payments going forward. 
Your new servicer will start accepting payments received from you on 
[Date].
    Send all payments due on or after [Date] to [Name of new servicer] 
at this address: [New servicer address].
    If you have any questions for either your present servicer, [Name of 
present servicer] or your new servicer [Name of new servicer], about 
your mortgage loan or this transfer, please contact them using the 
information below:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Current Servicer:                    New Servicer:
[Name of present servicer]           [Name of new servicer]
[Individual or Department]           [Individual or Department]
[Telephone Number]                   [Telephone Number]
[Address]                            [Address]
------------------------------------------------------------------------

    [Use this paragraph if appropriate; otherwise omit.] Important note 
about insurance: If you have mortgage life or disability insurance or 
any other type of optional insurance, the transfer of servicing rights 
may affect your insurance in the following way:

________________________________________________________________________

    You should do the following to maintain coverage:

________________________________________________________________________

    Under Federal law, during the 60-day period following the effective 
date of the transfer of the loan servicing, a loan payment received by 
your old servicer on or before its due date may not be treated by the 
new servicer as late, and a late fee may not be imposed on you.
________________________________________________________________________
[NAME OF PRESENT SERVICER]

________________________________________________________________________
Date

[and] [or]

________________________________________________________________________
[NAME OF NEW SERVICER]

________________________________________________________________________
Date


[78 FR 10886, Feb. 14, 2013]



                     Sec. Appendix MS-3 to Part 1024

                Model Force-Placed Insurance Notice Forms

                            Table of Contents

MS-3(A)--Model Form for Force-Placed Insurance Notice Containing 
Information Required By Sec. 1024.37(c)(2)
MS-3(B)--Model Form for Force-Placed Insurance Notice Containing 
Information Required By Sec. 1024.37(d)(2)(i)
MS-3(C)--Model Form for Force-Placed Insurance Notice Containing 
Information Required By Sec. 1024.37(d)(2)(ii)
MS-3(D)-- Model Form for Renewal or Replacement of Force-Placed 
Insurance Notice Containing Information Required by Sec. 1024.37(e)(2)

    MS-3(A)--Model Form for Force-Placed Insurance Notice Containing 
               Information Required By Sec. 1024.37(c)(2)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Please provide insurance information for [Property
Address]
    Dear [Borrower's Name]:
    Our records show that your [hazard] [Insurance Type] insurance [is 
expiring] [expired], and we do not have evidence that you have obtained 
new coverage. Because [hazard] [Insurance Type] insurance is required on 
your property, [we bought insurance for your property] [we plan to buy 
insurance for your property]. You must pay us for any period during 
which the insurance we buy is in effect but you do not have insurance.
    You should immediately provide us with your insurance information. 
[Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    The insurance we [bought] [buy]:
     May be more expensive than the insurance you can 
buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]
    MS-3(B)--Model Form for Force-Placed Insurance Notice Containing 
Information Required By Sec. 1024.37(d)(2)(i)
[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
    Subject: Second and final notice--please provide insurance 
information for [Property Address]

[[Page 577]]

    Dear [Borrower's Name]:
    This is your second and final notice that our records show that your 
[hazard] [Insurance Type] insurance [is expiring] [expired], and we do 
not have evidence that you have obtained new coverage. Because [hazard] 
[Insurance Type] insurance is required on your property, [we bought 
insurance for your property] [we plan to buy insurance for your 
property]. You must pay us for any period during which the insurance we 
buy is in effect but you do not have insurance.
    You should immediately provide us with your insurance information. 
[Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    The insurance we [bought] [buy]:
     [Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be more expensive than insurance 
you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

    MS-3(C)--Model Form for Force-Placed Insurance Notice Containing 
             Information Required By Sec. 1024.37(d)(2)(ii)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Second and final notice--please provide insurance information 
for [Property Address]
    Dear [Borrower's Name]:
    We received the insurance information you provided, but we are 
unable to verify coverage from [Date Range].
    Please provide us with insurance information for [Date Range] 
immediately.
    We will charge you for insurance we [bought] [plan to buy] for [Date 
Range] unless we can verify that you have insurance coverage for [Date 
Range].
    The insurance we [bought] [buy]:
     Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be more expensive than insurance 
you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

    MS-3(D)-- Model Form for Renewal or Replacement of Force-Placed 
 Insurance Notice Containing Information Required by Sec. 1024.37(e)(2)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Please update insurance information for [Property Address]
    Dear [Borrower's Name]:
    Because we did not have evidence that you had [hazard] [Insurance 
Type] insurance on the property listed above, we bought insurance on 
your property and added the cost to your mortgage loan account.
    The policy that we bought [expired] [is scheduled to expire]. 
Because [hazard][Insurance Type] insurance] is required on your 
property, we intend to maintain insurance on your property by renewing 
or replacing the insurance we bought.
    The insurance we buy:
     [Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be more expensive than insurance 
you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you buy [hazard] [Insurance Type] insurance, you should 
immediately provide us with your insurance information.
    [Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

[78 FR 10886, Feb. 14, 2013, as amended at 78 FR 60438, Oct. 1, 2013]



  Sec. Appendix MS-4 to Part 1024--Model Clauses for the Written Early 
                           Intervention Notice

MS-4(A)--Statement Encouraging the Borrower To Contact the Servicer and 
          Additional Information About Loss Mitigation Options 
                 (Sec. 1024.39(b)(2)(i), (ii) and (iv))

    Call us today to learn more about your options and instructions for 
how to apply. [The longer you wait, or the further you fall behind on 
your payments, the harder it will be to find a solution.]
[Servicer Name]
[Servicer Address]
[Servicer Telephone Number]
[For more information, visit [Servicer Web site] [and][or] [Email 
Address]].

[[Page 578]]

  MS-4(B)--Available Loss Mitigation Options (Sec. 1024.39(b)(2)(iii))

    [If you need help, the following options may be possible (most are 
subject to lender approval):]
     [Refinance your loan with us or another lender;]
     [Modify your loan terms with us;]
     [Payment forbearance temporarily gives you more 
time to pay your monthly payment;] [or]
     [If you are not able to continue paying your 
mortgage, your best option may be to find more affordable housing. As an 
alternative to foreclosure, you may be able to sell your home and use 
the proceeds to pay off your current loan.]

           MS-4(C)--Housing Counselors (Sec. 1024.39(b)(2)(v))

    For help exploring your options, the Federal government provides 
contact information for housing counselors, which you can access by 
contacting [the Consumer Financial Protection Bureau at [Bureau Housing 
Counselor List Web site]] [the Department of Housing and Urban 
Development at [HUD Housing Counselor List Web site]] or by calling [HUD 
Housing Counselor List Telephone Number].

[78 FR 10887, Feb. 14, 2013]



     Sec. Supplement I to Part 1024--Official Bureau Interpretations

                              Introduction

    1. Official status. This commentary is the primary vehicle by which 
the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation X. Good faith compliance with this 
commentary affords protection from liability under section 19(b) of the 
Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2617(b).
    2. Requests for official interpretations. A request for an official 
interpretation shall be in writing and addressed to the Associate 
Director, Research, Markets, and Regulations, Bureau of Consumer 
Financial Protection, 1700 G Street NW., Washington, DC 20552. A request 
shall contain a complete statement of all relevant facts concerning the 
issue, including copies of all pertinent documents. Except in unusual 
circumstances, such official interpretations will not be issued 
separately but will be incorporated in the official commentary to this 
part, which will be amended periodically. No official interpretations 
will be issued approving financial institutions' forms or statements. 
This restriction does not apply to forms or statements whose use is 
required or sanctioned by a government agency.
    3. Unofficial oral interpretations. Unofficial oral interpretations 
may be provided at the discretion of Bureau staff. Written requests for 
such interpretations should be sent to the address set forth for 
official interpretations. Unofficial oral interpretations provide no 
protection under section 19(b) of RESPA. Ordinarily, staff will not 
issue unofficial oral interpretations on matters adequately covered by 
this part or the official Bureau interpretations.
    4. Rules of construction. (a) Lists that appear in the commentary 
may be exhaustive or illustrative; the appropriate construction should 
be clear from the context. In most cases, illustrative lists are 
introduced by phrases such as ``including, but not limited to,'' ``among 
other things,'' ``for example,'' or ``such as.''
    (b) Throughout the commentary, reference to ``this section'' or 
``this paragraph'' means the section or paragraph in the regulation that 
is the subject of the comment.
    5. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that the 
comment interprets. The comments are designated with as much specificity 
as possible according to the particular regulatory provision addressed. 
For example, some of the comments to Sec. 1024.37(c)(1) are further 
divided by subparagraph, such as comment 37(c)(1)(i)-1. In other cases, 
comments have more general application and are designated, for example, 
as comment 40(a)-1. This introduction may be cited as comments I-1 
through I-5.

                      Subpart A--General Provisions

                    Section 1024.5 Coverage of RESPA

                      5(c) Relation to State laws.

                           Paragraph 5(c)(1).

    1. State laws that are inconsistent with the requirements of RESPA 
or Regulation X may be preempted by RESPA or Regulation X. State laws 
that give greater protection to consumers are not inconsistent with and 
are not preempted by RESPA or Regulation X. In addition, nothing in 
RESPA or Regulation X should be construed to preempt the entire field of 
regulation of the practices covered by RESPA or Regulation X, including 
the regulations in Subpart C with respect to mortgage servicers or 
mortgage servicing.

[[Page 579]]

      Subpart B--Mortgage Settlement and Escrow Accounts [Reserved]

                     Section 1024.17 Escrow Accounts

                         17(k) Timely payments.

              17(k)(5) Timely payment of hazard insurance.

                17(k)(5)(ii) Inability to disburse funds.

                  17(k)(5)(ii)(A)When inability exists.

    1. Examples of reasonable basis to believe that a policy has been 
cancelled or not renewed. The following are examples of where a servicer 
has a reasonable basis to believe that a borrower's hazard insurance 
policy has been canceled or not renewed for reasons other than the 
nonpayment of premium charges:
    i. A borrower notifies a servicer that the borrower has cancelled 
the hazard insurance coverage, and the servicer has not received 
notification of other hazard insurance coverage.
    ii. A servicer receives a notification of cancellation or non-
renewal from the borrower's insurance company before payment is due on 
the borrower's hazard insurance.
    iii. A servicer does not receive a payment notice by the expiration 
date of the borrower's hazard insurance policy.
    17(k)(5)(ii)(C) Recoupment for advances.
    1. Month-to-month advances. A servicer that advances the premium 
payment to be disbursed from an escrow account may advance the payment 
on a month-to-month basis, if permitted by State or other applicable law 
and accepted by the borrower's hazard insurance company.

                      Subpart C--Mortgage Servicing

                           Sec. 1024.30--Scope

    30(b) Exemptions.
    1. Exemption for Farm Credit System institutions. Pursuant to 12 CFR 
617.7000, certain servicers may be considered ``qualified lenders'' only 
with respect to loans discounted or pledged pursuant to 12 U.S.C. 
2015(b)(1). To the extent a servicer, as defined in RESPA, services a 
mortgage loan that has not been discounted or pledged pursuant to 12 
U.S.C. 2015(b)(1), and is not subject to the requirements set forth in 
12 CFR 617, the servicer may be required to comply with the requirements 
of Sec. Sec. 1024.38 through 41 with respect to that mortgage loan.

                        Sec. 1024.31--Definitions

    Loss mitigation application.
    1. Borrower's representative. A loss mitigation application is 
deemed to be submitted by a borrower if the loss mitigation application 
is submitted by an agent of the borrower. Servicers may undertake 
reasonable procedures to determine if a person that claims to be an 
agent of a borrower has authority from the borrower to act on the 
borrower's behalf.
    Loss mitigation option.
    1. Types of loss mitigation options. Loss mitigation options include 
temporary and long-term relief, including options that allow borrowers 
who are behind on their mortgage payments to remain in their homes or to 
leave their homes without a foreclosure, such as, without limitation, 
refinancing, trial or permanent modification, repayment of the amount 
owed over an extended period of time, forbearance of future payments, 
short-sale, deed-in-lieu of foreclosure, and loss mitigation programs 
sponsored by a locality, a State, or the Federal government.
    2. Available through the servicer. A loss mitigation option 
available through the servicer refers to an option for which a borrower 
may apply, even if the borrower ultimately does not qualify for such 
option.
    Qualified written request.
    1. A qualified written request is a written notice a borrower 
provides to request a servicer either correct an error relating to the 
servicing of a mortgage loan or to request information relating to the 
servicing of the mortgage loan. A qualified written request is not 
required to include both types of requests. For example, a qualified 
written request may request information relating to the servicing of a 
mortgage loan but not assert that an error relating to the servicing of 
a loan has occurred.
    2. A qualified written request is just one form that a written 
notice of error or information request may take. Thus, the error 
resolution and information request requirements in Sec. Sec. 1024.35 and 
1024.36 apply as set forth in those sections irrespective of whether the 
servicer receives a qualified written request.
    Service provider.
    1. Service providers may include attorneys retained to represent a 
servicer or an owner or assignee of a mortgage loan in a foreclosure 
proceeding, as well as other professionals retained to provide 
appraisals or inspections of properties.

               Sec. 1024.33--Mortgage Servicing Transfers

    33(a) Servicing disclosure statement.
    1. Terminology. Although the servicing disclosure statement must be 
clear and conspicuous pursuant to Sec. 1024.32(a), Sec. 1024.33(a) does 
not set forth any specific rules for the format of the statement, and 
the specific language of the servicing disclosure statement in appendix 
MS-1 is not required to be used. The model format may be supplemented 
with additional information that clarifies or enhances the model 
language.
    2. Delivery to co-applicants. If co-applicants indicate the same 
address on their application, one copy delivered to that address is 
sufficient. If different addresses are shown by co-applicants on the 
application, a copy

[[Page 580]]

must be delivered to each of the co-applicants.
    3. Lender servicing. If the lender, mortgage broker who anticipates 
using table funding, or dealer in a first lien dealer loan knows at the 
time of making the disclosure whether it will service the mortgage loan 
for which the applicant has applied, the disclosure must, as applicable, 
state that such entity will service such loan and does not intend to 
sell, transfer, or assign the servicing of the loan, or that such entity 
intends to assign, sell, or transfer servicing of such mortgage loan 
before the first payment is due. In all other instances, a disclosure 
that states that the servicing of the loan may be assigned, sold, or 
transferred while the loan is outstanding complies with Sec. 1024.33(a).
    33(b) Notices of transfer of loan servicing.
    Paragraph 33(b)(3).
    1. Delivery. A servicer mailing the notice of transfer must deliver 
the notice to the mailing address (or addresses) listed by the borrower 
in the mortgage loan documents, unless the borrower has notified the 
servicer of a new address (or addresses) pursuant to the servicer's 
requirements for receiving a notice of a change of address.
    33(c) Borrower payments during transfer of servicing.
    33(c)(1) Payments not considered late.
    1. Late fees prohibited. The prohibition in Sec. 1024.33(c)(1) on 
treating a payment as late for any purpose would prohibit a late fee 
from being imposed on the borrower with respect to any payment on the 
mortgage loan. See RESPA section 6(d) (12 U.S.C. 2605(d)).
    2. Compliance with Sec. 1024.39. A transferee servicer's compliance 
with Sec. 1024.39 during the 60-day period beginning on the effective 
date of a servicing transfer does not constitute treating a payment as 
late for purposes of Sec. 1024.33(c)(1).

  Sec. 1024.34--Timely Escrow Payments and Treatment of Escrow Balances

    Paragraph 34(b)(1).
    1. Netting of funds. Section 1024.34(b)(1) does not prohibit a 
servicer from netting any remaining funds in an escrow account against 
the outstanding balance of the borrower's mortgage loan.
    Paragraph 34(b)(2).
    1. Refund always permissible. A servicer is not required to credit 
funds in an escrow account to an escrow account for a new mortgage loan 
and may, in all circumstances, comply with the requirements of 
Sec. 1024.34(b) by refunding the funds in the escrow account to the 
borrower pursuant to Sec. 1024.34(b)(1).
    2. Borrower agreement. A borrower may agree either orally or in 
writing to a servicer's crediting of any remaining balance in an escrow 
account to a new escrow account for a new mortgage loan pursuant to 
Sec. 1024.34(b)(2).

                Sec. 1024.35--Error Resolution Procedures

    35(a) Notice of error.
    1. Borrower's representative. A notice of error is submitted by a 
borrower if the notice of error is submitted by an agent of the 
borrower. A servicer may undertake reasonable procedures to determine if 
a person that claims to be an agent of a borrower has authority from the 
borrower to act on the borrower's behalf, for example, by requiring that 
a person that claims to be an agent of the borrower provide 
documentation from the borrower stating that the purported agent is 
acting on the borrower's behalf. Upon receipt of such documentation, the 
servicer shall treat the notice of error as having been submitted by the 
borrower.
    2. Information request. A servicer should not rely solely on the 
borrower's description of a submission to determine whether the 
submission constitutes a notice of error under Sec. 1024.35(a), an 
information request under Sec. 1024.36(a), or both. For example, a 
borrower may submit a letter that claims to be a ``Notice of Error'' 
that indicates that the borrower wants to receive the information set 
forth in an annual escrow account statement and asserts an error for the 
servicer's failure to provide the borrower an annual escrow statement. 
Such a letter may constitute an information request under 
Sec. 1024.36(a) that triggers an obligation by the servicer to provide 
an annual escrow statement. A servicer should not rely on the borrower's 
characterization of the letter as a ``Notice of Error,'' but must 
evaluate whether the letter fulfills the substantive requirements of a 
notice of error, information request, or both.
    35(b) Scope of error resolution.
    1. Noncovered errors. A servicer is not required to comply with 
Sec. 1024.35(d), (e) and (i) with respect to a borrower's assertion of 
an error that is not defined as an error in Sec. 1024.35(b). For 
example, the following are not errors for purposes of Sec. 1024.35:
    i. An error relating to the origination of a mortgage loan;
    ii. An error relating to the underwriting of a mortgage loan;
    iii. An error relating to a subsequent sale or securitization of a 
mortgage loan;
    iv. An error relating to a determination to sell, assign, or 
transfer the servicing of a mortgage loan. However, an error relating to 
the failure to transfer accurately and timely information relating to 
the servicing of a borrower's mortgage loan account to a transferee 
servicer is an error for purposes of Sec. 1024.35.
    2. Unreasonable basis. For purposes of Sec. 1024.35(b)(5), a 
servicer lacks a reasonable basis to impose fees that are not bona fide, 
such as:
    i. A late fee for a payment that was not late;

[[Page 581]]

    ii. A charge imposed by a service provider for a service that was 
not actually rendered;
    iii. A default property management fee for borrowers that are not in 
a delinquency status that would justify the charge; or
    iv. A charge for force-placed insurance in a circumstance not 
permitted by Sec. 1024.37.
    35(c) Contact information for borrowers to assert errors.
    1. Exclusive address not required. A servicer is not required to 
designate a specific address that a borrower must use to assert an 
error. If a servicer does not designate a specific address that a 
borrower must use to assert an error, a servicer must respond to a 
notice of error received by any office of the servicer.
    2. Notice of an exclusive address. A notice establishing an address 
that a borrower must use to assert an error may be included with a 
different disclosure, such as a notice of transfer. The notice is 
subject to the clear and conspicuous requirement in Sec. 1024.32(a)(1). 
If a servicer establishes an address that a borrower must use to assert 
an error, a servicer must provide that address to the borrower in the 
following contexts:
    i. The written notice designating the specific address, required 
pursuant to Sec. 1024.35(c) and Sec. 1024.36(b).
    ii. Any periodic statement or coupon book required pursuant to 12 
CFR 1026.41.
    iii. Any Web site the servicer maintains in connection with the 
servicing of the loan.
    iv. Any notice required pursuant to Sec. Sec. 1024.39 or .41 that 
includes contact information for assistance.
    3. Multiple offices. A servicer may designate multiple office 
addresses for receiving notices of errors. However, a servicer is 
required to comply with the requirements of Sec. 1024.35 with respect to 
a notice of error received at any such designated address regardless of 
whether that specific address was provided to a specific borrower 
asserting an error. For example, a servicer may designate an address to 
receive notices of error for borrowers located in California and a 
separate address to receive notices of errors for borrowers located in 
Texas. If a borrower located in California asserts an error through the 
address used by the servicer for borrowers located in Texas, the 
servicer is still considered to have received a notice of error and must 
comply with the requirements of Sec. 1024.35.
    4. Internet intake of notices of error. A servicer may, but need 
not, establish a process for receiving notices of error through email, 
Web site form, or other online intake methods. Any such online intake 
process shall be in addition to, and not in lieu of, any process for 
receiving notices of error by mail. The process or processes established 
by the servicer for receiving notices of error through an online intake 
method shall be the exclusive online intake process or processes for 
receiving notices of error. A servicer is not required to provide a 
separate notice to a borrower to establish a specific online intake 
process as an exclusive online process for receiving such notices of 
error.
    35(e) Response to notice of error.
    35(e)(1) Investigation and response requirements.
    Paragraph 35(e)(1)(i).
    1. Notices alleging multiple errors; separate responses permitted. A 
servicer may respond to a notice of error that alleges multiple errors 
through either a single response or separate responses that address each 
asserted error.
    Paragraph 35(e)(1)(ii).
    1. Different or additional errors; separate responses permitted. A 
servicer may provide the response required by Sec. 1024.35(e)(1)(ii) for 
different or additional errors identified by the servicer in the same 
notice that responds to errors asserted by the borrower pursuant to 
Sec. 1024.35(e)(1)(i) or in a separate response that addresses the 
different or additional errors identified by the servicer.
    35(e)(3) Time limits.
    35(e)(3)(i) In general.
    Paragraph 35(e)(3)(i)(B).
    1. Foreclosure sale timing. If a servicer cannot comply with its 
obligations pursuant to Sec. 1024.35(e) by the earlier of a foreclosure 
sale or 30 days after receipt of the notice of error, a servicer may 
cancel or postpone a foreclosure sale, in which case the servicer would 
meet the time limit in Sec. 1024.35(e)(3)(i)(B) by complying with the 
requirements of Sec. 1024.35(e) before the earlier of 30 days after 
receipt of the notice of error (excluding legal public holidays, 
Saturdays, and Sundays) or the date of the rescheduled foreclosure sale.
    35(e)(3)(ii) Extension of time limit.
    1. Notices alleging multiple errors; extension of time. A servicer 
may treat a notice of error that alleges multiple errors as separate 
notices of error and may extend the time period for responding to each 
asserted error for which an extension is permissible under 
Sec. 1024.35(e)(3)(ii).
    35(e)(4) Copies of documentation.
    1. Types of documents to be provided. A servicer is required to 
provide only those documents actually relied upon by the servicer to 
determine that no error occurred. Such documents may include documents 
reflecting information entered in a servicer's collection system. For 
example, in response to an asserted error regarding payment allocation, 
a servicer may provide a printed screen-capture showing amounts credited 
to principal, interest, escrow, or other charges in the servicer's 
system for the borrower's mortgage loan account.
    35(g) Requirements not applicable.
    35(g)(1) In general.
    Paragraph 35(g)(1)(i).
    1. New and material information. A dispute between a borrower and a 
servicer with respect to whether information was previously

[[Page 582]]

reviewed by a servicer or with respect to whether a servicer properly 
determined that information reviewed was not material to its 
determination of the existence of an error, does not itself constitute 
new and material information.
    Paragraph 35(g)(1)(ii).
    1. Examples of overbroad notices of error. The following are 
examples of notices of error that are overbroad:
    i. Assertions of errors regarding substantially all aspects of a 
mortgage loan, including errors relating to all aspects of mortgage 
origination, mortgage servicing, and foreclosure, as well as errors 
relating to the crediting of substantially every borrower payment and 
escrow account transaction;
    ii. Assertions of errors in the form of a judicial action complaint, 
subpoena, or discovery request that purports to require servicers to 
respond to each numbered paragraph; and
    iii. Assertions of errors in a form that is not reasonably 
understandable or is included with voluminous tangential discussion or 
requests for information, such that a servicer cannot reasonably 
identify from the notice of error any error for which Sec. 1024.35 
requires a response.
    35(h) Payment requirements prohibited.
    1. Borrower obligation to make payments. Section 1024.35(h) 
prohibits a servicer from requiring a borrower to make a payment that 
may be owed on a borrower's account as a prerequisite to investigating 
or responding to a notice of error submitted by a borrower, but does not 
alter or otherwise affect a borrower's obligation to make payments owed 
pursuant to the terms of a mortgage loan. For example, if a borrower 
makes a monthly payment in February for a mortgage loan, but asserts an 
error relating to the servicer's acceptance of the February payment, 
Sec. 1024.35(h) does not alter a borrower's obligation to make a monthly 
payment that the borrower owes for March. A servicer, however, may not 
require that a borrower make the March payment as a condition for 
complying with its obligations under Sec. 1024.35 with respect to the 
notice of error on the February payment.

                 Sec. 1024.36--Requests for Information

    36(a) Information request.
    1. Borrower's representative. An information request is submitted by 
a borrower if the information request is submitted by an agent of the 
borrower. A servicer may undertake reasonable procedures to determine if 
a person that claims to be an agent of a borrower has authority from the 
borrower to act on the borrower's behalf, for example, by requiring that 
a person that claims to be an agent of the borrower provide 
documentation from the borrower stating that the purported agent is 
acting on the borrower's behalf. Upon receipt of such documentation, the 
servicer shall treat the request for information as having been 
submitted by the borrower.
    2. Owner or assignee of a mortgage loan. A servicer complies with 
Sec. 1024.36(d) by responding to an information request for the owner or 
assignee of a mortgage loan by identifying the person on whose behalf 
the servicer receives payments from the borrower. Although investors or 
guarantors, including among others the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corporation, or the 
Government National Mortgage Association, may be exposed to risks 
related to the mortgage loans held by a trust either in connection with 
an investment in securities issued by the trust or the issuance of a 
guaranty agreement to the trust, such investors or guarantors are not 
the owners or assignees of the mortgage loans solely as a result of 
their roles as such. In certain circumstances, however, a party such as 
a guarantor may assume multiple roles for a securitization transaction. 
For example, the Federal National Mortgage Association may act as 
trustee, master servicer, and guarantor in connection with a 
securitization transaction in which a trust owns a mortgage loan subject 
to a request. In this example, because the Federal National Mortgage 
Association is the trustee of the trust that owns the mortgage loan, a 
servicer complies with Sec. 1024.36(d) by responding to a borrower's 
request for information regarding the owner or assignee of the mortgage 
loan by providing the name of the trust, and the name, address, and 
appropriate contact information for the Federal National Mortgage 
Association as the trustee. The following examples identify the owner or 
assignee for different forms of mortgage loan ownership:
    i. A servicer services a mortgage loan that is owned by the 
servicer, or an affiliate of the servicer, in portfolio. The servicer 
therefore receives the borrower's payments on behalf of itself or its 
affiliate. A servicer complies with Sec. 1024.36(d) by responding to a 
borrower's request for information regarding the owner or assignee of 
the mortgage loan with the name, address, and appropriate contact 
information for the servicer or the affiliate, as applicable.
    ii. A servicer services a mortgage loan that has been securitized. 
In general, in a securitization transaction, a special purpose vehicle, 
such as a trust, is the owner or assignee of a mortgage loan. Thus, the 
servicer receives the borrower's payments on behalf of the trust. If a 
securitization transaction is structured such that a trust is the owner 
or assignee of a mortgage loan and the trust is administered by an 
appointed trustee, a servicer complies with Sec. 1024.36(d) by 
responding to a borrower's request for information regarding the owner 
or assignee of the mortgage loan by providing the borrower with the

[[Page 583]]

name of the trust and the name, address, and appropriate contract 
information for the trustee. Assume, for example, a mortgage loan is 
owned by Mortgage Loan Trust, Series ABC-1, for which XYZ Trust Company 
is the trustee. The servicer complies with Sec. 1024.36(d) by responding 
to a borrower's request for information regarding the owner or assignee 
of the mortgage loan by identifying the owner as Mortgage Loan Trust, 
Series ABC-1, and providing the name, address, and appropriate contact 
information for XYZ Trust Company as the trustee.
    36(b) Contact information for borrowers to request information.
    1. Exclusive address not required. A servicer is not required to 
designate a specific address that a borrower must use to request 
information. If a servicer does not designate a specific address that a 
borrower must use to request information, a servicer must respond to an 
information request received by any office of the servicer.
    2. Notice of an exclusive address. A notice establishing an address 
that a borrower must use to request information may be included with a 
different disclosure, such as a notice of transfer. The notice is 
subject to the clear and conspicuous requirement in Sec. 1024.32(a)(1). 
If a servicer establishes an address that a borrower must use to request 
information, a servicer must provide that address to the borrower in the 
following contexts:
    i. The written notice designating the specific address, required 
pursuant to Sec. 1024.35(c) and Sec. 1024.36(b).
    ii. Any periodic statement or coupon book required pursuant to 12 
CFR 1026.41.
    iii. Any Web site the servicer maintains in connection with the 
servicing of the loan.
    iv. Any notice required pursuant to Sec. Sec. 1024.39 or .41 that 
includes contact information for assistance.
    3. Multiple offices. A servicer may designate multiple office 
addresses for receiving information requests. However, a servicer is 
required to comply with the requirements of Sec. 1024.36 with respect to 
an information request received at any such address regardless of 
whether that specific address was provided to a specific borrower 
requesting information. For example, a servicer may designate an address 
to receive information requests for borrowers located in California and 
a separate address to receive information requests for borrowers located 
in Texas. If a borrower located in California requests information 
through the address used by the servicer for borrowers located in Texas, 
the servicer is still considered to have received an information request 
and must comply with the requirements of Sec. 1024.36.
    4. Internet intake of information requests. A servicer may, but need 
not, establish a process for receiving information requests through 
email, Web site form, or other online intake methods. Any such online 
intake process shall be in addition to, and not in lieu of, any process 
for receiving information requests by mail. The process or processes 
established by the servicer for receiving information requests through 
an online intake method shall be the exclusive online intake process or 
processes for receiving information requests. A servicer is not required 
to provide a separate notice to a borrower to establish a specific 
online intake process as an exclusive online process for receiving 
information requests.
    36(d) Response to information request.
    36(d)(1) Investigation and response requirements.
    Paragraph 36(d)(1)(ii).
    1. Information not available. Information is not available if:
    i. The information is not in the servicer's control or possession, 
or
    ii. The information cannot be retrieved in the ordinary course of 
business through reasonable efforts.
    2. Examples. The following examples illustrate when information is 
available (or not available) to a servicer under Sec. 1024.36(d)(1)(ii):
    i. A borrower requests a copy of a telephonic communication with a 
servicer. The servicer's personnel have access in the ordinary course of 
business to audio recording files with organized recordings or 
transcripts of borrower telephone calls and can identify the 
communication referred to by the borrower through reasonable business 
efforts. The information requested by the borrower is available to the 
servicer.
    ii. A borrower requests information stored on electronic back-up 
media. Information on electronic back-up media is not accessible by the 
servicer's personnel in the ordinary course of business without 
undertaking extraordinary efforts to identify and restore the 
information from the electronic back-up media. The information requested 
by the borrower is not available to the servicer.
    iii. A borrower requests information stored at an offsite document 
storage facility. A servicer has a right to access documents at the 
offsite document storage facility and servicer personnel can access 
those documents through reasonable efforts in the ordinary course of 
business. The information requested by the borrower is available to the 
servicer assuming that the information can be found within the offsite 
documents with reasonable efforts.
    36(f) Requirements not applicable.
    36(f)(1) In general.
    Paragraph 36(f)(1)(i).
    1. A borrower's request for a type of information that can change 
over time is not substantially the same as a previous information 
request for the same type of information if the subsequent request 
covers a different time period than the prior request.

[[Page 584]]

    Paragraph 36(f)(1)(ii).
    1. Confidential, proprietary or privileged information. A request 
for confidential, proprietary or privileged information of a servicer is 
not an information request for which the servicer is required to comply 
with the requirements of Sec. 1024.36(c) and (d). Confidential, 
proprietary or privileged information may include information requests 
relating to, for example:
    i. Information regarding management or profitability of a servicer, 
including information provided to investors in the servicer.
    ii. Compensation, bonuses, or personnel actions relating to servicer 
personnel, including personnel responsible for servicing a borrower's 
mortgage loan account;
    iii. Records of examination reports, compliance audits, borrower 
complaints, and internal investigations or external investigations; or
    iv. Information protected by the attorney-client privilege.
    Paragraph 36(f)(1)(iii).
    1. Examples of irrelevant information. The following are examples of 
irrelevant information:
    i. Information that relates to the servicing of mortgage loans other 
than a borrower's mortgage loan, including information reported to the 
owner of a mortgage loan regarding individual or aggregate collections 
for mortgage loans owned by that entity;
    ii. The servicer's training program for servicing personnel;
    iii. The servicer's servicing program guide; or
    iv. Investor instructions or requirements for servicers regarding 
criteria for negotiating or approving any program with a borrower, 
including any loss mitigation option.
    Paragraph 36(f)(1)(iv).
    1. Examples of overbroad or unduly burdensome requests for 
information. The following are examples of requests for information that 
are overbroad or unduly burdensome:
    i. Requests for information that seek documents relating to 
substantially all aspects of mortgage origination, mortgage servicing, 
mortgage sale or securitization, and foreclosure, including, for 
example, requests for all mortgage loan file documents, recorded 
mortgage instruments, servicing information and documents, and sale or 
securitization information and documents;
    ii. Requests for information that are not reasonably understandable 
or are included with voluminous tangential discussion or assertions of 
errors;
    iii. Requests for information that purport to require servicers to 
provide information in specific formats, such as in a transcript, letter 
form in a columnar format, or spreadsheet, when such information is not 
ordinarily stored in such format; and
    iv. Requests for information that are not reasonably likely to 
assist a borrower with the borrower's account, including, for example, a 
request for copies of the front and back of all physical payment 
instruments (such as checks, drafts, or wire transfer confirmations) 
that show payments made by the borrower to the servicer and payments 
made by a servicer to an owner or assignee of a mortgage loan.

                  Sec. 1024.37--Force-Placed Insurance

    37(a) Definition of force-placed insurance.
    37(a)(2) Types of insurance not considered force-placed insurance.
    Paragraph 37(a)(2)(iii).
    1. Servicer's discretion. Hazard insurance paid by a servicer at its 
discretion refers to circumstances in which a servicer pays a borrower's 
hazard insurance even though the servicer is not required by 
Sec. 1024.17(k)(1), (2), or (5) to do so.
    37(b) Basis for charging force-placed insurance.
    1. Reasonable basis to believe. Section Sec. 1024.37(b) prohibits a 
servicer from assessing on a borrower a premium charge or fee related to 
force-placed insurance unless the servicer has a reasonable basis to 
believe that the borrower has failed to comply with the loan contract's 
requirement to maintain hazard insurance. Information about a borrower's 
hazard insurance received by a servicer from the borrower, the 
borrower's insurance provider, or the borrower's insurance agent, may 
provide a servicer with a reasonable basis to believe that the borrower 
has either complied with or failed to comply with the loan contract's 
requirement to maintain hazard insurance. If a servicer receives no such 
information, the servicer may satisfy the reasonable basis to believe 
standard if the servicer acts with reasonable diligence to ascertain a 
borrower's hazard insurance status and does not receive from the 
borrower, or otherwise have evidence of insurance coverage as provided 
in Sec. 1024.37(c)(1)(iii). A servicer that complies with the 
notification requirements set forth in Sec. 1024.37(c)(1)(i) and (ii) 
has acted with reasonable diligence.
    37(c) Requirements before charging borrower for force-placed 
insurance.
    37(c)(1) In general.
    Paragraph 37(c)(1)(i).
    1. Assessing premium charge or fee. Subject to the requirements of 
Sec. 1024.37(c)(1)(i) through (iii), if not prohibited by State or other 
applicable law, a servicer may charge a borrower for force-placed 
insurance the servicer purchased, retroactive to the first day of any 
period of time in which the borrower did not have hazard insurance in 
place.
    Paragraph 37(c)(1)(iii).
    1. Extension of time. Applicable law, such as State law or the terms 
and conditions of a borrower's insurance policy, may provide for an 
extension of time to pay the premium on a borrower's hazard insurance 
after the due

[[Page 585]]

date. If a premium payment is made within such time, and the insurance 
company accepts the payment with no lapse in insurance coverage, then 
the borrower's hazard insurance is deemed to have had hazard insurance 
coverage continuously for purposes of Sec. 1024.37(c)(1)(iii).
    2. Evidence demonstrating insurance. As evidence of continuous 
hazard insurance coverage that complies with the loan contract's 
requirements, a servicer may require a copy of the borrower's hazard 
insurance policy declaration page, the borrower's insurance certificate, 
the borrower's insurance policy, or other similar forms of written 
confirmation. A servicer may reject evidence of hazard insurance 
coverage submitted by the borrower if neither the borrower's insurance 
provider nor insurance agent provides confirmation of the insurance 
information submitted by the borrower, or if the terms and conditions of 
the borrower's hazard insurance policy do not comply with the borrower's 
loan contract requirements.
    Paragraph 37(c)(2)(v).
    1. Identifying type of hazard insurance. If the terms of a mortgage 
loan contract requires a borrower to purchase both a homeowners' 
insurance policy and a separate hazard insurance policy to insure 
against loss resulting from hazards not covered under the borrower's 
homeowners' insurance policy, a servicer must disclose whether it is the 
borrower's homeowners' insurance policy or the separate hazard insurance 
policy for which it lacks evidence of coverage to comply with 
Sec. 1024.37(c)(2)(v).
    37(d) Reminder notice.
    37(d)(1) In general.
    1. When a servicer is required to deliver or place in the mail the 
written notice pursuant to Sec. 1024.37(d)(1), the content of the 
reminder notice will be different depending on the insurance information 
the servicer has received from the borrower. For example:
    i. Assume that, on June 1, the servicer places in the mail the 
written notice required by Sec. 1024.37(c)(1)(i) to Borrower A. The 
servicer does not receive any insurance information from Borrower A. The 
servicer must deliver to Borrower A or place in the mail a reminder 
notice, with the information required by Sec. 1024.37(d)(2)(i), at least 
30 days after June 1 and at least 15 days before the servicer charges 
Borrower A for force-placed insurance.
    ii. Assume the same example, except that Borrower A provides the 
servicer with insurance information on June 18, but the servicer cannot 
verify that Borrower A has hazard insurance in place continuously based 
on the information Borrower A provided (e.g., the servicer cannot verify 
that Borrower A had coverage between June 10 and June 15). The servicer 
must either deliver to Borrower A or place in the mail a reminder 
notice, with the information required by in Sec. 1024.37(d)(2)(ii), at 
least 30 days after June 1 and at least 15 days before charging Borrower 
A for force-placed insurance it obtains for the period between June 10 
and June 15.
    37(d)(2) Content of reminder notice.
    37(d)(2)(i) Servicer receiving no insurance information.
    Paragraph 37(d)(2)(i)(D).
    1. Reasonable estimate of the cost of force-placed insurance. 
Differences between the amount of the estimated cost disclosed under 
Sec. 1024.37(d)(2)(i)(D) and the actual cost later assessed to the 
borrower are permissible, so long as the estimated cost is based on the 
information reasonably available to the servicer at the time the 
disclosure is provided. For example, a mortgage investor's requirements 
may provide that the amount of coverage for force-placed insurance 
depends on the borrower's delinquency status (the number of days the 
borrower's mortgage payment is past due). The amount of coverage affects 
the cost of force-placed insurance. A servicer that provides an estimate 
of the cost of force-placed insurance based on the borrower's 
delinquency status at the time the disclosure is made complies with 
Sec. 1024.37(d)(2)(i)(D).
    37(d)(4) Updating notice with borrower information.
    1. Reasonable time. A servicer may have to prepare the written 
notice required by Sec. 1024.37(c)(1)(ii) in advance of delivering or 
placing the notice in the mail. If the notice has already been put into 
production, the servicer is not required to update the notice with new 
insurance information received about the borrower so long as the written 
notice was put into production within a reasonable time prior to the 
servicer delivering or placing the notice in the mail. For purposes of 
Sec. 1024.37(d)(4), five days (excluding legal holidays, Saturdays, and 
Sundays) is a reasonable time.
    37(e) Renewal or replacing force-placed insurance.
    37(e)(1) In general.
    1. For purposes of Sec. 1024.37(e)(1), as evidence that the borrower 
has purchased hazard insurance coverage that complies with the loan 
contract's requirements, a servicer may require a borrower to provide a 
form of written confirmation as described in comment 37(c)(1)(iii)-2, 
and may reject evidence of coverage submitted by the borrower for the 
reasons described in comment 37(c)(1)(iii)-2.
    37(e)(1)(iii) Charging before end of notice period.
    1. Example. Section 1024.37(e)(1)(iii) permits a servicer to assess 
on a borrower a premium charge or fee related to renewing or replacing 
existing force-placed insurance promptly after the servicer receives 
evidence demonstrating that the borrower lacked hazard insurance 
coverage in compliance with the loan contract's requirements to maintain

[[Page 586]]

hazard insurance for any period of time following the expiration of the 
existing force-placed insurance. To illustrate, assume that on January 
2, the servicer sends the notice required by Sec. 1024.37(e)(1)(i). At 
12:01 a.m. on January 12, the existing force-placed insurance the 
servicer had purchased on the borrower's property expires and the 
servicer replaces the expired force-placed insurance policy with a new 
policy. On February 5, the servicer receives evidence demonstrating the 
borrower has hazard insurance effective since 12:01 a.m. on January 31. 
The servicer may charge the borrower for force-placed insurance covering 
the period from 12:01 a.m. January 12 to 12:01 a.m. January 31, as early 
as February 5.
    Paragraph 37(e)(2)(vii).
    1. Reasonable estimate of the cost of force-placed insurance. The 
reasonable estimate requirement set forth in Sec. 1024.37(e)(2)(vii) is 
the same reasonable estimate requirement set forth in 
Sec. 1024.37(d)(2)(i)(D). See comment 37(d)(2)(i)(D)-1 regarding the 
reasonable estimate.
    37(g) Cancellation of force-placed insurance.
    Paragraph 37(g)(2).
    1. Period of overlapping insurance coverage. Section 1024.37(g)(2) 
requires a servicer to refund to a borrower all force-placed insurance 
premium charges and related fees paid by the borrower for any period of 
overlapping insurance coverage and remove from the borrower's account 
all force-placed insurance charges and related fees for such period. A 
period of overlapping insurance coverage means the period of time during 
which the force-placed insurance purchased by a servicer and the hazard 
insurance purchased by a borrower were in effect at the same time.

      Section 1024.38--General Servicing Policies, Procedures, and 
                              Requirements

    38(a) Reasonable policies and procedures.
    1. Policies and procedures. A servicer may determine the specific 
policies and procedures it will adopt and the methods by which it will 
implement those policies and procedures so long as they are reasonably 
designed to achieve the objectives set forth in Sec. 1024.38(b). A 
servicer has flexibility to determine such policies and procedures and 
methods in light of the size, nature, and scope of the servicer's 
operations, including, for example, the volume and aggregate unpaid 
principal balance of mortgage loans serviced, the credit quality, 
including the default risk, of the mortgage loans serviced, and the 
servicer's history of consumer complaints.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a servicer for achieving the objectives set forth 
in Sec. 1024.38(b).
    38(b) Objectives.
    38(b)(1) Accessing and providing timely and accurate information.
    Paragraph 38(b)(1)(ii).
    1. Errors committed by service providers. A servicer's policies and 
procedures must be reasonably designed to provide for promptly obtaining 
information from service providers to facilitate achieving the objective 
of correcting errors resulting from actions of service providers, 
including obligations arising pursuant to Sec. 1024.35.
    Paragraph 38(b)(1)(iv).
    1. Accurate and current information for owners or assignees of 
mortgage loans relating to loan modifications. The relevant current 
information to owners or assignees of mortgage loans includes, among 
other things, information about a servicer's evaluation of borrowers for 
loss mitigation options and a servicer's agreements with borrowers on 
loss mitigation options, including loan modifications. Such information 
includes, for example, information regarding the date, terms, and 
features of loan modifications, the components of any capitalized 
arrears, the amount of any servicer advances, and any assumptions 
regarding the value of a property used in evaluating any loss mitigation 
options.
    38(b)(2) Properly evaluating loss mitigation applications.
    Paragraph 38(b)(2)(ii).
    1. Means of identifying all available loss mitigation options. 
Servicers must develop policies and procedures that are reasonably 
designed to enable servicer personnel to identify all loss mitigation 
options available for mortgage loans currently serviced by the mortgage 
servicer. For example, a servicer's policies and procedures must be 
reasonably designed to address how a servicer specifically identifies, 
with respect to each owner or assignee, all of the loss mitigation 
options that the servicer may consider when evaluating any borrower for 
a loss mitigation option and the criteria that should be applied by a 
servicer when evaluating a borrower for such options. In addition, a 
servicer's policies and procedures must be reasonably designed to 
address how the servicer will apply any specific thresholds for 
eligibility for a particular loss mitigation option established by an 
owner or assignee of a mortgage loan (e.g., if the owner or assignee 
requires that a servicer only make a particular loss mitigation option 
available to a certain percentage of the loans that the servicer 
services for that owner or assignee, then the servicer's policies and 
procedures must be reasonably designed to determine in advance how the 
servicer will apply that threshold to those mortgage loans). A 
servicer's policies and procedures must also be reasonably designed to 
ensure that such information is readily accessible to the servicer 
personnel involved with loss mitigation, including personnel

[[Page 587]]

made available to the borrower as described in Sec. 1024.40.
    Paragraph 38(b)(2)(v).
    1. Owner or assignee requirements. A servicer must have policies and 
procedures reasonably designed to evaluate a borrower for a loss 
mitigation option consistent with any owner or assignee requirements, 
even where the requirements of Sec. 1024.41 may be inapplicable. For 
example, an owner or assignee may require that a servicer implement 
certain procedures to review a loss mitigation application submitted by 
a borrower less than 37 days before a foreclosure sale. Further, an 
owner or assignee may require that a servicer implement certain 
procedures to re-evaluate a borrower who has demonstrated a material 
change in the borrower's financial circumstances for a loss mitigation 
option after the servicer's initial evaluation. A servicer must have 
policies and procedures reasonably designed to implement these 
requirements even if such loss mitigation evaluations may not be 
required pursuant to Sec. 1024.41.
    38(b)(4) Facilitating transfer of information during servicing 
transfers.
    Paragraph 38(b)(4)(i).
    1. Electronic document transfers. A transferor servicer's policies 
and procedures may provide for transferring documents and information 
electronically, provided that the transfer is conducted in a manner that 
is reasonably designed to ensure the accuracy of the information and 
documents transferred and that enables a transferee servicer to comply 
with its obligations to the owner or assignee of the loan and with 
applicable law. For example, a transferor servicer must have policies 
and procedures reasonably designed to ensure that data can be properly 
and promptly boarded by a transferee servicer's electronic systems and 
that all necessary documents and information are available to, and can 
be appropriately identified by, a transferee servicer.
    2. Loss mitigation documents. A transferor servicer's policies and 
procedures must be reasonably designed to ensure that the transfer 
includes any information reflecting the current status of discussions 
with a borrower regarding loss mitigation options, any agreements 
entered into with a borrower on a loss mitigation option, and any 
analysis by a servicer with respect to potential recovery from a non-
performing mortgage loan, as appropriate.
    Paragraph 38(b)(4)(ii).
    1. Missing loss mitigation documents and information. A transferee 
servicer must have policies and procedures reasonably designed to 
ensure, in connection with a servicing transfer, that the transferee 
servicer receives information regarding any loss mitigation discussions 
with a borrower, including any copies of loss mitigation agreements. 
Further, the transferee servicer's policies and procedures must address 
obtaining any such missing information or documents from a transferor 
servicer before attempting to obtain such information from a borrower. 
For example, assume a servicer receives documents or information from a 
transferor servicer indicating that a borrower has made payments 
consistent with a trial or permanent loan modification but has not 
received information about the existence of a trial or permanent loan 
modification agreement. The servicer must have policies and procedures 
reasonably designed to identify whether any such loan modification 
agreement exists with the transferor servicer and to obtain any such 
agreement from the transferor servicer.
    38(b)(5) Informing borrowers of written error resolution and 
information request procedures.
    1. Manner of informing borrowers. A servicer may comply with the 
requirement to maintain policies and procedures reasonably designed to 
inform borrowers of the procedures for submitting written notices of 
error set forth in Sec. 1024.35 and written information requests set 
forth in Sec. 1024.36 by informing borrowers, through a notice (mailed 
or delivered electronically) or a Web site. For example, a servicer may 
comply with Sec. 1024.38(b)(5) by including in the periodic statement 
required pursuant to Sec. 1026.41 a brief statement informing borrowers 
that borrowers have certain rights under Federal law related to 
resolving errors and requesting information about their account, and 
that they may learn more about their rights by contacting the servicer, 
and a statement directing borrowers to a Web site that provides a 
description of the procedures set forth in Sec. Sec. 1024.35 and 
1024.36. Alternatively, a servicer may also comply with 
Sec. 1024.38(b)(5) by including a description of the procedures set 
forth in Sec. Sec. 1024.35 and 1024.36 in the written notice required by 
Sec. 1024.35(c) and Sec. 1024.36(b).
    2. Oral complaints and requests. A servicer's policies and 
procedures must be reasonably designed to provide information to 
borrowers who are not satisfied with the resolution of a complaint or 
request for information submitted orally about the procedures for 
submitting written notices of error set forth in Sec. 1024.35 and for 
submitting written requests for information set forth in Sec. 1024.36.
    3. Notices of error incorrectly sent to addresses associated with 
submission of loss mitigation applications or the continuity of contact. 
A servicer's policies and procedures must be reasonably designed to 
ensure that if a borrower incorrectly submits an assertion of an error 
to any address given to the borrower in connection with submission of a 
loss mitigation application or the continuity of contact pursuant to 
Sec. 1024.40, the servicer will inform the borrower of the procedures 
for submitting written notices of error set forth in

[[Page 588]]

Sec. 1024.35, including the correct address. Alternatively, the servicer 
could redirect such notices to the correct address.
    38(c) Standard requirements.
    38(c)(1)Record retention.
    1. Methods of retaining records. Retaining records that document 
actions taken with respect to a borrower's mortgage loan account does 
not necessarily mean actual paper copies of documents. The records may 
be retained by any method that reproduces the records accurately 
(including computer programs) and that ensures that the servicer can 
easily access the records (including a contractual right to access 
records possessed by another entity).
    38(c)(2) Servicing file.
    1. Timing. A servicer complies with Sec. 1024.38(c)(2) if it 
maintains information in a manner that facilitates compliance with 
Sec. 1024.38(c)(2) beginning on or after January 10, 2014. A servicer is 
not required to comply with Sec. 1024.38(c)(2) with respect to 
information created prior to January 10, 2014. For example, if a 
mortgage loan was originated on January 1, 2013, a servicer is not 
required by Sec. 1024.38(c)(2) to maintain information regarding 
transactions credited or debited to that mortgage loan account in any 
particular manner for payments made prior to January 10, 2014. However, 
for payments made on or after January 10, 2014, a servicer must maintain 
such information in a manner that facilitates compiling such information 
into a servicing file within five days.
    2. Borrower requests for servicing file. Section 1024.38(c)(2) does 
not confer upon any borrower an independent right to access information 
contained in the servicing file. Upon receipt of a borrower's request 
for a servicing file, a servicer shall provide the borrower with a copy 
of the information contained in the servicing file for the borrower's 
mortgage loan, subject to the procedures and limitations set forth in 
Sec. 1024.36.
    Paragraph 38(c)(2)(iv).
    1. Report of data fields. A report of the data fields relating to a 
borrower's mortgage loan account created by the servicer's electronic 
systems in connection with servicing practices means a report listing 
the relevant data fields by name, populated with any specific data 
relating to the borrower's mortgage loan account. Examples of data 
fields relating to a borrower's mortgage loan account created by the 
servicer's electronic systems in connection with servicing practices 
include fields used to identify the terms of the borrower's mortgage 
loan, fields used to identify the occurrence of automated or manual 
collection calls, fields reflecting the evaluation of a borrower for a 
loss mitigation option, fields used to identify the owner or assignee of 
a mortgage loan, and any credit reporting history.

   Sec. 1024.39--Early Intervention Requirements for Certain Borrowers

    39(a) Live contact.
    1. Delinquency. A borrower is delinquent for purposes of 
Sec. 1024.39 as follows:
    i. Delinquency begins on the day a payment sufficient to cover 
principal, interest, and, if applicable, escrow for a given billing 
cycle is due and unpaid, even if the borrower is afforded a period after 
the due date to pay before the servicer assesses a late fee. For 
example, if a payment due date is January 1 and the amount due is not 
fully paid during the 36-day period after January 1, the servicer must 
establish or make good faith efforts to establish live contact not later 
than 36 days after January 1--i.e., by February 6.
    ii. A borrower who is performing as agreed under a loss mitigation 
option designed to bring the borrower current on a previously missed 
payment is not delinquent for purposes of Sec. 1024.39.
    iii. During the 60-day period beginning on the effective date of 
transfer of the servicing of any mortgage loan, a borrower is not 
delinquent for purposes of Sec. 1024.39 if the transferee servicer 
learns that the borrower has made a timely payment that has been 
misdirected to the transferor servicer and the transferee servicer 
documents its files accordingly. See Sec. 1024.33(c)(1) and comment 
33(c)(1)-2.
    iv. A servicer need not establish live contact with a borrower 
unless the borrower is delinquent during the 36 days after a payment due 
date. If the borrower satisfies a payment in full before the end of the 
36-day period, the servicer need not establish live contact with the 
borrower. For example, if a borrower misses a January 1 due date but 
makes that payment on February 1, a servicer need not establish or make 
good faith efforts to establish live contact by February 6.
    2. Establishing live contact. Live contact provides servicers an 
opportunity to discuss the circumstances of a borrower's delinquency. 
Live contact with a borrower includes telephoning or conducting an in-
person meeting with the borrower, but not leaving a recorded phone 
message. A servicer may, but need not, rely on live contact established 
at the borrower's initiative to satisfy the live contact requirement in 
Sec. 1024.39(a). Good faith efforts to establish live contact consist of 
reasonable steps under the circumstances to reach a borrower and may 
include telephoning the borrower on more than one occasion or sending 
written or electronic communication encouraging the borrower to 
establish live contact with the servicer.
    3. Promptly inform if appropriate.
    i. Servicer's determination. It is within a servicer's reasonable 
discretion to determine

[[Page 589]]

whether informing a borrower about the availability of loss mitigation 
options is appropriate under the circumstances. The following examples 
demonstrate when a servicer has made a reasonable determination 
regarding the appropriateness of providing information about loss 
mitigation options.
    A. A servicer provides information about the availability of loss 
mitigation options to a borrower who notifies a servicer during live 
contact of a material adverse change in the borrower's financial 
circumstances that is likely to cause the borrower to experience a long-
term delinquency for which loss mitigation options may be available.
    B. A servicer does not provide information about the availability of 
loss mitigation options to a borrower who has missed a January 1 payment 
and notified the servicer that full late payment will be transmitted to 
the servicer by February 15.
    ii. Promptly inform. If appropriate, a servicer may inform borrowers 
about the availability of loss mitigation options orally, in writing, or 
through electronic communication, but the servicer must provide such 
information promptly after the servicer establishes live contact. A 
servicer need not notify a borrower about any particular loss mitigation 
options at this time; if appropriate, a servicer need only inform 
borrowers generally that loss mitigation options may be available. If 
appropriate, a servicer may satisfy the requirement in Sec. 1024.39(a) 
to inform a borrower about loss mitigation options by providing the 
written notice required by Sec. 1024.39(b)(1), but the servicer must 
provide such notice promptly after the servicer establishes live 
contact.
    4. Borrower's representative. Section 1024.39 does not prohibit a 
servicer from satisfying the requirements Sec. 1024.39 by establishing 
live contact with and, if applicable, providing information about loss 
mitigation options to a person authorized by the borrower to communicate 
with the servicer on the borrower's behalf. A servicer may undertake 
reasonable procedures to determine if a person that claims to be an 
agent of a borrower has authority from the borrower to act on the 
borrower's behalf, for example, by requiring a person that claims to be 
an agent of the borrower provide documentation from the borrower stating 
that the purported agent is acting on the borrower's behalf.
    39(b) Written notice.
    39(b)(1) Notice required.
    1. Delinquency. For guidance on the circumstances under which a 
borrower is delinquent for purposes of Sec. 1024.39, see comment 39(a)-
1. For example, if a payment due date is January 1 and the payment 
remains unpaid during the 45-day period after January 1, the servicer 
must provide the written notice within 45 days after January 1--i.e., by 
February 15. However, if a borrower satisfies a late payment in full 
before the end of the 45-day period, the servicer need not provide the 
written notice. For example, if a borrower misses a January 1 due date 
but makes that payment on February 1, a servicer need not provide the 
written notice by February 15.
    2. Frequency of the written notice. A servicer need not provide the 
written notice under Sec. 1024.39(a) more than once during a 180-day 
period beginning on the date on which the written notice is provided. 
For example, a borrower has a payment due on March 1. The amount due is 
not fully paid during the 45 days after March 1 and the servicer 
provides the written notice within 45 days after March 1--i.e., by April 
15. If the borrower subsequently fails to make a payment due April 1 and 
the amount due is not fully paid during the 45 days after April 1, the 
servicer need not provide the written notice again during the 180-day 
period beginning on April 15.
    3. Borrower's representative. See comment 39(a)-4.
    4. Relationship to Sec. 1024.39(a). The written notice required 
under Sec. 1024.39(b)(1) must be provided even if the servicer provided 
information about loss mitigation and foreclosure previously during an 
oral communication with the borrower under Sec. 1024.39(a).
    39(b)(2) Content of the written notice.
    1. Minimum requirements. Section 1024.39(b)(2) contains minimum 
content requirements for the written notice. A servicer may provide 
additional information that the servicer determines would be helpful or 
which may be required by applicable law or the owner or assignee of the 
mortgage loan.
    2. Format. Any color, number of pages, size and quality of paper, 
size and type of print, and method of reproduction may be used, provided 
each of the statements required by Sec. 1024.39(b)(2) satisfies the 
clear and conspicuous standard in Sec. 1024.32(a)(1).
    3. Delivery. A servicer may satisfy the requirement to provide the 
written notice by combining other notices that satisfy the content 
requirements of Sec. 1024.39(b)(2) into a single mailing, provided each 
of the statements required by Sec. 1024.39(b)(2) satisfies the clear and 
conspicuous standard in Sec. 1024.32(a)(1).
    Paragraph 39(b)(2)(iii).
    1. Number of examples. Section 1024.39(b)(2)(iii) does not require 
that a specific number of examples be disclosed, but borrowers are 
likely to benefit from examples of options that would permit them to 
retain ownership of their home and examples of options that may require 
borrowers to end their ownership to avoid foreclosure. The servicer may 
include a generic list of loss mitigation options that it offers to 
borrowers. The servicer may include a statement that not all borrowers 
will qualify for the listed options.

[[Page 590]]

    2. Brief description. An example of a loss mitigation option may be 
described in one or more sentences. If a servicer offers a loss 
mitigation option comprising several loss mitigation programs, the 
servicer may provide a generic description of the option without 
providing detailed descriptions of each program. For example, if the 
servicer offers several loan modification programs, the servicer may 
provide a generic description of ``loan modification.''
    Paragraph 39(b)(2)(iv).
    1. Explanation of how the borrower may obtain more information about 
loss mitigation options. A servicer may comply with 
Sec. 1024.39(b)(2)(iv) by directing the borrower to contact the servicer 
for more detailed information on how to apply for loss mitigation 
options. For example, a general statement such as, ``contact us for 
instructions on how to apply'' would satisfy the requirement to inform 
the borrower how to obtain more information about loss mitigation 
options. However, to expedite the borrower's timely application for any 
loss mitigation options, servicers may provide more detailed 
instructions, such as by listing representative documents the borrower 
should make available to the servicer (such as tax filings or income 
statements), and an estimate of how quickly the servicer expects to 
evaluate a completed application and make a decision on loss mitigation 
options. Servicers may also supplement the written notice required by 
Sec. 1024.39(b)(1) with a loss mitigation application form.

                    39(d)(1) Borrowers in bankruptcy.

    1. Commencing a case. The requirements of Sec. 1024.39 do not apply 
once a petition is filed under Title 11 of the United States Code, 
commencing a case in which the borrower is a debtor.
    2. Obligation to resume early intervention requirements. i. With 
respect to any portion of the mortgage debt that is not discharged, a 
servicer must resume compliance with Sec. 1024.39 after the first 
delinquency that follows the earliest of any of three potential outcomes 
in the borrower's bankruptcy case: the case is dismissed, the case is 
closed, or the borrower receives a discharge under 11 U.S.C. 727, 1141, 
1228, or 1328. However, this requirement to resume compliance with 
Sec. 1024.39 does not require a servicer to communicate with a borrower 
in a manner that would be inconsistent with applicable bankruptcy law or 
a court order in a bankruptcy case. To the extent permitted by such law 
or court order, a servicer may adapt the requirements of Sec. 1024.39 in 
any manner believed necessary.
    ii. Compliance with Sec. 1024.39 is not required for any portion of 
the mortgage debt that is discharged under applicable provisions of the 
U.S. Bankruptcy Code. If the borrower's bankruptcy case is revived--for 
example if the court reinstates a previously dismissed case, reopens the 
case, or revokes a discharge--the servicer is again exempt from the 
requirement in Sec. 1024.39.
    3. Joint obligors. When two or more borrowers are joint obligors 
with primary liability on a mortgage loan subject to Sec. 1024.39, the 
exemption in Sec. 1024.39(d)(1) applies if any of the borrowers is in 
bankruptcy. For example, if a husband and wife jointly own a home, and 
the husband files for bankruptcy, the servicer is exempt from complying 
with Sec. 1024.39 as to both the husband and the wife.

                   Sec. 1024.40--Continuity of Contact

    40(a) In general.
    1. Delinquent borrower. A borrower is not considered delinquent if 
the borrower has refinanced the mortgage loan, paid off the mortgage 
loan, brought the mortgage loan current by paying all amounts owed in 
arrears, or if title to the borrower's property has been transferred to 
a new owner through, for example, a deed-in-lieu of foreclosure, a sale 
of the borrower's property, including, as applicable, a short sale, or a 
foreclosure sale. For purposes of responding to a borrower's inquiries 
and assisting a borrower with loss mitigation options, the term 
``borrower'' includes a person authorized by the borrower to act on the 
borrower's behalf. A servicer may undertake reasonable procedures to 
determine if a person that claims to be an agent of a borrower has 
authority from the borrower to act on the borrower's behalf, for example 
by requiring that a person who claims to be an agent of the borrower 
provide documentation from the borrower stating that the purported agent 
is acting on the borrower's behalf.
    2. Assignment of personnel. A servicer has discretion to determine 
whether to assign a single person or a team of personnel to respond to a 
delinquent borrower. The personnel a servicer assigns to the borrower as 
described in Sec. 1024.40(a)(1) may be single-purpose or multi-purpose 
personnel. Single-purpose personnel are personnel whose primary 
responsibility is to respond to a delinquent borrower's inquiries, and 
as applicable, assist the borrower with available loss mitigation 
options. Multi-purpose personnel can be personnel that do not have a 
primary responsibility at all, or personnel for whom responding to a 
delinquent borrower's inquiries, and as applicable, assisting the 
borrower with available loss mitigation options is not the personnel's 
primary responsibility. If the delinquent borrower files for bankruptcy, 
a servicer may assign personnel with specialized knowledge in bankruptcy 
law to assist the borrower.
    3. Delinquency. For purposes of Sec. 1024.40(a), delinquency begins 
on the day a payment sufficient to cover principal, interest, and, if 
applicable, escrow for a given billing cycle is

[[Page 591]]

due and unpaid, even if the borrower is afforded a period after the due 
date to pay before the servicer assesses a late fee. See the example set 
forth in comment 39(a)-1.i.

                Sec. 1024.41--Loss Mitigation Procedures

    41(b) Receipt of a loss mitigation application.
    41(b)(1) Complete loss mitigation application.
    1. In general. A servicer has flexibility to establish its own 
application requirements and to decide the type and amount of 
information it will require from borrowers applying for loss mitigation 
options.
    2. When an inquiry or prequalification request becomes an 
application. A servicer is encouraged to provide borrowers with 
information about loss mitigation programs. If in giving information to 
the borrower, the borrower expresses an interest in applying for a loss 
mitigation option and provides information the servicer would evaluate 
in connection with a loss mitigation application, the borrower's inquiry 
or prequalification request has become a loss mitigation application. A 
loss mitigation application is considered expansively and includes any 
``prequalification'' for a loss mitigation option. For example, if a 
borrower requests that a servicer determine if the borrower is 
``prequalified'' for a loss mitigation program by evaluating the 
borrower against preliminary criteria to determine eligibility for a 
loss mitigation option, the request constitutes a loss mitigation 
application.
    3. Examples of inquiries that are not applications. The following 
examples illustrate situations in which only an inquiry has taken place 
and no loss mitigation application has been submitted:
    i. A borrower calls to ask about loss mitigation options and 
servicer personnel explain the loss mitigation options available to the 
borrower and the criteria for determining the borrower's eligibility for 
any such loss mitigation option. The borrower does not, however, provide 
any information that a servicer would consider for evaluating a loss 
mitigation application.
    ii. A borrower calls to ask about the process for applying for a 
loss mitigation option but the borrower does not provide any information 
that a servicer would consider for evaluating a loss mitigation 
application.
    4. Diligence requirements. Although a servicer has flexibility to 
establish its own requirements regarding the documents and information 
necessary for a loss mitigation application, the servicer must act with 
reasonable diligence to collect information needed to complete the 
application. Further, a servicer must request information necessary to 
make a loss mitigation application complete promptly after receiving the 
loss mitigation application. Reasonable diligence includes, without 
limitation, the following actions:
    i. A servicer requires additional information from the applicant, 
such as an address or a telephone number to verify employment; the 
servicer contacts the applicant promptly to obtain such information 
after receiving a loss mitigation application;
    ii. Servicing for a mortgage loan is transferred to a servicer and 
the borrower makes an incomplete loss mitigation application to the 
transferee servicer after the transfer; the transferee servicer reviews 
documents provided by the transferor servicer to determine if 
information required to make the loss mitigation application complete is 
contained within documents transferred by the transferor servicer to the 
servicer; and
    iii. A servicer offers a borrower a payment forbearance program 
based on an incomplete loss mitigation application; the servicer 
notifies the borrower that he or she is being offered a payment 
forbearance program based on an evaluation of an incomplete application, 
and that the borrower has the option of completing the application to 
receive a full evaluation of all loss mitigation options available to 
the borrower. If a servicer provides such a notification, the borrower 
remains in compliance with the payment forbearance program, and the 
borrower does not request further assistance, the servicer could suspend 
reasonable diligence efforts until near the end of the payment 
forbearance program. Near the end of the program, and prior to the end 
of the forbearance period, it may be necessary for the servicer to 
contact the borrower to determine if the borrower wishes to complete the 
application and proceed with a full loss mitigation evaluation.
    5. Information not in the borrower's control. A loss mitigation 
application is complete when a borrower provides all information 
required from the borrower notwithstanding that additional information 
may be required by a servicer that is not in the control of a borrower. 
For example, if a servicer requires a consumer report for a loss 
mitigation evaluation, a loss mitigation application is considered 
complete if a borrower has submitted all information required from the 
borrower without regard to whether a servicer has obtained a consumer 
report that a servicer has requested from a consumer reporting agency.
    41(b) Receipt of loss mitigation application.
    41(b)(1) Complete loss mitigation application.
    41(b)(2)Review of loss mitigation application submission.
    41(b)(2)(i) Requirements.
    Paragraph 41(b)(2)(i)(B).
    1. Later discovery of additional information required to evaluate 
application. Even if a servicer has informed a borrower that an 
application is complete (or notified the borrower of specific 
information necessary to complete an incomplete application), if the

[[Page 592]]

servicer determines, in the course of evaluating the loss mitigation 
application submitted by the borrower, that additional information or a 
corrected version of a previously submitted document is required, the 
servicer must promptly request the additional information or corrected 
document from the borrower pursuant to the reasonable diligence 
obligation in Sec. 1024.41(b)(1). See Sec. 1024.41(c)(2)(iv) addressing 
facially complete applications.
    41(b)(2)(ii) Time period disclosure.
    1. Reasonable date. Section 1024.41(b)(2)(ii) requires that a notice 
informing a borrower that a loss mitigation application is incomplete 
must include a reasonable date by which the borrower should submit the 
documents and information necessary to make the loss mitigation 
application complete. In determining a reasonable date, a servicer 
should select the deadline that preserves the maximum borrower rights 
under Sec. 1024.41 based on the milestones listed below, except when 
doing so would be impracticable to permit the borrower sufficient time 
to obtain and submit the type of documentation needed. Generally, it 
would be impracticable for a borrower to obtain and submit documents in 
less than seven days. In setting a date, the following milestones should 
be considered (if the date of a foreclosure sale is not known, a 
servicer may use a reasonable estimate of the date for which a 
foreclosure sale may be scheduled):
    i. The date by which any document or information submitted by a 
borrower will be considered stale or invalid pursuant to any 
requirements applicable to any loss mitigation option available to the 
borrower;
    ii. The date that is the 120th day of the borrower's delinquency;
    iii. The date that is 90 days before a foreclosure sale;
    iv. The date that is 38 days before a foreclosure sale.
    41(b)(3) Determining Protections.
    1. Foreclosure sale not scheduled. If no foreclosure sale has been 
scheduled as of the date that a complete loss mitigation application is 
received, the application is considered to have been received more than 
90 days before any foreclosure sale.
    2. Foreclosure sale re-scheduled. The protections under Sec. 1024.41 
that have been determined to apply to a borrower pursuant to 
Sec. 1024.41(b)(3) remain in effect thereafter, even if a foreclosure 
sale is later scheduled or rescheduled.
    41(c) Review of loss mitigation applications.
    41(c)(1) Complete loss mitigation application.
    1. Definition of ``evaluation.'' The conduct of a servicer's 
evaluation with respect to any loss mitigation option is in the sole 
discretion of a servicer. A servicer meets the requirements of 
Sec. 1024.41(c)(1)(i) if the servicer makes a determination regarding 
the borrower's eligibility for a loss mitigation program. Consistent 
with Sec. 1024.41(a), because nothing in section 1024.41 should be 
construed to permit a borrower to enforce the terms of any agreement 
between a servicer and the owner or assignee of a mortgage loan, 
including with respect to the evaluation for, or provision of, any loss 
mitigation option, Sec. 1024.41(c)(1) does not require that an 
evaluation meet any standard other than the discretion of the servicer.
    2. Loss mitigation options available to a borrower. The loss 
mitigation options available to a borrower are those options offered by 
an owner or assignee of the borrower's mortgage loan. Loss mitigation 
options administered by a servicer for an owner or assignee of a 
mortgage loan other than the owner or assignee of the borrower's 
mortgage loan are not available to the borrower solely because such 
options are administered by the servicer. For example:
    i. A servicer services mortgage loans for two different owners or 
assignees of mortgage loans. Those entities each have different loss 
mitigation programs. loss mitigation options not offered by the owner or 
assignee of the borrower's mortgage loan are not available to the 
borrower; or
    ii. The owner or assignee of a borrower's mortgage loan has 
established pilot programs, temporary programs, or programs that are 
limited by the number of participating borrowers. Such loss mitigation 
options are available to a borrower. However, a servicer evaluates 
whether a borrower is eligible for any such program consistent with 
criteria established by an owner or assignee of a mortgage loan. For 
example, if an owner or assignee has limited a pilot program to a 
certain geographic area or to a limited number of participants, and the 
servicer determines that a borrower is not eligible based on any such 
requirement, the servicer shall inform the borrower that the investor 
requirement for the program is the basis for the denial.
    3. Offer of a non-home retention option. A servicer's offer of a 
non-home retention option may be conditional upon receipt of further 
information not in the borrower's possession and necessary to establish 
the parameters of a servicer's offer. For example, a servicer complies 
with the requirement for evaluating the borrower for a short sale option 
if the servicer offers the borrower the opportunity to enter into a 
listing or marketing period agreement but indicates that specifics of an 
acceptable short sale transaction may be subject to further information 
obtained from an appraisal or title search.
    41(c)(2) Incomplete loss mitigation application evaluation.
    41(c)(2)(i) In general.
    1. Offer of a loss mitigation option without an evaluation of a loss 
mitigation application. Nothing in Sec. 1024.41(c)(2)(i) prohibits a

[[Page 593]]

servicer from offering loss mitigation options to a borrower who has not 
submitted a loss mitigation application. Further, nothing in 
Sec. 1024.41(c)(2)(i) prohibits a servicer from offering a loss 
mitigation option to a borrower who has submitted an incomplete loss 
mitigation application where the offer of the loss mitigation option is 
not based on any evaluation of information submitted by the borrower in 
connection with such loss mitigation application. For example, if a 
servicer offers trial loan modification programs to all borrowers who 
become 150 days delinquent without an application or consideration of 
any information provided by a borrower in connection with a loss 
mitigation application, the servicer's offer of any such program does 
not violate Sec. 1024.41(c)(2)(i), and a servicer is not required to 
comply with Sec. 1024.41 with respect to any such program, because the 
offer of the loss mitigation option is not based on an evaluation of a 
loss mitigation application.
    2. Servicer discretion. Although a review of a borrower's incomplete 
loss mitigation application is within a servicer's discretion, and is 
not required by Sec. 1024.41, a servicer may be required separately, in 
accordance with policies and procedures maintained pursuant to 
Sec. 1024.38(b)(2)(v), to properly evaluate a borrower who submits an 
application for a loss mitigation option for all loss mitigation options 
available to the borrower pursuant to any requirements established by 
the owner or assignee of the borrower's mortgage loan. Such evaluation 
may be subject to requirements applicable to loss mitigation 
applications otherwise considered incomplete pursuant to Sec. 1024.41.
    41(c)(2)(ii) Reasonable time.
    1. Significant period of time. A significant period of time under 
the circumstances may include consideration of the timing of the 
foreclosure process. For example, if a borrower is less than 50 days 
before a foreclosure sale, an application remaining incomplete for 15 
days may be a more significant period of time under the circumstances 
than if the borrower is still less than 120 days delinquent on a 
mortgage loan obligation.
    41(c)(2)(iii) Payment forbearance.
    1. Short-term payment forbearance program. The exemption in 
Sec. 1024.41(c)(2)(iii) applies to short-term payment forbearance 
programs. A payment forbearance program is a loss mitigation option for 
which a servicer allows a borrower to forgo making certain payments or 
portions of payments for a period of time. A short-term payment 
forbearance program allows the forbearance of payments due over periods 
of no more than six months. Such a program would be short-term 
regardless of the amount of time a servicer allows the borrower to make 
up the missing payments.
    2. Payment forbearance and incomplete applications. Section 
1024.41(c)(2)(iii) allows a servicer to offer a borrower a short-term 
payment forbearance program based on an evaluation of an incomplete loss 
mitigation application. Such an incomplete loss mitigation application 
is still subject to the other obligations in Sec. 1024.41, including the 
obligation in Sec. 1024.41(b)(2) to review the application to determine 
if it is complete, the obligation in Sec. 1024.41(b)(1) to exercise 
reasonable diligence in obtaining documents and information to complete 
a loss mitigation application (see comment 41(b)(1)-4.iii), and the 
obligation to provide the borrower with the Sec. 1024.41(b)(2)(i)(B) 
notice that the servicer acknowledges the receipt of the application and 
has determined the application is incomplete.
    3. Payment forbearance and complete applications. Even if a servicer 
offers a borrower a payment forbearance program based on an evaluation 
of an incomplete loss mitigation application, the servicer must still 
comply with all the requirements in Sec. 1024.41 if the borrower 
completes his or her loss mitigation application.
    41(c)(2)(iv) Facially complete application.
    1. Reasonable opportunity. Section 1024.41(c)(2)(iv) requires a 
servicer to treat a facially complete application as complete for the 
purposes of paragraphs (f)(2) and (g) until the borrower has been given 
a reasonable opportunity to complete the application. A reasonable 
opportunity requires the servicer to notify the borrower of what 
additional information or corrected documents are required, and to 
afford the borrower sufficient time to gather the information and 
documentation necessary to complete the application and submit it to the 
servicer. The amount of time that is sufficient for this purpose will 
depend on the facts and circumstances.
    2. Borrower fails to complete the application. If the borrower fails 
to complete the application within the timeframe provided under 
Sec. 1024.41(c)(2)(iv), the application shall be considered incomplete.
    41(d) Denial of loan modification options.
    1. Investor requirements. If a trial or permanent loan modification 
option is denied because of a requirement of an owner or assignee of a 
mortgage loan, the specific reasons in the notice provided to the 
borrower must identify the owner or assignee of the mortgage loan and 
the requirement that is the basis of the denial. A statement that the 
denial of a loan modification option is based on an investor 
requirement, without additional information specifically identifying the 
relevant investor or guarantor and the specific applicable requirement, 
is insufficient. However, where an owner or assignee has established an 
evaluation criteria that sets an order ranking for evaluation of loan 
modification options (commonly known as a waterfall) and a borrower has 
qualified for a

[[Page 594]]

particular loan modification option in the ranking established by the 
owner or assignee, it is sufficient for the servicer to inform the 
borrower, with respect to other loan modification options ranked below 
any such option offered to a borrower, that the investor's requirements 
include the use of such a ranking and that an offer of a loan 
modification option necessarily results in a denial for any other loan 
modification options below the option for which the borrower is eligible 
in the ranking.
    2. Net present value calculation. If a trial or permanent loan 
modification is denied because of a net present value calculation, the 
specific reasons in the notice provided to the borrower must include the 
inputs used in the net present value calculation.
    (c)(1)(4) Other notices. A servicer may combine other notices 
required by applicable law, including, without limitation, a notice with 
respect to an adverse action required by Regulation B (12 CFR 1002 et 
seq.) or a notice required pursuant to the Fair Credit Reporting Act, 
with the notice required pursuant to Sec. 1024.41(d), unless otherwise 
prohibited by applicable law.
    3. Determination not to offer a loan modification option constitutes 
a denial. A servicer's determination not to offer a borrower a loan 
modification available to the borrower constitutes a denial of the 
borrower for that loan modification option, notwithstanding whether a 
servicer offers a borrower a different loan modification option or other 
loss mitigation option.
    4. Reasons listed. A servicer is required to disclose the actual 
reason or reasons for the denial. If a servicer's systems establish a 
hierarchy of eligibility criteria and reach the first criterion that 
causes a denial but do not evaluate the borrower based on additional 
criteria, a servicer complies with the rule by providing only the reason 
or reasons with respect to which the borrower was actually evaluated and 
rejected as well as notification that the borrower was not evaluated on 
other criteria. A servicer is not required to determine or disclose 
whether a borrower would have been denied on the basis of additional 
criteria if such criteria were not actually considered.
    41(f) Prohibition on foreclosure referral.
    1. Prohibited activities. Section 1024.41(f) prohibits a servicer 
from making the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process under certain 
circumstances. Whether a document is considered the first notice or 
filing is determined on the basis of foreclosure procedure under the 
applicable State law.
    i. Where foreclosure procedure requires a court action or 
proceeding, a document is considered the first notice or filing if it is 
the earliest document required to be filed with a court or other 
judicial body to commence the action or proceeding (e.g., a complaint, 
petition, order to docket, or notice of hearing).
    ii. Where foreclosure procedure does not require an action or court 
proceeding, such as under a power of sale, a document is considered the 
first notice or filing if it is the earliest document required to be 
recorded or published to initiate the foreclosure process.
    iii. Where foreclosure procedure does not require any court filing 
or proceeding, and also does not require any document to be recorded or 
published, a document is considered the first notice or filing if it is 
the earliest document that establishes, sets, or schedules a date for 
the foreclosure sale.
    iv. A document provided to the borrower but not initially required 
to be filed, recorded, or published is not considered the first notice 
or filing on the sole basis that the document must later be included as 
an attachment accompanying another document that is required to be 
filed, recorded, or published to carry out a foreclosure.
    41(g) Prohibition on foreclosure sale.
    1. Dispositive motion. The prohibition on a servicer moving for 
judgment or order of sale includes making a dispositive motion for 
foreclosure judgment, such as a motion for default judgment, judgment on 
the pleadings, or summary judgment, which may directly result in a 
judgment of foreclosure or order of sale. A servicer that has made any 
such motion before receiving a complete loss mitigation application has 
not moved for a foreclosure judgment or order of sale if the servicer 
takes reasonable steps to avoid a ruling on such motion or issuance of 
such order prior to completing the procedures required by Sec. 1024.41, 
notwithstanding whether any such action successfully avoids a ruling on 
a dispositive motion or issuance of an order of sale.
    2. Proceeding with the foreclosure process. Nothing in 
Sec. 1024.41(g) prevents a servicer from proceeding with the foreclosure 
process, including any publication, arbitration, or mediation 
requirements established by applicable law, when the first notice or 
filing for a foreclosure proceeding occurred before a servicer receives 
a complete loss mitigation application so long as any such steps in the 
foreclosure process do not cause or directly result in the issuance of a 
foreclosure judgment or order of sale, or the conduct of a foreclosure 
sale, in violation of Sec. 1024.41.
    3. Interaction with foreclosure counsel. A servicer is responsible 
for promptly instructing foreclosure counsel retained by the servicer 
not to proceed with filing for foreclosure judgment or order of sale, or 
to conduct a foreclosure sale, in violation of Sec. 1024.41(g) when a 
servicer has received a complete loss mitigation application, which may 
include instructing counsel to move for a continuance with respect to 
the deadline for filing a dispositive motion.

[[Page 595]]

    4. Loss mitigation applications submitted 37 days or less before 
foreclosure sale. Although a servicer is not required to comply with the 
requirements in Sec. 1024.41 with respect to a loss mitigation 
application submitted 37 days or less before a foreclosure sale, a 
servicer is required separately, in accordance with policies and 
procedures maintained pursuant to Sec. 1024.38(b)(2)(v) to properly 
evaluate a borrower who submits an application for a loss mitigation 
option for all loss mitigation options available to the borrower 
pursuant to any requirements established by the owner or assignee of the 
borrower's mortgage loan. Such evaluation may be subject to requirements 
applicable to a review of a loss mitigation application submitted by a 
borrower 37 days or less before a foreclosure sale.
    Paragraph 41(g)(3).
    1. Short sale listing period. An agreement for a short sale 
transaction, or other similar loss mitigation option, typically includes 
marketing or listing periods during which a servicer will allow a 
borrower to market a short sale transaction. A borrower is deemed to be 
performing under an agreement on a short sale, or other similar loss 
mitigation option, during the term of a marketing or listing period.
    2. Short sale agreement. If a borrower has not obtained an approved 
short sale transaction at the end of any marketing or listing period, a 
servicer may determine that a borrower has failed to perform under an 
agreement on a loss mitigation option. An approved short sale 
transaction is a short sale transaction that has been approved by all 
relevant parties, including the servicer, other affected lienholders, or 
insurers, if applicable, and the servicer has received proof of funds or 
financing, unless circumstances otherwise indicate that an approved 
short sale transaction is not likely to occur.
    41(h) Appeal process.
    Paragraph 41(h)(3).
    1. Supervisory personnel. The appeal may be evaluated by supervisory 
personnel that are responsible for oversight of the personnel that 
conducted the initial evaluation, as long as the supervisory personnel 
were not directly involved in the initial evaluation of the borrower's 
complete loss mitigation application.
    41(i) Duplicative requests.
    1. Servicing transfers. A transferee servicer is required to comply 
with the requirements of Sec. 1024.41 regardless of whether a borrower 
received an evaluation of a complete loss mitigation application from a 
transferor servicer. Documents and information transferred from a 
transferor servicer to a transferee servicer may constitute a loss 
mitigation application to the transferee servicer and may cause a 
transferee servicer to be required to comply with the requirements of 
Sec. 1024.41 with respect to a borrower's mortgage loan account.
    2. Application in process during servicing transfer. A transferee 
servicer must obtain documents and information submitted by a borrower 
in connection with a loss mitigation application during a servicing 
transfer, consistent with policies and procedures adopted pursuant to 
Sec. 1024.38. A servicer that obtains the servicing of a mortgage loan 
for which an evaluation of a complete loss mitigation option is in 
process should continue the evaluation to the extent practicable. For 
purposes of Sec. 1024.41(e)(1), 1024.41(f), 1024.41(g), and 1024.41(h), 
a transferee servicer must consider documents and information received 
from a transferor servicer that constitute a complete loss mitigation 
application for the transferee servicer to have been received by the 
transferee servicer as of the date such documents and information were 
provided to the transferor servicer.

         Appendix MS--Mortgage Servicing Model Forms and Clauses

    1. In general. This appendix contains model forms and clauses for 
mortgage servicing disclosures required by Sec. Sec. 1024.33, 37, and 
39. Each of the model forms is designated for uses in a particular set 
of circumstances as indicated by the title of that model form or clause. 
Although use of the model forms and clauses is not required, servicers 
using them appropriately will be in compliance with disclosure 
requirements of Sec. Sec. 1024.33, 37, and 39. To use the forms 
appropriately, information required by regulation must be set forth in 
the disclosures.
    2. Permissible changes. Servicers may make certain changes to the 
format or content of the forms and clauses and may delete any 
disclosures that are inapplicable without losing the protection from 
liability so long as those changes do not affect the substance, clarity, 
or meaningful sequence of the forms and clauses. Servicers making 
revisions to that effect will lose their protection from civil 
liability. Except as otherwise specifically required, acceptable changes 
include, for example:
    i. Use of ``borrower'' and ``servicer'' instead of pronouns.
    ii. Substitution of the words ``lender'' and ``servicer'' for each 
other.
    iii. Addition of graphics or icons, such as the servicer's corporate 
logo.

        Appendix MS-3--Model Force-Placed Insurance Notice Forms

    1. Where the model forms MS-3(A), MS-3(B), MS-3(C), and MS-3(D) use 
the term ``hazard insurance,'' the servicer may substitute ``hazard 
insurance'' with ``homeowners' insurance'' or ``property insurance.''

[[Page 596]]

 Appendix MS-4--Model Clauses for the Written Early Intervention Notice

    1. Model MS-4(A). These model clauses illustrate how a servicer may 
provide its contact information, how a servicer may request that the 
borrower contact the servicer, and how the servicer may inform the 
borrower how to obtain additional information about loss mitigation 
options, as required by Sec. 1024.39(b)(2)(i), (ii), and (iv).
    2. Model MS-4(B). These model clauses illustrate how the servicer 
may inform the borrower of loss mitigation options that may be 
available, as required by Sec. 1024.39(b)(2)(iii), if applicable. A 
servicer may include clauses describing particular loss mitigation 
options to the extent such options are available. Model MS-4(B) does not 
contain sample clauses for all loss mitigation options that may be 
available. The language in the model clauses contained in square 
brackets is optional; a servicer may comply with the disclosure 
requirements of Sec. 1024.39(b)(2)(iii) by using language substantially 
similar to the language in the model clauses, providing additional 
detail about the options, or by adding or substituting applicable loss 
mitigation options for options not represented in these model clauses, 
provided the information disclosed is accurate and clear and 
conspicuous.
    3. Model MS-4(C). These model clauses illustrate how a servicer may 
provide contact information for housing counselors, as required by 
Sec. 1024.39(b)(2)(v). A servicer may, at its option, provide the Web 
site and telephone number for either the Bureau's or the Department of 
Housing and Urban Development's housing counselors list, as provided by 
paragraphs Sec. 1024.39(b)(2)(v).

[78 FR 10887, Feb. 14, 2013, as amended at 78 FR 44717, July 24, 2013; 
78 FR 60438, Oct. 1, 2013; 78 FR 63004, 63005, Oct. 23, 2013]

                          PART 1025 [RESERVED]

[[Page 597]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 599]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2015)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)

[[Page 600]]

      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)
        II  Recovery Accountability and Transparency Board (Parts 
                200--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)

[[Page 601]]

      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)

[[Page 602]]

    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
     XCVII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIV  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)

[[Page 603]]

       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

[[Page 604]]

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
         X  Bureau of Consumer Financial Protection (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)

[[Page 605]]

     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements

[[Page 606]]

        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)

[[Page 607]]

        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

[[Page 608]]

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)

[[Page 609]]

        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)

[[Page 610]]

        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)

[[Page 611]]

        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)

[[Page 612]]

         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)[Reserved]
            Subtitle C--Regulations Relating to Education
        XI  National Institute for Literacy [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

[[Page 613]]

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
  103--104  [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
  129--200  [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)

[[Page 614]]

       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--599)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)

[[Page 615]]

        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)

[[Page 616]]

         3  Health and Human Services (Parts 300--399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

[[Page 617]]

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 619]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2015)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     22, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII

[[Page 620]]

Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Bureau of Ocean Energy Management, Regulation,    30, II
     and Enforcement
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazardous Investigation       40, VI
     Board
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX
     for the District of Columbia
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I

[[Page 621]]

Defense Contract Audit Agency                     32, I
Defense Department                                2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99

[[Page 622]]

  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV

[[Page 623]]

Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Gulf Coast Ecosystem Restoration Council          40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A,
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 6, I; 8, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII

[[Page 624]]

Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department                               2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Bureau of Ocean Energy Management, Regulation,  30, II
       and Enforcement
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V

[[Page 625]]

  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Office of Workers' Compensation Programs        20, VII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIV
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I

[[Page 626]]

National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III, IV
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Natural Resource Revenue, Office of               30, XII
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Offices of Independent Counsel                    28, VI
Office of Workers' Compensation Programs          20, VII
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Recovery Accountability and Transparency Board    4, II
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L
Rural Telephone Bank                              7, XVI

[[Page 627]]

Rural Utilities Service                           7, XVII, XVIII, XLII, L
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
   and Water Commission, United States Section
[[Page 628]]

U.S. Copyright Office                             37, II
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 629]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2010 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.fdsys.gov. For changes to this volume of the CFR 
prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 1964-
1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. The 
``List of CFR Sections Affected 1986-2000'' is available at 
www.fdsys.gov.

                                  2010

12 CFR
                                                                   75 FR
                                                                    Page
Chapter IX
906.10--906.13 (Subpart C) Removed; eff. 1-27-11...................81402
918 Removed........................................................17039
925 Transferred to Chapter XII and redesignated as 1263..............690
926 Transferred to Chapter XII, Subchapter D and redesignated as 
        Part 1264...................................................8240
940 Transferred to Chapter XII, Subchapter D and redesignated as 
        Part 1265...................................................8240
944 Transferred to Chapter XII and redesignated as 1290..............701
950 Redesignated as Part 1266; eff. 1-10-11........................76622
960 Transferred to Chapter XII, Subchapter D and redesignated as 
        Part 1269...................................................8241
980 Redesignated as Part 1272; eff. 1-10-11........................76622
985 Removed........................................................23161
989 Removed........................................................23161

                                  2011

12 CFR
                                                                   76 FR
                                                                    Page
Chapter IX
907.9 Removed.......................................................7481
908 Removed........................................................53607
912 Removed; eff. 1-3-12...........................................74649
914 Authority citation revised.....................................33127
914.3 Removed......................................................33127
932 Authority citation revised.....................................11674
932.2 Revised......................................................11674
932.3 Revised......................................................11674
956 Removed........................................................29151
965 Removed........................................................18369
966 Removed........................................................18369
969 Removed........................................................18369
987 Removed........................................................18369
997 Removed; eff. 1-3-12...........................................74649
Chapter X
Enforceable rules and orders list...........................31222, 43569
    Established....................................................44242
1002 Added; interim................................................79445
1003 Added; interim................................................78468
1004 Added.........................................................44242
1005 Added.........................................................81023
1006 Added; interim................................................78124
1007 Added; interim................................................78487
1008 Added; interim................................................78487
1009 Added; interim................................................78129
1010 Added; interim................................................79489
1011 Added; interim................................................79522
1012 Added; interim................................................79524
1013 Added; interim................................................78502
    Supplement I corrected.........................................81790
1014 Added; interim................................................78133
1015 Added; interim................................................78133
1016 Added; interim................................................79028
1022 Added; interim................................................79312
1024 Added; interim................................................78981

[[Page 630]]

                                  2012

12 CFR
                                                                   77 FR
                                                                    Page
Chapter IX
905 Removed........................................................73264
Chapter X
Policy statement...................................................37558
1003 Supplement I amended....................................8722, 76840
1005 Authority citation revised; eff. 2-7-13.................6285, 50282
1005.1--1005.20 (Subpart A) Designated as Subpart A; heading 
        added; eff. 2-7-13..........................................6285
1005.1 (b) revised; eff. 2-7-13.....................................6285
1005.2 Introductory text revised; eff. 2-7-13.......................6285
1005.3 (a) revised; eff. 2-7-13.....................................6285
    (a) corrected; eff. 2-7-13.....................................40459
1005.30--1005.36 (Subpart B) Added; eff. 2-7-13.....................6285
1005.30 (f) revised; eff. 2-7-13...................................50282
1005.31 (a)(3)(ii), (iii), (5)(ii), (iii), (b)(2)(v), (vi) and (3) 
        revised; (a)(3)(iv), (5)(iv) and (b)(2)(vii) added; eff. 
        2-7-13; eff. 2-7-13........................................50282
1005.32 (b) and (c) introductory text revised; (d) added; eff. 2-
        7-13.......................................................50283
1005.33 (a)(1)(i) revised; eff. 2-7-13.............................50284
1005.36 Heading, (a) and (b) revised; (d) added; eff. 2-7-13.......50284
1005 Appendix A amended; eff. 2-7-13................................6290
    Supplement I amended; eff. 2-7-13........................6297, 50285
    Appendix A corrected; eff. 2-7-13..............................40459
1012 Heading correctly revised.....................................26154
1013 Authority citation revised....................................69736
1013 Supplement I amended..........................................69736
1022 Appendix I correctly revised..................................67745
    Appendix K correctly revised...................................67747
    Appendix M correctly revised...................................67750
    Appendix N correctly revised...................................67754

                                  2013

12 CFR
                                                                   78 FR
                                                                    Page
Chapter IX
911 Removed........................................................39958
Subchapter D Removed................................................2322
Subchapter F Removed................................................2322
952 Removed.........................................................2322
Subchapter H Removed................................................2322
975--978 (Subchapter I) Removed.....................................2322
Subchapter J Removed................................................2322
Subchapter K Removed................................................2322
995--997 (Subchapter L) Removed.....................................2322
998 Removed........................................................15870
Chapter X
Chapter X Policy statement..................................21218, 60697
1002.4 (d)(2) revised...............................................7248
    Regulation at 78 FR 7248 confirmed.............................69793
1002.14 Revised.....................................................7248
    Regulation at 78 FR 7248 confirmed.............................69793
1002 Appendix C amended.............................................7248
    Supplement I amended.....................................7248, 60437
    Appendix A amended.............................................60437
    Regulation at 78 FR 7248 confirmed.............................69793
1003 Supplement I amended..........................................79286
1005 Regulation at 77 FR 6285 eff. date delayed indefinitely........6025
    Regulation at 77 FR 50282 eff. date delayed indefinitely........6025
    Regulation at 77 FR 6285 confirmed.............................30662
    Regulation at 77 FR 50282 confirmed............................30662
    Safe harbor list...............................................66251
1005.1--1005.20 (Subpart A) Regulation at 77 FR 6285 eff. date 
        delayed indefinitely........................................6025
    Regulation at 77 FR 6285 confirmed.............................30662
1005.1 Regulation at 77 FR 6285 eff. date delayed indefinitely......6025
    Regulation at 77 FR 6285 confirmed.............................30662
1005.2 Regulation at 77 FR 6285 eff. date delayed indefinitely......6025
    Regulation at 77 FR 6285 confirmed.............................30662
1005.3 Regulation at 77 FR 6285 eff. date delayed indefinitely......6025
    Regulation at 77 FR 40459 eff. date delayed indefinitely........6025
    Regulation at 77 FR 6285 confirmed.............................30662
    Regulation at 77 FR 40459 confirmed............................30662
1005.16 (b), (c) and (d) revised...................................18224
1005.30--1005.36 (Subpart B) Regulation at 77 FR 6285 eff. date 
        delayed indefinitely........................................6025

[[Page 631]]

    Regulation at 77 FR 6285 confirmed.............................30662
1005.30 Regulation at 77 FR 50282 eff. date delayed indefinitely 
                                                                    6025
    Regulation at 77 FR 50282 confirmed............................30662
    Introductory text and (h) added................................30703
    Regulation at 78 FR 30703 confirmed............................69793
1005.31 Regulation at 77 FR 50282 eff. date delayed indefinitely 
                                                                    6025
    Regulation at 77 FR 50282 confirmed............................30662
    (a)(1), (b)(1)(ii), (v), (vi), (vii), (2)(i), (c)(1), (2), 
(3), (f) and (g)(1) revised; (b)(1)(viii) added....................30703
    Regulation at 78 FR 30703 confirmed............................69793
1005.32 Regulation at 77 FR 50283 eff. date delayed indefinitely 
                                                                    6025
    Regulation at 77 FR 50283 confirmed............................30662
    (b)(2)(ii), (c)(3) and (4) revised; (b)(3) added; (c)(5) 
removed............................................................30704
    Regulation at 78 FR 30704 confirmed............................69793
1005.33 Regulation at 77 FR 50284 eff. date delayed indefinitely 
                                                                    6025
    Regulation at 77 FR 50284 confirmed............................30662
    (a)(1)(iii), (iv)(B), (c)(2) introductory text, (ii) 
introductory text, (A)(2) and (B) revised; (c)(2)(iii) 
redesignated as (c)(2)(iv); (a)(1)(iv)(D), (c)(2)(iii) and (h) 
added..............................................................30704
    (c)(2)(iii) correctly revised..................................49366
    Regulation at 78 FR 30704 confirmed............................69793
1005.36 Regulation at 77 FR 50284 eff. date delayed indefinitely 
                                                                    6025
    Regulation at 77 FR 50284 confirmed............................30662
1005 Supplement I amended...................................18224, 30714
    Regulation at 77 FR 6290 eff. date delayed indefinitely.........6025
    Regulation at 77 FR 6297 eff. date delayed indefinitely.........6025
    Regulation at 77 FR 40459 eff. date delayed indefinitely........6025
    Regulation at 77 FR 50285 eff. date delayed indefinitely........6025
    Regulation at 77 FR 6290 confirmed.............................30662
    Regulation at 77 FR 6297 confirmed.............................30662
    Regulation at 77 FR 40459 confirmed............................30662
    Regulation at 77 FR 50285 confirmed............................30662
    Appendix A amended.............................................30705
    Supplement I correctly amended.................................49366
    Regulation at 78 FR 30705 confirmed............................69793
    Regulation at 78 FR 30714 confirmed............................69793
1013 Supplement I amended..........................................70194
1024 Authority citation revised; eff. 1-10-14......................10873
    Technical correction...........................................45842
    Policy statement; eff. 1-10-14.................................68343
    Regulation at 78 FR 10873 confirmed............................69793
1024.1--1024.5 (Subpart A) Designated as Subpart A; eff. 1-10-14 
                                                                   10873
    Heading revised; eff. 1-10-14..................................44717
    Regulation at 78 FR 10873 confirmed............................69793
1024.2 (b) amended; eff. 1-10-14...................................10873
    Regulation at 78 FR 10873 confirmed............................69793
1024.3 Revised; 1-10-14............................................10874
    Regulation at 78 FR 10874 confirmed............................69793
1024.4 Heading and (a)(1) revised; (b) removed; (c) redesignated 
        as (b); eff. 1-10-14.......................................10874
    Regulation at 78 FR 10874 confirmed............................69793
1024.5 (b)(7) revised; eff. 1-10-14................................10874
    (c) added; eff. 1-10-14........................................44717
    Regulation at 78 FR 10874 confirmed............................69793
    (a) revised; (b)(1) removed; (d) added; eff. 8-1-15............80104
1024.6--1024.20 (Subpart B) Designated as Subpart B; eff. 1-10-14 
                                                                   10875
    Regulation at 78 FR 10875 confirmed............................69793
1024.7 (f)(3) revised; 1-10-14.....................................10875

[[Page 632]]

    Regulation at 78 FR 10875 confirmed............................69793
1024.13 Heading and (d) revised; 1-10-14...........................10875
    Removed; eff. 1-10-14..........................................44717
    Regulation at 78 FR 10875 confirmed............................69793
1024.17 (c)(8), (f)(2)(ii), (4)(iii), (i)(2) and (4)(iii) revised; 
        (k)(5) added; (l) removed; (m) redesignated as (l); eff. 
        1-10-14....................................................10875
    Regulation at 78 FR 10875 confirmed............................69793
1024.18 Removed; eff. 1-10-14......................................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.19 Removed; eff. 1-10-14......................................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.20 Added.......................................................6961
1024.21 Removed; eff. 1-10-14......................................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.22 Removed; eff. 1-10-14......................................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.23 Removed; eff. 1-10-14......................................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.30--1024.41 (Subpart C) added; eff. 1-10-14...................10876
    Regulation at 78 FR 10876 confirmed............................69793
1024.30 (a) revised; eff. 1-10-14..................................60437
    (c)(1) revised; eff. 8-1-15....................................80104
1024.33 (a) revised; eff. 8-1-15...................................80104
1024.35 (g)(1)(iii)(B) revised; eff. 1-10-14.......................60437
1024.36 (f)(1)(v)(B) revised; eff. 1-10-14.........................60437
1024.39 (b)(1) and (3) revised; eff. 1-10-14.......................60437
    (d) added; interim; eff. 1-10-14...............................63004
1024.41 (b)(2)(ii), (c)(1)(ii), (2)(i), (d), (f)(1), (h)(4) and 
        (j) revised; (b)(3), (c)(2)(iii) and (iv) added; eff. 1-
        10-14......................................................60437
1024 Appendix MS-1 amended; eff. 1-10-14...........................10886
    Appendix MS-2 revised; eff. 1-10-14............................10886
    Appendix MS-3 added; eff. 1-10-14..............................10886
    Appendix MS-3 amended; eff. 1-10-14............................60438
    Appendix MS-4 added; eff. 1-10-14..............................10887
    Supplement I added; eff. 1-10-14...............................10887
    Supplement I amended; eff. 1-10-14...............44717, 60438, 63005
    Supplement I corrected; interim; eff. 1-10-14..................63005
    Regulation at 78 FR 10886 confirmed............................69793
    Regulation at 78 FR 10887 confirmed............................69793
    Appendix A amended; eff. 8-1-15................................80104
    Appendices B and C amended; eff. 8-1-15........................80105

                                  2014

12 CFR
                                                                   79 FR
                                                                    Page
Chapter IX
907 Removed........................................................64665
Chapter X
1003 Supplement I amended..........................................77855
1005.32 (a)(2) revised.............................................55991
1005.33 (a)(1)(iv)(B) and (c)(2)(iii) revised......................55991
1005 Appendix A amended............................................55991
    Supplement I amended...........................................55993
1013 Authority citation revised....................................56483
1013 Supplement I amended..........................................56483
1016.1 (b)(1) revised..............................................64081
1016.9 (c) revised.................................................64081
1024 Policy statement..............................................63295


                                  [all]