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FDIC Enforcement Decisions and Orders |
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Bank ordered to cease and desist from excluding the cost of credit life insurance from the finance charge while failing to make proper disclosures of such credit life insurance costs, in connection with consumer and agricultural loans.
[.1] Regulation ZFDIC Authority
[.2] Cease and Desist OrdersRemediesDisclosure
In the Matter of: * * * (INSURED
[.1] The Board of Directors, having considered the matter, concludes that the Bank violated the Truth in Lending Act and Regulation Z in a number of cases by failing to make any cost disclosure with respect to credit life insurance or by making inaccurate disclosure of the cost thereof and by failing to obtain a credit insurance authorization form at the time each loan was made to a particular customer. In view of these proven violations, the Board expressly finds it unnecessary to decide whether or not monthly rate disclosures of the cost of credit life insurance (as opposed to a total dollar cost disclosure) constituted violations of the Truth in Lending Act and Regulation Z in this case. In view of its authority under Section 108(e)(2)(A) of the Truth in Lending Act to require such remedial action as it deems equitable, the Board also expressly finds it unnecessary under the facts of this case to determine whether the Bank engaged in "clear and consistent pattern or practice of violations," or whether "immediately preceding examination" in Section 108(e)(3)(C)(i) of the Truth in Lending Act refers to the immediately preceding compliance examinations or also includes reference to safety and soundness examinations.
FINDINGS OF FACT AND
Accordingly, the Board of Directors adopts all the findings of fact, as well as those conclusions of law numbered 1 and 2, of the Administrative Law Judge, and the bases therefore, as set forth in his Recommended Decision, which are hereby incorporated by reference as part of this decision. As noted above, the Board of Directors expressly reserves decision on the question of whether monthly rate disclosures of credit life insurance cost constituted violations of the Truth in Lending Act and Regu-
{{4-1-90 p.A-114}}lation Z in this case and also reserves decision on the existence in this case of a "clear and consistent pattern or practice of violations" and on the meaning of "immediately preceding examination" for purposes of determining the restitution period. The Administrative Law Judge's reasoning and conclusions on these issues are not hereby adopted by the Board.
ORDER
The Board also hereby adopts in full the proposed order of the Administrative Law Judge as contained in his Recommended Decision, which is incorporated herein by reference, as its Final Order. This Order shall become effective at the expiration of thirty days after the service of the Order upon the Respondents.
FDIC-80-78b
Findings of Fact
1. The Bank, a corporation existing and doing business under the laws of the State of * * *, is and at all times pertinent hereto has been an insured State nonmember bank subject to Section 8(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(1)(Supp. III, 1979)), the Rules and Regulations of FDIC (12 C.F.R. Chapter III (1980)), and the laws of the State of * * *. (Bank's Answer to Notice of Charges and of Hearing ("Answer"), paragraph 1.)
(b) The following authorization cards had a premium cost of disclosure of .098¢ rather than the correct amount of 9.8¢ per $100 per month: * * * (01/14/79 authorization card); * * *; * * *; and * * *. (FDIC's Exhibit A-5).
Conclusion of Law
1. FDIC has jurisdiction of the Bank and the subject matter of this proceeding.
[.2] 2. As of May 27, 1980, the Bank violated Section 226.8(d)(3) of Regulation Z (12 C.F.R. 226.8(d)(3) (1980)) by excluding the cost of credit life insurance from the finance charge while failing to make proper disclosures of such credit life insurance costs, in connection with consumer and agricultural purpose loans.
Discussion
Under Section 8(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(1) (Supp. III, 1979))* the FDIC is authorized to issue and serve upon the Bank and its directors an Order to Cease and Desist from any violation of law or regulation established at an administrative hearing. The Order to Cease and Desist may require the Bank and its directors to take affirmative action to correct the conditions resulting from the violation of law or regulation. This Section 8(b)(1) authority, which is identical in every significant respect to that of the other federal financial regulatory agencies, grants the FDIC the power to take expeditions administrative action to correct specific violations of law, rule, or regulation, or any unsafe or unsound practice.
PROPOSED ORDER TO CEASE AND
1. The Bank and its Board of Directors forthwith shall cease and desist from violating Section 226.8(d)(3) of Regulation Z (12 C.F.R. 226.8(d)(3) (1980)).
/s/ Martin J. Linsky |
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Last Updated 6/6/2003 | legal@fdic.gov |