Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Proposed Rules 66179

investment specifically authorized by

the instrument creating the fiduciary

account or a court order, in the case of

trusts created by a corporation,

including its affiliates and subsidiaries,

or by several individual settlors who are

closely related.

(5) Special exemption funds. In any

other manner described by the bank in

a written plan approved by the OCC.

The written plan is deemed approved by

the OCC 30 days after it receives the

plan, unless the OCC notifies the bank

that the OCC has disapproved the plan

or is extending review beyond the 30-

day period because the proposal raises

issues that require additional

information or additional time for

analysis. The written plan must set

forth:

(i) The reason that the proposed fund

requires a special exemption;

(ii) The provisions of the proposed

fund that are inconsistent with

paragraphs (a) and (b) of this section;

(iii) The provisions of paragraph (b) of

this section for which the bank seeks an

exemption; and

(iv) The manner in which the

proposed fund addresses the rights and

interests of participating accounts.

§ 9.20 Transfer agents.

(a) The rules adopted by the

Securities and Exchange Commission

(SEC) pursuant section 17A of the

Securities Exchange Act of 1934 (15

U.S.C. 78q–1) prescribing procedures for

registration of transfer agents for which

the SEC is the appropriate regulatory

agency (17 CFR 240.17Ac2–1) apply to

national bank transfer agents.

References to the ‘‘Commission’’ are

deemed to refer to the ‘‘OCC.’’

(b) The rules adopted by the SEC

pursuant section 17A of the Securities

Exchange Act of 1934 prescribing

operational and reporting requirements

for transfer agents (17 CFR 240.17Ac2–

2, and 240.17Ad–1 through 240.17Ad–

16) apply to national bank transfer

agents.

PART 19—RULES OF PRACTICE AND

PROCEDURE

2. The authority citation for part 19 is

revised to read as follows:

Authority: 5 U.S.C. 504, 554–557; 12

U.S.C. 93(b), 164, 505, 1817, 1818, 1820,

1831o, 1972, 3102, 3108(a), and 3909; 15

U.S.C. 78(h), 78(i), 78o–4(c), 78o–5, 78q–1,

78s, 78u, 78u–2, 78u–3, and 78w; and 31

U.S.C. 330.

3. A new § 19.135 is added to subpart

E to read as follows:

§ 19.135 Applications for stay or review of

disciplinary actions imposed by registered

clearing agencies.

(a) Stays. The rules adopted by the

Securities and Exchange Commission

(SEC) pursuant to section 19 of the

Securities Exchange Act of 1934 (15

U.S.C. 78s) regarding applications by

persons for whom the SEC is the

appropriate regulatory agency for stays

of disciplinary sanctions or summary

suspensions imposed by registered

clearing agencies (17 CFR 240.19d–2)

apply to applications by national banks.

References to the ‘‘Commission’’ are

deemed to refer to the ‘‘OCC.’’

(b) Reviews. The regulations adopted

by the SEC pursuant to section 19 of the

Securities Exchange Act of 1934 (15

U.S.C. 78s) regarding applications by

persons for whom the SEC is the

appropriate regulatory agency for

reviews of final disciplinary sanctions,

denials of participation, or prohibitions

or limitations of access to services

imposed by registered clearing agencies

(17 CFR 240.19d–3(a)–(f)) apply to

applications by national banks.

References to the ‘‘Commission’’ are

deemed to refer to the ‘‘OCC.’’

Dated: December 11, 1995.

Eugene A. Ludwig,

Comptroller of the Currency.

[FR Doc. 95–30971 Filed 12–20–95; 8:45 am]

BILLING CODE 4810–33–P

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Reg. Z; Docket No. R–0908]

Truth in Lending

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Request for comments.

SUMMARY: The Board is soliciting

comment on how the finance charge

could more accurately reflect the cost of

consumer credit. In particular, the

Board is asking for the public’s views on

the feasibility of treating as finance

charges all costs imposed by the creditor

or payable by the consumer as an

incident to the extension of credit. The

Truth in Lending Act Amendments of

1995 direct the Board to submit a report

to the Congress regarding these issues.

Under present law, costs such as

interest are part of the finance charge;

other costs, including many associated

with real estate-secured lending, are

excluded from the finance charge. The

Board is also required to address in its

report abusive refinancing practices

engaged in by creditors for the purpose

of avoiding a consumer’s rescission

rights.

DATES: Comments must be received on

or before February 9, 1996.

ADDRESSES: Comments should refer to

Docket No. R–0908, and may be mailed

to William W. Wiles, Secretary of the

Board of Governors of the Federal

Reserve System, 20th Street and

Constitution Avenue, NW., Washington,

DC 20551. Comments also may be

delivered to Room B–2222 of the Eccles

Building between 8:45 a.m. and 5:15

p.m. weekdays, or to the guard station

in the Eccles Building courtyard on 20th

Street, NW., (between Constitution

Avenue and C Street) at any time.

Comments may be inspected in Room

MP–500 of the Martin Building between

9 a.m. and 5 p.m. weekdays, except as

provided in 12 CFR 261.8 of the Board’s

rules regarding the availability of

information.

FOR FURTHER INFORMATION CONTACT: Jane

E. Ahrens, Senior Attorney, or Sheilah

Goodman, or Kurt Schumacher, Staff

Attorneys, 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 Devices for the

Deaf, contact Dorothea Thompson, at

(202) 452–3544.

SUPPLEMENTARY INFORMATION:

I. Background

The Truth in Lending Act

Amendments of 1995 (1995

Amendments Act), Pub. L. 104–29, 109

Stat. 271, enacted into law on

September 30, 1995, direct the Board to

submit a report to the Congress

concerning the use of finance charges to

accurately reflect the cost of consumer

credit. The Board must consider the

feasibility of including in the finance

charge all charges payable directly or

indirectly by the consumer and imposed

directly or indirectly by the creditor as

an incident to the credit transaction—

especially costs associated with real

estate- or home-secured lending that are

currently excluded from the finance

charge under section 106 of the Truth in

Lending Act. As contemplated by the

Congress, perhaps only charges payable

in a comparable cash transaction would

continue to be excluded from the

finance charge. The report must also

address abusive refinancing practices

engaged in by a creditor for the purpose

of avoiding a consumer’s rescission

rights. The Board will submit its report

to the Congress in early spring 1996,

based on the comments of interested

parties and on its own analysis.
66180 Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Proposed Rules

II. Finance Charges

Definition

The Truth in Lending Act (15 U.S.C.

1601 et seq.) contains rules governing

the disclosure of finance charges

(Section 106). The act is implemented

by the Board’s Regulation Z (12 CFR

part 226). Rules on finance charges are

contained in Regulation Z § 226.4 and

accompanying official staff

interpretations. The finance charge is

defined as the cost of consumer credit

expressed as a dollar amount. It

includes any charge payable directly or

indirectly by the consumer and imposed

directly or indirectly by the creditor as

an incident to or a condition of the

extension of credit. The term ‘‘imposed’’

is interpreted broadly, to include any

cost charged by the creditor (unless

otherwise excluded), including charges

for optional services paid by the

consumer. Examples of a finance charge

include interest, points, and service or

transaction fees.

The act excludes certain costs from

the finance charge, such as charges

payable in a comparable cash

transaction and fees paid to third-party

closing agents (unless the creditor

requires the services provided or retains

the fee). Many costs associated with

loans secured by real estate or a

principal dwelling are specifically

excluded; examples are fees for

appraisals, document preparation, title

insurance, and pest inspections prior to

loan closing. The regulation also

excludes charges such as application

fees (charged to all applicants), late

payment fees, and most taxes.

Still other costs that are generally

included in the finance charge may

nevertheless be excluded. For example,

the act provides that credit report fees

are finance charges, but provides an

exception for credit report fees

associated with real estate- or homesecured loans. The act also excludes

optional credit life insurance premiums

and fees to record a security interest if

the cost is disclosed to the consumer

and meets other conditions.

Annual percentage rate

In addition to requiring disclosure of

finance charges as a dollar amount, the

act and regulation require creditors to

disclose the cost of consumer credit as

an annual percentage rate (APR).

Creditors must disclose an APR for all

types of consumer credit—installment

loans (closed-end credit) and credit card

accounts or home equity lines of credit

(open-end plans). The APR for closedend credit and open-end plans reflect

finance charges, but the distinct nature

of these products calls for differences in

how the APR is calculated.

The APR for closed-end credit is

based on the amounts borrowed by the

consumer in relation to the amount and

timing of payments to the creditor. It

factors in interest and all other finance

charges. Costs such as recording fees or

title insurance fees may be disclosed,

but are not a part of the finance charge

and thus, are excluded from the APR

calculation.

Under open-end plans such as a home

equity line of credit, the creditor

typically sets the maximum amount that

can be borrowed at any time. The

amount that will actually be borrowed

by the consumer, however, is typically

unknown when the credit plan is

established. The APR stated in

advertisements and account-opening

disclosures reflects only the rate of

interest that will be applied to any

outstanding balance the consumer may

have in the future. Additional costs—

whether finance or other charges—are

separately identified.

Consumers with outstanding balances

receive an APR on periodic statements.

That APR is based on the outstanding

balance and certain finance charges

imposed during the cycle. Some finance

charges, such as points charged in

connection with establishing a home

equity plan or other fees to open or

renew plans, would skew the APR for

the billing cycle in which they are

imposed. These types of finance charges

are disclosed on periodic statements but

are not figured in the APR.

Request for Comment

The Board requests comments on how

the definition of the finance charge

could be modified, if at all, to reflect the

cost of consumer credit more accurately.

The Congress directs the Board to make

recommendations on any necessary

statutory and regulatory changes. (1995

Amendments, Section 2(f).) The Board

believes the scope of the study is

limited to possible modifications to the

definition of the finance charge.

The 1995 Amendments contain, for

the most part, provisions affecting

closed-end credit that is real estate- or

home-secured. The Board believes that

the scope of the report is intended to

cover the treatment of costs as finance

charges for all types of consumer credit,

although a focus of the study will be on

those fees associated with real estate

lending that are currently excluded from

the finance charge. For example, many

costs associated with entering into

home-secured loans are the same

whether the credit is an installment loan

or a line of credit. Similarly, certain

application fees are excluded from the

finance charge for all types of credit

transactions, not just those affecting

installment loans.

Comment is requested on the

feasibility of including in the finance

charge all charges payable directly or

indirectly by the consumer and imposed

directly or indirectly by the creditor as

an incident to the credit transaction

(other than costs imposed in comparable

cash transactions), particularly costs

associated with real estate- or homesecured credit that are currently

excluded from the finance charge. For

example, mortgage brokers fees are

sometimes, but not always, a finance

charge under present law: A new

statutory provision categorizes all

brokers fees paid by the consumer to the

broker (or to the creditor for delivery to

the broker) as finance charges, and will

go into effect when the Board issues a

final rule in 1996.

In assessing the feasibility of this

approach, the Board must consider the

implications of including charges

imposed by third parties—settlement

agents and others—that may not be

within the creditor’s knowledge or

control. Comment is requested on

compliance issues that would arise if

the definition of the finance charge were

expanded to include charges by third

parties.

Treating all costs as a finance charge

would, of course, simplify creditor

compliance with the TILA and

Regulation Z; it would reduce the

potential for disclosure errors. The

Board believes the study is, in part, a

reaction to the spate of class action

lawsuits that followed the court

decision of Rodash v. AIB Mortgage

Company. (16 F.3d 1142 (11th Cir.

1994)). In Rodash, the court found,

among other TILA violations, that the

creditor improperly excluded several

fees from the finance charge

calculation—totalling about $225. The

court awarded civil money damages and

allowed the consumer to rescind a

$100,000 loan.

Including all costs in the finance

charge, however, would also increase

the APR disclosed for closed-end credit

transactions—dramatically, in some

cases. For example, the APR for homesecured loans would reflect closing

costs such as appraisal fees, title

insurance and the like. Including

premiums for optional credit life

insurance or for property insurance in

the finance charge could also have a

significant impact on the APR. The

resulting APR for installment loans may

seem distorted, particularly in relation

to the APR disclosed for a comparable

open-end product. For example,

disclosures for a home-secured open-
Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Proposed Rules 66181

end plan would include closing costs

and insurance premiums as finance

charges, but those fees would not be

included in the APR stated in

advertisements or account-opening

disclosures, unless the current rules on

calculating the APR are changed.

III. Abusive Refinancing Practices

The act and regulation allow

consumers to cancel (or rescind) certain

credit transactions secured by the

consumer’s principal dwelling. For

example, the right of rescission applies

if a consumer’s principal dwelling is

used to secure a loan financing home

improvements or a child’s education.

Other loans secured by a consumer’s

principal dwelling are not rescindable,

such as a loan for a business purpose.

A consumer’s right to rescind a

refinanced loan depends on both the

creditor and amount of money involved.

If the creditor refinancing the loan is the

same creditor that initially extended the

credit, consumers may rescind the

refinancing only to the extent new

monies are advanced. For example, if a

consumer’s principal dwelling secures a

loan with a creditor and the consumer

seeks to refinance an outstanding

balance of $100,000 with the same

creditor, the transaction is not

rescindable. If the consumer obtains

$25,000 in an additional advance, the

refinancing could be rescinded up to the

new advance of $25,000. If the

consumer refinances the loan with a

new creditor instead, the entire

transaction is rescindable, whether or

not new monies are advanced.

The Board’s report must include

recommendations, if any, for statutory

or regulatory changes necessary to

address abusive refinancing practices

engaged in by a creditor for the purpose

of avoiding a consumer’s rescission

rights. Comment is requested on the

issue.

IV. Form of Comment Letters

Comment letters should refer to

Docket No. R–0908, and, when possible,

should use a standard courier typeface

with a type size of 10 or 12 characters

per inch. 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 31⁄2 inch or 51⁄4 inch

computer diskettes in any IBMcompatible DOS-based format.

By order of the Board of Governors of the

Federal Reserve System, December 15, 1995.

William W. Wiles,

Secretary of the Board.

[FR Doc. 95–30994 Filed 12–20–95; 8:45 am]

BILLING CODE 6210–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Chapter I

[Summary Notice No. PR–95–4]

Petition for Rulemaking; Summary of

Petitions Received; Dispositions of

Petitions Issued

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of petitions for

rulemaking received and of dispositions

of prior petitions.

SUMMARY: Pursuant to FAA’s rulemaking

provisions governing the application,

processing, and disposition of petitions

for rulemaking (14 CFR part 11), this

notice contains a summary of certain

petitions requesting the initiation of

rulemaking procedures for the

amendment of specified provisions of

the Federal Aviation Regulations and of

denials or withdrawals of certain

petitions previously received. The

purpose of this notice is to improve the

public’s awareness of, and participation

in, this aspect of FAA’s regulatory

activities. Neither publication of this

notice nor the inclusion or omission of

information in the summary is intended

to affect the legal status of any petition

or its final disposition.

DATES: Comments on petitions received

must identify the petition docket

number involved and must be received

January 19, 1996.

ADDRESSES: Send comments on any

petition in triplicate to: Federal

Aviation Administration, Office of the

Chief Counsel, Attn: Rules Docket

No.llll, 800 Independence

Avenue, SW., Washington, D.C. 20591.

The petition, any comments received,

and a copy of any final disposition are

filed in the assigned regulatory docket

and are available for examination in the

Rules Docket (AGC–200), Room 915G,

FAA headquarters Building (FOB 10A),

800 Independence Ave., SW.,

Washington, D.C. 20591; telephone

(202) 267–3132. Comments may also be

sent electronically to the following

internet address:

nprmcmts@mail.hq.faa.gov.

FOR FURTHER INFORMATION CONTACT: Mr.

D. Michael Smith, Office of Rulemaking

(ARM–1), Federal Aviation

Administration, 800 Independence

Avenue, SW, Washington, DC 20591;

telephone (202) 267–7470.

This notice is published pursuant to

paragraphs (b) and (f) of § 11.27 of part

11 of the Federal Aviation Regulations

(14 CFR part 11).

Donald P. Byrne,

Assistant Chief Counsel for Regulations.

Petitions for Rulemaking

Docket No.: 28376.

Petitioner: National Business Aircraft

Association, Inc.

Regulations Affected: 14 CFR 91.501.

Description of Rulechange Sought: To

add a new paragraph (e) to § 91.501

defining the word ‘‘company’’ as it is

used in § 91.501(b)(5) and (6) to include

a governmental agency and

governmental corporation, as well as

defining the words ‘‘parent’’ and

‘‘subsidiary’’ to include another

governmental agency or governmental

corporation within the same local, state,

or federal jurisdiction. This amendment,

if granted, would include government

aircraft operations with corporate

aircraft operations under part 91 and,

therefore, allow government agencies to

recover the costs of owning, operating,

and maintaining their aircraft in certain

circumstances.

Petitioner’s Reason for the Request:

The petitioner feels that the current

regulatory scheme discriminates against

government owners and operators of

civil aircraft without justification.

[FR Doc. 95–31015 Filed 12–20–95; 8:45 am]

BILLING CODE 4910–13–M

14 CFR Part 71

[Airspace Docket No. 95–ANE–35]

Proposed Alteration of V–99, V–451

and J–62

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: This proposed rule would

alter Federal Airways V–99, V–451 and

Jet Route J–62 in Massachusetts and

Connecticut. Specific portions of each of

the airways and jet route are no longer

necessary for navigation and would be

revoked. Removing the obsolete

segments would eliminate clutter on the

aeronautical charts.

DATES: Comments must be received on

or before February 2, 1996.

ADDRESSES: Send comments on the

proposal in triplicate to: Manager, Air

Traffic Division, ANE–500, Docket No.

95–ANE–35, Federal Aviation