National Credit Union Administration |
 | Sec. 706.3 Unfair or deceptive cosigner practices.
(a) Prohibited practices. In connection with the extension of credit
to consumers, it is:
(1) A deceptive act or practice for a Federal credit union, directly
or indirectly, to mispresent the nature or extent of cosigner liability
to any person.
(2) An unfair act or practice for a Federal credit union, directly
or indirectly, to obligate a cosigner unless the cosigner is informed
prior to becoming obligated, which in the case of open-end credit means
prior to the time that the agreement creating the cosigner's liability
for future charges is executed, of the nature of his or her liability as
cosigner.
(b) Disclosure requirement.
(1) To comply with the cosigner
information requirement of paragraph (a)(2) of this section, a clear and
conspicuous disclosure statement shall be given in writing to the
cosigner prior to becoming obligated. The disclosure statement will
contain only the following statement, or one which is substantially
equivalent, and shall either be a separate document or included in the
documents evidencing the consumer credit obligation.
Notice to Cosigner
You are being asked to guarantee this debt. Think carefully before
you do. If the borrower doesn't pay the debt, you will have to. Be sure
you can afford to pay if you have to, and that you want to accept this
responsibility.
You may have to pay up to the full amount of the debt if the
borrower does not pay. You may also have to pay late fees or collection
costs, which increase this amount.
The creditor can collect this debt from you without first trying to
collect from the borrower. The creditor can use the same collection
methods against you that can be used against the borrower, such as suing
you, garnishing your wages, etc. If this debt is ever in default, that
fact may become a part of your credit record.
This notice is not the contract that makes you liable for the debt.
(2) If the notice to cosigner is a separate document, nothing other
than the following items may appear with the notice. Items (i) through
(v) may not be part of the narrative portion of the notice to cosigner.
(i) The name and address of the Federal credit union;
(ii) An identification of the debt to be consigned (e.g., a loan
identification number);
(iii) The amount of the loan;
(iv) The date of the loan;
(v) A signature line for a cosigner to acknowledge receipt of the
notice; and
(vi) To the extent permitted by state law, a cosigner notice
required by state law may be included in the paragraph (b)(1) notice.
(3) To the extent the notice to cosigner specified in paragraph
(b)(1) of this section refers to an action against a cosigner that is
not permitted by state law, the notice to cosigner may be modified.
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