Assistant Secretary of Defense (Manpower and Reserve Affairs), following consultation with the military departments concerned.

(v) All denials or withdrawals of privileges will be for a set period of time, at the end of which the individual may reapply for permission to solicit through the military department originally imposing the restriction. Denial or withdrawal of soliciting privileges may be continued, where warranted.

(vi) When such denials or withdrawals are lifted, the office of the Assistant Secretary of Defense (Manpower and Reserve Affairs) will be notified for parallel action if the same denial or withdrawal has been extended to other military departments.

(vii) The commanding officer may, if circumstances dictate, make immediate suspensions of solicitation privileges for a period of 30 days while an investigation is conducted.

(d) The Secretaries of the Military Departments. Upon receipt of information outlined in § 43.3(c) may direct the Armed Forces Disciplinary Control Boards in all geographical areas in which the practices have occurred to consider the charges and take appropriate action.

(e) Educational Programs and Advertising Policies. The Department of Defense expects that commercial enterprises soliciting military personnel through advertisements appearing in unofficial military publications will voluntarily observe, or the publisher of the military publication will request the advertiser to observe, the highest business ethics in describing goods, services and commodities and the terms of the sale (including guarantees, warranties, and the like). The advertising of credit terms shall conform to the provisions of the Truth-in-Lending Act, as implemented by Regulation Z (see chapter 3 of Public Law 90-321 and section 226.10 of Regulation Z (12 CFR 226)). In addition:

(1) The Military Departments will develop and disseminate information and education programs for the purpose of providing members of the armed forces with information pertaining to the conduct of their personal commercial affairs (1.e., the protection and remedies offered consumers under the Truth-inLending Act, insurance, Government benefits, savings, and budgeting). The

services of representatives of credit unions, banks, and those nonprofit military associations, approved by the Military Departments, may be used for this purpose provided their programs are entirely educational in nature. Under no circumstances will the service of commercial agents, including loan or finance companies and their associations, be used for this purpose. Educational materials prepared or presented by outside organizations expert in this field may be adapted or used provided such material is entirely educational in nature and does not contain application or contract forms.

(2) The Military Departments 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 (see Part 43a of this subchapter and Part 230 of Subchapter M).

(3) The individual military member will be encouraged to seek advice from a legal assistance officer or his own lawyer before making substantial loan or credit commitments.

(4) Each Military Department will provide advice and guidance to military personnel who have a complaint under the "Truth-in-Lending Act" or who allege a criminal violation of its provisions (section 112), including referral to the appropriate regulatory agency for processing of the complaint.

The Assistant Secretary of Defense (Manpower and Reserve Affairs) will be responsible for the administration of the provisions of this Part 43 and assure its effective implementation throughout the Department of Defense. In carrying out this responsibility, the ASD (M&RA) will:

(a) Assure that newly developed and renewed contracts for personal commercial solicitation in Armed Services Exchange Facilities contain the requirements of this Part 43.

(b) Extend the denial or revocation action taken by the installation commander under § 43.3 (c) (2), to other Military Departments, following consultation with the Department concerned.

(c) Assist in the development and dissemination to the Military Departments of information and education programs

438.6 438.7

438.8

438.9

Abuse of the processing privilege.
Full disclosure and standards of
fairness by creditors.

Certificate of compliance.
Standards of fairness.

438.10 Effective date and implementation.

AUTHORITY: The provisions of this Part 43a issued under sec. 301, 80 Stat. 379; 5 U.S.C. 301.

SOURCE: The provisions of this Part 438 appear at 34 F.R. 12627, Aug. 2, 1969, unless otherwise noted.

§ 43a.1 Purpose and applicability.

This Part 43a incorporates provisions of Public Law 90-321 to establish Department of Defense guidelines to be followed by the Military Departments in handling and processing claims of delinquent indebtedness against military members of the Armed Forces. Its provisions do not cover claims for support of dependents, or claims by the Federal, State, or municipal government.

§ 43a.2 Explanation of terms.

(a) "Just financial obligations,” refers to a legal debt acknowledged by the military member in which there is no reasonable dispute as to the facts of the law; or one reduced to judgment which conforms to the Soldiers' and Sailors' Civil Relief Act if applicable.

(a) A member of the Armed Forces is expected to pay his just financial obligations in a proper and timely manner. However, the Military Departments have no legal authority to require a member to pay a private debt or to divert any part of his pay for its satisfaction, 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.

(b) The processing of debt complaints will not be extended to those who have not made a bona fide effort to collect the debt directly from the military member, whose claims are patently false and misleading, or whose claims are obviously exorbitant. (Claimants 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, as provided under Part 288 of Subchapter P of this chapter.) § 43a.4 Procedures.

(a) Indebtedness complaints which meet the requirements of this part will be processed by the Military Service concerned. "Processed" means such administrative procedures as will result in the following actions:

(1) A review of all available facts surrounding the transaction forming the basis of the complaint, the member's legal rights and obligations, and any defenses or counterclaims the member may have. It also includes a review of the member's overall financial situation throughout the life of the obligation on which the complaint is based.

(2) The member being advised as to what actions he should take to comply with the policy, and that he is expected to pay his just financial obligations in a proper and timely manner. Further, the member will be advised of the counselling services available under the Legal Assistance program.

(3) A response by the appropriate commander advising the claimant of the DoD policy as to private indebtedness, and that the member concerned has

been advised accordingly. The commander's response will not undertake to arbitrate any disputed debt, or to admit or deny the validity of the claim. Under no circumstances will it indicate whether any action has been taken against the member as a result of the complaint.

(b) It is incumbent on those submitting indebtedness complaints to show that the disclosure requirements of Public Law 90-321 and Regulation Z have been met and that the Standards of Fairness (§ 43a.9) have been applied. § 43a.5 Debt processing requirements.

(a) Creditors subject to Regulation Z, and assignees claiming thereunder, shall submit with their request for debt processing assistance an executed copy of the Certificate of Compliance (§ 43a.8) and a true copy of the general and specific disclosures provided the military member as required by Public Law 90321. Requests which do not meet these requirements will be returned without action to the claimant.

(b) A creditor not subject to Regulation Z, such as a public utility company (as set forth in § 226.3 of this chapter), shall submit with the request a certification that no interest, finance charge or other fee is in excess of that permitted by the law of the State in which the obligation was incurred.

(c) A foreign-owned company having debt complaints shall submit with their request a true copy of the terms of the debt (English translation) and shall certify that they have subscribed to the Standards of Fairness (§ 43a.9).

§ 43a.6 Abuse of the processing privilege.

The Military Departments may promulgate such policies and procedures as will deny to any claimant the processing of his claim where

(a) A claimant, having been notified of the requirements of this part, refuses or repeatedly fails to comply with them;

or

(b) A claimant, no matter what the merits of his claim, has clearly shown that he is attempting to make unreasonable use of the processing privilege.

§ 43a.7 Full disclosure and standards of fairness by creditors.

(a) Public Law 90-321 prescribes the general disclosure requirements which must be met by those offering or extending consumer credit, and Regulation Z

prescribes the specific disclosure requirements for both open-end and installment credit transactions. In lieu of Federal Government requirments, State regulations apply to credit transactions when the Federal Reserve Board has determined that the State regulations impose substantially similar requirements and provide adequate enforcement measures. Regulations of the Federal Reserve Board should be checked to determine whether Federal or State laws and regulations govern.

(b) Banks and credit unions operating on military installations shall conform to the Standards of Fairness (§ 43a.9) before executing the loan or credit agreement. (See Part 230 of Subchapter M of this chapter.) Should an on-base bank or credit union refer a prospective borrower to an off-base bank or credit union belonging to the same bank or credit union system, it shall advise the latter that the Department of Defense requires compliance with the Standards of Fairness before executing the loan or credit agreement.

(c) The following banks and credit unions will be denied debt processing assistance if they do not apply the Standards of Fairness (§ 43a.9) to the loan or credit agreement: (1) Credit unions chartered to serve DoD personnel but operating off the installation and (2) any banks, wherever located, which have branch banks operating on a military installation.

full disclosure requirements of the Truthin-Lending Act and Regulation Z (or the laws and regulations of State of ---), and that the attached statement is a true copy of the general and specific disclosures provided the obligor as required by law.

I further certify that the Standards of Fairness set forth in § 438.9 have been applied to the consumer credit transaction to which this form refers. (If the unpaid balance has been adjusted as a consequence, the specific adjustments in the finance charge and the annual percentage rate should be set forth below.)

1 This form may be reproduced locally.

(Adjustments)

(Date of Certification)

§ 43a.9

(Signature of Creditor or Authorized Representative)

(Street)

(City, State and Zip Code) Standards of fairness.1 (a) 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 in the United States 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.

(b) 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 20 percent of the obligation found due. No attorney fees shall be authorized if he is a salaried employee of the holder.

(c) 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 condition where reasonable inquiry would have apprised him of this fact.

(d) 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.

(e) No late charge shall be made in excess of 5 percent of the late payment, or $5 whichever is the lesser amount. Only one late charge may be made for any tardy installment. Late charges will not be levied where an allotment has

1 This form may be reproduced locally.

been timely filed, but payment of the allotment has been delayed.

(f) 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.

(g) 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.

(h) 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.

(1) 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: (1) The defaulting purchaser will be given advance written notice of the intention to repossess; (2) following repossession, the defaulting purchaser will be served a complete statement of his obligations and adequate advance notice of the sale; (3) 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; (4) there will be a solicitation for a minimum of three sealed bids unless sold at auction; (5) the party holding the security, and all agents thereof, are ineligible to bid; (6) the defaulting purchaser will be charged only those charges which are reasonably necessary for storage, reconditioning and resale and (7) he shall be provided a written detailed statement of his obligations, if any, following the resale and

promptly refunded any credit balance due him, if any.

(j) A contract for personal goods and services may be terminated at any time before delivery of the goods or services without charge to the purchaser. However, if goods made to the special order of the purchaser result in preproduction costs, or require preparation for delivery, such additional costs will be listed in the order form or contract. No termination charge will be made in excess of this amount. Contracts for delivery at future intervals may be terminated as to the undelivered portion, and the purchaser shall be chargeable only for that proportion of the total cost which the goods or services delivered bear to the total goods called for by the contract. (This is in addition to the right to rescind certain credit transactions involving a security interest in real estate provided by section 125 of Public Law 90321 and § 226.9 of Regulation Z of this chapter.) § 43a.10

tation.

Effective date and implemen

(a) This part is effective July 1, 1969, and will be published in the FEDERAL REGISTER. Claims based on obligations incurred on or after that date must be accompanied by an executed copy of § 438.8. Claims based on obligations incurred before that date may be accepted if the requirements of Part 43 of this subchapter have been observed.

(b) Two copies of each Military Department regulation implementing this part will be forwarded to the Assistant Secretary of Defense (Manpower and Reserve Affairs) within sixty (60) days, and will be published in the FEDERAL REGISTER.

lishes Department of Defense policy guidance for use by the Secretaries of the Military Departments in procuring and distributing items of new and/or combat serviceable equipment to the Selected Reserve Forces of the armed forces under their jurisdiction.

§ 44.2 Definitions.

As used in this part.

(a) Sources of equipment. Initial procurement items, and excess equipment that has been repaired and will be issued to the Reserve Forces.

(b) Combat serviceable equipment. That equipment (not obsolete) that has been serviced/repaired-suitable for deployment to combat.

(c) Hardware units. Selected Reserve units organized and equipped with new and/or combat serviceable equipment to serve as units when mobilized.

(d) Selected Reserves. As defined in DOD Directive 1215.6, "Uniform Training Categories and Pay Groups within the Reserve Components", August 25, 1969.1

§ 44.3 Policies and responsibilities.

(a) The Secretaries of the Military Departments will provide combat serviceable equipment and logistical support to the Selected Reserves of their Reserve components to satisfy approved training and mobilization readiness requirements, as follows:

(1) Expeditiously procure, issue and maintain equipment of combat standard quality in amounts required for the training and mobilization of each hardware unit in the Selected Reserves of the Reserve components.

(2) Store, identify and maintain additional equipment in the quality and quantity required by Selected Reserve hardware units in the execution of mobilization plans.

(3) Establish the same equipment priorities for Selected Reserve hardware units as for Active units having the same mobilization missions or deployment requirements.

(4) Provide Selected Reserves with representative quantities of combat serviceable equipment of a type which will be issued to deploying hardware units (but which are currently not available to the Selected Reserves).

1 Filed as part of original. Copies available from the U.S. Naval Publications and Forms Center, 5801 Tabor Avenue, Philadelphia, PA 19120, Attention: Code 800.