[Federal Register Volume 63, Number 186 (Friday, September 25, 1998)]
[Proposed Rules]
[Pages 51305-51306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25663]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 561

[No. 98-95]
RIN 1550-AB28


Consumer Credit Classified as a Loss, Slow Consumer Credit and 
Slow Loans

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Thrift Supervision (OTS) is proposing to delete 
its regulatory definitions of ``consumer credit classified as a loss,'' 
``slow consumer credit,'' and ``slow loans.'' These definitions are not 
necessary for the interpretation of any OTS regulation and may conflict 
with proposed guidance recently issued by the Federal Financial 
Institutions Examination Council (FFIEC).

DATES: Comments must be received on or before October 26, 1998.

ADDRESSES: Send comments to Manager, Dissemination Branch, Records 
Management and Information Policy, Office of Thrift Supervision, 1700 G 
Street, NW., Washington, DC 20552, Attention Docket No. 98-95. Hand 
deliver comments to 1700 G Street, NW. from 9:00 A.M. to 5:00 P.M. on 
business days. Send facsimile transmissions to FAX Number (202) 906-
7755 or (202) 906-6956 (if the comment is over 25 pages). Send e-mails 
to [email protected] and include your name and telephone 
number. Interested persons may inspect comments at 1700 G Street, NW., 
from 9:00 A.M. until 4:00 P.M. on business days.

FOR FURTHER INFORMATION CONTACT: William Magrini, Senior Project 
Manager, Supervision Policy, (202/906-5744) or Vern McKinley, Senior 
Attorney (202/906-6241), Regulations and Legislation Division, Office 
of the Chief Counsel, Office of Thrift Supervision, 1700 G Street, 
N.W., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

Introduction

    The OTS is proposing to delete its regulatory definitions of 
``consumer credit classified as a loss,'' ``slow consumer credit,'' and 
``slow loans.'' These definitions are not necessary for the 
interpretation of any OTS regulation and may conflict with proposed 
guidance recently issued by the Federal Financial Institutions 
Examination Council (FFIEC).

Consumer Credit Classified as a Loss--Sec. 561.13

Slow Consumer Credit--Sec. 561.47

    Consumer credit is credit extended to individuals for personal, 
family or household purposes. See 12 CFR 561.12. Currently, ``consumer 
credit classified as a loss'' is defined as closed-end consumer credit 
that is delinquent 120 days or more (five monthly payments or more) and 
open-end consumer credit that is delinquent 180 days or more (seven 
zero billing cycles or more). See 12 CFR 561.13. OTS regulations define 
``slow consumer credit'' as closed-end consumer credit that is 
delinquent for 90 to 119 days (four monthly payments) and open-end 
consumer credit that is delinquent for 90 to 179 days (four to six zero 
billing cycles). See 12 CFR 561.47. Both definitions provide that a 
payment of 90 percent or more of the contractual payment is considered 
to be a full payment, and state that a loan is not considered to be 
slow or a loss if an association can clearly demonstrate that repayment 
will occur regardless of delinquency status.
    Neither of these terms is used in any other OTS regulation. The 
OTS, however, has issued guidance instructing examiners to follow these 
provisions when classifying closed-end and open-end consumer credit. 
Slow credits are presumed Substandard and consumer credit classified as 
a loss is presumed a Loss, subject to management providing 
documentation that such an adverse classification is not 
warranted.1
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    \1\ Thrift Activities Handbook, Section 260, Classification of 
Assets.
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    Recently, the FFIEC sought public comment on its proposed Uniform 
Retail Credit Classification Policy (``Uniform Classification 
Policy''), a supervisory policy used by the federal banking agencies 
for the uniform classification of retail credit loans of financial 
institutions.2 The banking agencies are considering two 
possible options for the classification of open-end and closed-end 
retail loans. Under both options, open-end and closed-end retail loans 
that are past due 90 days from the contractual due date would be 
classified as Substandard. Under the first option, open-end and closed-
end retail loans would be charged off when they are past due 150 days 
or more. Under the second option, open-end retail loans would be 
charged off at 180 days, and closed-end retail loans would be charged 
off at 120 days. The proposed Uniform Classification Policy also 
addresses the treatment of partial payments. Like the OTS definition, 
the proposed Uniform Classification Policy would consider a payment of 
90 percent or more of the contract to be a full payment. However, the 
proposed policy also permits an institution to aggregate payments and 
give credit for any partial payments received.3
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    \2\ 63 FR 36403 (July 6, 1998).
    \3\ The policy also addresses charge off policies for 
bankruptcies, fraud or deceased accounts, and other issues.
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    As noted above, the terms ``consumer credit classified as a loss'' 
and ``slow consumer credit'' are not used anywhere else in OTS 
regulations. Moreover, if the first option of the Uniform 
Classification Policy is adopted as proposed, the OTS definitions of 
consumer credit classified as a loss and slow consumer credit would 
conflict with the uniform interagency guidance. Accordingly, OTS is 
proposing to delete Secs. 561.13 and 561.47. The OTS, however, solicits 
comment on whether these terms should be retained but revised to

[[Page 51306]]

conform to the final FFIEC Uniform Classification Policy.

Slow Loans--Sec. 561.48

    Existing Sec. 561.48 defines slow loans with respect to loans that 
are issued on the security of a home.4 The classification of 
a loan as a slow loan is based on a variety of factors, including how 
long the loan is contractually delinquent, how seasoned the loan is, 
whether taxes are due and unpaid, and whether its terms have been 
modified or the loan has been refinanced due to delinquency.
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    \4\ 12 CFR 541.14 (``Home'' means real estate comprising a 
single-family dwelling or dwelling unit for four or fewer families 
in the aggregate.)
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    The term slow loan is not used elsewhere in the OTS regulations. 
However, the OTS has issued guidance to its examiners indicating that 
all slow mortgage loans are presumed to be Substandard.5 The 
OTS is proposing to delete this definition from the Code of Federal 
Regulations because it is not necessary to the interpretation of any 
other regulation.
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    \5\ Thrift Activities Handbook, Section 260, Classification of 
Assets.
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Executive Order 12866

    OTS has determined that this proposed rule does not constitute a 
``significant regulatory action'' for the purposes of Executive Order 
12866.

Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS 
has determined that this proposed rule would not have a significant 
economic impact on a substantial number of small entities. The proposed 
rule would merely delete unnecessary definitions from OTS regulations. 
This change should, therefore, reduce the burden of complying with 
regulations for all institutions, including small institutions.

Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L. 
104-4 (Unfunded Mandates Act) requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
Federal mandate that may result in expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. As discussed above, this 
proposed rule would reduce regulatory burden by eliminating unnecessary 
regulations. OTS has, therefore, determined that the effect of the 
proposed rule will not result in expenditures by State, local, or 
tribal governments or by the private sector of $100 million or more. 
Accordingly, OTS has not prepared a budgetary impact statement or 
specifically addressed the regulatory alternatives considered.

List of Subjects in 12 CFR Part 561

    Savings associations.

    Accordingly, the Office of Thrift Supervision proposes to amend 
part 561, chapter V, title 12, Code of Federal Regulations as set forth 
below:

PART 561--DEFINITIONS

    1. The authority citation for part 561 continues to read as 
follows:

    Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.


Secs. 561.13, 561.47, 561.48  [Removed]

    2. Sections 561.13, 561.47 and 561.48 are removed.

    Dated: September 21, 1998.

    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-25663 Filed 9-24-98; 8:45 am]
BILLING CODE 6720-01-P