[Federal Register Volume 65, Number 17 (Wednesday, January 26, 2000)]
[Proposed Rules]
[Page 4176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1748]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Chapter I

[Docket No. 00-04]


Debt Cancellation Contracts

AGENCY:  Office of the Comptroller of the Currency, Treasury.

ACTION:  Advance notice of proposed rulemaking.

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SUMMARY:  The Office of the Comptroller of the Currency (OCC) is 
seeking comment on whether it is necessary or appropriate to issue 
regulations governing bank sales of debt cancellation contracts. 
Currently, no comprehensive Federal regulations specifically govern 
this activity. The purpose of this request for comments is to help us 
determine whether to issue a proposed rule covering bank sales of these 
products.

DATES:  Comments must be received by March 27, 2000.

ADDRESSES:  Please direct your comments to: Docket No. [00-04], 
Communications Division, Third Floor, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219. You can inspect and 
photocopy all comments received at that address. In addition, you may 
send comments by facsimile transmission to FAX number (202) 874-5274, 
or by electronic mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Heidi M. Thomas, Senior Attorney, 
Legislative and Regulatory Activities, at (202) 874-5090.

SUPPLEMENTARY INFORMATION:  

Background

    Debt cancellation contracts (DCCs) are bank products that are 
contracts with a borrower providing for the cancellation of the 
borrower's obligation to repay an outstanding loan upon the occurrence 
of a certain event, such as the borrower's death or disability.
    The authority of national banks to offer DCCs is well established. 
In 1963, the OCC concluded that offering DCCs was incidental to the 
express authority of a national bank to make loans, and was therefore a 
permissible activity pursuant to 12 U.S.C. 24(Seventh). We codified 
this interpretation in 1971, thus confirming a national bank's 
authority to sell DCCs. 12 CFR 7.7495 (1972). The Eighth Circuit Court 
of Appeals upheld the OCC's interpretation in First National Bank of 
Eastern Arkansas v. Taylor, 907 F.2d 775, cert. denied, 498 U.S. 972 
(1990), holding that our construction of the statute was reasonable and 
that a national bank's ability to sell debt cancellation contracts was 
within the scope of the bank's powers authorized by 12 U.S.C. 
24(Seventh).
    In 1996, we amended the rule governing DCCs, which was renumbered 
as 12 CFR 7.1013, to provide that a national bank may offer DCCs that 
will cancel a debt obligation upon either the death or disability of 
the borrower.
    Current Sec. 7.1013 states that:

    A national bank may enter into a contract to provide for loss 
arising from cancellation of an outstanding loan upon the death or 
disability of a borrower. The imposition of an additional charge and 
the establishment of necessary reserves in order to enable the bank 
to enter into such debt cancellation contracts are a lawful exercise 
of the powers of a national bank.

    We further noted that, on a case-by-case basis, we may permit DCCs 
where the cancellation of the borrower's obligation is triggered by 
events other than death or disability. 61 FR 4849, 4852 (April 1, 
1996).
    We have not issued any regulations relating to DCCs since 1996, and 
there is currently no comprehensive Federal consumer protection scheme 
that covers national bank offerings of DCCs. The purpose of this 
advance notice of proposed rulemaking is to request comments on whether 
we should issue regulations governing DCCs, and if so, what specific 
provisions we should include in these regulations.

Comment Solicitation

    We invite you to comment on all aspects of the issues presented in 
this advance notice of proposed rulemaking. Specifically:
    1. Should we issue regulations governing DCCs that, for example, 
establish standards for the disclosure of terms, notices, contract 
termination, contract charges, and dispute resolution?
    2. Should we include debt suspension agreements in any regulations 
covering DCCs?
    3. Should we address other areas or issues by regulation? 
Commenters are invited to provide specific suggestions for provisions 
that would protect consumers, prohibit abusive practices, and ensure 
the safety and soundness of national banks.
    In addition, commenters are invited to address the impact that a 
regulation governing DCCs would have on community banks. We recognize 
that community banks operate with more limited resources than larger 
institutions and may present a different risk profile. Thus, we 
specifically request comment on the impact that a regulation governing 
DCCs would have on community banks' current resources and available 
personnel with the requisite expertise, and whether the goals of this 
regulation could be achieved, for community banks, through an 
alternative approach.

    Dated: January 13, 2000.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 00-1748 Filed 1-25-00; 8:45 am]
BILLING CODE 4810-33-P