In Brief: Fed Backs Off from a Fee Disclosure Proposal

The Federal Reserve Board has withdrawn a controversial proposal to let states decide if Truth-in-Lending disclosures must include fees for debt cancellation agreements.

Such contracts are similar to insurance in that cash benefits are paid if the individual is killed or disabled. But unlike traditional insurance, debt cancellation agreements only pay off a person's loans.

Bankers weren't sure if they should include the fees in Truth- in- Lending statements. Banks can exclude insurance costs from the disclosure, but they must include all other fees.

The Fed promised to provide new guidance shortly. Its dropping of the old proposal seems to indicate it wants one uniform rule governing the disclosures.

The original proposal required banks to look at each state's insurance laws before deciding if they had to disclose the fees. But bankers objected to the state-by-state approach, saying a single standard would be less burdensome.

"They really needed to have just one definition," said Robert Rowe, regulatory counsel at the Independent Bankers Association of America. "It was just too confusing the other way."