FRB REQUESTS INFORMATION ON DEBT CANCELLATION AND DEBT SUSPENSION AGREEMENTS

With the Federal Reserve Board’s (FRB) recent proposed rule for Regulation Z, the FRB requested information regarding the nature of debt cancellation and debt suspension products and comment on the FRB’s guidance to date. Currently, Regulation Z treats debt cancellation and debt suspension products the same as credit insurance, requiring essentially the same disclosures. However, relying on anecdotal evidence, the FRB reported that the sale of debt cancellation/suspension products may have changed because it has both increased and expanded to cover contingencies beyond death, disability and unemployment (e.g., marriage, divorce). Thus, the FRB questioned whether additional guidance may be useful regarding the expanded contingency coverage and requested information on the state of the products being offered currently to determine what disclosures should be required.

The FRB requests comment by January 30, 2004.

Mike Tomkies and Deborah Freye