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Register January 2006 No. 601
Chapter DFI-SL 22
DEBT CANCELLATION CONTRACTS AND DEBT SUSPENSION AGREEMENTS
DFI-SL 22.01   Definitions.
DFI-SL 22.02   Prohibited practices.
DFI-SL 22.03   Refunds of fees in the event of termination or prepayment of the covered loan.
DFI-SL 22.04   Method of payment of fees.
DFI-SL 22.05   Disclosures.
DFI-SL 22.06   Affirmative election to purchase and acknowledgement of receipt of disclosures required.
DFI-SL 22.07   Safety and soundness requirements.
Ch. DFI-SL 22 Note Note: This chapter takes effect on April 1, 2006, except for those provisions comparable to the provisions of 12 CFR sec. 37 that are subject to a delayed effective date by the United States Office of the Comptroller of Currency. These provisions shall become effective when the comparable provisions of 12 CFR sec. 37 become effective. The administrator for the division of banking shall issue interpretive letters confirming which provisions of this chapter have become effective and the effective date of these provisions.
DFI-SL 22.01 DFI-SL 22.01Definitions. In this chapter:
DFI-SL 22.01(1) (1) “Actuarial method" means the method of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and any remainder is subtracted from, or any deficiency is added to, the unpaid balance of the amount financed.
DFI-SL 22.01(2) (2) “Association" has the meaning set forth in s. 215.01 (1), Stats.
DFI-SL 22.01(3) (3) “Closed-end credit" means consumer credit other than open-end credit as defined in this section.
DFI-SL 22.01(4) (4) “Contract" means a debt cancellation contract or a debt suspension agreement.
DFI-SL 22.01(5) (5) “Customer" means an individual who obtains an extension of credit from an association primarily for personal, family or household purposes.
DFI-SL 22.01(6) (6) “Debt cancellation contract" means a loan term or contractual arrangement modifying loan terms under which an association agrees to cancel all or part of a customer's obligation to repay an extension of credit from that association upon the occurrence of a specified event. The agreement may be separate from or a part of other loan documents.
DFI-SL 22.01(7) (7) “Debt suspension agreement" means a loan term or contractual arrangement modifying loan terms under which an association agrees to suspend all or part of a customer's obligation to repay an extension of credit from that association upon the occurrence of a specified event. The agreement may be separate from or a part of other loan documents. “Debt suspension agreement" does not include loan payment deferral arrangements in which the triggering event is the borrower's unilateral election to defer repayment or the association's unilateral decision to allow a deferral of repayment.
DFI-SL 22.01(8) (8) “Open-end credit" means consumer credit extended by an association under a plan in which:
DFI-SL 22.01(8)(a) (a) The association reasonably contemplates repeated transactions;
DFI-SL 22.01(8)(b) (b) The association may impose a finance charge from time to time on an outstanding unpaid balance; and
DFI-SL 22.01(8)(c) (c) The amount of credit that may be extended to the customer during the term of the plan, up to any limit set by the association, is generally made available to the extent that any outstanding balance is repaid.
DFI-SL 22.01(9) (9) “Residential mortgage loan" means a loan secured by 1-4 family, residential real property.
DFI-SL 22.01 History History: CR 05-045: cr. Register January 2006 No. 601, eff. 4-1-06.
DFI-SL 22.02 DFI-SL 22.02Prohibited practices.
DFI-SL 22.02(1) (1) Anti-tying. An association shall not extend credit or alter the terms or conditions of an extension of credit conditioned upon the customer entering into a debt cancellation contract or debt suspension agreement with the association.
DFI-SL 22.02(2) (2)Misrepresentations generally. An association shall not engage in any practice or use any advertisement that is false, misleading or deceptive, or which omits to state material information, or otherwise would cause a reasonable person to reach an erroneous belief with respect to information that may be disclosed under this section.
DFI-SL 22.02(3) (3)Prohibited contract terms. An association shall not offer debt cancellation contracts or debt suspension agreements that contain any of the following:
DFI-SL 22.02(3)(a) (a) Terms giving the association the right unilaterally to modify the contract unless the modification is favorable to the customer and is made without additional charge to the customer, or the customer is notified of any proposed change and is provided a reasonable opportunity to cancel the contract without penalty before the change goes into effect.
DFI-SL 22.02(3)(b) (b) Terms requiring a lump sum, single payment for the contract payable at the outset of the contract, where the debt subject to the contract is a residential mortgage loan.
DFI-SL 22.02 History History: CR 05-045: cr. Register January 2006 No. 601, eff. 4-1-06.
DFI-SL 22.03 DFI-SL 22.03Refunds of fees in the event of termination or prepayment of the covered loan.
DFI-SL 22.03(1)(1) Refunds. If a debt cancellation contract or debt suspension agreement is terminated, including when the customer prepays the covered loan, the association shall refund to the customer any unearned fees paid for the contract unless the contract provides otherwise. An association may offer a customer a contract that does not provide for a refund only if the association also offers that customer a bona fide option to purchase a comparable contract that provides for a refund.
DFI-SL 22.03(2) (2)The method of calculating refund. The association shall calculate the amount of a refund using a method at least as favorable to the customer as the actuarial method.
DFI-SL 22.03 History History: CR 05-045: cr. Register January 2006 No. 601, eff. 4-1-06.
DFI-SL 22.04 DFI-SL 22.04Method of payment of fees. Except as provided in s. DFI-SL 22.02 (3), an association may offer a customer the option of paying the fee for a contract in a single payment, provided the association also offers the customer a bona fide option of paying the fee for that contract in monthly or other periodic payments. If the association offers the customer the option to finance the single payment by adding it to the amount the customer is borrowing, the association shall also disclose to the customer, in accordance with s. DFI-SL 22.05, whether and, if so, the time period during which, the customer may cancel the agreement and receive a refund.
DFI-SL 22.04 History History: CR 05-045: cr. Register January 2006 No. 601, eff. 4-1-06.
DFI-SL 22.05 DFI-SL 22.05Disclosures.
DFI-SL 22.05(1) (1) Content of short form of disclosures. The short form of disclosures required by this section shall include information relating to any of the following that is appropriate to the product offered:
DFI-SL 22.05(1)(a) (a) That the product is optional.
DFI-SL 22.05(1)(b) (b) Lump sum payment of fee.
DFI-SL 22.05(1)(c) (c) Lump sum payment of fee with no refund.
DFI-SL 22.05(1)(d) (d) Refund of fee paid in lump sum.
DFI-SL 22.05(1)(e) (e) Any additional disclosures.
DFI-SL 22.05(1)(f) (f) Eligibility requirements, conditions and exclusions.
DFI-SL 22.05(2) (2)Content of long form disclosures. The long form of disclosures required by this section shall include information relating to any of the following that is appropriate to the product offered:
DFI-SL 22.05(2)(a) (a) That the product is optional.
DFI-SL 22.05(2)(b) (b) An explanation of debt suspension agreement.
DFI-SL 22.05(2)(c) (c) The amount of fee.
DFI-SL 22.05(2)(d) (d) Lump sum payment of fee.
DFI-SL 22.05(2)(e) (e) Lump sum payment of fee with no refund.
DFI-SL 22.05(2)(f) (f) Refund of fee paid in lump sum
DFI-SL 22.05(2)(g) (g) Use of card or credit line restricted.
DFI-SL 22.05(2)(h) (h) Termination of product.
DFI-SL 22.05(2)(i) (i) Eligibility requirements, conditions and exclusions.
DFI-SL 22.05 Note Note: Copies of the short and long form, and instructions for using them may be obtained by writing to the Department of Financial Institutions, Division of Banking, P.O. Box 7876, Madison, WI 53707-7876 or by downloading it from the department's website, www.wdfi.org. Short form disclosures made in a form that is substantially similar to the disclosures available from the department will satisfy the short form disclosure requirement of this section. Long form disclosures made in a form that is substantially similar to the disclosures available from the department will satisfy the long form disclosure requirements of this section.
DFI-SL 22.05(3) (3)Disclosure requirement, and timing and method of disclosures.
DFI-SL 22.05(3)(a)(a) Short form disclosures. The association shall make the short form disclosures orally at the time the association first solicits the purchase of a contract.
DFI-SL 22.05(3)(b) (b) Long form disclosures. The association shall make the long form disclosures in writing before the customer completes the purchase of the contract. If the initial solicitation occurs in person, the association shall provide the long form disclosures in writing at that time.
DFI-SL 22.05(3)(c) (c) Transactions by telephone. If the contract is solicited by telephone, the association shall provide the short form disclosures orally and shall mail the long form disclosures, and, if appropriate, a copy of the contract to the customer within 3 business days, beginning on the first business day after the telephone solicitation.
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Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published.