[Federal Register Volume 64, Number 27 (Wednesday, February 10, 1999)]
[Rules and Regulations]
[Pages 6502-6503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2865]



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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 561

[No. 98-124]
RIN 1550-AB28


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

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is removing 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.

EFFECTIVE DATE: April 1, 1999.

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

SUPPLEMENTARY INFORMATION:

Background

    On September 23, 1998, OTS proposed to delete its regulatory 
definitions of ``consumer credit classified as a loss,'' ``slow 
consumer credit,'' and ``slow loans.'' \1\
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    \1\ 63 FR 51305 (September 25, 1998).
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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.\2\ ``Consumer credit classified as a 
loss'' is defined at 12 CFR 561.13 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). ``Slow consumer credit'' is defined at 12 
CFR 561.47 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). Both 
definitions provide that a payment of 90 percent or more of the 
contractual payment is considered a full payment, and state that a loan 
is not considered slow or a loss if an association can clearly 
demonstrate that repayment will occur regardless of delinquency status.
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    \2\ See 12 CFR 561.12.
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    Neither of these terms is used in any other OTS regulation. The 
OTS, however, has issued guidance instructing examiners to follow these 
definitions when classifying closed-end and open-end consumer credit. 
Slow loans 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.\3\
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    \3\ Thrift Activities Handbook, Section 260, Classification of 
Assets.
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    In July 1998, the Federal Financial Institutions Examination 
Council (FFIEC) sought public comment on a proposed Uniform Retail 
Credit Classification Policy (``Classification Policy''), a supervisory 
policy used by the federal banking agencies for the classification of 
retail credit loans of financial institutions.\4\ The OTS definitions 
of consumer credit classified as a loss and slow consumer credit 
conflicted with one of the options under consideration in the proposed 
Classification Policy.
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    \4\ 63 FR 36406 (July 6, 1998).
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    Because the terms ``consumer credit classified as a loss'' and 
``slow consumer credit'' are not used in OTS regulations and could 
conflict with the final FFIEC Classification Policy, OTS proposed to 
delete these two regulatory definitions.

Slow Loans--Sec. 561.48

    The term ``slow loans'' is defined at 12 CFR 561.48 with respect to 
loans that are issued on the security of a home. \5\ 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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    \5\ 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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    Because the term ``slow loan'' is not used elsewhere in OTS 
regulations, the OTS also proposed to delete this term. \6\
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    \6\ Like the two other definitions, OTS has issued guidance to 
its examiners indicating that all slow mortgage loans are presumed 
to be Substandard. Thrift Activities Handbook, Section 260, 
Classification of Assets.
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Summary of Comment and Description of the Final Rule

    OTS received one comment in response to the proposed rule from a 
thrift trade group. The commenter supported the proposal, noting that 
the FFIEC proposal to amend the Uniform Classification Policy would set 
out consistent, constructive guidance to identify and classify consumer 
loans. They agreed that retaining the cited regulatory definitions may 
cause confusion and is not necessary to meet any regulatory 
requirements.
    Elsewhere in today's Federal Register, FFIEC has published its 
final Uniform Retail Credit Classification Policy. While the final 
policy adopted by FFIEC does not conflict with the cited OTS 
definitions, the cited definitions remain unnecessary, as they are not 
used elsewhere in OTS's regulations. Accordingly, OTS is deleting 
Secs. 561.13, 561.47, and 561.48 as proposed.

Executive Order 12866

    OTS has determined that this final 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 final rule does not have a significant 
economic impact on a substantial number of small entities. The rule 
merely deletes 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, Public Law 
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 final 
rule reduces regulatory burden by eliminating unnecessary regulations. 
OTS has, therefore, determined that the effect of the 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.


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    Accordingly, the Office of Thrift Supervision amends 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: December 18, 1998.

     By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 99-2865 Filed 2-9-99; 8:45 am]
BILLING CODE 6720-01-P