Credit Insurance Disclosure Provisions of the Truth in Lending Act Consistently Enforced Except When Decisions Appealed

In response to a congressional request, GAO conducted a review to determine whether the Federal Deposit Insurance Corporation (FDIC) and four other Federal financial institution regulators were consistently enforcing the Truth in Lending Act disclosure requirements for insurance written in connection with credit transactions.

The review showed that, of the five Federal financial institution regulators, FDIC and the National Credit Union Administration (NCUA): (1) enforced the credit insurance disclosure provisions of the Act in a generally consistent manner except for a limited number of appeal cases; (2) did not develop consistent enforcement policies to handle appealed and unappealed cases; and (3) did not adequately inform the Federal Financial Institutions Examining Council that they were using enforcement criteria which were not specified in the policy guide on truth in lending enforcement and thus denied the Council the opportunity to revise the guide to provide for consistent enforcement among the five Federal regulators. From April 1981 through March 1982, FDIC and NCUA granted enforcement relief to 16 depository institutions found to be in violation of the credit insurance disclosure provisions of the Truth in Lending Act. These institutions were granted relief from making or offering reimbursement to consumers. Relief was granted under broad discretionary authority provided by the act; however, GAO noted that the granting of relief from reimbursement on this basis was not in strict accordance with the criteria contained in the guide. Affording relief on equity grounds differed from the enforcement results obtained in a large number of cases in which identical violations were committed under similar circumstances but were not appealed. GAO stated that consistent enforcement should be achieved in the future through the act which provides precise enforcement remedies for violations.