material is entirely educational in nature and does not contain or refer to any particular commercial product, service, or company. In addition, such experts in the field of personal commercial affairs may provide expert advice to those conducting such educational programs, but may not take parts in orientation lectures or individual counseling.

(b) The local military commander will also make qualified personnel and facilities available for individual counseling on loans and consumer credit transactions in order to encourage thrift and financial responsibility and promote a better understanding of the wise use of credit. Legal assistance programs will continue to encourage individual military members to seek advice from the judge advocate or their own lawyer before making substantial loan or credit commitments. The counseling service and the orientation lectures should include information regarding the need for a full disclosure of the terms of the agreement, how finance and interest rates are quoted and computed, the standards of fairness which should be observed, and the DoD forms available for this purpose. See § 43.9 and Attachment A to this part.

(c) The DoD expects that commercial enterprises soliciting military personnel through advertisements appearing in unofficial military publications will voluntarily observe, or will be requested by the publisher to observe, the highest business ethics in describing goods, services, and commodities and the terms of sale (including guarantees, warranties, etc.). If credit terms are offered in such advertisements, a clear statement of the total cash price as well as the total cost of credit, including all charges, should be shown clearly in the company's advertisements. If time payments are shown, the number of payments, the amount of each, and the time period should also be shown in order that the reader can easily compute the dollar cost of the loan. § 43.7

ity.

Exercise of "off-limits" author

(a) In appropriate cases a military commander may use the services of the Armed Forces Disciplinary Control Board to investigate reports that cash or consumer credit transactions offered military personnel by a business establishment are usurious, fraudulent, misleading, or deceptive. Should it be determined that the commercial establish

ment engages in such practices, that it has not taken corrective action upon being duly notified, and that the health, morale, and welfare of military personnel would be served thereby, the Armed Forces Disciplinary Control Board may recommend that the offending business establishment be declared "off-limits" to all military personnel. The procedures for making these determinations are set out in Joint Regulations, “Armed Forces Disciplinary Control Boards" (AR 15-3, DSAR 5725.1, BUPERSINST 1620.4, AFR 125-11, MCO 1620.1, COMDTINST 1620.1) March 12, 1965.

(b) A Secretary of a Military Department or the Secretary of Defense, upon receiving information that a company conducting cash or consumer credit transactions with members of the Armed Forces on a nation-wide or international basis is engaged in widespread usurious, fraudulent, or deceptive practices, may direct appropriate Armed Forces Disciplinary Control Boards in all geographical areas in which these practices have occurred to investigate the charges and take appropriate action.

(a) A member of the Armed Forces is expected to pay his just financial obligations in a proper and timely manner. A "just financial obligation" means one acknowledged by the military member in which there is no reasonable dispute as to the facts or the law, or one reduced to judgment which conforms to the Soldiers' and Sailors' Civil Relief Act (50 U.S. Code, App. 501, et seq.), if applicable. "In a proper and timely manner" means a manner which the military department concerned determines does not, under the circumstances, reflect discredit on the military service.

(b) However, the military departments are without legal authority to require a member to pay a private debt, or to divert any part of his pay for the satisfaction thereof even though the indebtedness may have been reduced to judgment by a civil court. The enforcement of the private obligations of a military member is a matter for civil authorities.

(c) Those desiring to contact a military member about his indebtedness may obtain the member's address by writing to the locator service of the military department concerned and enclosing $1.50 as a fee for the service.

§ 43.9

Standards of fairness and full disclosure by lenders and sellers.

(a) The Department recognizes that a great majority of those engaged in making loans and extending credit to military personnel deal fairly and justly. Attachment A to this part describes the principal standards (Part I) which are considered to characterize fair and just dealing with servicemen; and itemizes the information (Part II) which the serviceman needs to know in order to be fully informed on the terms of the contract. Adherence to these standards and disclosure of this information in advance places both parties squarely on notice of their respective obligations, discourages improvident loans, and reduces cases of default.

(b) Those who sell or loan to military personnel are expected to subscribe to the standards of fairness and to make full disclosure before the loan or credit agreement or contract is executed. Because banks and credit unions operating on military installations owe a special responsibility to deal fairly with those assigned to or employed on the installation, they must conform to the requirements of Attachment A to this part before executing the loan or credit agreement or contract.

(c) The itemized information required in Part II of Attachment A to this part may be presented to the serviceman in the form most convenient to the seller or lender, as long as all of the information is disclosed and a copy is provided to the borrower.

§ 43.10 Processing debt complaints.

(a) With the growth of borrowing opportunities and consumer credit, the military departments have been called upon, with increasing frequency, to provide assistance in the processing of debt complaints growing out of such transactions. While many of these requests involve loan and credit transactions which are fair and reasonable, others involve transactions in which the full cost of credit has not been stated simply and clearly in advance. Further, some of these transactions levy exorbitant charges and other unreasonable obligations against the military debtor. Under such circumstances, the Department will not use its facilities and personnel in

processing such debt complaints through military channels. For the purpose of this part, lenders also include all financial institutions (such as centralized charge systems) which, although not a party to the original transaction, seek assistance in the collection of debts.

(b) In all loan and credit transactions subject to this part, the military department concerned will refer letters charging military members with indebtedness through military channels to the debtor only under the conditions set forth in subparagraph (1) or (2) of this paragraph.

(1) Lenders and creditors completing Attachment A to this part before executing the loan or credit contract must submit a copy of Part II (Full Disclosure) and Part III (Certificate of Compliance) to the commanding officer of the military member concerned or, if unknown, to his military department for forwarding to the military member concerned.

(2) Those not executing Attachment A to this part before consummating the loan or credit contract (or who are unable to produce a copy thereof signed by both parties) must submit an executed copy of Part II (Full Disclosure) and Part III (Certificate of Compliance). Requests for assistance which fail to meet these requirements and which are not modified after the sender has been so notified, will not be acted upon.

(c) Those claims in which there is questionable compliance with these requirements, or in which the cost of the loan or credit, including all finance charges, although stated, appear excessive or exorbitant, will be referred to the officer responsible for such consideration and disposition as may be appropriate. Before deciding on a proper course of action, the appropriate officer will give the creditor an opportunity to demonstrate (1) that the finance charges conform to the law of the State governing the contract and (2) the extent to which the finance charges and rates conform to the prevailing rates and charges for similar consumer credit transactions.

(d) Additionally, the fact that a particular claim is exempt from the requirements of Full Disclosure and Standards of Fairness under paragraph (e) of this section (e.g., an open-end or revolving charge account), does not foreclose the right by the debtor to question service charges and other finance charges and

to negotiate a fair and reasonable settlement.

(e) The following types of debt complaints are not subject to the processing requirements of paragraph (b) of this section; claims by accommodation endorsers, comakers or lenders against the party primarily liable on obligations not intended to benefit the accommodating party through payment of interest or otherwise; contracts for the purchase, which the total unpaid amount does not sale or rental of real estate; claims in exceed $50; claims for support of dependents; claims based on a revolving or open-end credit account if the account shows the periodic rate and its annual rate equivalent and the balance to which it is applied to compute the charge; or purchase money liens on real property (this does not include other liens on real property and related obligations such as those which represent obligations for improvement or repair).

PART I-STANDARDS OF FAIRNESS

1. No finance charge contracted for, made, or received under any contract shall be in excess of the charge which could be made for such contract under the law of the place in which the contract is signed by the serviceman. In the event a contract is signed with a U.S. company in a foreign country the lowest interest rate of the State or States in which the company is chartered or does business shall apply.

2. No contract or loan agreement shall provide for an attorney's fee in the event of default unless suit is filed in which event the fee provided in the contract shall not exceed 10 percent of the obligation found due. No attorney fees shall be authorized if he is a salaried employee of the holder.

3. In loan transactions, defenses which the debtor may have against the original lender or its agent shall be good against any subsequent holder of the obligation. In credit transactions, defenses against the seller or its agent shall be good against any subsequent holder of the obligation provided that the holder had actual knowledge of the defense or under conditions where reasonable inquiry would have apprised him of this fact.

4. The debtor shall have the right to remove any security for the obligation beyond State or national boundaries if he or his family moves beyond such boundaries under military orders and notifies the creditor in advance of the removal, of the new address where the security will be located. Removal of the security shall not accelerate payment of the obligation.

5. No late charge shall be made in excess of 5 percent of the late payment, or $5., which ever is the lesser amount. Only one late charge may be made for any tardy installment.

6. The obligation may be paid in full at any time or through accelerated payments of any amount. There shall be no penalty for prepayment and in the event of prepayment that portion of the finance charges which have inured to the benefit of the seller or creditor shall be prorated on the basis of the charges which would have been ratably payable had finance charges been calculated and payable as equal periodic payments over the terms of the contract and only the prorated amount to the date of prepayment shall be due. As an alternative the "Rule of 78" may be applied, in which case its operation shall be explained in the contract.

7. No charge shall be made for an insurance premium or for finance charges for such premium unless satisfactory evidence of a policy, or insurance certificate where State insurance laws or regulations permit such certificates to be issued in lieu of a policy, reflecting such coverage has been delivered to the debtor within 30 days after the specified date of delivery of the item purchase or the signing of a cash loan agreement.

8. If the loan or contract agreement provides for payments in installments, each payment, other than the down payment, shall be in equal or substantially equal amounts, and installments shall be successive and of equal or substantially equal duration.

9. If the security for the debt is repossessed and sold in order to satisfy or reduce the debt, the repossession and resale will meet the following conditions: (a) The defaulting purchaser will be given advance written notice of the intention to repossess; (b) following repossession, the defaulting purchaser will be served a complete statement of his obligations and adequate advance notice of the sale; (c) he will be permitted to redeem the item by payment of the amount due before the sale, or in lieu thereof submit a bid at the sale; (d) there will be a solicitation for a minimum of three sealed bids unless sold at auction; (e) the party holding the security, and all agents thereof, are ineligible to bid; (f) the defaulting purchaser will be charged only those charges which are reasonably necessary for storage, reconditioning and resale and (g) he shall be provided a written detailed statement of his

Solution:

Step 1-Divide the finance charge by the total amount to be financed and multiply by $100. This gives the finance charge per $100 of amount to be financed. That is, $38÷$250X$100-$15.20. Step 2-Follow down the left hand column of the table to the line for 24 months. Follow across this line until you find the two numbers between which the finance charge of $15.20 falls. In this example $15.20 falls between $14.66 and $15.80. Reading up between the two columns of figures you will see that the annual percentage rate is 14 percent. For the purpose of this directive the annual percentage rate is the rate appearing at the head of the two columns between which the finance charge per $100 of total amount to be financed falls. (If the finance charge per hundred falls exactly on a tabular value, the lower percentage rate may be used.)

.

$0.40 $0.44 $0.48 $0. 52 $0.56 $0.60 $0.65 $0.71 $0.79 $0.88 $0.96 $1.04 $1. 12 $1. 21 $1.29 $1. 42 $1.58 $1.75 $1.92 $2.08 $2.25 $2.42 $2.62 $2.88 $3.12 59 66 72 .78 .84 .91 .97 1.06 1.19 1.31 1.44 1.57 1.69 1.82 1.94 2. 13 2.38 2.63 2.88 3. 14 3.39 3.64 3.95 .79 .88 96 1.04 1.13 1.21 1. 29 1.42 1.59 1.76 1.92 2.09 2.26 2.43 2.59 2.85 3.18 3. 52 3.86 4. 20 4.53 4.87 5.30 .99 1.10 1.20 1.31 1.41 1.51 1.62 1.78 1.99 2.20 2.41 2.62 2.83 3.04 3.25 3.57 3.99 4.41 4.84 5.26 5.69 6.11 6.65 1.19 1.32 1.44 1.57 1.69 1.82 1.95 2.13 2.39 2.64 2.89 3.15 3.40 3.65 3.91 4.29 4.80 5.31 5.82 6.34 6.85 7.37 8.01 1.39 1.54 1.68 1.83 1.98 2.13 2.27 2.49 2.79 3.08 3.38 3.68 3.97 4.27 4.57 5.02 5.61 6.21 6.81 7.42 8.02 8.63 9.39

1.59 1.76 1.93 2.09 2.26 2.43 2.60 2.85 1.79 1.98 2.17 2.36 2.55 2.74 2.93 3.21 1.99 2.20 2.41 2.62 2.83 3.05 3.26 3.57 4.00

2.19 2.42 2.65 2.89 3.12 3.35 3.59 3.94 4.41 2.39 2.64 2.90 3.15 3.41 3.66 3.92 4.30 4.81 2.59 2.87 3.14 3.42 3.69 3.97 4.25 4.66 5. 22

7. 29

4.33 4.71

5.80

6.31

7.93

5. 23 5.90

4.88 5.35 5.82 6. 29 6.77 7.24 7.96 8.91 9.88 10. 84 5.33 5.84 6.36 6.88 7.40 7.92 8.70 9.75 10. 80 11.86 8.03 8.59 9.45 10. 59

11. 74

12. 89

5.75 6.43 7.12 7.81 8.51 9.20 9. 90 10. 77 6.48 7.26 8.03 8.82 9.60 10. 39 11.18 12. 17 6.57 7.22 8.08 8.95 9.83 10. 70 11. 58 12. 47 13. 58 12. 79 13. 77 15.00 14.00 15.08 16. 43 15. 22 16. 40 17.87

11.81

16.48 17.98

12. 93

14. 05

18.06 19.71 19.66 21.46