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gage pursuant to a home purchase. Taxes and official fees do not have to be included in the annual percentage rate. Normal settlement fees do not have to be included if they are separately disclosed to the purchaser. These settlement fees include title examination, insurance, fees for preparation of deeds and other documents, escrows for future payment of taxes and insurance, notary fees, appraisal fees, and credit report fees.
The law applies to all consumer credit transactions whether they involve installment purchases or loans or open-end credit plans, such as revolving charge plans. A flat minimum charge need not be included in the computation of the annual rate if the charges do not exceed specific amounts. In the case of revolving credit plans, minimum charges of 50 cents a month or less need not be included. In installment transactions of less than $75, a total finance charge of $5 or less need not be included. If the transaction is $75 or more then the minimum amount is $7.50.
Finally, title I regulates credit advertising. Briefly, it provides that if an advertiser mentions a single credit term in his advertisement then he must make full disclosure, which includes the dollar amount of the finance charge, the finance charge expressed as an annual percentage rate, the down payment if any, the number, amount, and due dates of the payments.
This title outlaws extortionate credit transactions, sometimes known as loan sharking, and provides for stiff criminal penalties for its violation. An extortionate extension of credit is defined as one where the understanding of the creditor and the debtor is that violence or other criminal means will be employed to insure its collection.
This title deals with the garnishment of wages and is the first Federal legislation in this field. The new Federal law provides that 75 percent of an employees wages, after taxes and other legally required deductions, shall be exempt from garnishments. There is a $48 floor. This means that the garnishment will not apply to that portion of an employee's earnings which are $48 a week or less. In other words, the law guarantees $48 a week take home pay which cannot be subject to garnishment. The $48 floor is determined by multiplying the Federal minimum wage by 30. Thus the floor will increase over time as the Federal minimum wage is increased. The Federal law does not apply where State laws contain similar or less restrictive provisions.
TITLE IV-THE COMMISSION ON CONSUMER FINANCE
This Commission will be composed of three Members of the House of Representatives, three Members of the Senate, and three public members appointed by the President. The Commission is charged with an overall study of consumer credit practices in this country, and must make its report and recommendations to the Congress by January 1, 1971. The law specifically asks for a recommendation as to the advisability or Federal chartering of consumer finance companies.
TITLE V-MISCELLANEOUS PROVISIONS
Title V provides that the disclosure provisions shall become effective on July 1, 1969, and the garnishment provisions are effective July 1, 1970. All other provisions are effective as of the date of enactment. The enforcement of the law is to be handled by various Government agencies. The Federal Reserve Board has general regulatory authority and supervisory functions with regard to the disclosure provisions. However, actual enforcement is left to the appropriate Government agency. The Comptroller of Currency is responsible for national banks, the Federal Reserve Board for enforcement over its member banks, the Federal Home Loan Bank Board for institutions under its jurisdictions, the Bureau of Federal Credit Unions over credit unions, the CAB over air carriers and so on. The Secretary of Labor has enforcement responsibility for the garnishment provisions and, of course, the Department of Justice for the loan-sharking provisions.
PAYROLL SAVINGS DEDUCTIONS FOR FEDERAL
[Public Law 90-365, approved June 29, 1968]
To amend section 3620 of the Revised Statutes with respect to payroll deductions for Federal employees
PURPOSE OF LEGISLATION
The purpose of Public Law 90-365 is to permit Federal employees to save through the payroll savings plan. The statute permits Federal employees to have up to two payroll deductions for deposit with commercial banks, savings banks, credit unions, or savings and loan associations. The statute also permits the remainder of an employee's check to be deposited in a checking account or other savings account. The Government will be reimbursed for the additional cost of providing the payroll deductions by the financial institution receiving the deduction. The system will be administered pursuant to regulations prescribed by the Secretary of the Treasury.
HISTORY OF LEGISLATION
A payroll deduction bill applicable only to Federal credit unions (S. 1084) was introduced by Senator John Sparkman on February 27, 1967. The bill was referred to the Committee on Banking and Currency, and hearings were held before the Subcommittee on Financial Institutions on July 11, 1967. The committee expanded the bill by authorizing payroll deductions for other depository-type financial institutions such as commercial banks, savings banks, and savings and loan associations. The committee also permitted payroll savings deductions for two depository institutions instead of one. The committee reported the bill as amended on October 9, 1967, and the bill passed the Senate on October 11.
The House Committee on Banking and Currency held hearings on November 3 on H.R. 6157, a payroll deduction bill which applied
only to the Federal credit unions. The House committee reported the bill on November 7, 1967, and it passed the House on February 5, 1968. It was referred to the Senate Committee on Banking and Currency on February 6. On June 11, 1968, the Senate committee considered H.R. 6157 in executive session and approved an amendment deleting the House language and substituting the provisions of the previously passed Senate bill (S. 1084). As amended, H.R. 6157 thus authorized payroll deductions for all depository-type financial institutions. Because of the unique problems of the HouseSenate payroll system, an additional amendment was approved removing House and Senate employees from the scope of the bill. This bill, as amended, was reported by the Senate Committee on Banking and Currency on June 12, 1968, and agreed to by the Senate on June 13, 1968. On June 17, 1968, the House agreed to the Senate amendments and on June 29, the bill was signed into Law.
DIGEST OF STATUTE
Public Law 90-365 amends section 3620 of the Revised Statutes, as amended (31 U.S.C. 492). The legislation provides that the heads of Federal agencies shall authorize payroll savings deductions when requested by a Federal employee.
The employee would be entitled to two automatic payroll savings deductions which would be sent by the agency directly to the savings institution designated by the employee. Eligible savings institutions include credit unions, savings banks, savings and loan associations, and commercial banks.
In addition, if the employee so requests, the heads of Federal agencies are required to send the remainder of the employee's check to a third financial institution designated by the employee.
The legislation also requires that the Federal agency be reimbursed for the additional cost of providing payroll savings deductions. When an employee elects to have his check sent to two or three savings institutions, the Federal agency shall be reimbursed for the additional cost of processing the one or two checks in the smallest amount.
For purposes of the legislation, "agency" means any department, agency, independent establishment, or other establishment in the executive, legislative (except the Senate and House of Representatives), or judicial branch, any wholly owned or controlled Government corporation, and the municipal government of the District of Columbia.
SAVINGS AND LOAN HOLDING COMPANIES
[Public Law 90-255, approved February 14, 1968]
To amend section 408 of the National Housing Act, as amended, to provide for the regulation of savings and loan holding companies and subsidiary companies
PURPOSE OF LEGISLATION
The purpose of Public Law 90-255, is to provide the Federal Savings and Loan Insurance Corporation, which is administered by the Federal
Home Loan Bank Board, with additional authority over the activities of savings and loan holding companies. The legislation provides for the registration of holding companies and would require periodic reports to be filed with the Federal Home Loan Bank Board. The Board is also given additional authority to examine and investigate the activities of savings and loan holding companies.
The legislation also tightens up several potential loopholes in existing law which restrict financial transactions between subsidiary savings and loan associations and the parent holding company or its affiliates. The legislation guards against potential conflicts of interest by requiring holding companies which control two or more associations to divest themselves of activities unrelated to the savings and loan business. In addition, the Federal Home Loan Bank Board is given authority to control the debt structure of savings and loan holding companies predominantly in the savings and loan business. The purpose of this control is to prevent an excessive holding company debt structure from exerting undue pressure for dividend payments on the part of the subsidiary savings and loan associations.
Finally, future interstate holding companies are prohibited, although existing interstate holding companies are permitted to retain their present associations.
HISTORY OF LEGISLATION
The existing law on savings and loan holding companies was passed in 1959 and was regarded as a temporary measure until the Congress could evolve a permanent policy on savings and loan holding companies. The 1959 law (the Spence Act, sec. 408 of the National Housing Act, 12 U.S.C. 1730a) froze existing holding companies at their present level. Holding companies were prohibited from acquiring additional savings and loan associations although new holding companies could be formed to control one association.
In addition, the Spence Act prohibited certain financial transactions between the associations and the parent holding company or its subsidiaries. A subsidiary association was prohibited from investing in securities of the parent holding company or its subsidiaries; accepting such securities as collateral for loans to third parties; purchasing such securities under repurchase agreements; or otherwise extending credit to the holding company or its subsidiaries.
Section 408 (g) (2) of the Spence Act required the Federal Home Loan Bank Board to conduct a comprehensive survey of the savings and loan holding company industry and to report to the Congress within 1 year as to the need for and feasibility of additional legislation in the holding company area. In response to this requirement, the Board reported to the Congress on May 31, 1960, and recommended in general. terms a number of provisions to strengthen the Spence Act.
Legislation to mplement these recommendations was prepared by the Board and introduced in the 88th Congress S. 3244-and the 89th Congress S. 2329. Hearings were not scheduled on these bills. The President, in his Economic Report for 1966 and 1967, recommended stronger regulation of the savings and loan holding companies. Accordingly on April 14, 1967, the Chairman of the Federal Home Loan Bank Board, Mr. John E. Horne, transmitted a bill to the Congress with advice from the Bureau of the Budget that enact-
ment of the proposed legislation would be in accord with the program of the President. S. 1542, was introduced, by request, by Senator Sparkman on April 14, 1967. Hearings were held before the full Banking and Currency Committee on June 5, 6, and 7, 1967. The bill was reported to the Senate by Senator Proxmire on June 23, 1967 (S. Rept. 354), and it was passed by the Senate on June 26, 1967. The House Banking and Currency Committee reported a similar bill on December 6, 1967
The legislation was passed by the House of Representatives on January 23, 1968. The Senate concurred in the House amendments on January 30, 1968, and on February 14, 1968, the legislation was signed into law.
DIGEST OF STATUTE
Section 408 of the National Housing Act (12 U.S.C. 1730a) is amended as follows:
Subsection (a)-Definitions.—(1) As defined in the previous statute, the term "company" includes any corporation, business trust, association, or similar organization. Under the new legislation, a "company" would be defined as "any corporation, partnership, trust, joint-stock company, or similar organization".
Control of one insured institution by any company would make that company a "savings and loan holding company" under the legislation.
Any savings and loan holding company that controls two or more insured institutions is a "multiple savings and loan holding company"; and a "diversified savings and loan holding company" is any savings and loan holding company whose subsidiary insured institution and related activities, as permitted under paragraph (2) of subsection (c) of the act, represented less than 50 percent of its consolidated net worth at the close of the preceding fiscal year and of its consolidated net earnings for such fiscal year, as determined in accordance with regulations issued by the Federal Savings and Loan Insurance Corporation ("Corporation").
A "subsidiary" is defined as any company which is controlled by a "person" (i.e., an individual or a company) or by a company which is a subsidiary of such person. Any person which controls, is controlled by, or is under common control with, an insured institution would be an "affiliate" of that institution.
(2) The definition of "control" in the Act is more comprehensive, but requires a higher percentage of stock ownership, than the definition in the previous statute. Under the act a person would be deemed to have "control" of an insured institution or other company, if the person directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, (A) owns, trols, or holds with power to vote, or holds proxies representing, more than 25 percent of the voting shares of such insured institution, or controls in any manner the election of a majority of the directors of such institution, or (B) owns, controls, or holds with power to vote, or holds proxies representing, more than 25 percent of the voting shares or rights of such other company, or controls in any manner the election or appointment of a majority of the directors or trustees of such other company, or is a general partner in or has contributed more than 25 percent of the capital of such other company. As used