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Reg. Z revision gives contract copy, not just a look, to customers

November 24, 2010

Customers need not be given two copies of a retail installment contract- one prior to signing and a second after the contract is signed-in order to comply with the federal Truth in Lending Act, following April 9 action by the Federal Reserve Board. Instead, it is sufficient to give the customer physical possession of the completed multi-copy contract to review before signing it, and then one of the contract copies after the customer signs.

On the other hand, it is not sufficient merely to show the contract to the customer and ask for it to be signed. The customer must be allowed to take physical possession of the contract to review it before signing. The changes to Regulation Z, which implements the Truth in Lending Act, advances the Fed's goal of aiding consumers in comparison-shopping for credit. "The disclosure requirement is satisfied," according to the Fed, "if the creditor gives a copy of the document containing the unexecuted credit contract and disclosures to the consumer to read and sign; and the consumer receives a copy to keep at the time the consumer becomes obligated.

To illustrate: A creditor gives a consumer a multiple-copy form containing a credit agreement and TILA disclosures. The consumer reviews and signs the form and returns it to the creditor, who separates the copies and gives one copy to the consumer to keep. The creditor has satisfied the disclosure requirement. Consumers must be permitted to take possession of the TILA disclosures in their entirety, "including any required information that may be on the reverse side or continued on the next page," according to the Fed ruling.

This is required even if the consumer does not sign and become obligated on the credit contract. A consumer who signs the contract must receive a copy of the disclosures to keep at that time, the Fed said. It is not sufficient to present a copy "within a reasonable time after consummation." The new parameters should eliminate the ability of plaintiffs to successfully sue dealers for failing to engage in the mechanical exercise of providing consumers with two copies of the combined credit contract with TILA disclosures before the deal is consummated.

Despite that relief, however, dealers must ensure their personnel carefully follow the new guidelines. When TILA disclosures are combined on the retail installment sales contract, dealers must:

• Give consumers a copy of the unsigned contact and ensure they have an opportunity to review the document before signing it.
• Allow consumers to keep the document if they do not sign it at the time.
• Give consumers who do sign the contract a copy of the document immediately after signing it. The Regulation Z revisions appear in full on the Federal Reserve's Web site at The NADA can field questions at 703-821-7040.