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FEDERAL
VOLUME 13

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NUMBER 189

Washington, Tuesday, September 28, 1948

TITLE 12 BANKS AND BANKING
Chapter II-Federal Reserve System Subchapter A Board of Governors of the Federal Reserve System
P art
222C o nsu m er
I nstalm ent C redit
CALCULATION OP $70 MONTHLY PAYMENTS

The following interpretation under this part relating to consumer instalment credit has been issued by the Board of Governors of the Federal Reserve System:
222.103 Calculation of $70 monthly payments. The Board has been asked about the application of P art 2 of 222.9 which specifies a maximum ma turity of 15 months for extensions of credit of $1,000 or less and a maximum maturity of 18 months for extensions of credit of more than $1,000 with the ex ception that for credits of more than $1,000 the instalment payments shall not be less than $70 per m onth. The par ticular question is whether the $70 figure applies to the total monthly payment or only to the amount of that payment ap plicable to the principal of the obligation not including interest or finance charge.
The instalment payment referred to in the $70 clause is the total monthly payment. An example of its use in con nection with the purchase of an auto mobile is as follows:
Purchase price___________________ $1 ,5 0 0 .0 0
Down p a y m en t___:_____ _________
500.00
Balance o f purchase p rice________
Insurance 15-18 m o n th s _______

1 ,0 0 0 .0 0
90.00

Unpaid b alan ce princip al a m o u n t ___________ ___________
1, 090.00
F inance charge a t 6 % for 18
m o n th s___________ ______________98.10
A m ount o f to ta l o b ligation ________ 1 ,1 8 8 .1 0
M onthly p a y m en t a t 18 m on th s___

66.01

As this amount of monthly payment is less than $70, the number of months over which the contract is payable must be reduced. The longest term available for this transaction with equal monthly pay ments would be 16 months as shown by the following calculation:
Unpaid balance as above-------------- $ 1 ,0 9 0 .0 0
F inance charge a t 6% for 16
m onth s ______ ______________ !_
87.20
A m ount o f to ta l o b lig a tio n ----------

1 ,1 7 7 .2 0

M onthly p aym ent at 16 m o n th s
73.58

In the usual case, the registrant will not heed to go through these calculations in detail as he will have an appropriate payment chart which will give him the , necessary figures directly.
The Board has also been asked about the application of Part 2 of 222.9 in cases where the insurance and finance charge are not separated and it is not possible to determine the exact princi pal amount. These are usually cases in which the obligation is purchased from a dealer by a financial institution which furnishes the dealer with charts showing the payments necessary for various bal ances purchase price less down pay ment, the cbst df insurance and the finance charge being included in the pay ments. The balances which can be financed at various maturities can be determined from the charts by following the principle that a balance can be financed at 18 months, at 17 months, or at 16 months if the payments specified in the chart applicable to the transaction for the particluar maturity desired are at least $70 per month.
This principle is illustrated by the fol lowing procedure. The registrant can ascertain from the chart the smallest balance which requires monthly pay ments of $70 or more with an 18-m0nths maturity. That balance and all larger balances may be written with an 18months maturity. If the chart shows payments for a 17-months maturity, the Registrant can ascertain the smallest balance which requires monthly pay ments of $70 or more with a 17-months maturity. That balance and all larger balances may be written with a 17months maturity. A similar procedure can be followed if the chart shows pay ments for a 16-months maturity. The charts will in many instances be set up by the financial institutions to show these breaking points and it is of course op tional with the financial institution whether or not it will take contracts with 16-months or 17-months maturities.
For ease in handling, the financial in stitution may prefer to omit the 16months and 17-months maturities, in which case no balance smaller than the balance which requires monthly pay ments of $70 or more with an 18-months maturity could be written with a matu rity of more than 15 months. Sec. 5 b , 40 Stat. 415, as amended, Pub. Law 905, 80th Cong.: 12 U. S. C. and Sup. 95 a, C on tin u ed on next page
CONTENTS
Agriculture Department
Pas
See also Federal Crop Insurance Corporation.
Rules and regulations:
Sugar; entry into continental U. S____________________ 5631
Alien Property, Office of
Notices:
Vesting orders, etc.;
Pluskat, Augusta---------------Reinert, Julius____________
Schmid, Albert-----------------

5636
5636
5636

Customs Bureau
Rules and regulations;
Liquidation of duties; conver sion of currency----------------

5630

Federal Communications Com mission
Notices :
Hearings, etc.:
Northern Virginia Broadcast ers, Inc. WARD________ 5634
Scripps-Howard Radio, Inc., et al__________________ 5634
Seaside Broadcasting Co. and Pioneer Broadcasters, Inc_ 5634
Proposed rule making:
Ship service______ :__ .______ 5632
Federal Crop Insurance Cor poration
Rules and regulations:
Flax crop insurance; continuous contracts for 1949 and suc ceeding crop years Corr._ 5631
Federal Power Commission
Notices:
Council Bluffs Gas Co. et al.;
hearing__ ________________

5634

Federal Reserve System
Rules and regulations:
Consumer instalment credit;
calculation of $70 monthly payments ________ ____ _ 5629
Federal Trade Commission
Notices;
Corn Products Refining Co. et aL; hearing------------------ 5635
Housing Expediter, Office of
Rules and regulations:
Delegations of authority; revo cation of part____________ 5632
5629