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Negotiable Orders of Withdrawal (NOW) accounts, which in effect are interestbearing checking accounts. A provision of Public Law 94-22, signed on February 27, 1976, added Connecticut, Rhode Island, Maine, and Vermont to the list of States in which NOW accounts could be offered. Previously, they had been permitted only in Massachusetts and New Hampshire. This same legislation also amended the Truth in Lending Act to provide that cash discounts would not be regarded as interest for disclosure purposes and placed a 3-year ban on the imposition of surcharges on credit card purchases.

Approved on March 23, the Equal Credit Opportunity Act Amendments expanded the categories of prohibited discrimination in consumer credit transactions to include age, race, color, religion, national origin, and receipt of public assistance benefits, in addition to the existing prohibitions against discrimination because of sex or marital status. This law also gave rejected applicants the right to obtain specific reasons for the refusal of credit and raised the ceiling on class action liability to $500,000 (from $100,000) or 1 percent of the creditor's net worth, whichever is less.

The Consumer Leasing Act of 1976, which was also approved on March 23, made the Truth in Lending Act applicable to leases of consumer durables, such as automobiles and household goods, and required that the costs of the lease arrangement be clearly stated. It also created a presumption of unreasonableness if the final ("balloon") payment under the lease exceeded three times the average monthly payment. These new requirements of the Equal Credit Opportunity Act Amendments and the Consumer Leasing Act become effective on March 23, 1977, except for the increase in class action liability limits which became effective upon enactment.

A bill approved on August 3, 1976 (Public Law 94-375), contained provisions amending the National Flood Insur

ance Act to grant certain exemptions from the general statutory ban against mortgage lending by federally supervised financial institutions in identified flood hazard areas of communities not participating in the national flood insurance program. This legislation made permanent the existing temporary exemption permitting mortgage loans to be made for the purchase of existing, previously occupied residential dwellings. It also broadened this exemption to include loans to finance the purchase of existing small business properties and to permit owners of residential dwellings to renew or increase the financing on their homes. The new law further expanded this exemption to permit loans to finance improvements of existing residential structures, up to an aggregate of $5,000 per dwelling, and to finance farm improvements of a nonresidential, agricultural nature.

Legislation enacted late in the 94th Congress, the "Government in the Sunshine Act" (Public Law 94-409), requires all Federal agencies headed by two or more Presidential appointees to hold their meetings and to conduct agency business in the open after giving at least 1-week's notice of the time and place of their meetings. The agencies are required to keep transcripts, recordings, or detailed minutes of all closed agency meetings. The law contains a list of 10 exemptions from the open meeting requirements. The exemptions relating specifically to bank regulation matters include those covering trade secrets and confidential financial information, information contained in examination reports, and information which, if prematurely disclosed, would significantly endanger the stability of any financial institution. Agencies are required to issue implementing regulations by March 13, 1977.

Two provisions in the mammoth Tax Reform Act of 1976 (Public Law 94-455) which became law on October 4, 1976, are of particular interest to banks. An important step in the direction of financial

privacy for bank customers was taken in section 1205 of the act, which requires the Internal Revenue Service to provide, in most circumstances, at least 14 days' prior notice to any bank customer whose bank records it wishes to examine. Within this 14-day period, the customer may direct the bank in writing not to comply with the IRS administrative summons. The Service would then be required to obtain a court order to examine the records. Also, sections 1061-64 of the act provide that United States corporations

(including banks) actively participating in international boycotts not sanctioned by the United States can, in some circumstances, lose their foreign tax credits, foreign tax deferrals, and export subsidies.

Public Law 94-414 amended the Internal Revenue Code to permit banks in a holding company system to use a common trust fund maintained by one or more banks in the same affiliated group, without loss of the fund's tax-exempt status.

STATEMENTS BY CORPORATION DIRECTORS

PART FIVE

Statement by Frank Wille, on the Committee Print of the "Financial Reform Act of 1976"*

Mr. Chairman and Members of the Subcommittee:

I appreciate this opportunity to testify on the proposed "Financial Reform Act of 1976," a bill designed to reflect testimony and comments received in connection with your subcommittee's FINE Study "Discussion Principles." The bill also incorporates a number of provisions from the Senate-passed "Financial Institutions Act" (S. 1267), from legislative proposals by the Federal bank regulatory agencies designed to strengthen their available regulatory procedures to prevent and correct problem bank situations (S. 2304, H.R. 9743, and Title I of H.R. 10183), and from the FDIC's proposed "housekeeping" bill (S. 2233, H.R. 9742, and Title IV of H. R. 10183).

The bill before the subcommittee is long and complex. Many of its provisions are interrelated, and some, for technical consistency and clarification, may require amendments to Federal law beyond those presently contemplated. Because of the short time which has been available to analyze all the ramifications of the bill and its recently proposed amendments, I respectfully request that the FDIC be allowed to file for the record such additional comments and suggestions of both a technical and a substantive nature as may be appropriate in the light of our continued study of this important legislation.

On the substantive side, I have previously testified for the Corporation in general support of the objectives and provisions of the Senate-passed Financial Institutions Act, particularly those provisions which would enlarge the asset and

*Presented to the Subcommittee on Financial Institutions, Supervision, Regulation and Insurance, Committee on Banking, Currency and Housing, House of Representatives, March 16, 1976.

liability powers of thrift institutions, provide a Federal charter option for mutual savings banks, and schedule a gradual phasing out of the deposit rate ceilings presently found in Regulation Q and its FDIC counterpart. Naturally, the Corporation would favor those same provisions in the House bill, as well as those supervisory and housekeeping provisions which have been previously introduced at the FDIC's request and are now included in the same bill.

This morning I intend to confine my remarks**to five aspects included in or relevant to the proposed House bill:

the proposed restructuring of the Federal bank regulatory agencies, the requirement that the FDIC and the proposed Federal Banking Commission operate on appropriated funds,

the imposition of Federal Reserve reserve requirements on all State banks having third party payment accounts exceeding $15 million,

the need for a fresh look at the country's housing goals and incentives, and

the desirability of further legislation to mandate additional financial and operating disclosure on insured banks with fewer than 500 shareholders.

I. Agency Restructuring

My December 9 testimony before this subcommittee contained a specific, intermediate proposal for Federal bank agency restructuring which I think is superior to the provisions presently in the bill before you, because it would have consolidated

**In fairness to my successor as Chairman of the FDIC and to the Comptroller of the Currency who serves ex officio on the FDIC Board of Directors and will be presenting the views of his office tomorrow, these remarks should be considered personal observations of the present incumbent and not necessarily the present or future views of the FDIC.

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