Board of Governors of the Federal Reserve System: Truth in Lending, GAO-09-945R, August 11, 2009
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The Honorable Christopher J. Dodd
Chairman
The Honorable Richard C. Shelby
Ranking Minority Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
The Honorable Barney Frank
Chairman
The Honorable Spencer Bachus
Ranking Minority Member
Committee on Financial Services
House of Representatives
Subject: Board of Governors
of the Federal Reserve System: Truth in Lending
Pursuant to section
801(a)(2)(A) of title 5, United States Code, this is our report on a major rule
promulgated by the Board of Governors of the Federal Reserve System (Board),
entitled “Truth in Lending” (Docket No. R-1364). We received the rule on July 27, 2009. It was published in the Federal Register as an “interim final rule; request for public
comment” on July 22, 2009. 74 Fed. Reg.
36,077. The interim final rule is
effective on August 20, 2009, and comments must be received on or before
September 21, 2009.
The interim final rule amends Regulation Z in order to
implement provisions of the Credit Card Accountability Responsibility and
Disclosure Act of 2009, Pub. L. No. 111-24, sect. 102, 123 Stat. 1734 (Credit Card
Act) that are effective on August 20, 2009.
The interim final rule pertains to advance notices of rate increases and
changes in terms and the time consumers are given to make payments.
More specifically, the interim final rule generally
requires that creditors provide consumers with 45 days advance notice of rate
increases and other significant changes to the terms of their credit card
account agreements. In addition, the
interim final rule generally prohibits a creditor from treating a payment as
late or imposing additional finance charges unless the creditor mailed or
delivered the periodic statement at least 21 days before the payment due date
and the expiration of any period within which any credit extended may be repaid
without incurring a finance charge, i.e.,
a grace period.
Enclosed is our assessment of the Board’s compliance with
the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title
5 with respect to the rule. Our review of
the procedural steps taken indicates that the Board complied with the
applicable requirements.
If you have any questions about this report or wish to
contact GAO officials responsible for the evaluation work relating to the
subject matter of the rule, please contact Shirley A. Jones, Assistant General
Counsel, at (202) 512-8156.
signed
Robert J. Cramer
Managing Associate General Counsel
Enclosure
cc: Laricke
Blanchard
Assistant to the Board of Governors
of the Federal Reserve System
ENCLOSURE
REPORT UNDER 5 U.S.C.
sect. 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
ENTITLED
"TRUTH IN LENDING"
(DOCKET NO. R-1364)
(i) Cost-benefit analysis
The Board did not prepare a cost-benefit analysis. However, the core provisions of this interim
final rule implement the statutory requirements of section 102 of the Credit
Card Act that are effective on August 20, 2009.
(ii) Agency actions relevant to the Regulatory
Flexibility Act, 5 U.S.C. sections 603-605, 607, and 609
As discussed further below, the Board found good cause
under 5 U.S.C. sect. 553(b)(B) to conclude that, with respect to this interim final
rule, publication of a notice of proposed rulemaking was impractical and
unnecessary. Consequently, the Board was
not required to perform an initial or final regulatory flexibility analysis as
required under the Act. Nonetheless, in
order to solicit additional information from small entities subject to the
interim final rule, the Board published an initial regulatory flexibility
analysis relying, in large part, on the regulatory flexibility analysis
conducted for the Board’s January 2009 Regulation Z Rule (74 Fed. Reg. 5244) and
the January 2009 FTC Act Rule (74 Fed. Reg. 5498).
The Board notes that the precise costs to small entities
to conform to the interim final rule are difficult to predict and will depend
on a number of factors that are unknown to the Board. For this reason, the Board seeks comment on
any costs, compliance requirements, or changes in operating procedures arising
from the application of the interim final rule to small entities. Irrespective of these costs, however, the
Board states that the core provisions of this interim final rule implement the
statutory requirements of the Credit Card Act that are effective on August 20,
2009. The Board also states that it has
implemented these requirements so as to minimize burden, while retaining
benefits to consumers.
(iii) Agency actions relevant to sections 202-205 of
the Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections 1532-1535
The Unfunded Mandate Reform Act does not apply to
independent regulatory agencies, such as the Federal Reserve System.
(iv) Other relevant
information or requirements under acts and executive orders
Administrative Procedure
Act (APA), 5 U.S.C. sections 551 et seq.
The Board issued this rule
as an interim final rule, with an effective date of August 20, 2009. The APA generally requires that rules be
published not less than 30 days before their effective date. 5 U.S.C. sect. 553(d). The Board concluded, however, that “good
cause” exists to publish the interim final rule less than 30 days before the
effective date. Id.
The Board similarly concluded that there was “good cause”
to exempt this rule from the notice and comment requirements under the APA, 5
U.S.C. sect. 552(b)(B). The Board’s
rationale for both these “good cause” findings was based on the requirement in
the Credit Card Act for this rule to become effective on August 20, 2009. The Board states that this time period does
not provide sufficient time for the Board to prepare a proposed rule and
publish it in the Federal Register,
provide a reasonable comment period, analyze the comments submitted, and
prepare a final rule and publish it in the Federal
Register. In addition, the Board
asserted that the interim final rule is similar to rules recently adopted by
the Board after notice and public comment.
74 Fed. Reg. 36,079.
Paperwork Reduction Act, 44 U.S.C. sections 3501-3520
The collection of information requirements in this interim
final rule were approved by the Office of Management and Budget (OMB) and
assigned OMB Control Number 7100-0199.
Statutory authorization for the rule
The Board states that this interim final rule is
promulgated pursuant to the authority in 12 U.S.C. sect. 3806, 15 U.S.C. sections 1604,
1637(c)(5) and 1639(l), and Pub. L. No. 111-24, sect. 2, 123 Stat. 1734.
Executive Order No. 12,866 (Regulatory Planning and
Review)
The Executive Order does not apply to independent
regulatory agencies, such as the Federal Reserve System.
Executive Order No. 13,132 (Federalism)
The Executive Order does not apply to independent
regulatory agencies, such as the Federal Reserve System.