PART 37—DEBT CANCELLATION CONTRACTS AND DEBT SUSPENSION AGREEMENTS Authority: 12 U.S.C. 1 et seq., Source: 67 FR 58976, Sept. 19, 2002, unless otherwise noted. § 37.1 Authority, purpose, and scope. (a) Authority. (b) Purpose. (c) Scope. § 37.2 Definitions. For purposes of this part: (a) Actuarial method (b) Bank (c) Closed-end credit (d) Contract (e) Customer (f) Debt cancellation contract (g) Debt suspension agreement debt suspension agreement (h) Open-end credit (1) The bank reasonably contemplates repeated transactions; (2) The bank may impose a finance charge from time to time on an outstanding unpaid balance; and (3) The amount of credit that may be extended to the customer during the term of the plan (up to any limit set by the bank) is generally made available to the extent that any outstanding balance is repaid. (i) Residential mortgage loan § 37.3 Prohibited practices. (a) Anti-tying. (b) Misrepresentations generally. (c) Prohibited contract terms. (1) Giving the bank the right unilaterally to modify the contract unless: (i) The modification is favorable to the customer and is made without additional charge to the customer; or (ii) The customer is notified of any proposed change and is provided a reasonable opportunity to cancel the contract without penalty before the change goes into effect; or (2) Requiring a lump sum, single payment for the contract payable at the outset of the contract, where the debt subject to the contract is a residential mortgage loan. § 37.4 Refunds of fees in the event of termination or prepayment of the covered loan. (a) Refunds. bona fide (b) Method of calculating refund. § 37.5 Method of payment of fees. Except as provided in § 37.3(c)(2), a bank may offer a customer the option of paying the fee for a contract in a single payment, provided the bank also offers the customer a bona fide § 37.6 Disclosures. (a) Content of short form of disclosures. (b) Content of long form of disclosures. (c) Disclosure requirements; timing and method of disclosures Short form disclosures. (2) Long form disclosures. (3) Special rule for transactions by telephone. (4) Special rule for solicitations using written mail inserts or “take one” applications. (5) Special rule for electronic transactions. et seq. (d) Form of disclosures Disclosures must be readily understandable. (2) Disclosures must be meaningful. (i) A plain-language heading to call attention to the disclosures; (ii) A typeface and type size that are easy to read; (iii) Wide margins and ample line spacing; (iv) Boldface or italics for key words; and (v) Distinctive type style, and graphic devices, such as shading or sidebars, when the disclosures are combined with other information. (e) Advertisements and other promotional material for debt cancellation contracts and debt suspension agreements. § 37.7 Affirmative election to purchase and acknowledgment of receipt of disclosures required. (a) Affirmative election and acknowledgment of receipt of disclosures. (b) Special rule for telephone solicitations. (1) Maintains sufficient documentation to show that the customer received the short form disclosures and then affirmatively elected to purchase the contract; (2) Mails the affirmative written election and written acknowledgment, together with the long form disclosures required by § 37.6 of this part, to the customer within 3 business days after the telephone solicitation, and maintains sufficient documentation to show it made reasonable efforts to obtain the documents from the customer; and (3) Permits the customer to cancel the purchase of the contract without penalty within 30 days after the bank has mailed the long form disclosures to the customer. (c) Special rule for solicitations using written mail inserts or “take one” applications. (1) Maintains sufficient documentation to show that the bank provided the acknowledgment of receipt of disclosures to the customer as required by this section; (2) Maintains sufficient documentation to show that the bank made reasonable efforts to obtain from the customer a written acknowledgment of receipt of the long form disclosures; and (3) Permits the customer to cancel the purchase of the contract without penalty within 30 days after the bank has mailed the long form disclosures to the customer. (d) Special rule for electronic election. et seq. [67 FR 58976, Sept. 19, 2002, as amended at 73 FR 22252, Apr. 24, 2008] § 37.8 Safety and soundness requirements. A national bank must manage the risks associated with debt cancellation contracts and debt suspension agreements in accordance with safe and sound banking principles. Accordingly, a national bank must establish and maintain effective risk management and control processes over its debt cancellation contracts and debt suspension agreements. Such processes include appropriate recognition and financial reporting of income, expenses, assets and liabilities, and appropriate treatment of all expected and unexpected losses associated with the products. A bank also should assess the adequacy of its internal control and risk mitigation activities in view of the nature and scope of its debt cancellation contract and debt suspension agreement programs. Appendix A to Part 37—Short Form Disclosures • This product is optional Your purchase of [PRODUCT NAME] is optional. Whether or not you purchase [PRODUCT NAME] will not affect your application for credit or the terms of any existing credit agreement you have with the bank. • Lump sum payment of fee [Applicable if a bank offers the option to pay the fee in a single payment] [Prohibited where the debt subject to the contract is a residential mortgage loan] You may choose to pay the fee in a single lump sum or in [monthly/quarterly] payments. Adding the lump sum of the fee to the amount you borrow will increase the cost of [PRODUCT NAME]. • Lump sum payment of fee with no refund [Applicable if a bank offers the option to pay the fee in a single payment for a no-refund DCC] [Prohibited where the debt subject to the contract is a residential mortgage loan] You may choose [PRODUCT NAME] with a refund provision or without a refund provision. Prices of refund and no-refund products are likely to differ. • Refund of fee paid in lump sum [Applicable where the customer pays the fee in a single payment and the fee is added to the amount borrowed] [Prohibited where the debt subject to the contract is a residential mortgage loan] [Either:] (1) You may cancel [PRODUCT NAME] at any time and receive a refund; or (2) You may cancel [PRODUCT NAME] within __ days and receive a full refund; or (3) If you cancel [PRODUCT NAME] you will not receive a refund. • Additional disclosures We will give you additional information before you are required to pay for [PRODUCT NAME]. [If applicable]: This information will include a copy of the contract containing the terms of [PRODUCT NAME]. • Eligibility requirements, conditions, and exclusions There are eligibility requirements, conditions, and exclusions that could prevent you from receiving benefits under [PRODUCT NAME]. [Either:] You should carefully read our additional information for a full explanation of the terms of [PRODUCT NAME] or Appendix B to Part 37—Long Form Disclosures • This product is optional Your purchase of [PRODUCT NAME] is optional. Whether or not you purchase [PRODUCT NAME] will not affect your application for credit or the terms of any existing credit agreement you have with the bank. • Explanation of debt suspension agreement [Applicable if the contract has a debt suspension feature] If [PRODUCT NAME] is activated, your duty to pay the loan principal and interest to the bank is only suspended. You must fully repay the loan after the period of suspension has expired. [If applicable]: This includes interest accumulated during the period of suspension. • Amount of fee [For closed-end credit]: The total fee for [PRODUCT NAME] is __. [For open-end credit, either:] (1) The monthly fee for [PRODUCT NAME] is based on your account balance each month multiplied by the unit-cost, which is ___; or • Lump sum payment of fee [Applicable if a bank offers the option to pay the fee in a single payment] [Prohibited where the debt subject to the contract is a residential mortgage loan] You may choose to pay the fee in a single lump sum or in [monthly/quarterly] payments. Adding the lump sum of the fee to the amount you borrow will increase the cost of [PRODUCT NAME]. • Lump sum payment of fee with no refund [Applicable if a bank offers the option to pay the fee in a single payment for a no-refund DCC] [Prohibited where the debt subject to the contract is a residential mortgage loan] You have the option to purchase [PRODUCT NAME] that includes a refund of the unearned portion of the fee if you terminate the contract or prepay the loan in full prior to the scheduled termination date. Prices of refund and no-refund products may differ. • Refund of fee paid in lump sum [Applicable where the customer pays the fee in a single payment and the fee is added to the amount borrowed] [Prohibited where the debt subject to the contract is a residential mortgage loan] [Either:] (1) You may cancel [PRODUCT NAME] at any time and receive a refund; or (2) You may cancel [PRODUCT NAME] within __ days and receive a full refund; or (3) If you cancel [PRODUCT NAME] you will not receive a refund. • Use of card or credit line restricted [Applicable if the contract restricts use of card or credit line when customer activates protection] If [PRODUCT NAME] is activated, you will be unable to incur additional charges on the credit card or use the credit line. • Termination of [PRODUCT NAME] [Either]: (1) You have no right to cancel [PRODUCT NAME]; or [And either]: (1) The bank has no right to cancel [PRODUCT NAME]; or • Eligibility requirements, conditions, and exclusions There are eligibility requirements, conditions, and exclusions that could prevent you from receiving benefits under [PRODUCT NAME]. [Either]: (1) The following is a summary of the eligibility requirements, conditions, and exclusions. [The bank provides a summary of any eligibility requirements, conditions, and exclusions]; or