885 

Federal Reserve System § 227.1 

an open-end transaction, when the consumer 

becomes obligated under the plan. (For the 

purposes of this assumption, the initial 

amount of the credit is the principal loan 

amount less any costs to the consumer under 

section 226.33(c)(1).) 

(b)(10) Assumption for variable-rate reverse 

mortgage transactions. 

1. Initial discount or premium rate. Where a 

variable-rate reverse mortgage transaction 

includes an initial discount or premium rate, 

the creditor should apply the same rules for 

calculating the total annual loan cost rate 

as are applied when calculating the annual 

percentage rate for a loan with an initial discount or premium rate (see the commentary 

to §226.17(c)). 

(d) Reverse mortgage model form and sample 

form. 

(d)(2) Sample form. 

1. General. The ‘‘clear and conspicuous’’ 

standard for reverse mortgage disclosures 

does not require disclosures to be printed in 

any particular type size. Disclosures may be 

made on more than one page, and use both 

the front and the reverse sides, as long as the 

pages constitute an integrated document and 

the table disclosing the total annual loan 

cost rates is on a single page. 

APPENDIX L—ASSUMED LOAN PERIODS FOR

COMPUTATIONS OF TOTAL ANNUAL LOAN

COST RATES

1. General. The life expectancy figures used 

in appendix L are those found in the U.S. Decennial Life Tables for women, as rounded to 

the nearest whole year and as published by 

the U. S. Department of Health and Human 

Services. The figures contained in appendix 

L must be used by creditors for all consumers (men and women). Appendix L will be 

revised periodically by the Board to incorporate revisions to the figures made in the 

Decennial Tables. 

[46 FR 50288, Oct. 9, 1981] 

EDITORIAL NOTE: For FEDERAL REGISTER citations affecting supplement I of part 226, 

see the List of CFR Sections Affected, which 

appears in the Finding Aids section of the 

printed volume and at www.fdsys.gov. 

PART 227—UNFAIR OR DECEPTIVE 

ACTS OR PRACTICES (REGULATION AA) 

Subpart A—General Provisions 

Sec. 

227.1 Authority, purpose, and scope. 

227.2 Consumer complaint procedure. 

Subpart B—Credit Practices Rule 

227.11 Authority, purpose, and scope. 

227.12 Definitions. 

227.13 Unfair credit contract provisions. 

227.14 Unfair or deceptive practices involving cosigners. 

227.15 Unfair late charges. 

227.16 State exemptions. 

Subpart C [Reserved] 

SUPPLEMENT I TO PART 227—OFFICIAL STAFF

COMMENTARY

AUTHORITY: 15 U.S.C. 57a(f). 

Subpart A—General Provisions 

§ 227.1 Authority, purpose, and scope. 

(a) Authority. This part 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. The purpose of this part 

is to prohibit unfair or deceptive acts 

or practices in violation of section 

5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1). This part 

defines and contains requirements prescribed for the purpose of preventing 

specific unfair or deceptive acts or 

practices of banks. The prohibitions in 

this part do not limit the Board’s or 

any other agency’s authority to enforce the FTC Act with respect to any 

other unfair or deceptive acts or practices. 

(c) Scope. This part applies to banks, 

including subsidiaries of banks and 

other entities listed in paragraph (c)(2) 

of this section. This part does not 

apply to savings associations as defined 

in 12 U.S.C. 1813(b). Compliance is to be 

enforced by: 

(1) The Comptroller of the Currency, 

in the case of national banks 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 

886 

§ 227.2 12 CFR Ch. II (1–1–13 Edition) 

(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) Definitions. Unless otherwise 

noted, 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). 

[75 FR 7926, Feb. 22, 2010] 

§ 227.2 Consumer-complaint procedure. 

(a) Definitions. For purposes of this 

section, unless the context indicates 

otherwise, the following definitions 

apply: 

(1) ‘‘Board’’ means the Board of Governors of the Federal Reserve System. 

(2) ‘‘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. Unless the context indicates otherwise, ‘‘complaint’’ 

shall be construed to mean a ‘‘consumer complaint’’ for purposes of this 

section. 

(3) ‘‘State member bank’’ means a 

bank that is chartered by a State and 

is a member of the Federal Reserve 

System. 

(b) 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 

State member bank that is the subject 

of the complaint; and 

(iii) The name and address of the 

complainant. 

(2) Consumer complaints should be 

made to—Federal Reserve Consumer 

Help Center, P.O. Box 1200, Minneapolis, MN 55480, Toll-free number: 

(888) 851–1920, Fax number: (877) 888– 

2520, TDD number: (877) 766–8533, E-mail 

address: 

ConsumerHelp@FederalReserve.gov, Web 

site address: 

www.federalreserveconsumerhelp.gov. 

(c) 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. 

(d) 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. 

[74 FR 5559, Jan. 29, 2009] 

Subpart B—Credit Practices Rule 

SOURCE: Reg. AA, 50 FR 16697, Apr. 29, 1985, 

unless otherwise noted. 

§ 227.11 [Reserved] 

§ 227.12 Definitions. 

For the purposes of this subpart, the 

following definitions apply: 

(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. 

887 

Federal Reserve System § 227.14 

(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 not include: 

(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. 

§ 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 provisions: 

(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. 

§ 227.14 Unfair or deceptive practices 

involving cosigners. 

(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; 

and 

(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 

888 

§ 227.15 12 CFR Ch. II (1–1–13 Edition) 

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. 

§ 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 grace period. 

(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. 

§ 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 applies; and 

(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). 

Subpart C [Reserved] 

SUPPLEMENT I TO PART 227—OFFICIAL

STAFF COMMENTARY

SUBPART A—GENERAL PROVISIONS FOR

CONSUMER PROTECTION RULES

§ 227.1 Authority, purpose, and scope. 

1(C) SCOPE

1. Penalties for noncompliance. Administrative enforcement of the rule for 

banks may involve actions under section 8 of the Federal Deposit Insurance 

Act (12 U.S.C. 1818), including ceaseand-desist orders requiring that actions be taken to remedy violations 

and civil money penalties. 

2. Industrial loan companies. Industrial loan companies that are insured 

by the Federal Deposit Insurance Corporation are covered by the Board’s 

rule. 

[75 FR 7926, Feb. 22, 2010] 

PART 228—COMMUNITY 

REINVESTMENT (REGULATION BB) 

Sec. 

228.1–228.2 [Reserved] 

Subpart A—General 

228.11 Authority, purposes, and scope. 

228.12 Definitions. 

Subpart B—Standards for Assessing 

Performance 

228.21 Performance tests, standards, and 

ratings, in general. 

228.22 Lending test. 

228.23 Investment test. 

228.24 Service test. 

228.25 Community development test for 

wholesale or limited purpose banks. 

228.26 Small bank performance standards.