The Board of Governors of the
Federal Reserve System (Board), the Consumer Financial Protection
Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), and the Office of the
Comptroller of the Currency (OCC) (collectively, “the agencies”) issue
this guidance regarding certain consumer credit practices. While the
Federal Trade Commission’s (FTC) Credit Practices Rule remains in
effect, the credit practices rules for banks, savings associations,
and federal credit unions are being repealed as a consequence of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank
Act). Notwithstanding the repeal of these regulations, the agencies
have supervisory and enforcement authority regarding unfair or deceptive
acts or practices,
1 which could include the practices previously addressed
in the former credit practices rules.
The FTC Act permits the FTC to promulgate regulations that define
with specificity acts or practices that are unfair or deceptive, including
requirements prescribed for the purpose of preventing such acts or
practices.
2 Pursuant to this rulemaking authority,
the FTC issued its Credit Practices Rule.
3 The FTC’s Credit Practices Rule is applicable to
creditors that are within the FTC’s jurisdiction; it is not applicable,
for example, to banks, savings associations, and federal credit unions.
4 The FTC’s Credit Practices Rule generally prohibits (1) the use
of certain provisions in consumer credit contracts, (2) the misrepresentation
of the nature or extent of cosigner liability, and (3) the pyramiding
of late fees.
5 The Board, the Federal Home Loan
Bank Board (FHLBB)—predecessor to the Office of Thrift Supervision
(OTS)—and the NCUA subsequently issued regulations pursuant to the
FTC Act that were substantially similar to the FTC’s Credit Practices
Rule.
6 These regulations applied to banks,
savings associations, and federal credit unions, respectively.
7 However, in 2010, the Dodd-Frank
Act repealed the rulemaking authority of the Board, FHLBB/OTS, and
NCUA under the FTC Act.
8 Consequently, those regulations are being repealed.
9The agencies are issuing this statement
to clarify that the repeal of credit practices rules applicable to
banks, savings associations, and
federal credit unions should not be construed
as a determination by the agencies that the credit practices described
in these former regulations are permissible. The regulations were
issued on the basis of extensive findings that identified the unfair
or deceptive practices prohibited in the rules.
10 The agencies believe that, depending
on the facts and circumstances, if banks, savings associations, and
federal credit unions engage in the unfair or deceptive practices
described in these former credit practices rules, such conduct may
violate the prohibition against unfair or deceptive practices in section
5 of the FTC Act and sections 1031 and 1036 of the Dodd-Frank Act.
11 The agencies may determine that statutory violations exist
even in the absence of a specific regulation governing the conduct.
The agencies note that the FTC’s Credit Practices Rule
remains in effect for creditors that are within the FTC’s jurisdiction.
In addition to FTC enforcement, the FTC’s Credit Practices Rule is
enforced by the CFPB, to the extent that the FTC’s Credit Practices
Rule applies to creditors that are within the CFPB’s enforcement authority.
12Issued jointly by the Board of Governors of the Federal
Reserve System, the Consumer Financial Protection Bureau, the Federal
Deposit Insurance Corporation, the National Credit Union Administration,
and the Office of the Comptroller of the Currency August 22, 2014.
