Fed Sued Over Credit Law Changes
Consumers Union yesterday filed suit accusing the Federal Reserve Board of acting ÛÏwithout authorityÛ in abolishing the cooling-off period in which house buyers have three days to back out of certain financing arrangements.</br></br>A provision of the 1969 Trutb-in-Lending Act, the cooling-off period was designed as a safeguard for consumers who secured credit by putting up their houses as collateral ÛÓ only to realize late that they could actually lose their houses in the event of a default.</br></br>The controversy began in July when the Fed amended its Regulation Z ÛÓ Truth in Lending ÛÓ exempting ÛÏindividual transactions under an open end credit arrangement when the creditor and the seller was not the same or related persons.Û</br></br>In other words, if a consumer made a large purchase using such an open-ended credit arrangement, and his house was listed as collateral on the credit plan, he would not, under the new provision, have three days to back out.</br></br>Consumers Union called the Fed amendment proposal ÛÏarbitrary and capricious,Û and said it would ÛÏonce again (leave) unwary consumers vulnerable to loss of their homes.Û