This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

33499

Vol. 65, No. 101

Wednesday, May 24, 2000

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R–1070]

Truth in Lending

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Proposed rule.

SUMMARY: The Board is proposing

amendments to Regulation Z, which

implements the Truth in Lending Act, to

revise the disclosure requirements for

credit and charge card solicitations and

applications. The annual percentage rate

(APR) and other cost information must

be provided in direct mail and other

applications and solicitations to open

card accounts. The amendments are

intended to enhance consumers’ ability

to notice and understand cost

information that generally must be

provided in the form of a table. The APR

disclosed for purchase transactions

would be subject to a type size

requirement, and the requirement that

disclosures be ‘‘clear and conspicuous’’

would be more strictly construed.

Additional guidance would be given on

the requirement that the table be

prominently located, and on the level of

detail about cost information required or

permitted in the table.

DATES: Comments must be received on

or before July 18, 2000.

ADDRESSES: Comments, which should

refer to Docket No. R–1070, may be

mailed to Ms. Jennifer J. Johnson,

Secretary, Board of Governors of the

Federal Reserve System, 20th Street and

Constitution Avenue, NW., Washington,

DC. 20551 or mailed electronically to

regs.comments@federalreserve.gov.

Comments addressed to Ms. Johnson

may also be delivered to the Board’s

mail room between 8:45 a.m. and 5:15

p.m. weekdays, and to the security

control room at all other times. The mail

room and the security control room,

both in the Board’s Eccles Building, are

accessible from the courtyard entrance

on 20th Street between Constitution

Avenue and C Street, NW. Comments

may be inspected in room MP–500 in

the Board’s Martin Building between 9

a.m. and 5 p.m., pursuant to the Board’s

Rules Regarding the Availability of

Information, 12 CFR part 261.

FOR FURTHER INFORMATION CONTACT:

Natalie E. Taylor, Counsel, or Jane E.

Ahrens, Senior Counsel, Division of

Consumer and Community Affairs,

Board of Governors of the Federal

Reserve System, at (202) 452–3667 or

452–2412; for users of

Telecommunications Device for the Deaf

(TDD) only, contact Janice Simms at

(202) 872–4984.

SUPPLEMENTARY INFORMATION:

I. Background

The purpose of the Truth in Lending

Act (TILA), 15 U.S.C. 1601 et seq., is to

promote the informed use of consumer

credit by requiring disclosures about its

terms and cost. The Board’s Regulation

Z (12 CFR part 226) implements the act.

The act requires creditors to disclose the

cost of credit as a dollar amount (the

finance charge) and as an annual

percentage rate (the APR). Uniformity in

creditors’ disclosures is intended to

assist consumers in comparison

shopping.

The Fair Credit and Charge Card

Disclosure Act of 1988 (1988 Act)

amended TILA to require that the APR

and certain other terms (primarily

applicable to purchase transactions) be

disclosed in certain direct mail and

other solicitations and applications to

open credit and charge card accounts.

The purpose of the 1988 Act was to

ensure that consumers receive key cost

information about credit and charge

cards early enough to have the

opportunity to comparison shop for

such cards. The 1988 Act generally

requires that card application and

solicitation disclosures be provided in

the form of a table (commonly referred

to as the ‘‘Schumer box’’ after the law’s

chief sponsor) with headings for each

item of information. The terms required

to be in the table include: the name of

the method used for calculating finance

charges on an outstanding balance, any

minimum finance charge per billing

cycle, transaction fee, annual fee, grace

period, and the APR for purchase

transactions. The card issuer also must

disclose any cash advance fee, late

payment fee, or fee for exceeding a

credit limit. These items may be either

in the required table or clearly and

conspicuously elsewhere. The

applicable disclosures must also be

provided for charge cards that do not

use a periodic rate to compute a finance

charge.

As with all TILA disclosures, the table

is subject to the ‘‘clear and

conspicuous’’ standard. Currently, the

table meets the ‘‘clear and conspicuous’’

standard if the disclosures are in a

‘‘readily understandable form.’’ There

are no type size requirements associated

with this standard. The table is also

required to be in a ‘‘prominent location’’

on or with the application or

solicitation. Under the existing rules,

this requirement is met if the table is

‘‘readily noticeable to the consumer.’’

The table need not be in any particular

location to satisfy the requirement.

Over the years, the pricing of credit

card programs has changed, and the cost

disclosures accompanying card issuers’

solicitations and applications have

become more complex. Multiple APRs

may apply to a single program. There

may be a temporary introductory rate, a

fixed or variable rate for all purchases

after the introductory period expires,

and one or more ‘‘penalty rates’’ that

apply if, for example, the consumer

makes late payments.

As interest rates and other account

features have become more complex,

and disclosures longer, some card

issuers have compensated by using

reduced type sizes for the table instead

of allocating additional space for the

disclosures. In such cases, consumers

may have difficulty in using the table to

readily identify key costs and terms. In

contrast, the promotional materials that

accompany the credit card application

or solicitation may highlight a low

introductory APR in a large, easy to read

type size; oftentimes without the

expiration date in close proximity. The

APR in effect after the introductory rate

expires typically is disclosed much less

prominently—in a smaller type size—

and it may only appear in the disclosure

table and not at all in the promotional

materials. The table may be in a location

that is less likely to capture the

consumer’s attention, for example, on

the reverse side of an application or on

the last page of a multi-page solicitation.

Even with the format requirements,

there is substantial flexibility in the

current regulatory framework. While

some card issuers’ disclosures are fairly

33500 Federal Register / Vol. 65, No. 101 / Wednesday, May 24, 2000 / Proposed Rules

straightforward, other card issuers have

created disclosures that are difficult for

consumers to use. Changes to the

current regulatory scheme appear

necessary to ensure that consumers

receive meaningful disclosures on a

more consistent basis, for comparison

shopping.

The 1988 Act authorizes the Board to

require disclosure of additional

information, or to modify the

disclosures required by the statute if the

Board determines that such action is

necessary to carry out the purposes of,

or prevent evasions of the 1988 Act. See

15 U.S.C. 1637(c)(5). This is in addition

to the Board’s authority under section

105(a) of TILA to prescribe regulations

to effectuate the purposes of TILA, to

prevent circumvention or evasion, or to

facilitate compliance. See 15 U.S.C.

1604(a).

II. Summary of Proposed Revisions

The Board is proposing amendments

to Regulation Z in order to effectuate the

purposes of the 1988 Act and promote

more effective disclosure of the costs

and terms in credit and charge card

applications and solicitations.

Under the proposal, the APR for

purchase transactions is subject to a

type-size requirement, to highlight this

information. It would be in at least 18-

point type and would appear under a

separate heading from other APRs, such

as penalty rates. The requirement that

disclosures be ‘‘clear and conspicuous’’

would be more strictly construed for

purposes of the disclosure table

required for credit and charge card

applications and solicitations. These

disclosures would have to be ‘‘readily

noticeable,’’ as well as in a ‘‘reasonably

understandable form.’’ As to type size,

disclosures in at least 12-point type

would be deemed readily noticeable.

Additional guidance is provided on

satisfying the current requirement that

the table be prominently located. The

Staff Commentary would be revised to

provide that the table is sufficiently

prominent, for example, if it is on the

same page as an application or

solicitation reply form, or on a separate

insert with a reference to the insert on

the application or reply form.

Guidance also would be issued on the

level of detail required or permitted in

the table. This is intended to reduce

clutter and promote the use of more

concise language. For example, the table

must include any increased penalty

APR that will apply upon the

occurrence of one or more specific

events, such as a late payment or an

extension of credit exceeding the credit

limit. The card issuer must also provide

a description of the specific events that

can trigger an increase. Currently, card

issuers have the option of including this

description inside the table or

elsewhere. In order to simplify the table,

the existing staff interpretations would

be revised so that only the penalty rates

could appear inside the table; the

explanatory information would have to

appear outside the table.

Legislation

During 1999, bills were introduced in

the Congress that also would add new

disclosure requirements for credit card

applications and solicitations. Some

bills would require card issuers that

offer temporary introductory rates to

provide more conspicuous information

in their promotional materials about the

expiration date and the rate that will

apply after that date. The provisions in

these bills would address some of the

same concerns that are the basis for the

Board’s regulatory proposal. In light of

the pending legislation, however, the

scope of the Board’s regulatory proposal

does not address the rates and terms

disclosed in card issuer’s promotional

materials. Such matters may be the

subject of future regulatory proposals

once the Congress acts on the proposed

legislation or otherwise clarifies its

intent.

III. Section-by-Section Analysis

Subpart B—Open-End Credit

Section 226.5—General Disclosure

Requirements

5(a) Form of Disclosures

Section 226.5(a) states the general rule

that TILA disclosures for open-end

credit plans must be made clearly and

conspicuously. Comment 5(a)(1)–1

interprets this standard to require

disclosures to be in a ‘‘reasonably

understandable form.’’ Under the

proposal, this standard would be more

strictly construed for purposes of the

disclosures required under § 226.5a for

credit and charge card applications and

solicitations. Accordingly, comment

5(a)(1)–1 would be revised to reflect this

fact, and include a cross-reference to

proposed comments 5a(a)(2)–1 and 2

concerning the special format and

location rules for § 226.5a disclosures.

Section 226.5a—Credit and Charge Card

Applications and Solicitations

5a(a) General Rules

5a(a)(2) Form of Disclosures

Disclosures required by § 226.5a(a)(2)

must be clear and conspicuous and

prominently located on or with an

application or solicitation, or other

applicable document. Certain of these

disclosures are also required to be in a

tabular format. A new comment

5a(a)(2)–1 would be added to establish

a stricter standard for satisfying the

‘‘clear and conspicuous’’ standard with

respect to the tabular disclosures.

Proposed comment 5a(a)(2)–2 would

provide additional interpretative

guidance on the location of the table.

Because the proposed interpretations

differ from those currently provided,

they are intended to have prospective

application only.

Currently, information provided in

the table meets the ‘‘clear and

conspicuous’’ requirement if the

disclosures are reasonably

understandable. Although the tabular

format assists consumers by providing

key cost information in a single

location, consumers may have difficulty

using the table due to the amount of

information provided in the table and

the small type size used by some card

issuers to compensate for the amount of

information. To ensure that consumers

receive meaningful disclosures on a

consistent basis, proposed comment

5a(a)(2)–1 would provide that

disclosures are clear and conspicuous if

the disclosures are both reasonably

understandable and readily noticeable.

Comment 5a(a)(2)–1 would also provide

that as to type size, disclosures in at

least 12-point type would be deemed to

be readily noticeable. Disclosures

printed in less than 12-point type would

not automatically violate the standard,

but would be judged on a case-by-case

basis. For example, disclosures in 10- or

11-point type would probably satisfy the

standard, but disclosures in 6-point type

would likely be too small to satisfy the

standard.

Existing comment 5a(a)(2)–1

addresses the requirement that the table

be prominently located. The comment

would be redesignated as comment

5a(a)(2)–2, and would be revised to

address concerns about the location of

tabular disclosures. Currently, some

card issuers locate the table on the

reverse side of an application or reply

form or on the last page of a multi-page

solicitation. Consumers may see the

promotional materials and fill out the

application without being aware that

there is additional cost information

following the application, on the reverse

side of the page or at the end of the

promotional materials. Proposed

comment 5a(a)(2)–2 would provide

additional interpretative guidance; the

table would be deemed to be

prominently located, for example, if it

appears on the same page as the

application or solicitation reply form, or

the first page of any other applicable

document, or on an insert with a

Federal Register / Vol. 65, No. 101 / Wednesday, May 24, 2000 / Proposed Rules 33501

reference to the insert on the application

or reply form.

5a(b) Required Disclosures

The table required under § 226.5a

provides consumers with key cost

information, grouped together in one

place to facilitate consumers’ use of the

information for comparison shopping.

These disclosures are not intended to be

as detailed as disclosures provided to

consumers at account opening; at the

time the 1988 Act was adopted, the

primary focus was on cost disclosures

for purchase transactions. For example,

the APR and transaction fees for

purchases must be disclosed in the

table, but not the APR for cash

advances.

Because the services and features

offered with credit and charge cards

have evolved in recent years, the

disclosures required by the 1988 Act

may not capture costs commonly

assessed on such cards. For example,

the periodic rate of interest assessed on

a balance transfer (which the card issuer

may characterize as a cash advance) is

not disclosed in the table. The 1988 Act

expressly authorizes the Board to add

disclosures to the table, or modify the

existing requirements. Accordingly, the

Board solicits comment on whether

consumers could be aided in

comparison shopping by having

additional rates and fees disclosed in

the table. In particular, commenters

should address whether the APR and

transaction fees for balance transfers

and the APR for cash advances should

be included in the table; commenters

are requested to specify why the

benefits to consumers from the

additional information would not

outweigh the burden of compliance.

5a(b)(1) Annual Percentage Rate

Section 226.5a(b)(1) requires card

issuers to disclose in the table each

periodic rate that may be used to

compute the finance charge on an

outstanding balance for purchases,

expressed as an APR. This section

would be revised to require the APR for

purchases to be disclosed in the table in

at least 18-point type. The type-size

requirement would not apply to

temporary initial rates that are lower

than the APR that will apply after the

temporary rate expires, or to penalty

rates that may increase upon the

occurrence of one or more specific

events (such as a late payment or an

extension of credit that exceeds the

credit limit).

The use of this larger type size is

intended to highlight the significance of

this information, particularly in light of

the larger type sizes typically used by

card issuers to promote introductory

rates. Although the tabular format

generally draws consumers’ attention to

the table, under existing rules the APR

information is often obscured due to the

amount of other information provided

in the table and the small type size used

by some card issuers. The APR for

purchase transactions would also be

highlighted by requiring that it be listed

under a separate heading.

In September 1999, the Board

published a proposal that would amend

Regulation Z to authorize creditors to

use electronic communication to deliver

required disclosures. 64 FR 49722

(September 14, 1999). Accordingly,

comment is also requested on any

specific guidance that may be needed

for applying the type size requirements

to disclosures made using electronic

communication.

Comment 226.5a(b)(1)–6 provides that

where there is a temporary initial APR

that is higher than the rate that will

apply after the temporary rate expires,

the card issuer must disclose the higher

initial rate. The comment would be

revised to clarify that in such cases, the

initial rate must be disclosed in at least

18-point type, unless the card issuer

also discloses the permanently

applicable rate in the table, which

would have to be in at least 18-point

type.

Comment 226.5a(b)(1)–7 requires card

issuers to disclose ‘‘penalty rates’’ in the

table, along with a description of the

specific events that can trigger a rate

increase and any index or margin used

to determine the penalty rate. Currently,

card issuers have the option of

including this information inside the

table or elsewhere. To simplify the

table, the comment would be revised so

that only the penalty rates would appear

inside the table and the additional

information would appear outside the

table. Card issuers would be required to

use an asterisk or other means to direct

the consumer to the additional

information.

Appendices G and H to Part 226—OpenEnd and Closed-End Model Forms and

Clauses

Comment App. G and H–1 would be

revised to clarify that there are special

rules for disclosures required under

§ 226.5a for applications and

solicitations for credit and charge cards.

Appendix G to Part 226—Open-End

Model Forms and Clauses

The Board provides three model

forms to aid compliance with the

disclosure requirements of § 226.5a(b).

See Appendix G–10(A)–(C). Under the

proposal, Appendix G–10(A) would be

revised, and a new sample form G–10(D)

would be added to illustrate an account

with a lower introductory rate and a

penalty rate.

Comment G–5 would be revised to

clarify that there are format and

sequence requirements for certain

§ 226.5a disclosures.

IV. Form of Comment Letters

Comment letters should refer to

Docket No. R–1070, and, when possible,

should use a standard typeface with a

font size of 10 or 12. This will enable

the Board to convert the text to

machine-readable form through

electronic scanning, and will facilitate

automated retrieval of comments for

review. Also, if accompanied by an

original document in paper form,

comments may be submitted on 3 1⁄2

inch computer diskettes in any IBMcompatible DOS- or Windows-based

format.

V. Initial Regulatory Flexibility

Analysis

In accordance with section 3(a) of the

Regulatory Flexibility Act, the Board

has reviewed the proposed amendments

to Regulation Z. Although the proposal

would require creditors to use a specific

type size for the APR; require creditors

to provide supplemental information

about penalty rates outside the table;

and require that the table be located on

the same page as the application or

solicitation reply form, on the first page

of any other applicable document, or on

a separate insert with a reference to the

insert on the application or reply form,

the proposed amendments are not

expected to have any significant impact

on small entities beyond these initial

revisions. A final regulatory flexibility

analysis will be conducted after

consideration of comments received

during the public comment period.

VI. Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3506;

5 CFR 1320 Appendix A.1), the Board

reviewed the rule under the authority

delegated to the Board by the Office of

Management and Budget. The Federal

Reserve may not conduct or sponsor,

and an organization is not required to

respond to, this information collection

unless it displays a currently valid OMB

control number. The OMB control

number is 7100–0199.

The collection of information that is

revised by this rulemaking is found in

12 CFR part 226 and in Appendices F,

G, H, J, K, and L. This information is

mandatory (15 U.S.C. 1601 et seq.) to

evidence compliance with the

requirements of Regulation Z and the

33502 Federal Register / Vol. 65, No. 101 / Wednesday, May 24, 2000 / Proposed Rules

Truth in Lending Act (TILA). The

respondents/recordkeepers are for-profit

financial institutions, including small

businesses. Institutions are required to

retain records for twenty-four months.

This regulation applies to all types of

creditors, not just state member banks.

However, under Paperwork Reduction

Act regulations, the Federal Reserve

accounts for the burden of the

paperwork associated with the

regulation only for state member banks.

Other agencies account for the

paperwork burden on their respective

constituencies under this regulation.

The proposed revisions would require

creditors to revise disclosures for credit

card solicitations and applications by:

(1) Requiring the use of a specific type

size for the APR, (2) requiring creditors

to provide supplemental information

about penalty rates outside the table,

and (3) requiring that such table be

located on the same page as the

application or solicitation reply form,

on the first page of any other applicable

document, or on a separate insert with

a reference to the insert on the

application or reply form. Although the

proposal adds these requirements, it is

expected that these revisions would not

significantly increase the paperwork

burden of creditors. With respect to

state member banks, it is estimated that

there are 988 respondent/recordkeepers

and an average frequency of 136,294

responses per respondent each year.

Therefore, the current amount of annual

burden is estimated to be 1,863,754

hours. Because these proposed revisions

modify preexisting tables, there is

estimated to be no additional annual

cost burden and no capital or start-up

cost.

Because the records would be

maintained at state member banks and

the notices are not provided to the

Federal Reserve, no issue of

confidentiality under the Freedom of

Information Act arises; however, any

information obtained by the Federal

Reserve may be protected from

disclosure under exemptions (b)(4), (6),

and (8) of the Freedom of Information

Act (5 U.S.C. 522 (b)(4), (6) and (8)). The

disclosures and information about error

allegations are confidential between

creditors and the customer.

The Federal Reserve requests

comments from creditors, especially

state member banks, that will help to

estimate the number and burden of the

various disclosures that would be made

in the first year this proposed regulation

would be effective. Comments are

invited on: (a) The cost of compliance;

(b) ways to enhance the quality, utility,

and clarity of the information to be

disclosed; and (c) ways to minimize the

burden of disclosure on respondents,

including through the use of automated

disclosure techniques or other forms of

information technology. Comments on

the collection of information should be

sent to the Office of Management and

Budget, Paperwork Reduction Project

(7100–0199), Washington, DC 20503,

with copies of such comments sent to

Mary M. West, Federal Reserve Board

Clearance Officer, Division of Research

and Statistics, Mail Stop 97, Board of

Governors of the Federal Reserve

System, Washington, DC 20551.

List of Subjects in 12 CFR Part 226

Advertising, Federal Reserve System,

Mortgages, Reporting and recordkeeping

requirements, Truth in lending.

Text of Proposed Revisions

Certain conventions have been used

to highlight the proposed revisions to

the text of the staff commentary. New

language is shown inside bold-faced

arrows, while language that would be

deleted is set off with bold-faced

brackets.

For the reasons set forth in the

preamble, the Board proposes to amend

Regulation Z, 12 CFR part 226, as set

forth below:

PART 226—TRUTH IN LENDING

(REGULATION Z)

1. The authority citation for part 226

would continue to read as follows:

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604

and 1637(c)(5).

2. Section 226.5a would be amended

by revising paragraph (b)(1)

introductory text.

Subpart B—Open-End Credit

* * * * *

§ 226.5a Credit and charge card

applications and solicitations.

* * * * *

(b) Required disclosures. * * *

(1) Annual percentage rate. Each

periodic rate that may be used to

compute the finance charge on an

outstanding balance for purchases,

expressed as an annual percentage rate

(as determined by § 226.14(b)). When

more than one rate applies, the range of

balances to which each rate is

applicable shall also be disclosed. ∫The

annual percentage rate disclosed

pursuant to this paragraph shall be in at

least 18-point type, except for the

following: a temporary initial rate that is

lower than the rate that will apply after

the temporary rate expires, and a

penalty rate which is one that will apply

upon the occurrence of one or more

specific events.a

* * * * *

3. Appendix G to Part 226 would be

amended by:

a. Revising the table of contents at the

beginning of the appendix;

b. Revising Model G–10(A); and

c. Adding new Sample G–10(D).

Appendix G to Part 226—Open-End

Model Forms and Clauses

G–1 Balance-Computation Methods

Model Clauses (§§ 226.6 and 226.7)

G–2 Liability for Unauthorized Use

Model Clause (§ 226.12)

G–3 Long-Form Billing-Error Rights

Model Form (§§ 226.6 and 226.9)

G–4 Alternative Billing-Error Rights

Model Form (§ 226.9)

G–5 Rescission Model Form (When

Opening an Account) (§ 226.15)

G–6 Rescission Model Form (For Each

Transaction) (§ 226.15)

G–7 Rescission Model Form (When

Increasing the Credit Limit) (§ 226.15)

G–8 Rescission Model Form (When

Adding a Security Interest) (§ 226.15)

G–9 Rescission Model Form (When

Increasing the Security) (§ 226.15)

G–10 (A)–(B) Applications and

Solicitations Model Forms (Credit

Cards) (§ 226.5a(b))

G–10(C) Applications and Solicitations

Model Form (Charge Cards)

(§ 226.5a(b))

∫ G–10(D) Applications and

Solicitations Sample (Credit Cards)

(§ 226.5a(b)) a

G–11 Applications and Solicitations

Made Available to General Public

Model Clauses (§ 226.5a(e))

G–12 Charge Card Model Clause (When

Access to Plan Offered by Another)

(§ 226.5a(f))

G–13(A) Change in Insurance Provider

Model Form (Combined Notice)

(§ 226.9(f))

G–13(B) Change in Insurance Provider

Model Form (§ 226.9(f)(2))

G–14A Home Equity Sample

G–14B Home Equity Sample

G–15 Home Equity Model Clauses

* * * * *

G–10(A)—APPLICATIONS AND SOLICITATIONS MODEL FORM (CREDIT CARDS)

Annual percentage rate ∫(APR)a for purchases ...................................... ∫llllllll% until (expiration date) after that,

allllllll[%] ∫%a.

Federal Register / Vol. 65, No. 101 / Wednesday, May 24, 2000 / Proposed Rules 33503

G–10(A)—APPLICATIONS AND SOLICITATIONS MODEL FORM (CREDIT CARDS)—Continued

∫Other APRsa ........................................................................................... ∫Penalty rate: llllllll%. See explanation below.*a

Variable-rate information .......................................................................... Your annual percentage rate may vary. The rate is determined by

[(explanation).] ∫llll. See explanation below.**a

Grace period for repayment of balances for purchases .......................... You have [ll days] [until llllllll] [not less than ll

days] [betweenll andll days] [ll days on average] to repay

your balance [for purchases] before a finance charge on purchases

will be imposed.

[You have no grace period in which to repay your balance for purchases before a finance charge will be imposed.]

Method of computing the balance for purchases

Annual fees ............................................................................................... [Annual] [Membership] fee: $llllll per year]

[(type of fee): $llllll per year]

[(type of fee): $llllllllll]

Minimum finance charge .......................................................................... $llllll

Transaction fee for purchases .................................................................. [$llllll] [lll% of lll]

Transaction fee for cash advances: [$lll] [ll% of lll]

Late-payment fee: [$lll] [lll% of lll]

Over-the-credit-limit fee: $2

∫*Explanation of penalty.

**Explanation of variable rate.a

* * * * *

∫G–10(D)—APPLICATIONS AND SOLICITATIONS SAMPLE (CREDIT CARDS)

Annual percentage rate (APR) for purchases .......................................... 2.9% until October 1, 2000 after that, 14.90%.

Other APRs .............................................................................................. Penalty rate: 23.90% See explanation below.*

Variable-rate information .......................................................................... Your annual percentage rate may vary. The rate is determined monthly

by adding 5.9% to the Prime Rate. See explanation below.**

Grace period for repayment of balances for purchases .......................... 25 days on average.

Method of computing the balance for purchases ..................................... Average daily balance (excluding new purchases).

Annual fees ............................................................................................... No annual fee.

Minimum finance charge .......................................................................... $.50.

Transaction fee for cash advances. 3% of the amount advanced.

Late-payment fee: $25.

Over-the-credit-limit fee: $ 25.

* Explanation of penalty.

** The Prime Rate used to determine your APR is the rate published in ________ on the___day of the prior month.a

4. In Supplement I to Part 226, the

following amendments would be made:

a. Under Section 226.5—General

Disclosure Requirements, under

Paragraph 5(a)(1), paragraph 1.

introductory text would be revised;

b. Under Section 226.5a—Credit and

Charge Card Applications and

Solicitations, under 5a(a)(2) Form of

Disclosures, paragraph 1. through

paragraph 6. would be redesignated as

paragraph 2. through paragraph 7.

respectively, a new paragraph 1. would

be added, and newly designated

paragraph 2. would be revised.

c. Under Section 226.5a—Credit and

Charge Card Applications and

Solicitations, under 5a(b)(1) Annual

Percentage Rate, paragraphs 6. and 7.

would be revised.

d. Under Appendixes G and H—

Open-End and Closed-End Model Forms

and Clauses, a new sentence would be

added after the second sentence in

paragraph 1.

e. Under Appendix G—Open-end

Model Forms and Clauses, paragraph 5.

would be revised.

Supplement I to Part 226—Official Staff

Interpretations

* * * * *

Subpart B—Open-End Credit

Section 226.5—General Disclosure

Requirements

5(a) Form of disclosures.

Paragraph 5(a)(1).

1. Clear and conspicuous. The clear and

conspicuous standard requires that

disclosures be in a reasonably

understandable form. ∫Except where

otherwise provided, the standarda øIt¿ does

not require that disclosures be segregated

from other material or located in any

particular place on the disclosure statement,

or that numerical amounts or percentages be

in any particular type size. ∫(See comments

5a(a)(2)–1 and –2 for special rules concerning

§ 226.5a disclosures.)a The standard does not

prohibit: * * *

* * * * *

Section 226.5a—Credit and Charge Card

Applications and Solicitations

* * * * *

5a(a) General Rules.

5a(a)(2) Form of Disclosures.

1. ∫Clear and conspicuous standard. For

purposes of § 226.5a(a)(2) disclosures, ‘‘clear

and conspicuous’’ means in a reasonably

understandable form, and readily noticeable

to the consumer. As to type size, disclosures

in at least 12-point type are deemed to be

readily noticeable for purposes of

§ 226.5a(a)(2).

2. aProminent location. Certain of the

required disclosures provided on or with an

application or solicitation must be

prominently located. Disclosures are deemed

to be prominently located, for example, if the

disclosures are on the same page as an

application or solicitation reply form, on the

first page of any other applicable document,

or on a separate insert with a reference to the

insert on the application or reply form.

Disclosures in other than a tabular format

need not begin and end on the same page.a

that is, readily noticeable to the consumer.

There are, however, no requirements that the

disclosures be in any particular location or in

any particular type size or typeface.¿

* * * * *

5a(b) Required Disclosures.

5a(b)(1) Annual Percentage Rate.

* * * * *

6. Introductory rates—premium rates. If the

initial rate is temporary and is higher than

the permanently applicable rate, the card

33504 Federal Register / Vol. 65, No. 101 / Wednesday, May 24, 2000 / Proposed Rules

issuer must disclose ∫in the tablea the initial

rate. ∫The initial rate must be in at least 18-

point type unless the issuer also discloses in

the table the permanently applicable rate.a

The issuer may disclose in the table the∫

permanently applicablea rate that would

otherwise apply if the issuer also discloses

the time period during which the initial rate

will remain in effect. ∫In that case, the

permanently applicable rate must be in at

least 18-point type.a

7. Increased penalty rates. If the initial rate

may increase upon the occurrence of one or

more specific events, such as a late payment

or an extension of credit that exceeds the

credit limit, the card issuer must disclose in

the table the initial rate and the increased

penalty rate that may apply. If the penalty

rate is based on an index and an increased

margin, the issuer must also disclose in the

table the index and the margin. The issuer

must also disclose the specific event or

events that may result in imposing the

increased rate, such as ‘‘22% APR, if 60 days

late.’’ If the penalty rate cannot be

determined at the time disclosures are given,

the issuer must provide an explanation of the

specific event or events that may result in

imposing an increased rate. In describing the

specific event or events that may result in an

increased rate, issuers need not be as detailed

as for the disclosures required under

§ 226.6(a)(2). øAlternatively¿ For issuers

using a tabular format, the specific event or

events ∫musta ømay¿ be located outside of

the table∫ and an asterisk or other means

shall be used to direct the consumer to the

additional information.a øif the conditions

are noted with an asterisk or other means that

direct the consumer to the explanation.¿ At

its option, the issuer may ∫include in the

explanation of the penalty ratea ødisclose¿

the period for which the increased rate will

remain in effect, such as ‘‘until you make

three timely payments.’’ The issuer need not

disclose an increased rate that is imposed

when credit privileges are permanently

terminated.

* * * * *

Appendices G and H—Open-End and

Closed-End Model Forms and Clauses

1. Permissible changes. * * * ∫ (But see

comment G–5 for special rules concerning

certain disclosures required under § 226.5a

for credit and charge card applications and

solicitations).a ***

Appendix G—Open-End Model Forms and

Clauses

* * * * *

5. Models G–10(A) through G–10(C) ∫ and

Sample G–10(D) .a Models G–10(A) and G10(B) illustrate the tabular format for

providing the disclosures required under

§ 226.5a for applications and solicitations for

credit cards other than charge cards. Model

G–10(A) illustrates the permissible

inclusionin the tabular format of all of the

disclosures. Model G–10(B) contains only the

disclosures required to be included in the

table, while the three additional disclosures

are shown outside of the table. The two forms

also illustrate two different levels of detail in

disclosing the grace period, and different

arrangements of the disclosures. Model G–

10(C) illustrates the tabular format disclosure

for charge card applications and solicitations

and reflects all of the disclosures in the table.

∫Sample G–10(D) illustrates an account with

a lower introductory rate and a penalty rate.

Except as otherwise permitted, disclosures

must be substantially similar in sequence and

format to model forms G–10(A), (B), and (C).

The disclosures may, however, be arranged

vertically or horizontally and need not be

highlighted aside from being included in the

table.a øDisclosures may be arranged in an

order different from that in model forms G–

10(A), (B), and (C); may be arranged

vertically or horizontally; need not be

highlighted aside from being included in the

table; and are not required to be in any

particular type size¿. Various features from

different model forms may be combined; for

example, the shorter grace period disclosure

in model form G–10(B) may be used in any

disclosure. While proper use of the model

forms will be deemed in compliance with the

regulation, card issuers are permitted to use

headings and disclosures other than those in

the forms (with an exception relating to the

use of ‘‘grace period’’) if they are clear and

concise and are substantially similar to the

headings and disclosures contained in model

forms. For further discussion of requirements

relating to form, see the commentary to

§ 226.5a(a)(2).

* * * * *

By order of the Board of Governors of the

Federal Reserve System, May 17, 2000.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 00–12911 Filed 5–23–00; 8:45 am]

BILLING CODE 6210–11–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–103882–99]

RIN 1545–AX06

Depletion; Treatment of Delay Rental;

Hearing Cancellation

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Cancellation of notice of public

hearing on proposed rulemaking.

SUMMARY: This document provides

notice of cancellation of a public

hearing on proposed regulations which

contain proposed amendments

conforming regulations relating to delay

rental to the requirements of section

263A, relating to capitalization and

inclusion in inventory of costs of certain

expenses.

DATES: The public hearing originally

scheduled for Friday, May 26, 2000, at

10 a.m., is canceled.

FOR FURTHER INFORMATION CONTACT:

LaNita Van Dyke of the Regulations

Unit, Assistant Chief Counsel

(Corporate), at (202) 622–7180 (not a

toll-free number).

SUPPLEMENTARY INFORMATION: A notice

of proposed rulemaking and notice of

public hearing that appeared in the

Federal Register on February 8, 2000,

(65 FR 6090), announced that a public

hearing was scheduled for May 26,

2000, at 10 a.m., in room 2615, Internal

Revenue Building, 1111 Constitution

Avenue, NW., Washington, DC. The

subject of the public hearing is proposed

regulations under section 612 of the

Internal Revenue Code. The deadline for

outlines of oral comments and requests

to speak expired on May 5, 2000.

The notice of proposed rulemaking

and notice of public hearing, instructed

those interested in testifying at the

public hearing to submit a request to

speak and an outline of the topics to be

addressed. As of May 17, 2000, no one

has requested to speak. Therefore, the

public hearing scheduled for May, 26,

2000, is canceled.

Cynthia E. Grigsby,

Chief, Regulations Unit, Assistant Chief

Counsel (Corporate).

[FR Doc. 00–12987 Filed 5–23–00; 8:45 am]

BILLING CODE 4830–01–U

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 62

[AD–FRL–6603–4]

RIN 2060–ZA03

Federal Plan Requirements for Large

Municipal Waste Combustors

Constructed On or Before September

20, 1994

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The EPA is proposing to take

action on the ‘‘Federal Plan

Requirements for Large Municipal

Waste Combustors Constructed on or

Before September 20, 1994.’’ This action

would clarify the final compliance date,

update the list of which large municipal

waste combustor (MWC) units are

affected by the Federal plan, and add a

site-specific compliance schedule for

one MWC unit.

On November 12, 1998, the EPA

adopted the Federal plan to implement

emission guidelines for large MWC

units located in areas that are not

covered by an approved and currently