WASHINGTON - Federal bank and thrift regulators on Monday updated guidelines for lenders classifying or writing off delinquent retail loans.

The Federal Financial Institutions Examination Council said its revised policy statement, published in the Federal Register, responds to calls by industry and consumer groups for more flexibility in working with borrowers experiencing temporary repayment problems. The previous policy was issued in February 1999.

Regulators said they adjusted the standards for "re-aging" credits - bringing past due accounts to current status - to reflect industry practices regarding open-end and closed-end loans.

Previously, both types of loans could only be re-aged once every 12 months and twice in five years. Under the revised policy, these limits would stay the same for open-end loans such as credit card balances, but lenders could set their own limits for closed-end credits such as installment loans. For both types of credits, borrowers would have to show ability and willingness to repay.

The new policy would loosen the re-aging limits for open-end loans in cases where borrowers have entered into a workout agreement and made three monthly payments. These loans could be reclassified once in a five-year period, in addition to the once-in-12-months and twice-in-five-years limit on all open-end loans.

Also, the new policy for the first time would treat open-end and closed-end residential loans the same. Both kinds of loans may be past due for 180 days before any unsecured portions have to be charged off.

Lenders are not barred from adopting more conservative policies. Use of the new policy must be done in time for the Dec. 31 call reports and thrift financial reports, the Exam Council said.

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