[Federal Register Volume 68, Number 114 (Friday, June 13, 2003)]
[Rules and Regulations]
[Pages 35283-35285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14972]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 37

[Docket No. 03-11]
RIN 1557-AB75


Debt Cancellation Contracts and Debt Suspension Agreements; 
Change in Compliance Date and Request for Comment

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

ACTION: Notice of delay in compliance date; request for comment.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) has 
determined to delay the date when compliance is required with certain 
provisions of the final rule governing debt cancellation contracts 
(DCCs) and debt suspension agreements (DSAs) in order to allow the OCC 
to consider issues that have recently been brought to our attention 
concerning the application of the DCC/DSA rule in the context of 
closed-end consumer loan transactions where DCCs and DSAs are offered 
through unaffiliated, non-exclusive agents. The delay of the compliance 
date applies only to the extent and to the types of transactions 
described in this document. In all other circumstances, national banks 
are required to comply with the DCC/DSA rule as of June 16, 2003, which 
is the date on which the rule takes effect. The OCC also is inviting 
comment on issues raised by national banks related to the sale of DCCs 
and DSAs in connection with closed-end consumer loans offered through 
such non-exclusive agency relationships.

DATES: Compliance date: The compliance date for certain provisions in 
12 CFR part 37 published at 67 FR 58962 (September 19, 2002) is delayed 
indefinitely. See SUPPLEMENTARY INFORMATION for details. OCC will 
publish a document in the Federal Register announcing the compliance 
date.
    Comment date: Comments must be received by July 14, 2003.

[[Page 35284]]


ADDRESSES: Comments should be directed to Office of the Comptroller of 
the Currency, Public Information Room, 250 E Street, SW., Mail Stop 1-
5, Washington, DC 20219, Attention: Docket No. 03-11; Fax number (202) 
874-4448 or Internet address: [email protected]. Due to 
delays in paper mail delivery in the Washington area, commenters are 
encouraged to send comments by fax or e-mail when possible. Comments 
may be inspected and photocopied at the OCC's Public Reference Room, 
250 E Street, SW., Washington, DC. You may make an appointment to 
inspect the comments by calling (202) 874-5043.

FOR FURTHER INFORMATION CONTACT: Jean Campbell, Attorney, Legislative 
and Regulatory Activities Division, (202) 874-5090; or Pamela Mount, 
Compliance Specialist, Compliance Division, (202) 874-4428, Office of 
the Comptroller of the Currency, 250 E Street, SW., Washington, DC 
20219.

SUPPLEMENTARY INFORMATION:

Background

    On September 19, 2002, the OCC published the final rule governing 
DCCs and DSAs.\1\ The final rule establishes consumer protection 
standards and safety and soundness requirements that apply with respect 
to DCCs and DSAs entered into by national banks in connection with 
extensions of credit they make to customers. The rule prohibits 
national banks from engaging in certain practices, such as tying and 
misleading marketing or advertising. It also requires, among other 
things, that national banks provide standardized disclosures about the 
DCC and DSA products they offer; that they obtain a customer's 
acknowledgment of receipt of those disclosures; and that they obtain 
the customer's affirmative election to purchase the product. In 
addition, the rule requires a national bank that offers a customer the 
option to pay the fee for a DCC or DSA in a single payment also to 
offer that customer a bona fide option to pay the fee on a periodic 
basis (``periodic payment option''). The final rule takes effect on 
June 16, 2003.
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    \1\ 67 FR 58962. The rule is codified at 12 CFR part 37.
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    The OCC recently has received information that the periodic payment 
option requirement may present unique issues, of which the OCC was 
previously unaware, in connection with DCCs and DSAs offered by 
national banks through unaffiliated, non-exclusive agents, with respect 
to certain types of consumer purchase transactions, most notably car 
loans made available through automobile dealers.
    Accordingly, we have determined that it is appropriate to delay the 
mandatory compliance date for the periodic payment option in the case 
of transactions where unaffiliated, non-exclusive agents of a national 
bank offer that bank's DCC or DSA in connection with closed-end 
consumer credit, until the OCC has an opportunity to further evaluate 
the feasibility of approaches to providing appropriate customer 
protections in connection with that type of transaction. Because the 
availability of the periodic payment option also triggers certain 
disclosures, we also are delaying the time for compliance with certain 
other provisions in the DCC/DSA final rule that are linked to the 
requirement to offer a periodic payment option, including the 
requirement to provide the long form disclosures.
    Banks offering DCCs and DSAs through non-affiliated, non-exclusive 
agents thus remain subject to the following requirements:
    [sbull] The bank may not extend credit or alter the terms or 
conditions of an extension of credit conditioned upon the customer's 
purchase of a DCC or DSA.
    [sbull] The bank may not engage in any practice or use any 
advertisement that could mislead or otherwise cause a reasonable person 
to reach an erroneous belief with respect to information that must be 
disclosed under this part.
    [sbull] The bank may not offer DCCs or DSAs that contain terms 
giving the bank the right unilaterally to modify the contract unless 
the modification is favorable to the customer and is made without 
additional charge to the customer; or the customer is notified of any 
proposed change and is provided a reasonable opportunity to cancel the 
contract without penalty before the change goes into effect.
    [sbull] If a DCC or DSA is terminated, the bank must refund to the 
customer any unearned fees paid for the contract unless the contract 
provides otherwise.
    [sbull] The bank shall calculate the amount of a refund using a 
method at least as favorable to the customer as the actuarial method.
    [sbull] If the bank offers the customer the option to finance the 
fee for a DCC or DSA, the bank must disclose to the customer whether 
and, if so, the time period during which, the customer may cancel the 
agreement and receive a refund.
    [sbull] A national bank must provide to the customer at the time of 
the initial solicitation of the DCC or DSA, the short form disclosures 
described in Appendix A to part 37, as modified to reflect delay of the 
compliance date for providing the periodic payment option and related 
changes. The form of the short form disclosures must be readily 
understandable and meaningful. The short form disclosures also must be 
included in advertisements and other promotional material for DCCs and 
DSAs, unless they are of a general nature.
    [sbull] Before entering into a contract, the bank must obtain a 
customer's written affirmative election to purchase the DCC or DSA. The 
written election must be conspicuous, simple, direct, readily 
understandable, and designed to call attention to its significance.
    [sbull] A national bank must manage the risks associated with DCCs 
and DSAs in accordance with safe and sound banking principles.

Description of Provisions Affected

    As a result of today's actions, compliance with the following 
provisions will not be required, until further notice, when a national 
bank, in connection with closed-end consumer credit \2\ extended by 
that bank, offers a DCC or DSA through an unaffiliated, non-exclusive 
agent:
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    \2\ As used in this notice, the term ``closed-end consumer 
credit'' and ``closed-end consumer loan'' refer to consumer credit 
other than open-end credit, as defined in the final DCC/DSA rule. 
These terms do not include loans secured by 1-4 residential real 
property. See 12 CFR 37.2(a).
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    [sbull] The requirement to offer a periodic payment option set 
forth in 12 CFR 37.5.
    [sbull] The requirement set forth in 12 CFR 37.4(a) that a bank 
that offers a customer a DCC or DSA without a refund provision also 
must offer that customer a bona fide option to purchase a comparable 
DCC or DSA that provides for a refund.
    [sbull] The long-form disclosure requirement set forth in 12 CFR 
37.6.
    [sbull] The second disclosure set forth in Appendix A to part 37 
(Short Form Disclosures), entitled ``Lump sum payment of fee,'' 
informing the customer that he or she has the option to pay the fee in 
a single lump sum or in periodic payments.
    [sbull] The third disclosure set forth in Appendix A to part 37 
(Short Form Disclosures), entitled ``Lump sum payment of fee with no 
refund,'' informing the customer that he or she has the option to 
purchase a DCC or DSA with a refund provision.
    [sbull] The fifth disclosure set forth in Appendix A to part 37 
(Short Form Disclosures), entitled ``Additional disclosures,'' 
indicating that the customer will receive additional

[[Page 35285]]

information before being required to pay for the DCC or DSA.\3\
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    \3\ The sixth disclosure set forth in Appendix A to part 37, 
provides banks the option of directing customers either to the long 
form disclosures or the contract for a full explanation of the 
terms. Clearly, since the long form is not required for the time 
being, the bank will refer customers to the contract.
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    [sbull] The requirement to obtain a customer's written 
acknowledgment of receipt of disclosures set forth at 12 CFR 37.7(a).
    The OCC expects that national banks that do not provide long forms 
disclosures will conspicuously inform customers that they will receive 
a copy of the contract before they are required to pay for the product.

Request for Comment

    As we have indicated, the purpose of this delay in the time for 
compliance is to permit the OCC to consider how best to address 
compliance issues that arise under the circumstances described in this 
notice. To aid our review of these issues, we invite comment on the 
following specific questions, as well as on any other aspect of this 
notice that commenters wish to address:
    1. Please comment on any compliance issues or problems posed by 
providing the periodic payment option and the associated short and long 
form disclosures for DCCs or DSAs sold by unaffiliated, non-exclusive 
agents in connection with closed-end loans.
    2. Please explain the types of loan products, e.g., car loans, 
where this issue arises.
    3. What alternative approaches are available to provide appropriate 
consumer protections?
    4. In the case of closed-end loans, should the requirement in the 
long form disclosures to disclose the total fee for a DCC paid on a 
monthly or periodic basis be modified? Is there an alternative, 
effective way to disclose that information that could be added to the 
rule?

    Dated: June 10, 2003.
John D. Hawke, Jr.,
Comptroller of the Currency.
[FR Doc. 03-14972 Filed 6-12-03; 8:45 am]
BILLING CODE 4810-33-P