Unfair or Deceptive Acts or Practices
Subpart A--Consumer Complaints
Section 227.1 Definitions.
Section 227.2 Consumer complaint procedure.
Subpart B--Credit Practices Rule
Section 227.11 Authority, purpose, and scope.
Section 227.12 Definitions.
Section 227.13 Unfair credit contract provisions.
Section 227.14 Unfair or deceptive practices involving
Section 227.15 Unfair late charges.
Section 227.16 State exemptions.
Sec. 227.1 Definitions.
For the purposes of this part,1
unless the context indicates otherwise, the following definitions apply:
1 The words this part,
as used herein, mean title 12, chapter II, part 227 of the Code of Federal
Regulations, cited as 12 CFR part 227 and designated as Regulation AA.
(a) Board means the Board of Governors of
the Federal Reserve System.
(b) Consumer complaint means an allegation
by or on behalf of an individual, group of individuals, or other entity
that a particular act or practice of a State member bank is unfair or deceptive,
or in violation of a regulation issued by the Board pursuant to a Federal
statute, or in violation of any other Act or regulation under which the
bank must operate.
(c) State member bank means a bank that is
chartered by a State and is a member of the Federal Reserve System.
(d) Unless the context indicates otherwise,
bank shall be construed to mean a State member bank, and complaint to mean
a consumer complaint.
Sec. 227.2 Consumer complaint procedure.
(a) Submission of complaints. (1) Any consumer
having a complaint regarding a State member bank is invited to submit it
to the Federal Reserve System. The complaint should be submitted in writing,
if possible, and should include the following information:
(i) A description of the act or practice that
is thought to be unfair or deceptive, or in violation of existing law or
regulation, including all relevant facts;
(ii) The name and address of the bank that
is the subject of the complaint; and
(iii) The name and address of the complainant.
(2) Consumer complaints should be made to:
(i) The Director, Division of Consumer Affairs,
Board of Governors of the Federal Reserve System, Washington, DC 20551;
(ii) The Federal Reserve Bank of the District
in which the bank is located. The addresses of the Federal Reserve Banks
are as follows:
Federal Reserve Bank of Boston, 30 Pearl Street, Boston, MA 02106.
Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045.
Federal Reserve Bank of Philadelphia, 100 North 6th Street, Philadelphia,
Federal Reserve Bank of Cleveland, 1455 East Sixth Street, Cleveland, OH
Federal Reserve Bank of Richmond, 100 North Ninth Street, Richmond, VA 23261.
Federal Reserve Bank of Chicago, 230 South La Salle Street, Chicago, IL
Federal Reserve Bank of St. Louis, 411 Locust Street, St. Louis, MO 63166.
Federal Reserve Bank of Minneapolis, 250 Marquette Street, Minneapolis,
Federal Reserve Bank of Kansas City, 925 Grand Avenue, Kansas City, MO 64198.
Federal Reserve Bank of Dallas, 400 South Akard Street, Dallas, TX 75222.
Federal Reserve Bank of Atlanta, 104 Marietta Street NW., Atlanta, GA 30303.
Federal Reserve Bank of San Francisco, 400 Sansome Street, San Francisco,
(b) Response to complaints. Within 15 business
days of receipt of a written complaint by the Board or a Federal Reserve
Bank, a substantive response or an acknowledgment setting a reasonable time
for a substantive response will be sent to the individual making the complaint.
(c) Referrals to other agencies. Complaints
received by the Board or a Federal Reserve Bank regarding an act or practice
of an institution other than a State member bank will be forwarded to the
Federal agency having jurisdiction over that institution.
Sec. 227.11 Authority, purpose, and scope.
(a) Authority. This subpart is issued by the
Board under section 18(f) of the Federal Trade Commission Act, 15 U.S.C.
57a(f) (section 202(a) of the Magnuson-Moss Warranty--Federal Trade Commission
Improvement Act, Pub. L. 93-637).
(b) Purpose. Unfair or deceptive acts or practices
in or affecting commerce are unlawful under section 5(a)(1) of the Federal
Trade Commission Act, 15 U.S.C. 45(a)(1). This subpart defines unfair or
deceptive acts or practices of banks in connection with extensions of credit
(c) Scope. This subpart applies to all banks
and their subsidiaries, except savings banks that are members of the Federal
Home Loan Bank System. Compliance is to be enforced by:
(1) The Comptroller of the Currency, in the
case of national banks, banks operating under the code of laws for the District
of Columbia, and federal branches and federal agencies of foreign banks;
(2) The Board of Governors of the Federal
Reserve System, in the case of banks that are members of the Federal Reserve
System (other than banks referred to in paragraph (c)(1) of this section),
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; and
(3) The Federal Deposit Insurance Corporation,
in the case of banks insured by the Federal Deposit Insurance Corporation
(other than banks referred to in paragraphs (c)(1) and (c)(2) of this section),
and insured state branches of foreign banks.
(d) The terms used in paragraph (c) of this
section that are not defined in the Federal Trade Commission Act or in section
3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have
the meaning given to them in section 1(b) of the International Banking Act
of 1978 (12 U.S.C. 3101).
Sec. 227.12 Definitions.
For the purposes of this subpart, the following
(a) Consumer means a natural person who seeks
or acquires goods, services, or money for personal, family, or household
use other than for the purchase of real property.
(b)(1) Cosigner means a natural person who
assumes liability for the obligation of a consumer without receiving goods,
services, or money in return for the obligation, or, in the case of an open-end
credit obligation, without receiving the contractual right to obtain extensions
of credit under the account.
(2) Cosigner includes any person whose signature
is requested as a condition to granting credit to a consumer, or as a condition
for forbearance on collection of a consumer's obligation that is in default.
The term does not include a spouse whose signature is required on a credit
obligation to perfect a security interest pursuant to state law.
(3) A person who meets the definition in this
paragraph is a cosigner, whether or not the person is designated as such
on the credit obligation.
(c) Earnings means compensation paid or payable
to an individual or for the individual's account for personal services rendered
or to be rendered by the individual, whether denominated as wages, salary,
commission, bonus, or otherwise, including periodic payments pursuant to
a pension, retirement, or disability program.
(d) Household goods means clothing, furniture,
appliances, linens, china, crockery, kitchenware, and personal effects of
the consumer and the consumer's dependents. The term household goods does
(1) Works of art;
(2) Electronic entertainment equipment (other
than one television and one radio);
(3) Items acquired as antiques; that is, items
over one hundred years of age, including such items that have been repaired
or renovated without changing their original form or character; and
(4) Jewelry (other than wedding rings).
(e) Obligation means an agreement between
a consumer and a creditor.
(f) Person means an individual, corporation,
or other business organization.
Sec. 227.13 Unfair credit contract provisions.
It is an unfair act or practice for a bank
to enter into a consumer credit obligation that contains, or to enforce
in a consumer credit obligation purchased by the bank, any of the following
(a) Confession of judgment. A cognovit or
confession of judgment (for purposes other than executory process in the
State of Louisiana), warrant of attorney, or other waiver of the right of
notice and the opportunity to be heard in the event of suit or process thereon.
(b) Waiver of exemption. An executory waiver
or a limitation of exemption from attachment, execution, or other process
on real or personal property held, owned by, or due to the consumer, unless
the waiver applies solely to property subject to a security interest executed
in connection with the obligation.
(c) Assignment of wages. An assignment of
wages or other earnings unless:
(1) The assignment by its terms is revocable
at the will of the debtor;
(2) The assignment is a payroll deduction
plan or preauthorized payment plan, commencing at the time of the transaction,
in which the consumer authorizes a series of wage deductions as a method
of making each payment; or
(3) The assignment applies only to wages or
other earnings already earned at the time of the assignment.
(d) Security interest in household goods.
A nonpossessory security interest in household goods other than a purchase
money security interest.
Sec. 227.14 Unfair or deceptive practices involving
(a) Prohibited practices. In connection with
the extension of credit to consumers, it is:
(1) A deceptive act or practice for a bank
to misrepresent the nature or extent of cosigner liability to any person;
(2) An unfair act or practice for a bank to
obligate a cosigner unless the cosigner is informed prior to becoming obligated
of the nature of the cosigner's liability.
(b) Disclosure requirement. (1) A clear and
conspicuous disclosure statement shall be given in writing to the cosigner
prior to becoming obligated. The disclosure statement shall be substantially
similar to the following statement and shall either be a separate document
or included in the documents evidencing the consumer credit obligation.
Notice to Cosigner
You are being asked to guarantee this debt.
Think carefully before you do. If the borrower doesn't pay the debt, you
will have to. Be sure you can afford to pay if you have to, and that you
want to accept this responsibility.
You may have to pay up to the full amount
of the debt if the borrower does not pay. You may also have to pay late
fees or collection costs, which increase this amount.
The bank can collect this debt from you without
first trying to collect from the borrower. The bank can use the same collection
methods against you that can be used against the borrower, such as suing
you, garnishing your wages, etc. If this debt is ever in default, that fact
may become a part of your credit record.
This notice is not the contract that makes
you liable for the debt.
(2) In the case of open-end credit, the disclosure
statement shall be given to the cosigner prior to the time that the cosigner
becomes obligated for fees or transactions on the account.
(3) A bank that is in compliance with this
paragraph may not be held in violation of paragraph (a)(2) of this section.
Sec. 227.15 Unfair late charges.
(a) In connection with collecting a debt arising
out of an extension of credit to a consumer, it is an unfair act or practice
for a bank to levy or collect any delinquency charge on a payment, when
the only delinquency is attributable to late fees or delinquency charges
assessed on earlier installments, and the payment is otherwise a full payment
for the applicable period and is paid on its due date or within an applicable
(b) For the purposes of this section, collecting
a debt means any activity, other than the use of judicial process, that
is intended to bring about or does bring about repayment of all or part
of money due (or alleged to be due) from a consumer.
Sec. 227.16 State exemptions.
(a) General rule. (1) An appropriate state
agency may apply to the Board for a determination that:
(i) There is a state requirement or prohibition
in effect that applies to any transaction to which a provision of this subpart
(ii) The state requirement or prohibition
affords a level of protection to consumers that is substantially equivalent
to, or greater than, the protection afforded by this subpart.
(2) If the Board makes such a determination,
the provision of this subpart will not be in effect in that state to the
extent specified by the Board in its determination, for as long as the state
administers and enforces the state requirement or prohibition effectively.
(b) Applications. The procedures under which
a state agency may apply for an exemption under this section are the same
as those set forth in appendix B to Regulation Z (12 CFR part 226).
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