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1.5.3.1 History of Regulation Z and the FRB Interpretations

As Congress has recognized since the inception of TILA, the oversight of consumer credit is a full time job, beyond the capacity of a legislature. As a result, Congress delegated broad authority for the implementation of TILA to the Federal Reserve Board.208 The FRB responded by promulgating a comprehensive set of Truth in Lending rules known as Regulation Z, which has been in effect, in various forms, since July 1, 1969. The current version, now under the authority of the Consumer Financial Protection Bureau, is reprinted at Appendix B, infra. The original version and subsequent amendments are available online as companion material to this treatise.

The FRB’s version of Regulation Z is found at 12 C.F.R. part 226. When the CFPB took over rulemaking authority under TILA on July 21, 2011,209 it republished Regulation Z as 12 C.F.R. part 1026, without making substantive changes. In renumbering the sections of Regulation Z, the CFPB simply replaced the first “2” in “226” with “10,” so that, for example, the FRB’s Regulation Z § 226.35 became the CFPB’s § 1026.35. However, the CFPB changed some subsection numbers, mostly in the course of deleting footnotes that were part of the FRB’s version of the rule.210 The FRB’s version of Regulation Z has not been repealed, and continues to apply to certain automobile dealers that are excluded from the CFPB’s authority under TILA.211

Regulation Z restates many sections of TILA verbatim but is generally a more thorough statement of Truth in Lending law than the statute. Reference to it is inescapable in almost any TILA case. Nevertheless, it became apparent almost as soon as Regulation Z was released that it left many questions unanswered, and the FRB immediately began to issue a stream of amendments to and interpretations of Regulation Z. The interpretations, in particular, deserve some description because they came from different sources within the FRB and carried different degrees of authority.

Pre-Simplification, the FRB issued several different kinds of interpretations of Regulation Z. The most authoritative were the Official Board Interpretations, published in the Code of Federal Regulations.212 Only sixty were issued prior to Simplification. Because these interpretations were approved by the FRB itself, they carried the same weight as did Regulation Z. FRB staff also issued informal interpretations of Regulation Z.213 These were typically written in response to individual inquiries from creditors. Between 1969 and 1976, all of these staff interpretations were “unofficial,” meaning that they were binding on neither the FRB nor the courts and thus could be relied upon by creditors only at their own risk. In 1976, however, an amendment to TILA214 authorized the issuance of “official staff interpretations,” which, while still nonbinding, provided protection from civil TILA actions to those creditors who followed them. As a result of this amendment, after 1976 there were “official” staff interpretations that gave legal protection to creditors following them and “unofficial” FRB staff interpretations (also known as Public Information Letters), which carried no creditor protection.

Truth in Lending Simplification did simplify this regulatory morass. Regulation Z was rewritten to accommodate the changes made in the Simplification Act. In the process, many previously disputed provisions were eliminated or clarified.215 The FRB added an appendix of model forms to Regulation Z, the proper use of which automatically places a creditor in compliance with the Act. Creditors were not required, however, to use the model forms. All of the existing interpretations of Regulation Z were replaced with the Official Staff Interpretations on Regulation Z.216

The official interpretations are to Regulation Z what Regulation Z is to TILA. They track Regulation Z clause by clause, clarifying the intent, giving examples of proper application, and, at times, inventing rules where none otherwise exist. When assessing any transaction for compliance with any Regulation Z provision, the corollary official interpretations provision should also be reviewed. As of July 21, 2011, authority over the official interpretations was transferred from the FRB to the Consumer Financial Protection Bureau (CFPB).

In addition, the CFPB generally publishes supplementary information in the Federal Register to explain any revisions to Regulation Z or the official interpretations that it proposes or adopts, as did the FRB. These explanations are often useful in construing Regulation Z and its official interpretations. The supplemental information for amendments to Regulation Z and the commentary from February 11, 1969 to the present are available online as companion material to this treatise.

Footnotes

  • 208 {208} 15 U.S.C. § 1604.

  • 209 {209} See 12 U.S.C. § 5481(12), (14) (defining “enumerated consumer law” to include TILA, and “Federal consumer financial law” to include all the “enumerated consumer laws”); 12 U.S.C. § 5581 (transferring rulemaking authority under Federal consumer financial laws to CFPB).

    The CFPB is technically a bureau within the Federal Reserve Board but it is largely independent of the FRB.

  • 210 {210} See chart in Appx. B, infra (mapping the substantive differences between the FRB and CFPB versions of Reg. Z); chart in Appx. C, infra (mapping the substantive differences between the FRB and CFPB versions of official interpretations of Reg. Z).

  • 211 {211} See 12 U.S.C. § 5519 (providing that the CFPB has no rulemaking, supervisory, enforcement, or other authority over motor vehicle dealers other than certain buy-here-pay-here dealers).

    12 U.S.C. § 5517 also excludes various entities from the CFPB’s authority, including rulemaking, supervisory, and enforcement authority, but these exclusions do not apply to the extent the entity is subject to an “enumerated consumer law” such as TILA.

  • 212 {212} See 12 C.F.R. §§ 226.101 et seq. (1981).

  • 213 {213} Summaries of these interpretations can be found in National Consumer Law Center, Truth in Lending in Transition § 2 (1982). The interpretations were also found in Consumer Credit Guide, a loose-leaf service published by Commerce Clearing House, but CCH has withdrawn them due to their replacement by the Official Staff Interpretations.

  • 214 {214} Pub. L. No. 94-222, 90 Stat. 197 (1976), amending TILA § 130(f), 15 U.S.C. § 1640(f).

  • 215 {215} For example, the definition of a security interest was clarified.

  • 216 {216} See comments of the FRB on the issue of replacing prior interpretations with a published commentary in 46 Fed. Reg. 50,288 (Oct. 9, 1981) (available online as companion material to this treatise).