2968 Federal Register / Vol. 61, No. 20 / Tuesday, January 30, 1996 / Proposed Rules

III. Summary

The NRC has determined the 10 CFR part

171 annual fees significantly impacts a

substantial number of small entities. A

maximum fee for small entities strikes a

balance between the requirement to collect

100 percent of the NRC budget and the

requirement to consider means of reducing

the impact of the fee on small entities. On the

basis of its regulatory flexibility analyses, the

NRC concludes that a maximum annual fee

of $1,800 for small entities and a lower-tier

small entity annual fee of $400 for small

businesses and not-for-profit organizations

with gross annual receipts of less than

$350,000, small governmental jurisdictions

with a population of less than 20,000, small

manufacturing entities that have less than 35

employees and educational institutions that

are not State or publicly supported and have

less than 35 employees reduces the impact

on small entities. At the same time, these

reduced annual fees are consistent with the

objectives of OBRA–90. Thus, the revised

fees for small entities maintain a balance

between the objectives of OBRA–90 and the

RFA. Therefore, the analysis and conclusions

established in the FY 1991–1995 rules

remain valid for this proposed rule for FY

1996.

[FR Doc. 96–1524 Filed 1–29–96; 8:45 am]

BILLING CODE 7590–01–P

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-0913]

Truth in Lending

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Request for comments.

SUMMARY: The Board is soliciting

comment on whether the Truth in

Lending Act cost disclosure and other

rules for open-end home-secured lines

of credit provide adequate consumer

protections. The Riegle Community

Development and Regulatory

Improvement Act of 1994 directs the

Board to submit a report to the Congress

regarding this matter. Under present

law, creditors offering open-end homeequity lending programs have to provide

detailed disclosures at the time a

consumer applies for a line of credit.

The law also imposes specific

substantive limitations on how these

programs may be structured; however

they are not subject to the type of

disclosure and restrictions imposed by

the Home Ownership and Equity Act of

1994 for closed-end credit.

DATES: Comments must be received on

or before April 1, 1996.

ADDRESSES: Comments should refer to

Docket No. R–0913, and may be mailed

to William W. Wiles, Secretary, 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 9:00 a.m. and

5:00 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:

Obrea Poindexter, Staff Attorney,

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), please contact Dorothea

Thompson at (202) 452–3544.

SUPPLEMENTARY INFORMATION:

I. Background

The Home Ownership and Equity

Protection Act (HOEPA) amendments to

the Truth in Lending Act, contained in

the Riegle Community Development and

Regulatory Improvement Act of 1994

(RCDRIA) require special disclosures

and impose substantive limitations on

certain closed-end home-equity loans

with rates or fees above a certain

percentage or amount. The requirements

and prohibitions contained in the

HOEPA, which became effective in

October 1995, do not apply to open-end

home-secured lines of credit. The

legislative history notes that

congressional hearings on home-equity

lending practices revealed little

evidence of abusive practices in the

open-end home-equity credit market.

The legislative history also states that, if

the market changes or if the Board finds

that open-end credit plans are being

used to circumvent the HOEPA, the

Board has the authority to address

abuses under section 152(d) of the

HOEPA.

In addition, the RCDRIA directs the

Board to conduct a study and submit a

report to the Congress, including

recommendations for legislation, on

whether existing rules for open-end

home-equity lending programs provide

consumers obtaining home-equity lines

of credit with adequate protections.

II. Current Rules for Home-Equity Lines

of Credit

The Home Equity Loan Consumer

Protection Act amendments to the Truth

in Lending Act, enacted in November

1988, require creditors to give

consumers extensive disclosures and an

educational brochure for home-equity

plans at the time an application is

provided. For example, creditors must

provide information about payment

terms, fees imposed under the plans,

and, for variable-rate plans, information

about the index used to determine the

rate and a fifteen-year history of changes

in the index values. In addition, the law

imposes certain substantive limitations

on home-equity plans, such as limiting

the right of creditors to terminate a plan

and accelerate an outstanding balance or

to change the terms of a plan after it has

been opened.

The Board’s Regulation Z (12 CFR

part 226) implements the Truth in

Lending Act. Regulation Z requirements

for home-equity lines of credit closely

mirror the statutory requirements. As

the statute sets forth specific

requirements that are restrictive in

many cases, the rules implementing the

statute are similarly restrictive.

Specific rules on home-equity lines of

credit are contained in Regulation Z,

§§ 226.5b, 226.6(e), 226.9(c)(3), and

226.16(d) and its accompanying

commentary. Requirements for homeequity lines of credit apply to all openend credit plans secured by a

consumer’s dwelling. The rules require

creditors offering home-equity plans

(and third-parties in some instances) to

give specific disclosures about costs and

terms and limits how creditors may

structure programs.

Format and Timing of Disclosures

In most cases, at the time a consumer

is provided with an application for a

home-secured line of credit, disclosures

must be given. These disclosures must

be in writing, grouped together, and

segregated from all unrelated

information. Each consumer must also

be given an educational pamphlet

prepared by the Board entitled ‘‘When

Your Home is On the Line: What You

Should Know About Home Equity Lines

of Credit,’’ or a similar substitute.

Program-specific initial disclosures

must be given in writing before the first

transaction is made under the plan.

Content of Disclosures

Creditors offering home-equity plans

must provide information to consumers

that is required under section 226.5b of

the regulation. This includes, but is not

limited to, the following:

(1) The payment terms, including the

length of the draw and any repayment

period, an explanation of how the

minimum periodic payment will be

determined and the timing of payments,

and an example based on a $10,000
Federal Register / Vol. 61, No. 20 / Tuesday, January 30, 1996 / Proposed Rules 2969

1The example must show the minimum periodic

payment and the time it would take to repay the

$10,000 balance if the consumer made only those

payments and obtained no additional credit

extensions.

outstanding balance and a recent annual

percentage rate (APR): 1

(2) The APR;

(3) Fees imposed by the creditor and

third parties;

(4) A statement that negative

amortization may occur and that as a

result a consumer’s equity in a home

may decrease; and

(5) Several statements, including a

statement that loss of the home could

occur in the event of default.

Subsequent Disclosures

Subject to certain limitations on

changes in terms, creditors are generally

required to send the consumer a fifteenday advance notice if a term on the plan

is changed. In addition, a notice must

also be sent if additional extensions of

credit are prohibited or if the credit

limit is reduced; this notice must be

sent no later than three business days

after the action is taken. 12 CFR 226.9(c)

Limitations on Home-equity Plans

Regulation Z prescribes substantive

limitations on the changes that a

creditor can make in the annual

percentage rate, termination of a plan,

and any other change in the credit terms

that were initially disclosed. For

example, a creditor cannot terminate a

plan and demand repayment of the

entire outstanding balance unless the

consumer has engaged in fraud or

misrepresentation, failed to meet the

repayment terms, or adversely affected

the creditor’s security by action or

inaction. A creditor generally cannot

change a term unless the change was

provided for in the initial agreement,

the consumer agrees to the change in

writing, or the change is insignificant or

‘‘unequivocally beneficial’’ to the

consumer throughout the remainder of

the plan; and cannot apply a new index

and margin unless the original index

becomes unavailable. 12 CFR 226.5b(f)

Advertising

Creditors generally trigger additional

disclosures, in advertisements, if they

advertise account-opening disclosures

relating to finance charges and other

significant charges or repayment terms

for a plan. If a home-equity plan

advertisement contains a trigger term,

creditors must also state the following:

(1) The periodic rate used to compute

the finance charge (expressed as an

APR);

(2) Loan fees that are a percentage of

the credit limit, along with an estimate

of other plan fees; and

(3) The maximum APR that could be

imposed in a variable-rate plan.

If a minimum payment for the homeequity plan is stated, the advertisement

must also state if a balloon payment will

result. For a variable-rate plan, if the

advertisement states a rate other than

one based on the contract’s index and

margin, the advertisement must also

state how long the introductory rate will

be in effect. The introductory rate and

the fully-indexed rate must be disclosed

with equal prominence. In addition,

creditors cannot advertise home-equity

plans as ‘‘free money’’ (or using a

similar term) and cannot discuss the tax

consequences of interest deductions in

a misleading way. 12 CFR 226.16(d)

III. Request for Comments

The Board requests comment on

whether the existing home-equity

lending rules provide adequate

protections for consumers and whether

any statutory or regulatory changes are

warranted to ensure adequate disclosure

and other consumer protections in

connection with open-end home-equity

lines of credit.

The Board will submit its report to the

Congress in early fall 1996, based on the

comments of interested parties and its

own analysis.

By order of the Board of Governors of the

Federal Reserve System, January 24, 1996.

William W. Wiles,

Secretary of the Board.

[FR Doc. 96–1651 Filed 1–29–96; 8:45 am]

BILLING CODE 6210–01–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

15 CFR Part 981

[Docket No. 951213299–5299–01]

RIN 0648–AI42

Ocean Thermal Energy Conversion

Licensing Program

AGENCY: Office of Ocean and Coastal

Resource Management (OCRM),

National Ocean Service (NOS), National

Oceanic and Atmospheric

Administration (NOAA), Department of

Commerce (DOC).

ACTION: Proposed rule.

SUMMARY: The National Oceanic and

Atmospheric Administration (NOAA) is

proposing to remove Part 981 from Title

15 of the Code of Federal Regulations

(Part 981). Part 981 implements the

Ocean Thermal Energy Conversion

(OTEC) Licensing Program, which was

established under the Ocean Thermal

Energy Conversion Act of 1980, as

amended, (OTEC Act), 42 U.S.C. 9101 et

seq. No applications under Part 981 for

licenses of commercial OTEC facilities

or plantships have yet been received by

NOAA, and there has been a low level

of NOAA activity under the OTEC Act.

During this 15 year period of time, the

availability and relatively low price of

fossil fuels, coupled with the risks to

potential investors, has limited the

interest in the commercial development

of OTEC projects. Removal of Part 981

at this time will allow NOAA to

evaluate the appropriateness of these, or

any other, regulations at such time as

interest in the commercial development

of OTEC projects occurs.

DATES: Comments on the proposed rule

are invited and will be considered if

submitted in writing to the address

below on or before February 29, 1996.

ADDRESSES: Comments should be

submitted to Karl Jugel, Chief, Ocean

Minerals and Energy Division, Office of

Ocean and Coastal Resource

Management, National Ocean Service,

National Oceanic and Atmospheric

Administration, 1305 East-West

Highway, 11th Floor, Silver Spring, MD

20910.

FOR FURTHER INFORMATION CONTACT:

James Lawless, Deputy Director, Office

of Ocean and Coastal Resource

Management, at (301) 713–3155.

SUPPLEMENTARY INFORMATION:

I. Regulatory Review

The National Oceanic and

Atmospheric Administration (NOAA) is

proposing to remove Part 981 of 15 CFR,

pursuant to the Regulatory Reform

Initiative of President Clinton and the

Ocean Thermal Energy Conversion Act

of 1980, as amended.

In March 1995, President Clinton

issued a directive to federal agencies

regarding their responsibilities under

his Regulatory Reform Initiative. This

initiative is part of the National

Performance Review and calls for

immediate, comprehensive regulatory

reform. The President directed all

agencies to undertake, as part of this

initiative, an exhaustive review of all

their regulations—with an emphasis on

eliminating or modifying those that are

obsolete or otherwise in need of reform.

The Ocean Thermal Energy

Conversion Act of 1980, as amended,

(OTEC Act), 42 U.S.C. §§ 9101 et seq.,

also requires that NOAA periodically

review the regulations that apply to the

licensing of OTEC facilities and