**DEPARTMENT OF THE TREASURY**

**Office of the Comptroller of the**

**Currency**

**12 CFR Part 37**

**\[Docket No. 03-XX\]**

**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.

**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 \[INSERT DATE 30 DAYS FROM
THE DATE OF PUBLICATION IN THE **FEDERAL REGISTER**\].

**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- \_\_; Fax number
(202) 874-4448 or Internet address: <regs.comments@occ.treas.gov>. 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]{.underline}**

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]{.underline}
option to pay the fee on a periodic basis ("periodic payment option").
The final rule takes effect on June 16, 2003.

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:

-   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.

-   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.

-   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.

-   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.

-   The bank shall calculate the amount of a refund using a method at
    least as favorable to the customer as the actuarial method.

-   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.

-   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.

-   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.

-   A national bank must manage the risks associated with DCCs and DSAs
    in accordance with safe and sound banking principles.

**[Description of Provisions Affected]{.underline}**

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:

-   The requirement to offer a periodic payment option set forth in 12
    CFR 37.5.

-   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]{.underline} [fide]{.underline} option to
    purchase a comparable DCC or DSA that provides for a refund.

-   The long-form disclosure requirement set forth in 12 CFR 37.6.

-   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.

-   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.

-   The fifth disclosure set forth in Appendix A to part 37 (Short Form
    Disclosures), entitled \"Additional disclosures,\" indicating that
    the customer will receive additional information before being
    required to pay for the DCC or DSA.[^3]

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-   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]{.underline}**

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.]{.underline}, 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: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 2003

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**John D. Hawke, Jr.,**

*Comptroller of the Currency.*

[^1]: 67 FR 58962. The rule is codified at 12 CFR part 37.

[^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).

[^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.