Regulation AA
What Is Regulation AA?
Regulation AA (Unfair or Deceptive Acts or Practices) was a regulation made by the Federal Reserve intended to address practices by banks that were perceived as unfair by consumers. Regulation AA laid out the procedures used to handle objections registered by bank customers. This regulation applied to state member banks as it were. It was adopted in 1985 and canceled in 2016.
Grasping Regulation AA
Regulation AA was made in response to various consumer objections related to their banks that were not being addressed in an orderly way. Before Regulation AA, consumers felt that certain bank practices were unfair, for example, credit-related fees, confusion around credit practices, and different obligations.
The FTC Act permitted the Federal Trade Commission (FTC) to put in place regulations that would characterize and stop unfair practices to consumers. The FTC required the Board of Governors of the Federal Reserve to make comparative rules according to banks.
Regulation AA was made to carry lucidity to the credit practices followed by banks to safeguard consumers. Consumers who had grievances about their bank were directed to send them to the director of the Division of Consumer and Community Affairs at the Board of Governors in Washington, D.C.
Practices Prohibited by Regulation AA
Two subparts created Regulation AA. Subpart An illustrated the Federal Reserve's procedures for processing and answering consumer objections about unfair and misleading banking practices. Subpart B denied the utilization by banks of certain practices used to implement credit obligations in their contracts. The types of contract provisions disallowed under Subpart B included:
- Wage assignments
- [Admissions of judgment](/admission judgment)
- Security interests in household merchandise
- Waivers of exceptions
Banks were likewise disallowed from distorting the degree or nature of a cosigner's possible liability for a debt and from neglecting to illuminate a cosigner regarding this liability prior to the invasion of the debt. Besides, Regulation AA restricted banks from utilizing pyramided late fees. Pyramided late fees are the point at which a bank charges a late fee after a customer makes a full loan payment however didn't make a prior late fee on a previous payment.
Regulation AA likewise set out a cycle on how consumers ought to file a grievance in regards to a bank that they had worked with, and how the Board of Governors would answer this protest. This was intended to give consumers a reasonable comprehension and course of events of how their objections would be dealt with and answered. Regulation AA additionally remembered staff rules for how the regulation applied in various conditions, making it more straightforward to decide whether any unfair or misleading practice actually happened.
Cancelation of Regulation AA
The [Dodd-Frank Wall Street Reform and Consumer Protection Act](/dodd-frank-financial-administrative reform-bill) ended the Federal Reserve Board's power to make rules in regards to misleading or unfair banking practices, and accordingly Regulation AA was canceled with the entry of the Dodd-Frank Act.
Be that as it may, the Dodd-Frank Act moved this rulemaking authority to the Consumer Financial Protection Bureau (CFPB). The CFPB has issued the Interagency Guidance Regarding Unfair or Deceptive Credit Practices, which serve "to explain that the cancelation of the credit practices rule [as illustrated in Regulation AA] … ought not be understood as a determination by the Agencies that the credit practices depicted in these former regulations are [now] permissible."
Thus, any financial institution that participates in the credit practices formerly disallowed under Regulation AA might in any case be refered to for statutory infringement. Consumer objections against such practices can in any case be filed on the CFPB's website.
Features
- Two parts made up Regulation AA: Subpart An and Subpart B, illustrating grievance procedures and disallowing certain contract provisions.
- Regulation AA educated consumers on the most proficient method to file a grievance against state member banks and the procedures on how they would be answered.
- Regulation AA was made in 1985 and revoked in 2016.
- Regulation AA (Unfair or Deceptive Acts or Practices) was a regulation made by the Federal Reserve to address practices by banks that consumers accepted to be unfair.
- The creation of the Dodd-Frank Act brought about the annulment of Regulation AA; notwithstanding, institutions are as yet kept from taking part in acts denied by Regulation AA under the Consumer Financial Protection Bureau.
