22948 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

FEDERAL RESERVE SYSTEM 

12 CFR Part 226 

[Regulation Z; Docket No. R–1393] 

RIN 7100–AD55 

Truth in Lending 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: On February 22, 2010 and 

June 29, 2010, the Board published in 

the Federal Register final rules 

amending Regulation Z’s provisions that 

apply to open-end (not home-secured) 

credit plans, in each case in order to 

implement provisions of the Credit Card 

Accountability Responsibility and 

Disclosure Act of 2009. The Board 

believes that clarification is needed 

regarding compliance with certain 

aspects of the final rules. Accordingly, 

to facilitate compliance, the Board is 

further amending specific portions of 

the regulations and official staff 

commentary. 

DATES: Effective Date: October 1, 2011. 

Mandatory Compliance Date: October 1, 

2011. Creditors may, at their option, 

comply with this rule prior to October 

1, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Shin, Attorney, or Amy 

Henderson or Benjamin K. Olson, 

Counsels, Division of Consumer and 

Community Affairs, Board of Governors 

of the Federal Reserve System, at (202) 

452–3667 or 452–2412; for users of 

Telecommunications Device for the Deaf 

(TDD) only, contact (202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Credit Card Act 

The Credit Card Accountability 

Responsibility and Disclosure Act of 

2009 (Credit Card Act) was signed into 

law on May 22, 2009. Public Law 111– 

24, 123 Stat. 1734 (2009). The Credit 

Card Act primarily amended the Truth 

in Lending Act (TILA) and instituted a 

number of new substantive and 

disclosure requirements to establish fair 

and transparent practices pertaining to 

open-end consumer credit plans. 

The requirements of the Credit Card 

Act that pertain to credit cards or other 

open-end credit for which the Board has 

rulemaking authority became effective 

in three stages. First, provisions 

generally requiring that consumers 

receive 45 days’ advance notice of 

interest rate increases and significant 

changes in terms (TILA Section 127(i)) 

and provisions regarding the amount of 

time that consumers have to make 

payments (TILA Section 163) became 

effective on August 20, 2009 (90 days 

after enactment of the Credit Card Act). 

A majority of the requirements under 

the Credit Card Act for which the Board 

has rulemaking authority, including, 

among other things, provisions 

regarding interest rate increases (TILA 

Section 171), over-the-limit transactions 

(TILA Section 127(k)), and student cards 

(TILA Sections 127(c)(8), 127(p), and 

140(f)) became effective on February 22, 

2010 (9 months after enactment). 

Finally, two provisions of the Credit 

Card Act addressing the reasonableness 

and proportionality of penalty fees and 

charges (TILA Section 149) and reevaluation by creditors of rate increases 

(TILA Section 148) became effective on 

August 22, 2010 (15 months after 

enactment). 

Implementation of Credit Card Act 

The Board issued rules to implement 

the provisions of the Credit Card Act in 

stages, consistent with the statutory 

timeline established by Congress. On 

July 22, 2009, the Board published an 

interim final rule to implement the 

provisions of the Credit Card Act that 

became effective on August 20, 2009. 

See 74 FR 36077 (July 2009 Interim 

Final Rule). On January 12, 2010, the 

Board issued a final rule adopting in 

final form the requirements of the July 

2009 interim final rule and 

implementing the provisions of the 

Credit Card Act that became effective on 

February 22, 2010. See 75 FR 7658 

(February 2010 Final Rule). 

Independent of the Credit Card Act, this 

rule also incorporated the Board’s 

comprehensive changes to the 

Regulation Z provisions applicable to 

open-end (not home-secured) credit, 

including amendments that affected all 

of the five major types of required 

disclosures: credit card applications and 

solicitations, account-opening 

disclosures, periodic statements, notices 

of changes in terms, and advertisements. 

Finally, on June 29, 2010, the Board 

published a final rule implementing the 

provisions of the Credit Card Act that 

became effective on August 22, 2010. 

See 75 FR 37526 (June 2010 Final Rule). 

Since publication of the February 

2010 and June 2010 Final Rules, the 

Board has become aware that 

clarification is needed to resolve 

confusion regarding how institutions 

must comply with particular aspects of 

those rules. In order to provide guidance 

and facilitate compliance with the final 

rules, the Board published proposed 

amendments to portions of the 

regulation and the accompanying staff 

commentary on November 2, 2010. See 

75 FR 67458 (November 2010 Proposed 

Rule). 

In response to the proposed rule, the 

Board received approximately 200 

comment letters from members of 

Congress, credit card issuers and their 

employees, consumer groups and 

individual consumers, trade 

associations, and others. Based on a 

review of these comments and on its 

own analysis, the Board is adopting this 

final rule. The provisions of this rule are 

discussed in detail in Section III of this 

supplementary information. In the 

proposed rule, the Board encouraged 

commenters to limit their submissions 

to the issues addressed in the proposal, 

emphasizing that the purpose of this 

rulemaking is to clarify and facilitate 

compliance with the consumer 

protections contained in the February 

2010 and June 2010 Final Rules, not to 

reconsider the need for—or the extent 

of—the protections in those rules. 

Accordingly, to the extent that 

commenters raised issues that are 

beyond the scope of the proposed rule, 

those issues are not addressed in this 

final rule. 

II. Statutory Authority 

In the supplementary information for 

the February 2010 and June 2010 Final 

Rules, the Board set forth the sources of 

its statutory authority under the Truth 

in Lending Act and the Credit Card Act. 

See 75 FR 7662 and 75 FR 37528. For 

purposes of this final rule, the Board 

continues to rely on this legal authority. 

III. Section-by-Section Analysis 

Section 226.2 Definitions and Rules of 

Construction 

2(a) Definitions 

2(a)(15) Credit Card 

2(a)(15)(ii) Credit Card Account Under 

an Open-End (Not Home-Secured) 

Consumer Credit Plan 

In the February 2010 Final Rule, the 

Board retained the pre-existing 

definition of ‘‘credit card’’ as any card, 

plate, or other single credit device that 

may be used from time to time to obtain 

credit. See § 226.2(a)(15)(i). However, 

the Board also added a new, somewhat 

narrower definition in order to 

implement the provisions of the Credit 

Card Act that apply to ‘‘credit card 

account[s] under an open end consumer 

credit plan.’’ Specifically, in a new 

§ 226.2(a)(15)(ii), the Board defined 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan’’ to mean any open-end credit 

account accessed by a credit card 

except: (1) A home-equity plan subject 

to the requirements of § 226.5b that is 


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accessed by a credit card; or (2) an 

overdraft line of credit that is accessed 

by a debit card. This term is generally 

used in the provisions of Regulation Z 

that implement the Credit Card Act. 

The Board’s February 2010 Final Rule 

declined requests from industry 

commenters to exempt all lines of credit 

accessed solely by an account number 

from the definition in § 226.2(a)(15)(ii), 

noting Congress’ apparent intent that 

the Credit Card Act apply broadly to all 

products that meet the definition of 

‘‘credit card.’’ See 75 FR 7664–7665. 

However, the Board understands that 

this determination has caused 

uncertainty about whether all credit 

products accessed by an account 

number are subject to TILA’s credit card 

provisions. 

In particular, some institutions offer 

general purpose open-end lines of credit 

that are linked to a checking or other 

asset account with the same institution. 

The consumer can use the line’s account 

number to request an extension of 

credit, which is then deposited into the 

asset account. The Board understands 

that there has been some confusion as 

to whether, in these circumstances, the 

account number is a ‘‘credit card’’ for 

purposes of § 226.2(a)(15)(i) and 

therefore a ‘‘credit card account under 

an open-end (not home-secured) 

consumer credit plan’’ for purposes of 

§ 226.2(a)(15)(ii). Because most if not all 

credit accounts can be accessed in some 

fashion by an account number, the 

Board does not believe that Congress 

generally intended to treat account 

numbers that access a credit account as 

credit cards for purposes of TILA. 

However, the Board is concerned that, 

when an account number can be used to 

access an open-end line of credit to 

purchase goods or services, it would be 

inconsistent with the purposes of the 

Credit Card Act to exempt the line of 

credit from the protections provided for 

credit card accounts. For example, 

creditors may offer open-end credit 

accounts designed for online purchases 

that function like a traditional credit 

card account but can only be accessed 

using an account number. In these 

circumstances, the Board believes that 

TILA’s credit card protections should 

apply. 

Accordingly, the Board proposed to 

clarify the application of 

§ 226.2(a)(15)(i) and (a)(15)(ii) to 

account numbers by amending comment 

2(a)(15)–2, which provides illustrative 

examples of credit devices that are and 

are not credit cards. Specifically, the 

Board proposed to add an additional 

example clarifying that an account 

number that accesses a credit account is 

not a credit card, unless the account 

number can access an open-end line of 

credit to purchase goods or services. 

The comment would further clarify that, 

if, for example, a creditor provides a 

consumer with an open-end line of 

credit that can be accessed by an 

account number in order to transfer 

funds into another account (such as an 

asset account with the same creditor), 

the account number is not a credit card 

for purposes of § 226.2(a)(15)(i). 

However, if the account number can 

also access the line of credit in order to 

purchase goods or services (such as an 

account number that can be used to 

purchase goods or services on the 

Internet), the account number is a credit 

card for purposes of § 226.2(a)(15)(i). 

Furthermore, if the line of credit can 

also be accessed by a card (such as a 

debit card or prepaid card), then that 

card is a credit card for purposes of 

§ 226.2(a)(15)(i). 

Consistent with this treatment of 

account numbers, the Board also 

proposed to amend 

§ 226.2(a)(15)(ii)(B)—which currently 

excludes overdraft lines of credit 

accessed by a debit card from the 

definition of ‘‘credit card account under 

an open-end (not home-secured) 

consumer credit plan’’—to also exclude 

overdraft lines of credit accessed by an 

account number (such as when a debit 

card number or checking account 

number is used to make an online 

purchase that overdraws the asset 

account). In addition, the Board 

proposed to adopt a new comment 

2(a)(15)–4, which clarifies the test used 

for determining whether an account is a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan for purposes of § 226.2(a)(15)(ii). 

Finally, for clarity and consistency, the 

Board proposed additional nonsubstantive revisions to the exception 

for home-equity plans in 

§ 226.2(a)(15)(ii)(A). 

Except as discussed below, the 

revisions to § 226.2(a)(15)(ii) and the 

commentary to § 226.2(a)(15) are 

adopted as proposed. While industry 

commenters generally supported or did 

not oppose this aspect of the proposal, 

comments from the prepaid card 

industry strongly objected to the 

reference to prepaid cards in the 

proposed example in comment 2(a)(15)– 

2. As discussed above, the Board’s 

proposed amendments to comment 

2(a)(15)–2 were intended to clarify 

§ 226.2(a)(15)(i)’s definition of ‘‘credit 

card’’ with respect to account numbers 

that access lines of credit, not prepaid 

cards that access lines of credit. 

Accordingly, the Board has revised the 

proposed example in comment 2(a)(15)– 

2 to remove the specific reference to 

prepaid cards. However, a prepaid card 

is a credit card for purposes of 

Regulation Z if it falls within the general 

definition of ‘‘credit card’’ set forth in 

§ 226.2(a)(15) and the accompanying 

commentary. 

Consumer group commenters objected 

to the proposed revisions to comment 

2(a)(15)–2, which could—in their 

view—create an incentive for creditors 

to develop new products designed to 

circumvent the Credit Card Act. 

However, the proposed revisions are 

intended to prevent circumvention by 

clarifying that an account number that 

accesses an open-end line of credit to 

purchase goods or services is generally 

treated as a credit card for purposes of 

Regulation Z. To the extent that 

additional products emerge that raise 

concerns regarding circumvention, 

further revisions to Regulation Z may be 

appropriate. Nevertheless, the Board has 

revised comment 2(a)(15)–2 to clarify 

that, when an account number can 

access an open-end line of credit to 

purchase goods or services, a creditor 

cannot evade Regulation Z’s credit card 

provisions by treating the purchases as 

cash advances or as some other type of 

transaction. 

2(a)(15)(iii) Charge Card 

The Board understands that there has 

been some confusion as to whether a 

charge card is a ‘‘credit card account 

under an open-end (not home-secured) 

consumer credit plan,’’ as defined in 

§ 226.2(a)(15)(ii). Section 

226.2(a)(15)(iii) defines a ‘‘charge card’’ 

as a credit card on an account for which 

no periodic rate is used to compute a 

finance charge. The Board has 

historically applied the same 

requirements to credit and charge cards, 

unless otherwise stated. See 

§ 226.2(a)(15); comment 2(a)(15)–3. 

Therefore, as discussed in the February 

2010 Final Rule, the Board adopted a 

similar approach when implementing 

the provisions of the Credit Card Act. 

See 75 FR 7672–7673. Nevertheless, for 

clarity and consistency, the Board 

proposed to amend comment 2(a)(15)–3 

to state that references to a credit card 

account under an open-end (not homesecured) consumer credit plan in 

Subpart B (Open-End Credit) and 

Subpart G (Special Rules Applicable to 

Credit Card Accounts and Open-End 

Credit Offered to Students) include 

charge cards unless otherwise stated. 

The Board also proposed to update 

the list of provisions in comment 

2(a)(15)–3 that distinguish charge cards 

from credit cards. In addition, the Board 

proposed to remove the statement in the 

comment that, when the term ‘‘credit 

card’’ is used in the listed provisions, it 


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22950 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

refers to credit cards other than charge 

cards. While generally accurate, this 

statement may be overbroad in certain 

circumstances. For example, the 

exemption in § 226.7(b)(12)(v)(A) and 

the safe harbor in § 226.52(b)(1)(ii)(C) 

are limited to charge card accounts that 

require payment of outstanding balances 

in full at the end of each billing cycle. 

Accordingly, the applicability of a 

particular provision should be 

determined based on a review of that 

provision and the relevant staff 

commentary. 

The Board did not receive significant 

comment on the proposed revisions to 

comment 2(a)(15)–3. Accordingly, that 

comment is revised as proposed. 

Section 226.5 General Disclosure 

Requirements 

5(b) Time of Disclosures 

5(b)(2) Periodic Statements 

Prior to enactment of the Credit Card 

Act, TILA Section 163 generally 

required creditors to send periodic 

statements for open-end consumer 

credit plans at least 14 days before the 

expiration of any period within which 

any credit extended may be repaid 

without incurring a finance charge (i.e., 

a ‘‘grace period’’). See 15 U.S.C. 1666b 

(2008). The Board’s Regulation Z, 

however, extended this 14-day 

requirement to apply even if no grace 

period was provided. Specifically, prior 

to the 2009 amendments implementing 

the Credit Card Act, § 226.5(b)(2)(ii) 

required that creditors mail or deliver 

periodic statements at least 14 days 

before the date by which payment was 

due for purposes of avoiding not only 

finance charges as a result of the loss of 

a grace period but also any other charges 

(such as late payment fees). See also 

former comment 5(b)(2)(ii)–1 (2008). 

Thus, before the Credit Card Act, 

creditors were generally required to 

provide consumers with at least 14 days 

to make payments for all open-end 

consumer credit accounts. 

Effective August 20, 2009, the Credit 

Card Act amended TILA Section 163 to 

generally prohibit a creditor from 

treating a payment as late or imposing 

additional finance charges with respect 

to open-end consumer credit plans 

unless the creditor mailed or delivered 

the periodic statement at least 21 days 

before the payment due date and the 

expiration of any grace period. See 

Credit Card Act § 106(b)(1). The Board’s 

July 2009 interim final rule made 

corresponding amendments to 

§ 226.5(b)(2)(ii) and the accompanying 

official staff commentary. See 74 FR 

36077 (July 22, 2009). Because amended 

TILA 163 required that periodic 

statements be mailed at least 21 days 

before the payment due date for all 

open-end consumer credit accounts 

even if no grace period was provided, 

the amendments to § 226.5(b)(2)(ii) 

removed the pre-existing 14-day 

requirement as unnecessary. 

However, in November 2009, the 

Credit CARD Technical Corrections Act 

of 2009 (Technical Corrections Act) 

further amended TILA Section 163. Pub. 

L. 111–93, 123 Stat. 2998 (Nov. 6, 2009). 

The Technical Corrections Act 

narrowed the requirement in TILA 

Section 163(a) that statements be mailed 

or delivered at least 21 days before the 

payment due date to apply only to 

credit card accounts, rather than to all 

open-end consumer credit plans. 

However, open-end consumer credit 

plans that provide a grace period remain 

subject to the 21-day requirement in 

TILA Section 163(b). In its February 

2010 Final Rule, the Board narrowed the 

application of § 226.5(b)(2)(ii) for 

consistency with the Technical 

Corrections Act. However, in doing so, 

the Board inadvertently failed to 

reinsert the 14-day requirement for 

open-end consumer credit plans 

without a grace period. 

The Board believes that it would be 

inconsistent with the purposes of the 

Credit Card Act for consumers to receive 

less time to make payments after its 

implementation than they did 

beforehand. Accordingly, pursuant to its 

authority under Section 105(a) of TILA 

and Section 2 of the Credit Card Act, the 

Board proposed to amend 

§ 226.5(b)(2)(ii) to reinsert the 14-day 

requirement for open-end consumer 

credit plans that are not subject to the 

Credit Card Act’s 21-day requirements. 

Specifically, the Board proposed to 

revise § 226.5(b)(2)(ii) to provide that, in 

these circumstances, the creditor must 

adopt reasonable procedures designed 

to ensure that: (1) Periodic statements 

are mailed or delivered at least 14 days 

prior to the date on which the required 

minimum periodic payment must be 

made to avoid being treated as late; and 

(2) payments received on or prior to that 

date are not treated as late for any 

purpose. The Board also proposed 

corresponding revisions to the 

commentary to § 226.5(b)(2)(ii). 

Comments from industry and consumer 

groups supported these revisions, which 

are generally adopted as proposed. 

However, based on further analysis the 

Board has revised § 226.5(b)(2)(ii)(B) to 

clarify that the 14-day requirement 

applies regardless of whether a grace 

period applies to the account. In other 

words, the fact that a grace period 

applies to an account does not permit 

the creditor to treat a payment as late 

during the 14-day period, even if that 

payment does not satisfy the 

requirements of the grace period. 

The Board also proposed to delete 

comment 5(b)(2)(iii)–1, which provided 

guidance regarding the pre-Credit Card 

Act versions of TILA Section 163 and 

§ 226.5(b)(2) and was inadvertently 

retained in the February 2010 Final 

Rule. Prior to enactment of the Credit 

Card Act, TILA Section 163(b) stated 

that the 14-day mailing requirement did 

not apply ‘‘in any case where a creditor 

has been prevented, delayed, or 

hindered in making timely mailing or 

delivery of [the] periodic statement 

within the time specified * * * because 

of an act of God, war, natural disaster, 

strike, or other excusable or justifiable 

cause. * * *’’ Comment 5(b)(2)(iii)–1 

clarified that these exceptions did not 

extend to the failure to provide a 

periodic statement because of a 

computer malfunction. Consumer 

groups opposed the deletion of this 

comment, arguing that the Board should 

reaffirm that a computer malfunction 

never excuses a creditor from providing 

periodic statements in a timely manner. 

The Credit Card Act and the Board’s 

final rules replaced the exceptions in 

TILA Section 163(b) with a requirement 

that creditors adopt ‘‘reasonable 

procedures’’ for ensuring that periodic 

statements are mailed or delivered 

consistent with the appropriate 

timelines. In the February 2010 Final 

Rule, the Board noted that the Credit 

Card Act’s removal of the statutory 

exceptions was consistent with the 

adoption of a ‘‘reasonable procedures’’ 

standard insofar as a creditor’s 

procedures for responding to any of the 

situations listed in prior TILA Section 

163(b) will now be evaluated for 

reasonableness. See 75 FR 7667. 

Similarly, the Board believes that it is 

appropriate to evaluate a creditor’s 

procedures for responding to a 

computer malfunction for 

reasonableness. Accordingly, the final 

rule deletes comment 5(b)(2)(iii)–1. 

Section 226.5a Credit and Charge Card 

Applications and Solicitations 

5a(b) Required Disclosures 

5a(b)(1) Annual Percentage Rate 

Limitations on Rate Decreases 

Section 226.5a(b)(1) requires that the 

tabular disclosure provided with credit 

and charge card applications and 

solicitations state each periodic rate that 

may be used to compute the finance 

charge on an outstanding balance for 

purchases, a cash advance, or a balance 

transfer, expressed as an annual 

percentage rate. Section 226.5a(b)(1)(i) 


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1The Board notes that 45 days’ advance notice is 

required pursuant to § 226.9(g) prior to imposition 

of the higher rate. See 74 FR 5346. In addition, the 

limitations set forth in § 226.55 apply. 

clarifies this disclosure requirement 

when a rate is a variable rate. In part, 

§ 226.5a(b)(1)(i) provides that a card 

issuer may not disclose any applicable 

limitations on rate increases or 

decreases in the table. 

Section 226.55 sets forth limitations 

on rate increases applicable to credit 

card accounts under an open-end (not 

home-secured) consumer credit plan. 

Section 226.55(b)(2) provides that a card 

issuer may increase an annual 

percentage rate when (1) the rate varies 

according to an index that is not under 

the card issuer’s control and is available 

to the general public, and (2) the rate 

increase is due to an increase in that 

index. In the February 2010 Final Rule, 

the Board adopted comment 55(b)(2)–2 

that clarified that a card issuer exercises 

control over the operation of an index 

if the variable rate based on that index 

is subject to a fixed minimum rate or 

similar requirement that does not permit 

the variable rate to decrease consistent 

with reductions in the index. 

In November 2010, the Board 

proposed to amend § 226.5a(b)(1)(i) for 

conformity with comment 55(b)(2)–2. 

The Board is aware that, as a practical 

matter, § 226.55(b)(2) and comment 

55(b)(2)–2 preclude card issuers from 

imposing a variable rate that is subject 

to a fixed minimum rate. Accordingly, 

the Board proposed to delete as 

unnecessary language in § 226.5a(b)(1)(i) 

providing that a card issuer may not 

disclose any applicable limitations on 

rate decreases in the table. The Board 

received no comment on this change, 

which is adopted as proposed. 

In the supplementary information to 

the November 2010 Proposed Rule, the 

Board noted that § 226.6(b)(2)(i)(A) 

contains analogous language regarding 

limitations on rate decreases. However, 

§ 226.55(b)(2) applies only to credit card 

accounts under an open-end (not homesecured) consumer credit plan while 

§ 226.6(b) applies to all open-end (not 

home-secured) credit. Therefore, the 

Board did not propose to delete the 

reference to limitations on rate 

decreases from § 226.6(b)(2)(i)(A). But 

see § 226.9(c)(2)(v)(C) regarding the 

notice requirements that apply to an 

open-end (not home-secured) plan with 

a variable rate that is subject to a fixed 

minimum rate. 

Loss of Employee Preferential Rates 

If a rate may increase as a penalty for 

one or more events specified in the 

account agreement, § 226.5a(b)(1)(iv) 

requires that the card issuer disclose the 

increased rate that may apply, a brief 

description of the event or events that 

may result in the increased rate, and a 

brief description of how long the 

increased rate will remain in effect. This 

disclosure generally must appear in the 

§ 226.5a table; however, 

§ 226.5a(b)(1)(iv)(B) provides that, for 

introductory rates as defined in 

§ 226.16(g)(2)(ii), the card issuer must 

briefly disclose directly beneath the 

table the circumstances, if any, under 

which the introductory rate may be 

revoked, and the type of rate that will 

apply after the introductory rate is 

revoked. The Board adopted this format 

requirement for the disclosure regarding 

loss of an introductory rate in part due 

to concerns that including this 

information in the tabular disclosure 

could lead to ‘‘information overload.’’ 

See 74 FR 5244, 5286. 

The Board noted in the November 

2010 Proposed Rule that some issuers 

may offer preferential or reduced rates 

at account opening that are not 

‘‘introductory rates’’ as defined in 

§ 226.16(g)(2)(ii). For example, an issuer 

may offer a preferential rate to its 

employees. Eligibility for the 

preferential or reduced rate is 

conditioned upon the consumer’s 

continued employment with the issuer. 

Accordingly, if the consumer’s 

employment is terminated, the contract 

provides that the rate will increase from 

the reduced preferential rate to a higher 

rate, such as the standard rate on the 

account.1

In the November 2010 Proposed Rule, 

the Board proposed to adopt a new 

§ 226.5a(b)(1)(iv)(C), which would 

require that disclosures regarding the 

loss of an employee preferential rate be 

placed directly below the tabular 

disclosure. Proposed 

§ 226.5a(b)(1)(iv)(C) generally mirrored 

§ 226.5a(b)(1)(iv)(B) and provided that if 

a card issuer discloses in the table a 

preferential annual percentage rate for 

which only employees of the creditor or 

employees of a third party are eligible, 

the card issuer must briefly disclose 

directly beneath the table the 

circumstances under which such 

preferential rate may be revoked, and 

the rate that will apply after such 

preferential rate is revoked. The Board 

also proposed a new 

§ 226.6(b)(2)(i)(D)(3) that would mirror 

proposed § 226.5a(b)(1)(iv)(C) and 

would require that brief disclosures 

regarding the loss of an employee 

preferential rate be placed directly 

below the tabular disclosure provided at 

account opening. The Board also 

proposed conforming amendments to 

the formatting requirements set forth in 

§§ 226.5a(a)(2)(iii) and 226.6(b)(1)(ii). 

For ease of reference, this section of 

supplementary information addresses 

both proposed § 226.5a(b)(1)(iv)(C) and 

§ 226.6(b)(2)(i)(D)(3). 

The Board also proposed a new 

comment 5a(b)(1)–5.iv to provide 

guidance regarding the disclosure below 

the table of the circumstances under 

which an employee preferential rate 

may be revoked. Proposed comment 

5a(b)(1)–5.iv generally mirrored relevant 

portions of the guidance set forth in 

comment 5a(b)(1)–5.ii regarding the 

revocation of introductory rates. In 

addition, proposed comment 5a(b)(1)– 

5.iv clarified that the description of the 

circumstances in which an employee 

preferential rate could be revoked 

should be brief. For example, if an 

issuer may increase an employee 

preferential rate based upon termination 

of the employee’s employment 

relationship with the issuer or a third 

party, the proposed comment clarified 

that an issuer may describe this 

circumstance as ‘‘if your employment 

with [issuer or third party] ends.’’ 

Several industry commenters 

expressed concerns that the proposal 

would add new disclosure requirements 

for employee preferred rates. One 

commenter stated that when a creditor 

offers an employee rate it is not usually 

disclosed in the tabular disclosures 

provided pursuant to §§ 226.5a and 

226.6(b). This commenter stated that the 

tabular disclosures are drafted for 

general use and, if an employee applies, 

the account terms are subsequently 

amended to provide for the employee 

preferred rate. The commenter asked the 

Board to clarify that the proposal would 

not require creditors to disclose 

employee preferential rates in the tables 

provided pursuant to §§ 226.5a and 

226.6(b). Two other industry 

commenters expressed concerns that the 

proposal would require a new 

disclosure to be included in application 

and account-opening disclosures 

relating to the potential loss of an 

employee preferred rate. These 

commenters argued that such disclosure 

requirements, particularly when paired 

with the advance notice requirements of 

§ 226.9 and the limitations on rate 

increases in § 226.55, could result in 

reduced availability of beneficial 

employee rate programs, because issuers 

would be required to provide special 

disclosures to employees who receive 

preferred employee rates, while at the 

same time the advance notice 

requirements and limitations on rate 

increases would apply when the 

consumer’s employment ends. These 

commenters recommended that the 

temporary rate exception be expanded 


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2 If an employee preferential rate is not included 

in the initial account agreement, but is instead 

added by an amendment to the agreement after 

account opening, such a rate is not required to be 

disclosed in the tabular disclosures pursuant to 

§§ 226.5a and 226.6(b). But see § 226.9(c)(2) and (g) 

for other disclosure requirements that may apply. 

3Similar to employee preferential rates, the Board 

notes that 45 days’ advance notice is required 

pursuant to § 226.9(g) prior to imposition of the 

higher rate when the consumer ceases to meet the 

conditions for such preferential rates. In addition, 

the limitations set forth in § 226.55 apply. 

to permit issuers to increase rates, or 

fees where appropriate, based on 

termination of a consumer’s 

employment, without being subject to 

45-day advance notice or the limitations 

in § 226.55. 

The Board notes that proposed 

§§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) were not intended to 

impose any new disclosure 

requirements regarding employee 

preferential rates, but were rather 

intended to clarify the placement 

requirements for disclosures that are 

already required under Regulation Z. 

Sections 226.5a(b)(1) and 226.6(b)(2)(i) 

currently require disclosure of each 

periodic rate that may be used to 

compute the finance charge on an 

outstanding balance for purchases, a 

cash advance, or a balance transfer. 

Thus, the Board believes that under 

current Regulation Z requirements, 

employee preferential rates must be 

included in the tabular disclosures 

provided pursuant to §§ 226.5a and 

226.6(b), if they are, or will be, included 

in the initial account agreement.2 In 

addition, §§ 226.5a(b)(1)(iv)(A) and 

226.6(b)(2)(i)(D) currently require that 

certain additional disclosures be 

provided if a rate may increase as a 

penalty for one or more events specified 

in the account agreement. As stated in 

the supplementary information to its 

final rule published on January 29, 

2009, the Board believes that an 

increase in rate due to the termination 

of a consumer’s employment is a type of 

rate increase as a penalty, even if the 

circumstances under which the change 

may occur are set forth in the account 

agreement. See 74 FR 5244, 5346 

(January 2009 Final Rule). Accordingly, 

the Board believes that 

§§ 226.5a(b)(1)(iv)(A) and 

226.6(b)(2)(i)(D) currently require 

disclosures regarding the revocation of 

an employee preferential rate that is 

offered at account opening. 

The Board noted in the proposal that 

the proposed placement requirement 

would be appropriate in order to 

prevent ‘‘information overload’’ and to 

focus consumers’ attention on the 

disclosures that they find the most 

important. The Board continues to 

believe that it is appropriate to require 

that disclosures regarding the revocation 

of an employee preferential rate be 

provided with the tabular disclosures 

provided with credit card applications 

and solicitations and at account 

opening. However, the Board is 

concerned that including this 

information, which is likely relevant 

only to a limited subset of consumers, 

in the tabular disclosure may distract 

other consumers from other key 

disclosures. Accordingly, the Board is 

adopting §§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) generally as 

proposed. 

One industry commenter stated that 

the Board also should apply proposed 

§§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) to situations in 

which a preferential rate is offered to a 

bank’s insiders, such as executive 

officers, directors, or principal 

shareholders. The commenter noted that 

applicable regulations may permit 

preferential rates to be offered to such 

individuals, but that such preferential 

rates might not be covered by proposed 

§§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) because insiders 

such as executive officers, directors, or 

principal shareholders are not 

employees of the creditor. The Board 

believes that it is appropriate to extend 

the guidance in §§ 226.5a(b)(1)(iv)(C) 

and 226.6(b)(2)(i)(D)(3) to apply to 

individuals who, while not technically 

employees of the card issuer or third 

party, have a similar affiliation to such 

entities. The Board believes that, as with 

employee preferential rates, requiring 

that disclosures regarding the revocation 

of preferential rates offered to such 

insiders be placed in the tabular 

disclosure may distract some consumers 

from other key disclosures and 

contribute to information overload. 

Thus, as adopted, §§ 226.5a(b)(1)(iv)(C) 

and 226.6(b)(2)(i)(D)(3) would apply if a 

card issuer or creditor discloses in the 

table a preferential annual percentage 

rate for which only employees of the 

card issuer or creditor, employees of a 

third party, or other individuals with 

similar affiliations with the card issuer, 

creditor, or third party, such as 

executive officers, directors, or principal 

shareholders, are eligible. 

Consumer group commenters agreed 

with the Board’s statement that 

termination of an employee preferential 

rate is not a promotional rate but is in 

fact a contingent rate increase. These 

commenters supported the inclusion of 

footnote 1 in the supplementary 

information to the proposal, which 

noted that 45 days’ advance notice is 

required pursuant to § 226.9(g) prior to 

imposition of a higher rate upon loss of 

an employee promotional rate and that 

the limitations set forth in § 226.55 

apply to the rate increase. Consumer 

groups requested that the substance of 

this footnote be incorporated into the 

commentary and that comment 

55(b)(1)–4 be amended to expressly 

prohibit application of a rate increase 

due to loss of an employee preferential 

rate to existing balances on the account. 

For the reasons stated in the 

supplementary information to the 

January 2009 Final Rule and February 

2010 Final Rule, the Board believes that 

rate increases that occur upon 

expiration of an employee preferential 

rate should continue to be subject to the 

advance notice requirements of 

§ 226.9(g) and the substantive 

limitations in § 226.55. See, e.g., 74 FR 

5346, 75 FR 7736. However, the Board 

believes that Regulation Z already 

clearly provides that rate increases upon 

loss of an employee preferential rate 

require 45 days’ advance notice under 

§ 226.9(g) and are subject to the 

limitations in § 226.55. 

Proposed §§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) would have applied 

only to loss of employee preferential 

rates. The Board solicited comment on 

whether there are other types of 

preferential or reduced rates that are not 

introductory rates as defined in 

§ 226.16(g)(2)(ii) but for which similar 

treatment under § 226.5a would be 

appropriate. Several industry 

commenters identified other scenarios 

in which creditors or card issuers may 

offer preferred rates that do not meet the 

definition of ‘‘introductory rates’’ in 

§ 226.16(g)(2)(ii). For example, an issuer 

or creditor may offer preferred rates for 

making payments automatically via 

electronic recurring payments or payroll 

deduction. Other creditors may offer 

preferred rates as relationship rewards, 

for example for maintaining a deposit 

account with the creditor or for 

maintaining a minimum balance in a 

deposit account with the creditor. If the 

consumer fails to continue to meet the 

conditions associated with the 

preferential rate, the preferential rate 

will be revoked and a higher rate will 

be imposed.3

At this time, the Board is not 

extending the guidance in 

§§ 226.5a(b)(1)(iv)(C) and 

226.6(b)(2)(i)(D)(3) to address the loss of 

preferred rates offered in other 

circumstances, such as preferred rates 

offered to consumers who make 

automatic payments or preferred rates 

otherwise offered as relationship 

rewards. Unlike employee preferred 

rates, which are likely relevant only to 

a subset of an issuer or creditor’s 


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4The Board notes that the second example in 

proposed comment 5a(b)(1)–5.i erroneously referred 

to § 226.54(b)(4) instead of § 226.55(b)(4). This 

typographical error has been corrected in the final 

rule. 

consumers, the Board believes that 

relationship rewards or a discount for 

making automatic payments may be 

relevant to a much larger portion of a 

creditor’s customer base. In addition, 

the Board believes that creditors may be 

more likely to market credit products on 

the basis of preferred rates based on 

automatic payments or other 

relationship rewards than on the basis 

of discounted rates that are available 

only if the consumer is employed with 

the creditor or another specific third 

party. Accordingly, the Board is 

concerned that permitting disclosures 

regarding the loss of preferential rate 

programs made available to the general 

public, such as those based upon 

automatic payments or as other types of 

relationship rewards, to be placed below 

the §§ 226.5a and 226.6 tables may 

detract from consumers’ awareness and 

understanding of the circumstances 

under which such preferred rates can be 

terminated by the creditor. 

Disclosure of How Long a Penalty Rate 

Will Remain in Effect 

If a rate may increase as a penalty for 

one or more events specified in the 

account agreement, § 226.5a(b)(1)(iv) 

requires that the card issuer disclose the 

increased rate that may apply, a brief 

description of the event or events that 

may result in the increased rate, and a 

brief description of how long the 

increased rate will remain in effect. The 

Board understands that, in light of 

several provisions of the Credit Card 

Act, there is confusion regarding how 

issuers must disclose the period for 

which the penalty rate will remain in 

effect. The Board understands that 

historically some issuers’ card 

agreements provided that penalty rates, 

once triggered, could remain in effect 

indefinitely. However, the enactment of 

the Credit Card Act established certain 

circumstances in which a card issuer 

must reduce the rate even after penalty 

pricing has been triggered. In particular, 

§ 226.55(b)(4) requires a card issuer to 

reduce a rate that was raised based upon 

a delinquency of more than 60 days, if 

the consumer makes the first six 

required minimum payments on time 

following the effective date of the rate 

increase. In addition, § 226.59 requires a 

card issuer to periodically review 

accounts on which a rate increase has 

been imposed and, where appropriate 

based on the review, reduce the rate 

applicable to the account. 

As a consequence of §§ 226.55(b)(4) 

and 226.59, the Board understands that 

it may be unclear how issuers should 

disclose the duration for which a 

penalty rate will be in effect, for 

example if the contract provides that the 

penalty rate may remain in effect 

indefinitely, except to the extent 

otherwise required by §§ 226.55(b)(4) 

and 226.59. Accordingly, the Board 

proposed to amend comment 5a(b)(1)– 

5.i to clarify that a card issuer may not 

disclose in the table any limitations 

imposed by §§ 226.55(b)(4) and 226.59 

on the duration of increased rates. 

Proposed comment 5a(b)(1)–5.i set forth 

two examples. First, the proposed 

comment provided that if a card issuer 

reserves the right to apply the increased 

rate to any balances indefinitely, the 

issuer should disclose that the penalty 

rate may apply indefinitely, even 

though §§ 226.55(b)(4) and 226.59 may 

impose limitations on the continued 

application of a penalty rate to certain 

balances. The second example provided 

that if the issuer generally provides that 

the increased rate will apply until the 

consumer makes twelve timely 

consecutive required minimum periodic 

payments, the issuer should disclose 

that the penalty rate will apply until the 

consumer makes twelve consecutive 

timely minimum payments, even 

though §§ 226.55(b)(4) and 226.59 may 

impose limitations on the continued 

application of a penalty rate to certain 

balances.4

One industry commenter supported 

the proposed changes to comment 

5a(b)(1)–5.i. However, two other 

industry commenters expressed 

concerns regarding this aspect of the 

proposal. These commenters stated that 

comment 5a(b)(1)–5.i could contribute 

to consumer confusion and reduce a 

card issuer’s incentive to implement 

practices that are more beneficial to 

consumers than the minimum 

requirements of Regulation Z. The 

commenters expressed concern that if 

an issuer discloses a practice that is 

more beneficial to consumers than the 

requirements of §§ 226.55(b)(4) and 

226.59—for example, that the issuer will 

lower the rate if the consumer makes 

three consecutive timely minimum 

payments—consumers will assume that 

the disclosed practice is detrimental to 

their interests. 

The Board notes that § 226.5a(b)(1)(iv) 

requires issuers to disclose a brief 

description of how long a penalty rate 

will remain in effect. While the 

proposed clarification provided that a 

card issuer may not disclose in the table 

any limitations imposed by 

§§ 226.55(b)(4) and 226.59 on the 

duration of increased rates, 

§ 226.5a(b)(1)(iv) nonetheless requires a 

card issuer to provide a disclosure 

regarding the duration of penalty rates. 

For example, if an issuer’s account 

agreement generally provides for no 

automatic cure for penalty rates (except 

as required pursuant to § 226.55(b)(4)), 

the issuer would be required to disclose 

that the penalty rate may remain in 

effect indefinitely. Similarly, if the 

account agreement provides for a more 

advantageous cure for penalty rates than 

is required pursuant to § 226.55(b)(4), 

for example that penalty rates will be 

reduced if the consumer makes three 

consecutive timely payments, the issuer 

would disclose that fact. Accordingly, 

the Board believes that consumers will 

be able to compare the practices of 

different issuers and that a disclosure of 

an automatic penalty pricing cure based 

upon three consecutive timely payments 

will compare favorably with the 

disclosure provided by an issuer who 

offers no cure for penalty pricing except 

to the extent required under 

§§ 226.55(b)(4) and 226.59. 

Accordingly, the Board is adopting 

the changes to comment 5a(b)(1)–5.i as 

proposed. The Board believes more 

complex disclosures explaining the 

applicability of the rules in 

§§ 226.55(b)(4) and 226.59 would be 

confusing to consumers, and would be 

of limited assistance in shopping for 

credit, given that those provisions apply 

to all issuers. In addition, consumers to 

whose accounts the cure right under 

§ 226.55(b)(4) applies will be notified of 

that right when they receive a notice 

under § 226.9(c)(2) or (g) disclosing the 

associated rate increase. 

Other Amendments to § 226.5a(b)(1) 

The Board also proposed an 

amendment to comment 5a(b)(1)–5.ii to 

correct a technical error. As discussed 

above, pursuant to § 226.5a(b)(1)(iv)(B), 

information regarding the revocation of 

an introductory rate is required to be 

disclosed directly beneath the table. 

Comment 5a(b)(1)–5.ii, which discusses 

the disclosures regarding the revocation 

of an introductory rate, contained an 

erroneous reference to a disclosure in, 

rather than beneath, the table. 

Accordingly, the Board proposed a 

technical amendment to comment 

5a(b)(1)–5.ii for conformity with the 

placement requirements in 

§ 226.5a(b)(1)(iv)(B). The Board received 

no comments on this technical 

correction, which is adopted as 

proposed. 

5a(b)(2) Fees for Issuance or Availability 

Comment 5a(b)(2)–4 states that, if fees 

required to be disclosed are waived or 

reduced for a limited time, the 

introductory fees or the fact of fee 


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22954 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

waivers may be disclosed in the table in 

addition to the required fees if the card 

issuer also discloses how long the 

reduced fees or waivers will remain in 

effect. For the reasons discussed below, 

the Board has revised this comment to 

clarify that the card issuer must comply 

with the disclosure requirements in 

§§ 226.9(c)(2)(v)(B) and 226.55(b)(1). 

5a(b)(5) Grace Period 

Section 226.5a(b)(5) requires that the 

tabular disclosure provided with credit 

and charge card applications and 

solicitations state the date by which or 

the period within which any credit 

extended for purchases may be repaid 

without incurring a finance charge due 

to a periodic interest rate and any 

conditions on the availability of the 

grace period. If no grace period is 

provided, that fact must be disclosed. 

Comment 5a(b)(5)–1 states that an 

issuer that offers a grace period on all 

purchases and conditions the grace 

period on the consumer paying his or 

her outstanding balance in full by the 

due date each billing cycle, or on the 

consumer paying the outstanding 

balance in full by the due date in the 

previous and/or the current billing 

cycle(s) will be deemed to meet the 

requirements in § 226.5a(b)(5) by 

providing the following disclosure, as 

applicable: ‘‘Your due date is [at least] 

___ days after the close of each billing 

cycle. We will not charge you any 

interest on purchases if you pay your 

entire balance by the due date each 

month.’’ This model language was 

developed through extensive consumer 

testing. 

In the February 2010 Final Rule, the 

Board adopted comment 5a(b)(5)–4, 

which clarifies that § 226.5a(b)(5) does 

not require a card issuer to disclose the 

limitations on the imposition of finance 

charges in § 226.54. Implementing the 

Credit Card Act, § 226.54 provides that, 

when a consumer pays some but not all 

of the balance subject to a grace period 

prior to the expiration of the grace 

period, the card issuer is prohibited 

from imposing finance charges on the 

portion of the balance paid. In adopting 

comment 5a(b)(5)–4, the Board was 

concerned that the inclusion of language 

attempting to describe the limitations 

set forth in § 226.54 could reduce the 

effectiveness of the grace period 

disclosure in the table. The Board also 

stated its belief that a disclosure of the 

limitations set forth in § 226.54 is not 

necessary insofar as the model language 

set forth in comment 5a(b)(5)–1 

accurately states that a consumer 

generally will not be charged any 

interest on purchases if the entire 

balance is paid by the due date each 

month. Thus, although § 226.54 limits 

the imposition of finance charges if the 

consumer pays less than the entire 

balance shown on the periodic 

statement, the model language achieves 

its intended purpose of explaining 

succinctly how a consumer can avoid 

all interest charges on purchases. 

Many issuers offer a grace period on 

all purchases under which no interest 

will be charged on purchases shown on 

a periodic statement if a consumer pays 

his or her outstanding balance shown on 

the periodic statement in full by the due 

date in the previous and/or the current 

billing cycle(s). Many of these issuers 

are using the model language set forth 

in comment 5a(b)(5)–1, or substantially 

similar language, to describe the grace 

period and the conditions on its 

availability. Nonetheless, other issuers 

have chosen not to use the model 

language set forth in comment 5a(b)(5)– 

1, even though the issuers would be 

permitted to do so. Some of the issuers 

that have chosen not to use the model 

language are disclosing the grace period 

in more technical detail, including a 

discussion of the limitations on 

imposition of finance charges under 

§ 226.54, and the impact of payment 

allocation on whether interest will be 

charged on purchases due to the loss of 

a grace period. Other issuers are 

including detailed language to explain 

the conditions on the grace period, such 

as an explanation that the consumer 

will not be charged any interest on new 

purchases, or any portion of a new 

purchase, paid by the due date on the 

consumer’s current billing statement if 

the consumer paid his or her entire 

balance on the previous billing 

statement in full by the due date on that 

statement. 

Thus, in the November 2010 Proposed 

Rule, the Board proposed to revise 

comment 5a(b)(5)–1 to clarify that 

issuers must not disclose in the table 

required by § 226.5a the limitations on 

the imposition of finance charges as a 

result of a loss of a grace period in 

§ 226.54, or the impact of payment 

allocation on whether interest is 

charged on purchases as a result of a 

loss of a grace period. However, issuers 

would not have been prohibited from 

disclosing this information outside the 

table. Comment 5a(b)(5)–4, which states 

that card issuers are not required to 

disclose the limitations set forth in 

§ 226.54, would have been deleted. As 

discussed above, the Board believed the 

inclusion of language attempting to 

describe the limitations set forth in 

§ 226.54 or the impact of payment 

allocation on whether interest will be 

charged on purchases due to the loss of 

a grace period could reduce the 

effectiveness of the grace period 

disclosure in the table. 

In addition, the Board proposed to 

revise comment 5a(b)(5)–1 to clarify 

that, for purposes of the tabular 

disclosures required by § 226.5a, certain 

issuers must use the disclosure language 

set forth in proposed comment 5a(b)(5)– 

1. Specifically, proposed comment 

5a(b)(5)–1 noted that some issuers may 

offer a grace period on all purchases 

under which interest will not be 

charged on purchases if the consumer 

pays the outstanding balance shown on 

a periodic statement in full by the due 

date shown on that statement for one or 

more billing cycles. The proposed 

comment would have clarified that in 

these circumstances, § 226.5a(b)(5) 

requires that the issuer disclose the 

grace period and the conditions for its 

applicability using the following 

language, or substantially similar 

language, as applicable: ‘‘Your due date 

is [at least] __ days after the close of 

each billing cycle. We will not charge 

you any interest on purchases if you pay 

your entire balance by the due date each 

month.’’ As discussed above, this 

disclosure language was developed 

through extensive consumer testing, and 

the Board believed this disclosure 

language achieves its intended purpose 

of explaining succinctly how a 

consumer can avoid all interest charges 

on purchases. 

The Board recognized that some 

issuers may structure their grace periods 

differently than as described above, and 

the disclosure language described above 

may not be accurate for those issuers. 

Proposed comment 5a(b)(5)–1 noted that 

some issuers may offer a grace period on 

all purchases under which interest may 

be charged on purchases even if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by 

the due date shown on that statement 

each billing cycle. As an example, the 

proposal noted that an issuer may 

charge interest on purchases if the 

consumer uses the account for a cash 

advance, regardless of whether the 

outstanding balance shown on the 

periodic statement is paid in full by the 

due date shown on that statement. In 

these circumstances, proposed comment 

5a(b)(5)–1 clarified that § 226.5a(b)(5) 

requires the issuer to amend the above 

disclosure language to describe 

accurately the conditions on the 

applicability of the grace period. 

Nonetheless, under the proposal, these 

issuers in disclosing the grace period 

and the conditions on its availability in 

the § 226.5a table still would not have 

been allowed to disclose the limitations 

on the imposition of finance charges as 

a result of a loss of a grace period in 


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§ 226.54, or the impact of payment 

allocation on whether interest is 

charged on purchases as a result of a 

loss of a grace period. 

Consumer group commenters objected 

to the proposed example in comment 

5a(b)(5)–1, arguing that, when a 

consumer pays the outstanding balance 

shown on a periodic statement in full by 

the due date shown on that statement, 

a card issuer should not be permitted to 

charge interest on purchases based on 

the consumer’s use of the account for a 

cash advance. As discussed below, these 

commenters requested that the Board 

ban this and other issuer practices 

related to grace periods using its 

authority under the Federal Trade 

Commission Act (FTC Act). In revising 

comment 5a(b)(5)–1, the Board intended 

to clarify the requirements for disclosing 

grace periods, not to opine on whether 

particular grace period practices are 

permissible. Accordingly, the final 

version of comment 5a(b)(5)–1 does not 

include the proposed example. 

One industry commenter opposed the 

proposed modifications to comment 

5a(b)(5)–1 that would prohibit a card 

issuer from disclosing in the table any 

limitations on the imposition of finance 

charges as a result of a loss of a grace 

period in § 226.54, or the impact of 

payment allocation on whether interest 

is charged on purchases as a result of a 

loss of a grace period. The commenter 

believes the impact of payment 

allocation on whether interest is 

charged on purchases as the result of a 

loss of a grace period is very important 

information for an applicant attempting 

to determine the cost of a credit program 

based on how they intend to use various 

features of the account. For example, if 

a customer must pay one credit feature 

in full (due to payment allocation 

requirements) before payments are 

applied to a second credit feature 

nearing the end of its grace period, the 

commenter believed that the consumer 

should be alerted to such a situation in 

the table because it could require a 

significant commitment of resources by 

the consumer to avoid paying interest 

on the second credit feature. The 

commenter requested that the Board 

adopt model language that would 

address this situation, such as the 

following language: ‘‘We will not charge 

you interest if you pay the full balance 

of credit feature 1 and any balance in 

credit feature 2 in full by the due date 

each billing period.’’ 

Except as discussed above, comment 

5a(b)(5)–1 is adopted as proposed. As 

noted earlier, the Board believes the 

inclusion of language attempting to 

describe the limitations set forth in 

§ 226.54 or the impact of payment 

allocation on whether interest will be 

charged on purchases due to the loss of 

a grace period could reduce the 

effectiveness of the grace period 

disclosure in the table. Under comment 

5a(b)(5)–1, an issuer must use the 

following language to describe the grace 

period as applicable: ‘‘Your due date is 

[at least] __ days after the close of each 

billing cycle. We will not charge you 

any interest on purchases if you pay 

your entire balance by the due date each 

month.’’ This language achieves its 

intended purpose of explaining 

succinctly how a consumer can avoid 

all interest charges on purchases, 

namely by paying the entire balance by 

the due date each month. 

Ban on certain types of grace periods. 

In response to the November 2010 

Proposed Rule, several consumer groups 

requested that the Board develop model 

language for different types of grace 

periods and require the use of such 

model language for all issuers. In 

addition, the consumer groups 

requested that the Board use its 

authority under the FTC Act to limit 

issuers to the types of grace period for 

which there is model language. These 

consumer groups believe that some 

issuers are making grace period 

disclosures, and structuring grace 

periods themselves, in a manner that is 

confusing, deceptive, or unfair. In the 

November 2010 Proposed Rule, the 

Board did not propose to use its FTC 

Act authority to ban issuers from using 

certain types of grace periods, and is not 

adopting such a ban as part of the final 

rule. 

Conditions on the grace period for 

certain future promotional offers. One 

industry commenter requested that the 

Board revise proposed comment 

5a(b)(5)–1 to clarify that an issuer is not 

required to disclose in the table any 

conditions that a future promotional 

offer might place on the grace period. 

Specifically, this commenter indicated 

that some promotional offers place 

limitations on the grace period. For 

example, a promotional offer may 

provide that the grace period is 

eliminated for purchases under that 

offer, even if the customer pays his or 

her balance in full. The commenter 

argued that if the promotion is part of 

the account-opening offer, it is 

appropriate to include the specific 

limitations in the account-opening table. 

The commenter argued, however, that if 

the promotion is not offered at accountopening, it would not be appropriate to 

include the specific limitations in the 

account-opening table because they may 

never apply. The commenter believed 

that such disclosure would be confusing 

to consumers and potentially incorrect 

and misleading. In this case, the 

commenter believed that the applicable 

grace period disclosures should be given 

with the promotional materials. 

To avoid consumer confusion, the 

Board believes that issuers should not 

include in the table any conditions that 

a future promotional offer might place 

on the grace period. The Board believes 

that it is more appropriate for issuers to 

treat any conditions that a future 

promotional offer might place on the 

grace period as a change to the grace 

period under § 226.9(c)(2), or under 

§ 226.9(b)(3) if the change is applicable 

only to checks that access a credit card 

account. The Board notes that if the 

change in the grace period is applicable 

only to checks that access a credit card 

account, the issuer is not required to 

provide a disclosure pursuant to 

§ 226.9(c)(2) (including the 45-day 

notice requirement), so long as the 

issuer complies with the disclosure 

requirements in § 226.9(b)(3). See 

comment 9(c)(2)–4. The Board 

recognizes that comment 9(c)(2)–1 

indicates that no notice of a change in 

terms need be given under § 226.9(c)(2) 

if the specific change is set forth 

initially. For comment 9(c)(2)–1 to 

apply, however, both the triggering 

event and the resulting modification 

must be stated with specificity. The 

Board believes that comment 9(c)(2)–1 

is not applicable in these situations. The 

Board believes that creditors are not 

able to identify with sufficient 

specificity at account opening which 

future promotional offers would trigger 

the additional conditions on the grace 

period in a way that consumers would 

understand. 

Other grace period disclosures. The 

proposal provides that the § 226.54 

limitations on imposition of finance 

charges must not be disclosed when 

describing a grace period in the 

disclosure table under § 226.5a(b)(5), or 

in the account-opening table under 

§ 226.6(b)(2)(v). One industry 

commenter suggested that the Board 

clarify that the § 226.54 limitations on 

imposition of finance charges must not 

be disclosed with respect to any grace 

period disclosure required by the 

regulation, such as the disclosure of any 

grace period related to checks that 

access credit card accounts under 

§ 226.9(b)(3)(i)(D), on the periodic 

statement under § 226.7(b)(8), or on the 

renewal notice under § 226.9(e). 

1. Grace period disclosure for checks 

that access a credit card account. 

Section 226.9(b)(3)(i)(D) provides that 

with respect to checks that access a 

credit card account, creditors generally 

must disclose on the front of the page 

containing those checks whether or not 


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22956 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

any grace period will apply to the check 

transactions. This grace period 

disclosure must be disclosed in a table, 

along with other disclosures relating to 

the checks. Comment 9(b)(3)(i)(D)–1 

currently provides that creditors may 

use the following language to describe a 

grace period on check transactions: 

‘‘Your due date is [at least] ____ days 

after the close of each billing cycle. We 

will not charge you interest on check 

transactions if you pay your entire 

balance by the due date each month.’’ 

Creditors may use the following 

language to describe that no grace 

period on check transactions is offered, 

as applicable: ‘‘We will begin charging 

interest on these checks on the 

transaction date.’’ 

As discussed above, one industry 

commenter suggested that the Board 

clarify that the § 226.54 limitations on 

imposition of finance charges must not 

be disclosed with respect to the 

disclosure of any grace period related to 

checks that access credit card accounts 

under § 226.9(b)(3)(i)(D), consistent with 

proposed guidance in comment 

5a(b)(5)–1 and comments 6(b)(2)(v)–1 

and –3. For the reasons discussed 

below, the final rule revises comment 

9(b)(3)(i)(D)–1 to be consistent with 

guidance adopted under comment 

5a(b)(5)–1 and comments 6(b)(2)(v)–1 

and –3. Specifically, revised comment 

9(b)(3)(i)(D)–1 clarifies that creditors in 

disclosing any grace period related to 

checks that access a credit card under 

§ 226.9(b)(3)(i)(D) must not disclose the 

limitations on the imposition of finance 

charges as a result of a loss of a grace 

period in § 226.54, or the impact of 

payment allocation on whether interest 

is charged on transactions as a result of 

a loss of a grace period. The revised 

comment notes that some creditors may 

offer a grace period on credit extended 

by the use of an access check under 

which interest will not be charged on 

the check transactions if the consumer 

pays the outstanding balance shown on 

a periodic statement in full by the due 

date shown on that statement for one or 

more billing cycles. In these 

circumstances, comment 9(b)(3)(i)(D)–1 

clarifies that § 226.9(b)(3)(i)(D) requires 

that the creditor disclose the grace 

period using the following language, or 

substantially similar language, as 

applicable: ‘‘Your due date is [at least] 

__ days after the close of each billing 

cycle. We will not charge you any 

interest on check transactions if you pay 

your entire balance by the due date each 

month.’’ Revised comment 9(b)(3)(i)(D)– 

1 notes, however, that other creditors 

may offer a grace period on check 

transactions under which interest may 

be charged on check transactions even 

if the consumer pays the outstanding 

balance shown on a periodic statement 

in full by the due date shown on that 

statement each billing cycle. In these 

circumstances, revised comment 

9(b)(3)(i)(D)–1 clarifies that 

§ 226.9(b)(3)(i)(D) requires the creditor 

to amend the above disclosure language 

to describe accurately the conditions on 

the applicability of the grace period. 

The Board believes that it is 

appropriate to adopt similar guidance 

for disclosure of a grace period 

applicable to access checks, as is 

adopted for disclosure of a grace period 

in the disclosure table under § 226.5a 

and the account-opening table under 

§ 226.6. The grace period disclosure on 

checks accessing a credit card account 

required under § 226.9(b)(3)(i)(D) must 

be disclosed in a tabular format on the 

front of the page containing the checks, 

along with other required disclosures. 

The Board believes that the language 

contained in revised comment 

9(b)(3)(i)(D)–1 for describing the grace 

period succinctly communicates to the 

consumer how he or she can avoid all 

interest charges on the check 

transactions, namely by paying the 

entire balance on the account by the due 

date each month. The Board believes the 

inclusion of language attempting to 

describe the limitations set forth in 

§ 226.54 or the impact of payment 

allocation on whether interest will be 

charged on the check transactions due 

to the loss of a grace period could 

reduce the effectiveness of the grace 

period disclosure, and could distract 

consumers from other important 

information disclosed in the table. 

2. Grace period disclosure on periodic 

statements. Section 226.7(b)(8) provides 

that a creditor must disclose on the 

periodic statement the date by which or 

the time period within which the new 

balance or any portion of the new 

balance shown on that periodic 

statement must be paid to avoid 

additional finance charges. Comment 

7(b)(8)–3 clarifies that § 226.7(b)(8) does 

not require a card issuer to disclose the 

limitations on the imposition of finance 

charges in § 226.54. The final rule 

retains in comment 7(b)(8)–3 the 

clarification that § 226.7(b)(8) does not 

require a card issuer to disclose the 

limitations on the imposition of finance 

charges in § 226.54. The final rule also 

revises comment 7(b)(8)–3 to clarify that 

§ 226.7(b)(8) does not require a card 

issuer to disclose the impact of payment 

allocation on whether interest is 

charged on transactions as a result of a 

loss of a grace period. Thus, under 

revised comment 7(b)(8)–3, a creditor 

would not be required to disclose under 

§ 226.7(b)(8) the limitations on the 

imposition of finance charges as a result 

of a loss of a grace period in § 226.54, 

or the impact of payment allocation on 

whether interest is charged on 

transactions as a result of a loss of a 

grace period. 

Nonetheless, unlike for the disclosure 

of the grace period in the tables under 

§§ 226.5a, 226.6, and 226.9(b)(3), a 

creditor in disclosing the grace period 

on the periodic statement under 

§ 226.7(b)(8) would retain the flexibility 

to disclose the limitations on the 

imposition of finance charges as a result 

of a loss of a grace period in § 226.54, 

and the impact of payment allocation on 

whether interest is charged on 

transactions as a result of a loss of a 

grace period. The Board believes that it 

is appropriate to provide creditors with 

additional flexibility in describing the 

grace period on the periodic statement 

because this disclosure is not subject to 

tabular or other format requirements. In 

addition, the information about the 

limitations on the imposition of finance 

charges as result of a loss of a grace 

period in § 226.54, and the impact of 

payment allocation on whether interest 

is charged on transactions as a result of 

a loss of a grace period could be more 

relevant to consumers on the periodic 

statement, as consumers decide how 

much to pay in a particular billing 

cycle. Some consumers might find this 

information useful in evaluating the 

impact of a partial payment on whether 

they will pay interest on transactions in 

that billing cycle as a result of a loss of 

the grace period. 

3. Grace period disclosures on 

renewal notices under § 226.9(e). In 

some instances, a card issuer is required 

under § 226.9(e) to send a notice to the 

consumer prior to the renewal of a 

consumer’s credit or charge card. In this 

renewal notice, the card issuer must 

disclose certain account terms that 

would apply if the account were 

renewed, such as any grace period 

applicable to purchases as described in 

§ 226.5a(b)(5). The Board does not 

believe, however, that any additional 

guidance is needed with respect to how 

a card issuer must disclose the grace 

period disclosure in the renewal notice 

under § 226.9(e). Under § 226.9(e), the 

grace period disclosure must be 

described using the same level of detail 

as the grace period disclosure in 

§ 226.5a(b)(5). See § 226.9(e)(1)(i). Thus, 

guidance in § 226.5a(b)(5) and related 

commentary would be applicable to the 

grace period disclosure in the renewal 

notice under § 226.9(e). 

4. Disclosure of change to the grace 

period under § 226.9(c)(2). The Board 

also notes if a creditor changes any 


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grace period disclosed under 

§ 226.6(b)(2)(v), the creditor must 

disclose the change under § 226.9(c)(2), 

except as provided in § 226.9(c)(2)(v). 

The Board does not believe, however, 

that any additional guidance is needed 

with respect to how to disclose any 

change to the grace period under 

§ 226.9(c)(2). Under § 226.9(c)(2)(iv)(D), 

the new grace period must be described 

using the same level of detail as 

required when disclosing the grace 

period in the account-opening table 

under § 226.6(b)(2). Thus, guidance in 

§ 226.6(b)(2)(v) and related commentary 

is applicable to the grace period 

disclosure in the change-in-terms notice 

required under § 226.9(c)(2). 

5a(b)(6) Balance Computation Method 

Section 226.5a(b)(6) requires that a 

card issuer disclose on or with a credit 

card application or solicitation 

information about the method it uses to 

determine the balance for purchases on 

which the finance charge is computed. 

Comment 5a(b)(6)–1 provides guidance 

on how to comply with this requirement 

to disclose balance computation 

information for purchase balances. This 

comment also contains a cross-reference 

to the commentary to § 226.5a(g) for 

guidance on particular balance 

computation methods. In the November 

2010 Proposed Rule, the Board 

proposed to delete this cross-reference 

as obsolete because there currently is no 

commentary to § 226.5a(g). The Board 

adopts this deletion as proposed. For 

clarity, the final rule also revises 

comment 5a(b)(6)–1 to reference 

§ 226.5a(g), where particular balance 

computation methods are described in 

the regulation. 

Section 226.6 Account-Opening 

Disclosures 

6(b) Rules Affecting Open-End (Not 

Home-Secured) Plans 

6(b)(2) Required Disclosures for 

Account-Opening Table for Open-End 

(Not Home-Secured) Plans 

6(b)(2)(i) Annual Percentage Rate 

The Board proposed to replace the 

reference to ‘‘card issuer’’ in 

§ 226.6(b)(2)(i)(B) with ‘‘creditor’’ in 

order to correct a typographical error 

and to provide clarity and consistency 

with the scope of § 226.6(b). The Board 

did not receive significant comment on 

this aspect of the proposal, which is 

adopted as proposed. 

In addition, for the reasons discussed 

in the supplementary information to 

§ 226.5a(b)(1), the Board is adopting 

new § 226.6(b)(2)(i)(D)(3), which 

requires that certain information 

regarding revocation of an employee 

preferential rate be disclosed directly 

beneath the account-opening table. 

6(b)(2)(v) Grace Period 

Section 226.6(b)(2)(v) requires that the 

account-opening summary table state 

the date by which or the period within 

which any credit may be repaid without 

incurring a finance charge due to a 

periodic interest rate and any conditions 

on the availability of the grace period. 

If no grace period is provided, that fact 

must be disclosed. 

Many creditors offer a grace period on 

purchases, but do not offer a grace 

period on cash advances and balance 

transfers. Samples G–17(B) and G–17(C) 

provide guidance on complying with 

§ 226.6(b)(2)(v) when a creditor offers a 

grace period on purchases but no grace 

period on balance transfers and cash 

advances. See comment 6(b)(2)(v)–3. 

Specifically, Samples G–17(B) and 

G–17(C) contain the following model 

language to meet the requirements in 

§ 226.6(b)(2)(v): ‘‘Your due date is [at 

least] l days after the close of each 

billing cycle. We will not charge you 

any interest on purchases if you pay 

your entire balance by the due date each 

month. We will begin charging interest 

on cash advances and balance transfers 

on the transaction date.’’ This model 

language was developed through 

extensive consumer testing. 

Comment 6(b)(2)(v)–1 provides model 

language for creditors to use when they 

provide a grace period on all types of 

transactions for the account. 

Specifically, this comment states that an 

issuer that offers a grace period on all 

types of transactions for the account and 

conditions the grace period on the 

consumer paying his or her outstanding 

balance in full by the due date each 

billing cycle, or on the consumer paying 

the outstanding balance in full by the 

due date in the previous and/or the 

current billing cycle(s) will be deemed 

to meet the requirements in 

§ 226.6(b)(2)(v) by providing the 

following disclosure, as applicable: 

‘‘Your due date is [at least] ll days 

after the close of each billing cycle. We 

will not charge you any interest on your 

account if you pay your entire balance 

by the due date each month.’’ 

In addition, for the reasons discussed 

in the section-by-section analysis to 

§ 226.5a(b)(5), in the February 2010 

Final Rule, the Board adopted comment 

6(b)(2)(v)–4, which clarifies that 

§ 226.6(b)(2)(v) does not require a card 

issuer to disclose the limitations on the 

imposition of finance charges in 

§ 226.54. Implementing the Credit Card 

Act, § 226.54 provides that, when a 

consumer pays some but not all of the 

balance subject to a grace period prior 

to the expiration of the grace period, the 

card issuer is prohibited from imposing 

finance charges on the portion of the 

balance paid. In adopting comment 

6(b)(2)–4, the Board was concerned that 

the inclusion of language attempting to 

describe the limitations set forth in 

§ 226.54 could reduce the effectiveness 

of the grace period disclosure in the 

table. 

As discussed above, many creditors 

offer a grace period on purchases, but do 

not offer a grace period on cash 

advances and balance transfers. Many of 

these creditors are using the model 

language set forth in Samples G–17(B) 

and G–17(C), or substantially similar 

language, to meet the requirements in 

§ 226.6(b)(2)(v). Nonetheless, other 

creditors have chosen not to use this 

model language, even though the 

creditors could do so. Some of the 

creditors that have chosen not to use the 

model language are disclosing the grace 

period for purchases in more technical 

detail, including a discussion of the 

limitations on imposition of finance 

charges under § 226.54, and the impact 

of payment allocation on whether 

interest will be charged on purchases 

due to the loss of a grace period. Other 

creditors are including detailed 

language to explain the conditions on 

the grace period for purchases, such as 

an explanation that the consumer will 

not be charged any interest on new 

purchases, or any portion of a new 

purchase, paid by the due date on the 

consumer’s current billing statement if 

the consumer paid his or her entire 

balance on the previous billing 

statement in full by the due date on that 

statement. 

Consistent with proposed changes to 

comment 5a(b)(5)–1 and for the reasons 

discussed in the section-by-section 

analysis to § 226.5a(b)(5), the Board 

proposed to revise comment 6(b)(2)(v)– 

1 to clarify that creditors must not 

disclose in the table required by 

§ 226.6(b) the limitations on the 

imposition of finance charges as a result 

of a loss of a grace period in § 226.54, 

or the impact of payment allocation on 

whether interest is charged on 

transactions as a result of a loss of a 

grace period. The Board believed the 

inclusion of language attempting to 

describe the limitations set forth in 

§ 226.54 and the impact of payment 

allocation on whether interest will be 

charged on transactions due to the loss 

of a grace period could reduce the 

effectiveness of the grace period 

disclosure required by § 226.6(b)(2)(v). 

Comment 6(b)(2)(v)–4, which states that 

card issuers are not required to disclose 

the limitations set forth in § 226.54, 

would have been deleted. 


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22958 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

In addition, consistent with proposed 

changes to comment 5a(b)(5)–1 and for 

the reasons discussed in the section-bysection analysis to § 226.5a(b)(5), the 

Board proposed to revise comment 

6(b)(2)(v)–3 to clarify that 

§ 226.6(b)(2)(v) requires certain creditors 

that provide a grace period on purchases 

but not on cash advances and balance 

transfers to use the disclosure language 

this is currently set forth in Samples G– 

17(B) and G–17(C). Specifically, 

proposed comment 6(b)(2)(v)–3 noted 

that some creditors do not offer a grace 

period on cash advances and balance 

transfers, but offer a grace period for all 

purchases under which interest will not 

be charged on purchases if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by 

the due date shown on that statement 

for one or more billing cycles. Proposed 

comment 6(b)(2)(v)–3 would have 

clarified that in these circumstances, 

§ 226.6(b)(2)(v) requires that the creditor 

disclose the grace period for purchases 

and the conditions for its applicability, 

and the lack of a grace period for cash 

advances and balance transfers using 

the following language, or substantially 

similar language, as applicable: ‘‘Your 

due date is [at least] l days after the 

close of each billing cycle. We will not 

charge you any interest on purchases if 

you pay your entire balance by the due 

date each month. We will begin 

charging interest on cash advances and 

balance transfers on the transaction 

date.’’ This disclosure language, which 

also is set forth in the ‘‘Paying Interest’’ 

row in Samples G–17(B) and G–17(C), 

was developed through extensive 

consumer testing. The Board believed 

this disclosure language achieves its 

intended purpose of explaining 

succinctly how a consumer can avoid 

all interest charges on purchases, while 

explaining that no grace period is 

offered for cash advances and balance 

transfers. 

The Board recognized that some 

creditors may offer a grace period on 

purchases but structure their grace 

periods differently than as described 

above, and the disclosure language 

described above may not be accurate for 

those creditors. Proposed comment 

6(b)(2)(v)–3 noted that some creditors 

may offer a grace period on all 

purchases under which interest may be 

charged on purchases even if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by 

the due date shown on that statement 

each billing cycle. Proposed comment 

6(b)(2)(v)–3 would have clarified that in 

these circumstances, § 226.6(a)(2)(v) 

requires the creditor to amend the above 

disclosure language to accurately 

describe the conditions on the 

applicability of the grace period. 

Nonetheless, under the proposal, these 

creditors in disclosing the grace period 

and the conditions on its availability 

still would not have been allowed to 

disclose the limitations on the 

imposition of finance charges as a result 

of a loss of a grace period in 226.54, or 

the impact of payment allocation on 

whether interest is charged on 

purchases as a result of a loss of a grace 

period. 

Similarly, some creditors may not 

offer a grace period on cash advances 

and balance transfers, and will begin 

charging interest on these transactions 

from a date other than the transaction 

date, such as the posting date. Proposed 

comment 6(b)(2)(v)–3 would have 

clarified that in these circumstances, 

§ 226.6(a)(2)(v) requires the creditor to 

amend the above disclosure language to 

be accurate. 

Consistent with the proposed changes 

to comment 6(b)(2)(v)–3, the Board also 

proposed changes to comment 

6(b)(2)(v)–1 which discusses 

circumstances where a creditor offers a 

grace period on all types of transactions 

on the account, including purchases, 

cash advances, and balances transfers. 

Specifically, proposed comment 

6(b)(2)(v)–1 noted that some creditors 

may offer a grace period on all types of 

transactions under which interest will 

not be charged on transactions if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by 

the due date shown on that statement 

for one or more billing cycles. In these 

circumstances, proposed comment 

6(b)(2)(v)–1 would have clarified that 

§ 226.6(b)(2)(v) requires that the creditor 

disclose the grace period and the 

conditions for its applicability using the 

following language, or substantially 

similar language, as applicable: ‘‘Your 

due date is [at least] ll days after the 

close of each billing cycle. We will not 

charge you any interest on your account 

if you pay your entire balance by the 

due date each month.’’ Proposed 

comment 6(b)(2)(v)–1 also noted that 

other creditors may offer a grace period 

on all types of transactions under which 

interest may be charged on transactions 

even if the consumer pays the 

outstanding balance shown on a 

periodic statement in full by the due 

date shown on that statement each 

billing cycle. This proposed comment 

would have clarified that in these 

circumstances, § 226.6(b)(2)(v) requires 

the creditor to amend the above 

disclosure language to describe 

accurately the conditions on the 

applicability of the grace period. 

Consistent with changes to comment 

5a(b)(5)–1 and for the reasons discussed 

in the section-by-section analysis to 

§ 226.5a(b)(5), the final rule adopts 

comments 6(b)(2)(v)–1 and –3 as 

proposed, except that—as discussed 

above with respect to comment 5a(b)(5)– 

1—the Board has removed the proposed 

example regarding the loss of a grace 

period on purchases when the account 

is used for a cash advance. The Board 

believes the inclusion of language 

attempting to describe the limitations 

set forth in § 226.54 and the impact of 

payment allocation on whether interest 

will be charged on transactions due to 

the loss of a grace period could reduce 

the effectiveness of the grace period 

disclosure required by § 226.6(b)(2)(v). 

Comment 6(b)(2)(v)–3 clarifies that 

§ 226.6(b)(2)(v) requires the creditor to 

disclose the grace period for purchases 

and the conditions for its applicability, 

and the lack of a grace period for cash 

advances and balance transfers using 

the following language, or substantially 

similar language, as applicable: ‘‘Your 

due date is [at least] ll days after the 

close of each billing cycle. We will not 

charge you any interest on purchases if 

you pay your entire balance by the due 

date each month. We will begin 

charging interest on cash advances and 

balance transfers on the transaction 

date.’’ This disclosure language, which 

also is set forth in the ‘‘Paying Interest’’ 

row in Samples G–17(B) and G–17(C), 

was developed through extensive 

consumer testing. The Board believed 

this disclosure language achieves its 

intended purpose of explaining 

succinctly how a consumer can avoid 

all interest charges on purchases, while 

explaining that no grace period is 

offered for cash advances and balance 

transfers. 

6(b)(2)(vi) Balance Computation Method 

Section 226.6(b)(2)(vi) requires that a 

creditor disclose information about 

balance computation methods as part of 

the account-opening disclosures. 

Specifically, § 226.6(b)(2)(vi) provides 

that a creditor must disclose the name 

of the balance computation method 

listed in § 226.5a(g) that is used to 

determine the balance on which the 

finance charge is computed for each 

feature, or an explanation of the method 

used if it is not listed, along with a 

statement that an explanation of the 

method(s) required by § 226.6(b)(4)(i)(D) 

is provided with the account-opening 

disclosures. The information required 

by § 226.6(b)(2)(vi) must appear directly 

beneath the account-opening summary 

table. See § 226.6(b)(2)(ii). 

The names of the balance 

computation methods listed in 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 22959 

§ 226.5a(g) describe balance 

computation methods for purchases 

(e.g., ‘‘average daily balance (including 

new purchases)’’ and ‘‘average daily 

balance (excluding new purchases)’’). 

Nonetheless, unlike § 226.5a(b)(6), 

creditors are required in § 226.6(b)(2)(vi) 

to disclose the balance computation 

method used for each feature on the 

account. Samples G–17(B) and G–17(C) 

provide guidance on how to disclose the 

balance computation method where the 

same method is used for all features on 

the account. See comment 6(b)(2)(vi)–1. 

Samples G–17(B) and G–17(C) disclose, 

as an example, the ‘‘average daily 

balance (including new purchases)’’ as 

the method that is being used to 

calculate the balance for all features on 

the account. Thus, for simplicity, where 

the balance for each feature is computed 

using the same balance computation 

method, a creditor may use the name of 

the appropriate balance computation 

method listed in § 226.5a(g) (e.g., 

‘‘average daily balance (including new 

purchases)’’) to satisfy the requirement 

to disclose the name of the method for 

all features on the account, even though 

the name only refers to purchases. 

Questions have been asked, however, 

regarding whether a creditor may revise 

the names of the balance computation 

methods listed in § 226.5a(g) to be more 

accurate by referring more broadly to all 

new transactions (rather than referring 

only to ‘‘new purchases’’) when the same 

method is used to calculate the balances 

for all features on the account. For 

example, creditors have asked whether 

they can revise the name listed in 

§ 226.5a(g)(i) to disclose it as ‘‘average 

daily balance (including new 

transactions)’’ when this method is used 

to calculate the balances for all features 

of the account. Also, creditors have 

asked whether they may revise the 

names listed in § 226.5a(g) to be 

applicable to features other than 

purchases. Creditors in some cases may 

disclose the balance computation 

methods separately for each feature, 

such as when a different balance 

computation method applies to 

purchases than to cash advances. 

To address these compliance issues 

and to provide additional flexibility to 

creditors, in the November 2010 

Proposed Rule, the Board proposed to 

revise comment 6(b)(2)(vi)–1 to provide 

that in cases where the balance for each 

feature is computed using the same 

balance computation method, a single 

identification of the name of the balance 

computation method is sufficient. In 

that case, the proposed comment would 

have made clear that a creditor may use 

an appropriate name listed in 

§ 226.5a(g) (e.g., ‘‘average daily balance 

(including new purchases)’’) to satisfy 

the requirement to disclose the name of 

the method for all features on the 

account, even though the name only 

refers to purchases. For example, if a 

creditor uses the average daily balance 

method including new transactions as 

the balance computation method for all 

features, a creditor may use the name 

‘‘average daily balance (including new 

purchases)’’ listed in § 226.5a(g)(i) to 

satisfy the requirement to disclose the 

name of the balance computation 

method for all features. As an 

alternative, the proposed comment 

would have provided that a creditor 

may revise the balance computation 

names listed in § 226.5a(g) to refer more 

broadly to all new credit transactions, 

such as using the language ‘‘new 

transactions’’ or ‘‘current transactions’’ 

(e.g., ‘‘average daily balance (including 

new transactions)’’), rather than simply 

referring to new purchases when the 

same method is used to calculate the 

balances for all features of the account. 

In addition, the Board proposed to 

add comment 6(b)(2)(vi)–2 to address 

situations where a creditor is disclosing 

the name of the balance computation 

methods separately for each feature. In 

that case, in using the names listed in 

§ 226.5a(g) to satisfy the requirements of 

§ 226.6(b)(2)(vi) for features other than 

purchases, proposed comment 

6(b)(2)(vi)–2 would have made clear that 

a creditor must revise the names listed 

in § 226.5a(g) to refer to the other 

features. For example, under proposed 

comment 6(b)(2)(vi)–2, when disclosing 

the name of the balance computation 

method applicable to cash advances, a 

creditor would have been required to 

revise the name listed in § 226.5a(g)(i) to 

disclose it as ‘‘average daily balance 

(including new cash advances)’’ when 

the balance for cash advances is figured 

by adding the outstanding balance 

(including new cash advances and 

deducting payments and credits) for 

each day in the billing cycle, and then 

dividing by the number of days in the 

billing cycle. Similarly, under proposed 

comment 6(b)(2)(vi)–2, a creditor would 

have been required to revise the name 

listed in § 226.5a(g)(ii) to disclose it as 

‘‘average daily balance (excluding new 

cash advances)’’ when the balance for 

cash advances is figured by adding the 

outstanding balance (excluding new 

cash advances and deducting payments 

and credits) for each day in the billing 

cycle, and then dividing by the number 

of days in the billing cycle. 

The Board received several comments 

supporting proposed comment 

6(b)(2)(vi)–2, and no comments 

opposing it. For the reasons discussed 

above, the Board adopts comment 

6(b)(2)(vi)–2 as proposed. 

Balance computation methods that 

consider transactions from previous 

cycles. One industry commenter 

requested that the Board confirm that 

the balance computation methods listed 

in § 226.5a(g) can be used for 

transactions that accrue interest 

beginning on the transaction date even 

if the transaction date is prior to the first 

day of the cycle in which the 

transaction posts to the account, which 

may be the case for cash advances. The 

Board notes that § 226.54 provides that 

a card issuer cannot impose finance 

charges as a result of the loss of a grace 

period on a credit card account under 

an open-end (not home-secured) 

consumer credit plan if those finance 

charges are based on balances for days 

in billing cycles that precede the most 

recent billing cycle. Nonetheless, 

§ 226.54 does not apply if transactions 

are not eligible for a grace period. See 

comment 54(a)(1)–1. Thus, in certain 

instances, a card issuer is not prohibited 

by § 226.54 from calculating interest 

charges beginning on the transaction 

date even if the transaction date is prior 

to the first day of the cycle in which the 

transaction posts to the account. 

Nonetheless, a creditor that uses such a 

balance computation method may not 

use the names of the balance 

computation methods listed in 

§ 226.5a(g) to describe such method. 

The balance computation methods 

listed in § 226.5a(g) contemplate that the 

balances are computed using only days 

in the current billing cycle. For balance 

computation methods that calculate the 

balance using days from the previous 

cycle, the creditor may not use the 

names of the balance computation 

methods listed in § 226.5a(g). Instead, 

the creditor must provide an 

explanation of the method underneath 

the disclosure table required under 

§ 226.5a and the account-opening table 

required under § 226.6. See 

§ 226.5a(b)(2)(iii), § 226.5a(b)(6), 

§ 226.6(b)(1)(ii), and § 226.6(b)(2)(vi). In 

describing this balance computation 

method below the tables required under 

§ 226.5a and § 226.6, the creditor must 

clearly explain the method in as much 

detail as set forth in the descriptions of 

balance methods in § 226.5a(g). See 

comment 5a(b)(6)–1. 

Using the phrase ‘‘(including new 

transactions’’) in describing balance 

computation method for § 226.5a. One 

industry commenter requested that, 

consistent with proposed comment 

6(b)(2)(vi)–2, the Board clarify that an 

issuer may use either the name ‘‘daily 

balance (including new purchases)’’ or 

‘‘daily balance (including new 


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22960 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

transactions)’’ to disclose the balance 

computation method underneath the 

disclosure table required by § 226.5a. 

The final rule does not contain this 

clarification. Section 226.5a(b)(6) 

requires that a card issuer disclose on or 

with a credit card application or 

solicitation information about the 

balance computation method it uses for 

purchases. Under § 226.5a(b)(6), an 

issuer is not required to disclose the 

balance computation method used for 

other features on the account. 

Accordingly, the names of the balance 

computation methods listed in 

§ 226.5a(g) describe balance 

computation methods for purchases 

(e.g., ‘‘average daily balance (including 

new purchases)’’ and ‘‘average daily 

balance (excluding new purchases)’’). 

Thus, the Board believes it is 

appropriate to continue to describe the 

balance computation methods in 

§ 226.5a(g) with respect to purchases. 

Section 226.7 Periodic Statement 

7(b) Rules Affecting Open-End (Not 

Home-Secured) Plans 

7(b)(5) Balance on Which Finance 

Charge Computed 

Section 226.7(b)(5) provides that a 

creditor must disclose on the periodic 

statement the amount of the balance to 

which a periodic rate was applied and 

an explanation of how that balance was 

determined, using the term Balance 

Subject to Interest Rate. As an 

alternative to providing an explanation 

of how the balance was determined, a 

creditor that uses a balance computation 

method identified in § 226.5a(g) may, at 

the creditor’s option, identify the name 

of the balance computation method and 

provide a toll-free telephone number 

where consumers may obtain from the 

creditor more information about the 

balance computation method and how 

resulting interest charges were 

determined. If the method used is not 

identified in § 226.5a(g), the creditor 

must provide a brief explanation of the 

method used. 

Comment 7(b)(5)–7 provides guidance 

on the use of one balance computation 

method explanation or name when 

multiple balances are disclosed. 

Specifically, comment 7(b)(5)–7 notes 

that sometimes the creditor will disclose 

more than one balance to which a 

periodic rate was applied, even though 

each balance was computed using the 

same balance computation method. For 

example, if a plan involves purchases 

and cash advances that are subject to 

different rates, more than one balance 

must be disclosed, even though the 

same computation method is used for 

determining the balance for each 

feature. In these cases, one explanation 

or a single identification of the name of 

the balance computation method is 

sufficient. In addition, sometimes the 

creditor separately discloses the 

portions of the balance that are subject 

to different rates because different 

portions of the balance fall within two 

or more balance ranges, even when a 

combined balance disclosure would be 

permitted under comment 7(b)(5)–1. In 

these cases, one explanation or a single 

identification of the name of the balance 

computation method is also sufficient 

(assuming, of course, that all portions of 

the balance were computed using the 

same method). 

The comment does not specify, 

however, whether in this case a creditor 

may use the balance computation 

method names listed in § 226.5a(g) (e.g., 

‘‘average daily balance (including new 

purchases)’’) as the single identification 

of the name of the balance computation 

method used for all features, even 

though the name only refers to 

purchases. In addition, as discussed in 

the section-by-section analysis to 

§ 226.6(b)(2)(vi), questions have been 

asked as to whether a creditor may 

revise the names of the balance 

computation methods listed in 

§ 226.5a(g) to refer more broadly to all 

new transactions (rather than referring 

only to ‘‘new purchases’’) when the same 

method is used to calculate the balances 

for all features on the account. For 

example, creditors have asked whether 

they may revise the name listed in 

§ 226.5a(g)(i) to disclose it as ‘‘average 

daily balance (including new 

transactions)’’ when this method is used 

to calculate the balances for all features 

of the account. Also, creditors have 

asked whether they may revise the 

names listed in § 226.5a(g) to be 

applicable to features other than 

purchases. Creditors in some cases may 

disclose the balance computation 

methods separately for each feature, 

such as when a different balance 

computation method applies to 

purchases than for cash advances. 

To address these issues and to 

provide flexibility to creditors, 

consistent with proposed guidance in 

comment 6(b)(2)(vi), the Board proposed 

to revise comment 7(b)(5)–7 to provide 

that in cases where each balance was 

computed using the same balance 

computation method, a creditor may use 

an appropriate name listed in 

§ 226.5a(g) (e.g., ‘‘average daily balance 

(including new purchases)’’) as the 

single identification of the name of the 

balance computation method applicable 

to all features, even though the name 

only refers to purchases. For example, 

under proposed comment 7(b)(5)–7, if a 

creditor uses the average daily balance 

method including new transactions as 

the balance computation method for all 

features, a creditor would have been 

allowed to use the name ‘‘average daily 

balance (including new purchases)’’ 

listed in § 226.5a(g)(i) to satisfy the 

requirement to disclose the name of the 

balance computation method for all 

features. As an alternative, the proposed 

comment provided that a creditor may 

revise the balance computation names 

listed in § 226.5a(g) to refer more 

broadly to all new credit transactions, 

such as using the language ‘‘new 

transactions’’ or ‘‘current transactions’’ 

(e.g., ‘‘average daily balance (including 

new transactions)’’), rather than simply 

referring to new purchases when the 

same method is used to calculate the 

balances for all features of the account. 

Also consistent with proposed 

comment 6(b)(2)(vi)–2, the Board 

proposed to add a new comment 

7(b)(5)–8 to address situations where a 

creditor is disclosing the name of the 

balance computation methods 

separately for each feature. Proposed 

comment 7(b)(5)–8 would have 

provided that in those cases, where a 

creditor is using the names listed in 

§ 226.5a(g) to satisfy the requirements of 

§ 226.7(b)(5) for features other than 

purchases, a creditor must revise the 

names listed in § 226.5a(g) to refer to the 

other features. For example, under 

proposed comment 7(b)(5)–8, when 

disclosing the name of the balance 

computation method applicable to cash 

advances, a creditor would have been 

required to revise the name listed in 

§ 226.5a(g)(i) to disclose it as ‘‘average 

daily balance (including new cash 

advances)’’ when the balance for cash 

advances is figured by adding the 

outstanding balance (including new 

cash advances and deducting payments 

and credits) for each day in the billing 

cycle, and then dividing by the number 

of days in the billing cycle. Similarly, a 

creditor would have been required to 

revise the name listed in § 226.5a(g)(ii) 

to disclose it as ‘‘average daily balance 

(excluding new cash advances)’’ when 

the balance for cash advances is figured 

by adding the outstanding balance 

(excluding new cash advances and 

deducting payments and credits) for 

each day in the billing cycle, and then 

dividing by the number of days in the 

billing cycle. 

The Board received several comments 

supporting proposed comments 7(b)(5)– 

7 and -8, and no comments opposing 

them. For the reasons discussed above, 

the Board adopts these comments as 

proposed. 


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7(b)(6) Charges Imposed 

Section 226.7(b)(6) generally requires 

the disclosure of the amounts of any 

charges imposed on a plan, which 

consists of finance charges attributable 

to periodic interest rates (disclosed as 

Interest Charged), and charges imposed 

as part of a plan other than charges 

attributable to periodic interest rates 

(disclosed as Fees). In addition, 

calendar year-to-date totals for both 

interest and fees must be disclosed. 

Comment 7(b)(6)–3 provides guidance 

for disclosing calendar-year-to-date 

totals for fees. In order to avoid 

inconsistency, the Board proposed to 

amend comment 7(b)(6)–3 to clarify that 

this guidance applies to fees as well as 

interest charged. The Board did not 

receive significant comment on this 

clarification, which is adopted in the 

final rule. The Board has modified the 

proposed comment to clarify that 

creditors must disclose separate totals 

for interest and fees. 

7(b)(8) Grace Period 

See discussion regarding 

§ 226.5a(b)(5). 

7(b)(12) Repayment Disclosures 

Section 226.7(b)(12) requires that for 

a credit card account under an open-end 

(not home-secured) consumer credit 

plan, card issuers generally must 

disclose the following repayment 

disclosures on each periodic statement: 

(1) A ‘‘warning’’ statement indicating 

that making only the minimum payment 

will increase the interest the consumer 

pays and the time it takes to repay the 

consumer’s balance; (2) the length of 

time it would take to repay the 

outstanding balance if the consumer 

pays only the required minimum 

monthly payments and no further 

advances are made; (3) the total cost to 

the consumer of paying the balance in 

full if the consumer pays only the 

required minimum monthly payment 

and no further advances are made; (4) 

the monthly payment amount that 

would be required for the consumer to 

pay off the outstanding balance in 36 

months, if no further advances are 

made; (5) the total cost to the consumer 

of paying the balance in full if the 

consumer pays the balance over 36 

months; (6) the total savings of paying 

the balance in 36 months (rather than 

making only minimum payments); and 

(7) a toll-free telephone number at 

which the consumer may receive 

information about accessing consumer 

credit counseling. See § 226.7(b)(12)(i). 

To simplify the disclosures, 

§ 226.7(b)(12)(i) and (ii) provide that 

card issuers must round the following 

disclosures to the nearest whole dollar 

when disclosing them on the periodic 

statement: (1) The minimum payment 

total cost estimate, (2) the estimated 

monthly payment for repayment in 36 

months, (3) the total cost estimate for 

repayment in 36 months, and (4) the 

savings estimate for repayment in 36 

months. See § 226.7(b)(12)(i)(C), 

(b)(12)(i)(F)(1)(i), (b)(12)(i)(F)(1)(iii), 

(b)(12)(i)(F)(1)(iv) and (b)(12)(ii)(C). 

Some card issuers have requested, 

however, that they be permitted to 

provide these disclosures on the 

periodic statement rounded to the 

nearest cent to be more accurate and to 

avoid potential consumer confusion that 

rounding to the dollar might cause in 

certain circumstances. For example, 

assume that a consumer’s balance is 

$3,000 and the APR on the account is 

14.4%. The estimated monthly payment 

to repay the balance in 36 months 

would be $103.12 (rounded to the 

nearest cent). A card issuer would be 

required to disclose on the periodic 

statement the estimated monthly 

payment for repayment in 36 months as 

$103, and the total cost estimate for 

repayment in 36 months as $3,712. (The 

total cost estimate for repayment in 36 

months is calculated by multiplying 

$103.12 times 36, and rounding that 

result to the nearest whole dollar.) 

Nonetheless, if a consumer pays $103 

each month for 36 months, the 

consumer will have paid only $3,708 

(not the $3,712 shown on the 

statement). Thus, rounding the 

disclosures to whole dollars when 

providing them on the periodic 

statement in some cases may make the 

disclosures appear to be inconsistent 

with each other. 

To provide additional flexibility to 

card issuers, in the November 2010 

Proposed Rule, the Board proposed to 

revise § 226.7(b)(12)(i) and (b)(12)(ii) to 

allow card issuers, at their option, to 

provide the following disclosures on the 

periodic statement either rounded to the 

nearest whole dollar or to the nearest 

cent: (1) The minimum payment total 

cost estimate, (2) the estimated monthly 

payment for repayment in 36 months, 

(3) the total cost estimate for repayment 

in 36 months, and (4) the savings 

estimate for repayment in 36 months. 

Nonetheless, proposed comment 

7(b)(12)–1 would have provided that an 

issuer’s rounding for all of these 

disclosures must be consistent. Under 

proposed comment 7(b)(12)–1, an issuer 

would have been allowed to round all 

of these disclosures to the nearest whole 

dollar when providing them on periodic 

statements, or round all of these 

disclosures to the nearest cent. An 

issuer would not have been allowed, 

however, to round some of the 

disclosures to the nearest whole dollar, 

while rounding other disclosures to the 

nearest cent. The Board believed that 

requiring an issuer to be consistent in 

how it rounds these disclosures helps to 

ensure that these disclosures remain 

consistent with each other. 

The Board received several comments 

supporting the proposed changes to 

§ 226.7(b)(12)(i) and (b)(12)(ii) and 

comment 7(b)(12)–1, and no comments 

opposing them. For the reasons 

discussed above, the Board adopts these 

changes as proposed. 

7(b)(14) Deferred Interest or Similar 

Transactions 

Section 226.7(b)(14) generally 

requires disclosure of the date by which 

any outstanding balance subject to a 

deferred interest or similar program 

must be paid in full in order to avoid 

finance charges on the front of each 

periodic statement issued during the 

deferred interest period. In order to 

avoid potential confusion, the Board 

proposed to amend § 226.7(b)(14) and 

its commentary to clarify that the 

disclosure required by § 226.7(b)(14) 

may be on the front of any page of each 

periodic statement issued during the 

deferred interest period that reflects the 

deferred interest or similar transaction. 

Industry commenters generally 

supported the proposal. 

However, consumer group 

commenters opposed the proposal as 

well as deferred interest plans generally. 

These commenters argued that the 

deferred interest disclosure should be 

on the front of the first page of the 

periodic statement, or in the alternative, 

grouped with the disclosure of the 

deferred interest balance, deferred 

interest APR, and accrued interest for 

the deferred interest balance. 

The clarifications in § 226.7(b)(14) 

and its commentary is adopted as 

proposed. The Board believes this 

clarification ensures that consumers 

continue to receive conspicuous 

disclosure of the end of the deferred 

interest period and also provides greater 

certainty and flexibility to creditors in 

order to facilitate compliance. 

Section 226.9 Subsequent Disclosure 

Requirements 

9(b) Disclosures for Supplemental Credit 

Access Devices and Additional Features 

9(b)(3) Checks That Access a Credit 

Card Account 

Section 226.9(b)(3) sets forth 

requirements for disclosures that must 

be provided with checks that access a 

credit card account. These disclosures 


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22962 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

set forth certain key terms, such as the 

rates that will apply to the checks, any 

transaction fees applicable to the 

checks, and whether or not a grace 

period is given within which any credit 

extended by use of the checks may be 

repaid without incurring interest 

charges. In the November 2010 

Proposed Rule, the Board proposed to 

clarify that if any rate disclosed 

pursuant to § 226.9(b)(3) is a variable 

rate, the card issuer must disclose that 

the rate may vary and how the rate is 

determined. Proposed § 226.9(b)(3)(iii) 

generally mirrored the disclosure 

requirements for variable rates set forth 

in §§ 226.5a(b)(1)(i) and 

226.6(b)(2)(i)(A). In describing how the 

applicable rate will be determined, the 

proposal would have required the card 

issuer to identify the type of index or 

formula that is used in setting the rate. 

The proposal would not have permitted 

disclosure of the value of the index and 

the amount of the margin that are used 

to calculate the variable rate in the table. 

In addition, the proposal would not 

have permitted a card issuer to disclose 

any applicable limitations on rate 

increases in the table. 

One card issuer commented in 

support of the proposed variable-rate 

disclosure requirements in 

§ 226.9(b)(3)(iii). One other card issuer 

agreed that it is important that variable 

rate information be disclosed to 

consumers who receive checks that 

access a credit card account, but 

questioned the benefit of providing the 

proposed variable rate disclosures to 

consumers who have already received 

variable rate disclosures at account 

opening. Several other issuers 

commented that requiring additional 

disclosures about variable rates could 

contribute to information overload and 

impose burden on issuers that may 

result in reduced availability of 

promotional offers in connection with 

checks that access a credit card account. 

Two such commenters recommended 

that the final rule limit the requirement 

to provide variable rate disclosures to 

situations where the promotional or 

post-promotional rates or fees that apply 

to the checks exceed the rates applicable 

prior to the promotion. 

The Board continues to believe that it 

is important that consumers be 

informed if the rates that apply to 

checks that access a credit card account 

are variable rates, to better assist 

consumers with making an informed 

decision regarding use of the checks. 

Accordingly, the Board is adopting 

§ 226.9(b)(3)(iii) as proposed. Even if 

variable rates are disclosed at account 

opening, the Board also believes it is 

important that consumers receive 

information regarding any applicable 

variable rate at the same time that they 

receive other disclosures regarding the 

check offer, including the annual 

percentage rates that will apply to the 

checks. The Board is concerned that 

even if variable rates are disclosed at 

account opening, consumers may not be 

aware when they receive a check offer 

that the rates that apply to those checks 

and that must be disclosed pursuant to 

§ 226.9(b)(3) also will be variable rates. 

Indeed, it may be confusing or even 

misleading for the rates disclosed 

pursuant to § 226.9(b)(3) to state nothing 

regarding the fact that the rates that 

apply to the checks are variable, when 

disclosures of annual percentage rates 

provided with credit card applications 

and solicitations and at account opening 

are required to set forth certain 

information identifying a rate as 

variable. The variable-rate disclosure 

requirements in new § 226.9(b)(3)(iii) 

are based on the approach in 

§§ 226.5a(b)(1)(i) and 226.6(b)(2)(i)(A), 

which was informed by consumer 

testing conducted on behalf of the 

Board. The Board believes that 

§ 226.9(b)(3)(iii) strikes the appropriate 

balance between informing consumers 

of key information regarding the 

variable rate or rates applicable to 

checks that access a credit card account 

and avoiding overly detailed 

information that may be confusing to 

consumers. 

Section 226.9(b)(3)(i) requires that the 

disclosures given in connection with 

checks that access a credit card account 

be in the form of a table with headings, 

content, and form substantially similar 

to Sample G–19. In the November 2010 

Proposed Rule, the Board proposed a 

new comment 9(b)(3)(i)–2 to clarify that 

a card issuer may include in the tabular 

disclosure provided pursuant to 

§ 226.9(b)(3) disclosures regarding the 

terms offered on non-check transactions, 

provided that such transactions are 

subject to the same terms that are 

required to be disclosed pursuant to 

§ 226.9(b)(3)(i) for the checks that access 

a credit card account. Proposed 

comment 9(b)(3)(i)–2 stated, however, 

that a card issuer may not include in the 

table information regarding additional 

terms that are not required disclosures 

for access checks pursuant to 

§ 226.9(b)(3). 

Commenters who addressed this 

aspect of the proposal supported 

comment 9(b)(3)(i)–2, which is adopted 

as proposed. As stated in the November 

2010 Proposed Rule, the Board believes 

that if a card issuer offers a single set of 

terms that apply both to checks that 

access a credit card account and to other 

transactions, it is appropriate to permit 

the card issuer to present one combined 

tabular disclosure. For example, a card 

issuer may offer a single set of 

promotional terms that apply both to 

checks that access a credit card account 

and to balance transfers made without 

use of an access check. Under these 

circumstances, it is unnecessary to 

require card issuers to provide two 

substantively identical but separate sets 

of disclosures, one for check 

transactions and one for other balance 

transfers. Accordingly, the Board 

believes that comment 9(b)(3)(i)–2 will 

ensure that consumers receive clear 

disclosures regarding checks that access 

a credit card account, while at the same 

time minimizing the operational burden 

that would be associated with providing 

two sets of disclosures of substantively 

identical terms. 

Finally, the Board has revised the 

guidance regarding grace periods in 

comment 9(b)(3)(i)(D)–1 consistent with 

the revisions to the commentary for 

§ 226.5a(b)(5), which are discussed in 

detail above. 

9(c)(2) Rules Affecting Open-End (Not 

Home-Secured) Plans 

Comment 9(c)(2)–1 states that, except 

as provided in § 226.9(g)(1), no notice of 

a change in terms need be given if the 

specific change is set forth initially, 

such as rate increases under a properly 

disclosed variable-rate plan in 

accordance with § 226.9(c)(2)(v)(C). The 

Board proposed to revise this comment 

to clarify that the initial disclosure of 

the change must be provided consistent 

with any applicable requirements. For 

example, no notice of a change in terms 

is required when a promotional rate 

expires, provided that the card issuer 

disclosed the terms associated with that 

promotional rate consistent with 

§ 226.9(c)(2)(v)(B). Commenters 

supported this revision, which is 

adopted as proposed. 

9(c)(2)(i) Changes Where Written 

Advance Notice is Required 

9(c)(2)(ii) Significant Changes in 

Account Terms 

Section 226.9(c)(2) sets forth the 

change-in-terms notice requirements for 

open-end consumer credit plans that are 

not home-secured. Section 226.9(c)(2)(i) 

states that, when a significant change in 

account terms as described in 

§ 226.9(c)(2)(ii) is made to a term 

required to be disclosed under 

§ 226.6(b)(3), (b)(4), or (b)(5), a creditor 

must generally provide a written notice 

at least 45 days prior to the effective 

date of the change. Section 226.9(c)(2)(i) 

defines a ‘‘significant change in account 

terms’’ as a change to a term required to 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 22963 

be disclosed under § 226.6(b)(1) and 

(b)(2), an increase in the required 

minimum periodic payment, or the 

acquisition of a security interest. 

The Board is aware that some 

confusion has arisen regarding the 

references to § 226.6(b)(3), (b)(4), and 

(b)(5) contained in § 226.9(c)(2). In 

particular, given that ‘‘significant change 

in account terms’’ is defined in 

§ 226.9(c)(2)(ii) generally with respect to 

terms required to be disclosed in the 

account-opening table under 

§ 226.6(b)(1) and (b)(2), several creditors 

asked the Board to clarify what advance 

notice requirements apply when a 

change is made to a term required to be 

disclosed under § 226.6(b)(3), (b)(4), or 

(b)(5) that (1) may impact a term 

required to be disclosed in the accountopening table pursuant to § 226.6(b)(1) 

and (b)(2), but (2) is not a term that itself 

is required or permitted to be included 

in the account-opening table. For 

example, the Board was asked whether 

45 days’ advance notice is required 

prior to changing the date or schedule 

on which the value of a variable annual 

percentage rate is adjusted, if the 

formula for computing the value of the 

variable rate otherwise remains the 

same (i.e., based on the same index and 

margin). The Board notes that the 

variable annual percentage rate is a term 

required to be disclosed pursuant to 

§ 226.6(b)(1) and (b)(2). In contrast, the 

date or schedule on which the rate is 

computed is not required or permitted 

to be disclosed in the tabular disclosure 

pursuant to § 226.6(b)(1) and (b)(2). 

However, the date or schedule on which 

the rate is computed is required to be 

disclosed at account opening outside of 

the table pursuant to § 226.6(b)(4). 

The Board proposed several 

amendments to § 226.6(b)(1) and (b)(2) 

to clarify the advance notice 

requirements for changes to terms 

specified in § 226.6(b)(3), (b)(4), or (b)(5) 

that are not also terms required to be 

disclosed under § 226.6(b)(1) and (b)(2). 

First, the Board proposed to delete as 

unnecessary the references to 

§ 226.6(b)(3), (b)(4) and (b)(5), as well as 

a reference to increases in the required 

minimum periodic payment, from 

§ 226.9(c)(2)(i). The Board noted in the 

November 2010 Proposed Rule that 

defining the term ‘‘significant change in 

account terms’’ exclusively in 

§ 226.9(c)(2)(ii) and deleting the 

references to § 226.6(b)(3), (b)(4) and 

(b)(5) and increases in the required 

minimum periodic payment in 

§ 226.9(c)(2)(i) would alleviate 

confusion regarding compliance with 

the change-in-terms notice 

requirements. 

Second, the Board proposed to amend 

the definition of ‘‘significant change in 

account terms’’ in § 226.9(c)(2)(ii) to 

clarify to which terms the 45-day 

advance notice requirements in 

§ 226.9(c)(2) apply. The proposal would 

have amended § 226.9(c)(2)(ii) to define 

‘‘significant change in account terms’’ as 

a change to a term required to be 

disclosed under § 226.6(b)(1) and (b)(2), 

an increase in the required minimum 

periodic payment, a change to a term 

required to be disclosed under 

§ 226.6(b)(4), or the acquisition of a 

security interest. 

Two industry commenters objected to 

the proposed amendment clarifying that 

changes to terms required to be 

disclosed under § 226.6(b)(4) are 

‘‘significant changes in account terms.’’ 

These commenters argued that 45 days’ 

advance notice of changes in terms 

required to be disclosed under 

§ 226.6(b)(4) is unnecessary and that 45 

days’ advance notice should be required 

only in connection with changes to 

those terms that are required to be 

disclosed in the account opening 

disclosure table. The commenters 

argued that advance notice of changes in 

terms required to be disclosed under 

§ 226.6(b)(4) would better be addressed 

by state or contract law, and that 

highlighting these changes by requiring 

notice pursuant to § 226.9(c)(2) could 

contribute to ‘‘information overload.’’ 

Finally, these commenters indicated 

that application of the advance notice 

rules to changes in terms required to be 

disclosed under § 226.6(b)(4) would 

increase regulatory burden and 

administrative costs. 

In contrast, consumer groups and one 

industry commenter supported the 

Board’s proposal to expressly provide 

that changes to terms required to be 

disclosed under § 226.6(b)(4) are 

‘‘significant changes in account terms.’’ 

The industry commenter acknowledged 

that the clarification could result in the 

provision of more change-in-terms 

notices but agreed that the changes are 

significant to the consumer and should 

be subject to 45 days’ advance notice. 

One industry commenter erroneously 

stated that the proposal would create a 

new requirement that 45 days’ advance 

notice be given prior to changing the 

balance computation method applicable 

to an open-end (not home-secured) 

account. This commenter argued that a 

change in the balance computation 

method is not a significant change in 

account terms and that 45 days’ advance 

notice should not be required. The 

Board notes that the balance 

computation method is a term required 

to be disclosed under § 226.6(b)(1) and 

(b)(2), and therefore a change in the 

balance computation method currently 

is a ‘‘significant change in account 

terms’’ under existing § 226.9(c)(2)(ii), 

and would remain a ‘‘significant change 

in account terms’’ under the November 

2010 Proposed Rule. 

The Board is adopting the changes to 

§ 226.9(c)(2)(i) and (c)(2)(ii) as proposed. 

Accordingly, § 226.9(c)(2)(ii) as adopted 

specifically categorizes changes in terms 

required to be disclosed under 

§ 226.6(b)(4) as ‘‘significant change[s] in 

account terms.’’ Section 226.6(b)(4) 

requires disclosure of certain 

information regarding periodic rates that 

may be used to calculate interest. The 

Board believes that changes in the 

manner in which annual percentage 

rates are computed, for example, 

changes in the frequency with which a 

variable rate may increase, are 

significant changes because they may 

impact the amount of interest imposed 

on a consumer’s account, which is one 

of the key costs associated with openend (not home-secured) credit. While 

certain details regarding rates mandated 

by § 226.6(b)(4) are not required or 

permitted to be disclosed in the 

account-opening table, changes in the 

manner in which an interest rate is 

computed may have a direct impact on 

the annual percentage rate expressed as 

a yearly rate, which is a required 

disclosure in the account-opening table 

under § 226.6(b)(1) and (b)(2). For 

example, for variable rates § 226.6(b)(4) 

requires disclosure of the frequency 

with which the rate may increase and 

the circumstances under which the rate 

may increase, both of which may impact 

the computation of the rate required to 

be disclosed in the account-opening 

table. Thus, the Board continues to 

believe that 45 days’ advance notice of 

such changes is appropriate to ensure 

that consumers can take actions to 

mitigate the potential impact of changes 

in the way in which the annual 

percentage rate or rates applicable to 

their accounts are computed. 

As discussed below, the Board notes 

that the final rule provides creditors 

with flexibility in how to format the 

notice of a change to a term required to 

be disclosed pursuant to § 226.6(b)(4); if 

the change does not result in a change 

to a term required to be disclosed 

pursuant to § 226.6(b)(1) or (b)(2), the 

notice would not be required to be 

presented in a tabular format pursuant 

to § 226.9(c)(2)(iv)(D). The Board 

believes that this flexibility will 

alleviate burden on creditors, while 

ensuring that the changes of the most 

importance to consumers are 

appropriately highlighted. 

Proposed § 226.9(c)(2)(ii) did not 

specifically identify changes in terms 


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5The Board notes that charges for voluntary 

credit insurance, debt cancellation or debt 

suspension coverage are ‘‘charges imposed as part 

of the plan’’ under § 226.6(b)(3)(ii)(F), and 

accordingly changes in the cost of such coverage are 

required to be disclosed in accordance with 

§ 226.9(c)(2)(iii). 

required to be disclosed under 

§ 226.6(b)(3) in the list of ‘‘significant 

change[s] in account terms.’’ The Board 

stated in the proposal that it believes a 

reference to § 226.6(b)(3) is unnecessary, 

for several reasons. Section 226.6(b)(3) 

addresses disclosure of charges imposed 

as part of an open-end (not homesecured) plan. Certain charges imposed 

as part of a plan are specifically 

required to be disclosed in the accountopening table under § 226.6(b)(1) and 

(b)(2), while other charges imposed as 

part of the plan are not required or 

permitted to be disclosed in the table. 

Therefore, the 45-day advance notice 

requirement would continue to apply to 

charges that are identified in 

§ 226.6(b)(3) that are also required to be 

disclosed in the account-opening table 

under § 226.6(b)(1) and (b)(2). In 

addition, § 226.9(c)(2)(iii) sets forth a 

special rule for notice of changes to 

charges imposed as part of the plan that 

are not required to be disclosed in the 

account-opening table. In particular, for 

charges imposed as part of the plan 

under § 226.6(b)(3) that are not required 

to be disclosed in the account-opening 

table under § 226.6(b)(1) and (b)(2), 

§ 226.9(c)(2)(iii) requires a creditor to 

either, at its option (1) provide at least 

45 days’ written advance notice before 

the change becomes effective, or (2) 

provide notice orally or in writing of the 

amount of the charge to an affected 

consumer at a relevant time before the 

consumer agrees to or becomes 

obligated to pay the charge. 

Consumer group commenters objected 

to the existing rule set forth in 

§ 226.9(c)(2)(iii), to the extent that it 

permits new fees that are not disclosed 

in the account opening table to be 

disclosed orally at a relevant time before 

the consumer agrees or becomes 

obligated to pay the charge. Consumer 

groups believe that the addition of a 

new fee, other than one-time fees for 

time-sensitive matters, should require a 

change in terms notice. However, for the 

reasons discussed in the supplementary 

information to the January 2009 Final 

Rule, the Board is not expanding the 

45-day advance notice requirements to 

charges imposed as part of the plan 

under § 226.6(b)(3) that are not required 

to be disclosed in the account-opening 

table under § 226.6(b)(1) and (b)(2). See, 

e.g., 74 FR 5273, 74 FR 5345. 

The Board proposed one wording 

change to § 226.9(c)(2)(iii) and comment 

9(c)(2)(iii)–1; the proposal would have 

replaced the word ‘‘may’’ with ‘‘must,’’ in 

order to clarify that increases in, or the 

introduction of new, charges imposed as 

part of the plan under § 226.6(b)(3) must 

be disclosed in accordance with 

§ 226.9(c)(2)(iii). The Board received no 

comments on this change, which is 

adopted as proposed. 

Finally, unlike current § 226.9(c)(2)(i), 

the definition of ‘‘significant change[s] 

in account terms’’ in proposed 

§ 226.9(c)(2)(ii) did not expressly 

reference the disclosures required by 

§ 226.6(b)(5). Section 226.6(b)(5) 

requires that a creditor disclose, to the 

extent applicable, certain information 

regarding voluntary credit insurance, 

debt cancellation or debt suspension 

coverage, security interests, and a 

statement regarding the consumer’s 

billing rights. The disclosures regarding 

voluntary credit insurance and similar 

products and the statement of billing 

rights set forth in § 226.6(b)(5) are not 

terms of the account, but specific 

disclosures that must be given. 

Accordingly, given that these are not 

terms of the account, the Board noted in 

the proposal that there are no 

corresponding changes in terms for 

which it is appropriate to require 

advance notice.5 In contrast, the 

acquisition of a security interest is 

expressly included in § 226.9(c)(2)(ii)’s 

definition of ‘‘significant change in 

account terms’’ for which 45 days’ 

advance notice must generally be 

provided. The Board received no 

comments on this aspect of the 

proposal, which is adopted as proposed. 

The Board is also amending 

§ 226.9(c)(2)(i)(A) to correct a technical 

issue; this amendment is not intended 

as a substantive change to the changein-terms notice requirements. Consumer 

group commenters noted that in the 

February 2010 Final Rule, the Board 

created a new § 226.9(c)(2)(i)(B) to 

address change-in-terms notice 

requirements for changes agreed to by 

the consumer. As discussed in the 

supplementary information to the 

February 2010 Final Rule, new 

§ 226.9(c)(2)(i)(B) generally included 

guidance that was formerly included in 

the commentary to § 226.9(c)(2), which 

was moved into the regulation for 

clarity. See 75 FR 7693. Section 

226.9(c)(2)(i)(B) sets forth guidance 

regarding which changes are deemed to 

be ‘‘agreed to’’ by the consumer. 

Consumer group commenters on the 

November 2010 Proposed Rule 

expressed concerns that the retention in 

the February 2010 Final Rule of a 

separate reference to changes agreed to 

by the consumer in § 226.9(c)(2)(i)(A) 

could be read as creating a different, 

broader standard than the one set forth 

in § 226.9(c)(2)(i)(B). Accordingly, the 

Board is amending § 226.9(c)(2)(i)(A) to 

expressly cross-reference 

§ 226.9(c)(2)(i)(B), in order to clarify that 

the guidance in § 226.9(c)(2)(i)(B) is 

intended to exclusively address what it 

means for a change to be ‘‘agreed to by 

the consumer.’’ 

9(c)(2)(iv) Disclosure Requirements 

As discussed above, the Board is 

amending § 226.9(c)(2)(ii) to expressly 

provide that changes to terms required 

to be disclosed under § 226.6(b)(4) are 

‘‘significant change[s] in account terms.’’ 

The Board proposed several conforming 

changes to § 226.9(c)(2)(iv), which sets 

forth the disclosure requirements for the 

45-day advance notice of a significant 

change in account terms. First, the 

Board proposed to amend 

§ 226.9(c)(2)(iv)(A)(1) to provide that the 

notice must include a summary of 

changes made to terms required to be 

disclosed under § 226.6(b)(4). Second, 

the Board proposed to amend 

§ 226.9(c)(2)(iv)(D)(1) to clarify the 

formatting requirements for the notice 

provided in advance of a change to a 

term required to be disclosed under 

§ 226.6(b)(4). Section 

226.9(c)(2)(iv)(D)(1) generally requires 

that the summary of changes included 

with a change-in-terms notice be in a 

tabular format, with headings and 

format substantially similar to any of the 

account-opening tables found in G–17 to 

appendix G. However, terms required to 

be disclosed under § 226.6(b)(4), such as 

the margin for a variable rate, are not 

permitted to be included in the accountopening table, and therefore would not 

be in a tabular format in the samples in 

G–17 to appendix G. Accordingly, the 

Board proposed to amend 

§ 226.9(c)(2)(iv)(D)(1) to expressly state 

that the summary of a term required to 

be disclosed under § 226.6(b)(4) that is 

not required to be disclosed under 

§ 226.6(b)(1) and (b)(2) need not be in a 

tabular format. 

The Board received only one 

comment on this aspect of the proposal, 

from an industry commenter that 

supported this flexible approach to 

providing disclosures of changes to 

terms required to be disclosed under 

§ 226.6(b)(4). Accordingly, the Board is 

adopting the changes to 

§ 226.9(c)(2)(iv)(A)(1) and (c)(2)(iv)(D)(1) 

as proposed. 

Right To Reject 

The Board proposed several changes 

related to disclosure of the right to reject 

certain types of changes. When a 

creditor makes a significant change in 

account terms on a credit card account 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 22965 

6The right to reject would apply, however, to 

changes to a balance computation method 

applicable to a consumer’s account; the balance 

computation method is a required disclosure 

pursuant to both § 226.6(b)(2)(vi) and (b)(4)(i)(D). 

under an open-end (not home-secured) 

consumer credit plan, 

§ 226.9(c)(2)(iv)(B) generally requires 

the creditor to disclose certain 

information regarding the consumer’s 

right to reject that change under 

§ 226.9(h). Section 226.9(c)(2)(iv)(B) also 

lists several types of changes to which 

the right to reject does not apply, 

including a change in the balance 

computation method necessary to 

comply with § 226.54. The Board 

adopted this exemption in the February 

2010 Final Rule in order to facilitate 

compliance with the limitations on the 

imposition of finance charges in 

§ 226.54, which implemented the Credit 

Card Act’s prohibition on the two-cycle 

balance computation method. See 75 FR 

7696, 7730. 

Because § 226.54 went into effect on 

February 22, 2010, the Board proposed 

to remove the exemption in 

§ 226.9(c)(2)(iv)(B) for changes 

necessary to comply with § 226.54. In its 

place, the Board proposed to adopt an 

exemption stating that, when a fee has 

been reduced consistent with the 

Servicemembers Civil Relief Act 

(SCRA), 50 U.S.C. app. 501 et seq., or a 

similar Federal or State statute or 

regulation, the right to reject does not 

apply to an increase in that fee once the 

statute or regulation no longer applies, 

provided that the amount of the 

increased fee does not exceed the 

amount of that fee prior to the 

reduction. 

As discussed in greater detail below 

with respect to § 226.55(b)(6), the SCRA 

and some state statutes generally require 

creditors to reduce interest rates and 

fees for consumers who are in military 

service. When the SCRA or similar state 

statute ceases to apply, § 226.9(c) 

generally requires the creditor to 

provide 45 days’ advance notice of any 

increase in a rate or fee. The right to 

reject does not apply to rate increases, 

but § 226.55(b)(6) limits the ability of a 

card issuer to increase the rate that 

applies to the existing balance on a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan in these circumstances. 

Specifically, § 226.55(b)(6) provides 

that, if the SCRA requires a card issuer 

to reduce an interest rate on an existing 

balance when a consumer enters 

military service, the rate applied to that 

balance when the consumer leaves 

military service cannot exceed the rate 

that applied prior to military service. In 

other words, consumers cannot be 

charged higher rates once the SCRA 

ceases to apply than they were before 

the SCRA began to apply. 

The Board understands that, in order 

to comply with the SCRA and similar 

Federal or State statutes or regulations, 

many creditors reduce or cease to 

impose annual fees, late payment fees, 

and other types of fees while a 

consumer is in military service. 

Although the right to reject generally 

applies to increases in fees required to 

be disclosed under § 226.6(b)(1) and 

(b)(2) (such as annual fees and late 

payment fees), the Board believes that, 

when a consumer leaves military service 

and the legal requirements of the SCRA 

or a similar Federal or State statute or 

regulation cease to apply, it is 

appropriate to permit creditors to return 

fees to pre-existing levels. Accordingly, 

the Board proposed to exempt such 

increases from the right to reject, 

although the right to reject would 

continue to apply if a creditor sought to 

apply a fee that exceeded the amount of 

the fee prior to the consumer entering 

military service. Commenters generally 

supported this aspect of the proposal, 

which is adopted as proposed. 

Section 226.9(c)(2)(iv)(B) also 

provides that the right to reject does not 

apply to changes to an annual 

percentage rate applicable to a 

consumer’s account. As discussed 

above, the Board has amended the 

definition of ‘‘significant change in 

account terms’’ under § 226.9(c)(2)(ii) to 

expressly include changes to terms 

required to be disclosed under 

§ 226.6(b)(4). Section 226.6(b)(4) 

requires disclosure of certain 

information regarding periodic rates that 

may be used to calculate interest. One 

industry commenter asked the Board to 

expressly provide that changes to terms 

required to be disclosed under 

§ 226.6(b)(4) do not trigger the right to 

reject under § 226.9(c)(2)(iv)(B). The 

Board believes that the broad language 

of § 226.9(c)(2)(iv)(B), which refers to ‘‘a 

change in an annual percentage rate 

applicable to a consumer’s account’’ 

generally encompasses changes to terms 

required to be disclosed under 

§ 226.6(b)(4).6 Accordingly, while the 

Board believes that the right to reject 

does not apply to most changes to terms 

required to be disclosed under 

§ 226.6(b)(4), it is not adopting any 

amendments to the text of 

§ 226.9(c)(2)(iv)(B) to address such 

changes. 

Changes in Type of Rate 

Comments 9(c)(2)(iv)–3 and –4 and 

comments 9(c)(2)(v)–3 and –4 clarify 

that, if a creditor is changing a rate 

applicable to a consumer’s account from 

a non-variable rate to a variable rate (or 

vice versa), the creditor must provide a 

notice pursuant to § 226.9(c) even if the 

new rate is lower than the prior rate. 

The Board proposed to revise this 

guidance to clarify that notice is not 

required pursuant to § 226.9(c)(2) when 

a lower rate is applied in connection 

with a promotional or other temporary 

rate program or a workout or temporary 

hardship arrangement, provided that the 

terms of that program or arrangement 

are disclosed consistent with 

§ 226.9(c)(2)(v)(B) or (c)(2)(v)(D). In 

these circumstances, the Board believes 

that the 45-day notice requirement 

would unnecessarily delay application 

of a lower rate to a consumer’s account 

in circumstances where 

§ 226.9(c)(2)(v)(B) or (c)(2)(v)(D) 

generally require that the consumer be 

informed of the terms associated with 

the lower rate before it is applied to the 

account. Furthermore, when a 

promotional or temporary rate or 

workout or temporary hardship 

arrangement is applied to an account, 

the substantive limitations in 

§ 226.55(b)(1) and (b)(5) protect 

consumers from unanticipated increases 

in the rates that apply to existing 

balances. 

The Board also proposed to clarify 

that notice pursuant to § 226.9(c)(2) is 

not required when the creditor applies 

a lower rate in order to comply with the 

SCRA or a similar Federal or State 

statute or regulation. Finally, in order to 

eliminate redundancy and ensure 

consistent guidance, the Board proposed 

to replace comments 9(c)(2)(v)–3 and –4 

with cross references to comments 

9(c)(2)(iv)–3 and –4. 

Commenters generally supported 

these proposed revisions, which are 

adopted as proposed. In addition, as 

suggested by consumer group 

commenters, the Board has added a 

cross reference in comment 9(c)(2)(iv)– 

4 to comment 55(b)(2)–4, which 

addresses the limitations in 

§ 226.55(b)(2) on changing the rate that 

applies to a protected balance from a 

non-variable rate to a variable rate. 

Finally, the Board has clarified that a 

creditor is not required to provide a 

notice under § 226.9(c) when changing a 

variable rate to a lower non-variable rate 

or a non-variable rate to a lower variable 

rate in order to comply with 

§ 226.55(b)(4). Section 226.55(b)(4) 

permits a card issuer to increase the rate 

that applies to an existing credit card 

balance if the account becomes more 

than 60 days delinquent. However, if 

the consumer makes the next six 

required minimum payments on time, 

§ 226.55(b)(4) requires the card issuer to 

lower the rate on the existing balance to 


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22966 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

the pre-existing rate. For example, 

assume that a credit card account 

became more than 60 days delinquent 

and that, after providing 45 days 

advance notice, the card issuer 

increased the rate on the existing 

balance from a 15% variable rate to a 

30% non-variable penalty rate. If the 

consumer made the next six required 

minimum payments on time, 

§ 226.55(b)(4) requires the card issuer to 

lower the rate that applies to the 

existing balance to the 15% variable 

rate. However, the card issuer is not 

required to provide 45 days advance 

notice before doing so. 

9(c)(2)(v) Notice Not Required 

Temporary Rate Exception 

Section 226.9(c)(2) generally requires 

that 45 days’ advance notice be 

provided of significant changes in 

account terms for open-end (not homesecured) consumer credit plans. Several 

exceptions to this 45-day advance notice 

requirement are set forth in 

§ 226.9(c)(2)(v). Section 226.9(c)(2)(v)(B) 

sets forth an exception for increases in 

annual percentage rates upon the 

expiration of a period of time, provided 

that prior to the commencement of that 

period, the creditor discloses to the 

consumer clearly and conspicuously in 

writing the length of the period and the 

annual percentage rate that will apply 

after that period. Section 

226.9(c)(2)(v)(B)(2) requires that the 

disclosure of the length of the period 

and the rate that will apply after 

expiration of the period must be 

disclosed in close proximity and equal 

prominence to the first listing of the 

disclosure of the rate that applies during 

the specified period of time. 

In November 2010, the Board 

proposed to clarify the proximity and 

prominence requirements for the 

disclosure of introductory rates that are 

disclosed at account opening. The Board 

noted that there is confusion regarding 

how to comply with the proximity and 

prominence rules in § 226.9(c)(2)(v)(B) 

when an introductory rate is being 

disclosed in the account-opening table. 

The rules in § 226.6(b) contain 

prescriptive formatting and font size 

requirements for the disclosures 

required to be provided in tabular form 

at account opening. Section 226.6(b)(1) 

requires that the tabular disclosure have 

headings, content, and format 

substantially similar to any of the 

applicable tables in G–17 in appendix 

G. In addition, § 226.6(b)(2)(i) requires 

that annual percentage rates for 

purchases be disclosed in the tabular 

disclosure provided at account opening 

in 16-point font. Section 226.6(b)(1)(i) 

requires that annual percentage rates 

required to be disclosed pursuant to 

§ 226.6(b)(2)(i), including introductory 

rates required to be disclosed under 

§ 226.6(b)(2)(i)(F), be disclosed in bold 

text. 

Sample G–17(C) contains a sample 

disclosure of an introductory rate on 

purchases, where the introductory and 

standard annual percentage rates are 

presented in bold 16-point font in 

accordance with § 226.6(b)(1)(i) and 

(b)(2)(i). However, the disclosure of the 

introductory period is displayed in 

10-point font and is not presented in 

bold text, consistent with § 226.6(b). 

Accordingly, the Board sought to 

address confusion regarding whether 

the § 226.6(b) tabular disclosure would 

be deemed to comply with the 

formatting requirements in 

§ 226.9(c)(2)(v)(B)(2), because the period 

is disclosed in a smaller font than the 

font in which the relevant rates are 

disclosed, and is not in bold text. 

Specifically, the Board proposed to 

adopt a new comment 9(c)(2)(v)-10 

which states that a disclosure of the 

information described in 

§ 226.9(c)(2)(v)(B)(1) provided in the 

account-opening table in accordance 

with § 226.6(b) complies with the 

requirements of § 226.9(c)(2)(v)(B)(2), if 

the listing of the introductory rate in 

such tabular disclosure also is the first 

listing as described in comment 

9(c)(2)(v)–6. The Board proposed to 

renumber existing comments 9(c)(2)(v)– 

10 through 9(c)(2)(v)–12 accordingly. 

Industry commenters generally 

supported proposed comment 

9(c)(2)(v)–10. These commenters 

indicated that permitting promotional 

rates to be disclosed in the accountopening table under § 226.9(c)(2)(v)(B), 

even if the duration of the period is 

disclosed in a smaller, non-bold font, 

would facilitate creditors’ ability to 

continue to make beneficial promotional 

offers to consumers. However, several 

industry commenters objected to the 

language limiting comment 9(c)(2)(v)–10 

to circumstances where the listing of the 

introductory rate in the tabular 

disclosure is the first listing of the rate. 

These commenters expressed particular 

concern regarding private label credit 

card programs that provide a cover page 

at account opening which includes a 

reference to the temporary rate offer. 

Accordingly, for such programs, 

commenters indicated that the accountopening table often may not be the first 

listing of the promotional rate. These 

commenters stated that the Board 

should permit lenders to comply with 

the disclosure requirement for 

temporary and introductory rates by 

including the required information in 

the account-opening table provided 

pursuant to § 226.6(b) even if it is not 

the first listing. 

The Board is adopting comment 

9(c)(2)(v)–10 as proposed. The Board 

continues to believe that additional 

clarification is appropriate as to the 

relationship between the formatting 

requirements of §§ 226.9(c)(2)(v)(B)(2) 

and 226.6(b). The Board believes that if 

the information described in 

§ 226.9(c)(2)(v)(B)(2) is included in the 

account-opening table provided 

pursuant to, and in compliance with, 

§ 226.6(b), it should be deemed to meet 

the equal prominence and close 

proximity requirements of 

§ 226.9(c)(2)(v)(B). The format and 

presentation of information in the 

account-opening table was informed by 

the Board’s consumer testing, and the 

Board believes that the requirements of 

§ 226.6(b) are appropriate and sufficient 

to convey key information regarding 

introductory rates to consumers. 

The Board notes that 

§ 226.9(c)(2)(v)(B)(2) and comment 

9(c)(2)(v)–6, which were adopted in the 

February 2010 Final Rule, apply the 

close proximity and equal prominence 

requirements for the § 226.9(c)(2)(v)(B) 

disclosures to the first listing of the 

temporary rate. The Board adopted this 

‘‘first listing’’ rule in response to 

concerns raised by a commenter that, as 

originally proposed, § 226.9(c)(2)(v)(B) 

could have been construed to apply the 

close proximity and equal prominence 

requirements to each disclosure of the 

promotional rate, not just the first 

listing. See 75 FR 7699. The Board 

proposed comment 9(c)(2)(v)–10, not as 

a reconsideration of the ‘‘first listing’’ 

rule set forth in § 226.9(c)(2)(v)(B)(2) 

and comment 9(c)(2)(v)–6, but to clarify 

the relationship between the formatting 

requirements of §§ 226.9(c)(2)(v)(B) and 

226.6(b). The Board continues to believe 

that the ‘‘first listing’’ standard set forth 

in § 226.9(c)(2)(v)(B)(2) and comment 

9(c)(2)(v)–6 is appropriate, to ensure 

that consumers notice the disclosures 

required under § 226.9(c)(2)(v)(B) by 

requiring that those disclosures be 

closely proximate and equally 

prominent to the most prominent 

disclosure of the temporary rate. 

Consumer groups did not oppose 

proposed comment 9(c)(2)(v)–10 but 

urged the Board to also require that 

creditors comply with § 226.16(g) as 

part of compliance with in 

§ 226.9(c)(2)(v)(B), especially when the 

first listing of the introductory rate is 

not in the account-opening table. 

However, the Board is not expressly 

requiring compliance with § 226.16(g) as 

a condition of the exception set forth in 

§ 226.9(c)(2)(v)(B), for several reasons. 


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7As discussed below, the Board proposed to 

extend the exception in § 226.9(c)(2)(v)(B) to apply 

to temporary fee reductions; accordingly, proposed 

comment 9(c)(2)(v)–5.ii applied both to temporary 

rate and temporary fee offers. 

First, the requirements of § 226.16(g) 

apply independently of the change-interms provisions in § 226.9(c)(2). The 

Board is concerned that making 

compliance with the advertising 

requirements in § 226.16(g) a 

prerequisite for compliance with 

§ 226.9(c)(2)(v)(B) could be 

misconstrued as suggesting that the 

requirements of § 226.16(g) do not 

otherwise independently apply. Second, 

§ 226.16(g) applies to advertisements of 

an open-end (not home-secured) plan. 

The definition of advertisement is set 

forth in § 226.2(a) and related staff 

commentary; comment 2(a)(2)–1.ii.F 

expressly states that communications 

about an existing credit account (for 

example, a promotion encouraging 

additional or different uses of an 

existing credit card account) are not 

advertisements. In contrast, 

§ 226.9(c)(2)(v)(B) applies to 

promotional rates offered on both new 

and existing accounts; therefore, any 

reference to compliance with § 226.16(g) 

would be inapplicable in cases where a 

creditor is utilizing the exception in 

§ 226.9(c)(2)(v)(B) for a promotion 

offered on an existing account. 

One commenter urged the Board to 

clarify, given an issuer’s ability to 

combine application disclosures with 

account-opening disclosures, that 

placing the temporary rate information 

in the tabular disclosure provided 

pursuant to § 226.5a would meet the 

timing, proximity, and prominence 

requirements of § 226.9(c)(2)(v)(B). The 

Board believes that no additional 

clarification is necessary. In certain 

circumstances, comment 5a–2 permits 

the account-opening summary table 

described under § 226.6(b)(1) to be 

substituted for the disclosures required 

by § 226.5a. Accordingly, when an 

issuer combines application disclosures 

with account-opening disclosures, the 

disclosures being provided are the 

§ 226.6(b) disclosures, to which 

comment 9(c)(2)(v)–10 already applies. 

Comment 9(c)(2)(v)–5 sets forth 

guidance regarding the disclosure 

requirements for temporary rates when 

the temporary rate reduction is initially 

offered to the consumer by telephone. 

Comment 9(c)(2)(v)–5 states that the 

timing requirements of 

§ 226.9(c)(2)(v)(B) are deemed to have 

been met, and written disclosures 

required by § 226.9(c)(2)(v)(B) may be 

provided as soon as reasonably 

practicable after the first transaction 

subject to a rate that will be in effect for 

a specified period of time (a temporary 

rate) if: (1) The consumer accepts the 

offer of the temporary rate by telephone; 

(2) the creditor permits the consumer to 

reject the temporary rate offer and have 

the rate or rates that previously applied 

to the consumer’s balances reinstated 

for 45 days after the creditor mails or 

delivers the written disclosures required 

by § 226.9(c)(2)(v)(B); and (3) the 

disclosures required by 

§ 226.9(c)(2)(v)(B) and the consumer’s 

right to reject the temporary rate offer 

and have the rate or rates that 

previously applied to the consumer’s 

account reinstated are disclosed to the 

consumer as part of the temporary rate 

offer. 

As discussed in the supplementary 

information to the February 2010 Final 

Rule, this rule for telephone offers of 

promotional rates is intended to ensure 

that consumers may take immediate 

advantage of promotions that they 

believe to be beneficial, while protecting 

consumers by allowing them to 

terminate the promotion and thus avoid 

adverse consequences, upon receipt of 

written disclosures. Consistent with the 

rationale discussed in the February 2010 

Final Rule, the Board proposed to 

amend comment 9(c)(2)(v)–5.ii to 

provide that, in connection with 

telephone offers of temporary rates or 

fees,7 the creditor need not permit the 

consumer to reject the temporary rate or 

temporary fee offer if the rate or rates or 

fee that will apply following expiration 

of the temporary rate do not exceed the 

rate or rates or fee that applied 

immediately prior to commencement of 

the temporary rate. The Board noted 

that, since such an offer never results in 

the increase in an interest rate or fee 

even on a prospective basis, it may be 

unnecessary to provide consumers with 

the opportunity to reject such an offer. 

The Board also proposed a conforming 

change to comment 9(c)(2)(v)–5.iii. 

Several industry commenters 

supported the proposed amendment to 

comment 9(c)(2)(v)–5.ii. These 

commenters stated that it makes little 

sense to offer a consumer a right to 

reject a temporary rate or fee offer if the 

rejection can only result in the 

consumer’s account being subject to 

higher fees or charges. Consumer group 

commenters, on the other hand, 

opposed the proposed amendment to 

comment 9(c)(2)(v)–5.ii. Consumer 

groups indicated that even if the rate 

that will apply after a temporary rate 

expires does not exceed the rate that 

applied immediately prior to 

commencement of the temporary rate, a 

consumer might wish to reject the 

promotional offer if he or she purchased 

goods without comprehending that the 

promotional rate was temporary. These 

commenters stated that at a minimum, 

the Board should provide consumers 

with the right to return any goods 

without charge when the consumer 

bought goods based upon telephone 

disclosure of a promotional rate 

program. 

The Board is adopting comment 

9(c)(2)(v)–5.ii as proposed. The Board 

believes that it is not necessary to 

provide consumers with a right to reject 

a temporary rate or fee offer when the 

rate or fee that will apply upon 

expiration of the temporary offer does 

not exceed the rate or fee that applied 

immediately prior to commencement of 

the promotion. In these circumstances, 

consumers still must receive oral 

disclosures in advance of the terms of 

the promotion, including the period for 

which the reduced rate or fee will be in 

effect. An issuer that fails to provide 

these oral disclosures has not complied 

with § 226.9(c)(2)(v)(B) and must 

provide 45 days’ advance notice prior to 

raising the rate or fee upon expiration of 

the promotion; in addition, in 

circumstances where § 226.55 applies, 

such issuers are prohibited from 

increasing the rate or fee applicable to 

existing balances. Finally, the Board 

believes that when the rate or fee that 

will be in effect after the promotion 

expires does not exceed the standard 

rate or fee in effect prior to the 

commencement of the promotion, this 

situation presents less potential for 

harm to consumers than when the rate 

or fee after the promotion expires will 

exceed the rate or fee in effect prior to 

commencement of the promotion. 

Exception for Temporary Reductions 

in Fees 

The Board also proposed to amend 

§ 226.9(c)(2)(v)(B) to provide an 

exception to the advance notice 

requirements for increases in fees that 

occur after the expiration of a specified 

period of time. The Board declined to 

adopt a specific exception for temporary 

or promotional fee programs in the 

February 2010 Final Rule because the 

Credit Card Act did not contain such an 

exception and because an exception did 

not appear to be necessary. See 75 FR 

7699. In the supplementary information 

to the February 2010 Final Rule, the 

Board noted that nothing in Regulation 

Z prohibits a creditor from providing 

notice of a future increase in a fee at the 

same time it temporarily reduces the 

fee; a creditor could provide 

information regarding the temporary 

reduction in the same notice, provided 

that it is not interspersed with the 

content required to be disclosed 

pursuant to § 226.9(c)(2)(iv). See 75 FR 

7699. 


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However, upon further review, the 

Board proposed in November 2010 to 

use its authority under TILA Section 

105(a) to specifically address the 

advance notice requirements for 

temporary or promotional fees in order 

to encourage issuers to disclose and 

structure such programs in a consistent 

manner that enables consumers to 

understand the associated costs. 

Accordingly, the Board proposed to 

amend § 226.9(c)(2)(v)(B) to apply to 

increases in fees upon the expiration of 

a specified period of time. Thus, 

proposed § 226.9(c)(2)(v)(B) permitted a 

card issuer to increase a fee after a 

specified period of time without 

providing 45 days’ advance notice, if the 

card issuer provides the consumer in 

advance with a clear and conspicuous 

written disclosure of the length of the 

period and the fee or charge that will 

apply after expiration of the period. In 

addition, the Board proposed to amend 

comments 9(c)(2)(v)–5 through 

9(c)(2)(v)–7 to expressly refer to 

temporary fee offers. 

In addition, for clarity, and for 

consistency with the proposed changes 

to § 226.9(c)(2)(v)(B), the Board also 

proposed to amend comment 9(c)(2)(v)– 

2, which addresses skip features offered 

in connection with open-end (not homesecured) consumer credit plans. 

Comment 9(c)(2)(v)–2 addresses the 

disclosures that must be given when a 

credit program allows consumers to skip 

or reduce one or more payments during 

the year or involves temporary 

reductions in finance charges. Comment 

9(c)(2)(v)–2 was previously amended in 

the February 2010 Final Rule for 

conformity with the exception in 

§ 226.9(c)(2)(v)(B) for temporary 

reductions in interest rates. In 

particular, the Board added a new 

comment 9(c)(2)(v)–2.ii that clarifies the 

notice requirements for temporary 

reductions in interest rates. See 75 FR 

7702. Because the Board proposed to 

expand § 226.9(c)(2)(v)(B) to cover 

promotional fee offers in addition to 

promotional rate offers, the Board 

proposed in November 2010 to amend 

comment 9(c)(2)(v)–2.ii to also cover 

temporary reductions in fees; comment 

9(c)(2)(v)–2.i would accordingly apply 

only to programs that permit a 

consumer to skip or reduce a payment. 

Industry commenters generally 

supported the proposed amendment 

that would create an exception to the 

45-day advance notice requirements for 

temporary fee arrangements disclosed in 

advance in accordance with 

§ 226.9(c)(2)(v)(B). Commenters 

indicated that the proposed 

clarifications provide necessary 

guidance regarding the content of a 

notice of a temporary fee, and stated 

that adopting the proposed amendments 

to § 226.9(c)(2)(v)(B) would help to 

facilitate the continued availability of 

temporary fee reductions. 

Consumer group commenters 

expressed concerns regarding the 

proposed amendments to 

§ 226.9(c)(2)(v)(B), but did not oppose 

promotional fee programs. Consumer 

groups indicated that it is important for 

consumers to receive advance notice 

when the period for a promotional fee 

expires and an increased fee will be 

imposed, and suggested that this is 

particularly necessary for promotional 

programs for annual fees. If a specific 

promotion provides, for example, that 

no annual fee will be imposed during 

the first year after account opening but 

that an annual fee will be imposed in 

subsequent years, consumer groups 

believe that consumers may forget the 

terms of the promotion during the first 

year and be unduly surprised when a 

fee is imposed in year two. Consumer 

groups urged the Board to require a 

notice stating that the post-promotional 

fee will, or may, be imposed in the next 

billing cycle, on the periodic statement 

for the billing cycle prior to expiration 

of the promotional period. 

The Board is adopting the changes to 

§ 226.9(c)(2)(v)(B) and the related staff 

commentary generally as proposed. The 

Board believes that it is appropriate to 

establish standardized disclosure 

requirements for promotional fee offers 

that permit creditors to provide advance 

disclosures of temporary fees, the period 

for which those temporary fees will be 

in effect, and the fee that will apply 

upon expiration of the temporary fee. 

Offers of temporarily reduced fees can 

benefit consumers and the Board 

believes that the amendments to 

§ 226.9(c)(2)(v)(B) and the related staff 

commentary appropriately balance 

ensuring that consumers receive 

important information regarding the 

terms of a temporarily reduced fee with 

promoting the continued availability of 

offers that benefit consumers. 

The Board notes that consumers will 

continue to receive advance notice prior 

to imposition of an annual fee on a 

credit or charge card account pursuant 

to § 226.9(e) in addition to the notice set 

forth in § 226.9(c)(2)(v)(B). The Board 

recognizes that § 226.9(e) requires only 

30 days or one billing cycle’s advance 

notice, rather than the 45 days’ advance 

notice required for changes in terms 

under § 226.9(c)(2). However, § 226.9(e) 

does require that the renewal notice 

provided prior to imposition of an 

annual fee disclose how and when the 

cardholder may terminate credit 

availability under the account to avoid 

paying the fee. Accordingly, the Board 

notes that for annual fees imposed on 

credit card accounts, the consumer will 

receive both the § 226.9(c)(2)(v)(B) 

notice prior to commencement of the 

promotion and a notice pursuant to 

§ 226.9(e) immediately prior to 

imposition of the annual fee. 

Several industry commenters urged 

the Board to provide additional 

guidance regarding the treatment under 

§ 226.9(c)(2) of temporary waivers of 

penalty fees. These commenters stated 

that temporary penalty fee waivers 

should be excluded from all notice 

requirements, including disclosure 

requirements for promotional fee 

reductions. These commenters indicated 

that a temporary reduction of the 

penalty fee should not trigger notice to 

the consumer because the reduction is 

an accommodation made only in 

circumstances where the consumer has 

not complied with the terms of the 

account agreement. One commenter 

noted that penalty fee waivers or 

reductions are typically provided in 

connection with workout programs 

rather than as a part of a marketing 

solicitation or offer. 

The Board agrees with commenters 

that it would be appropriate to provide 

an exception to § 226.9(c)(2) for penalty 

fee waivers offered in connection with 

workout or similar programs. The Board 

understands that such waivers of 

penalty fees are generally an 

accommodation to consumers and that 

creditors do not market such waivers, 

given that penalty fees may only be 

imposed if consumers violate the terms 

of the account. Section 226.9(c)(2)(v)(D) 

sets forth an exception to the 45-day 

advance notice requirements for certain 

increases in rates or fees or charges due 

to the completion of, or a consumer’s 

failure to comply with the terms of, a 

workout or temporary hardship 

arrangement provided that the annual 

percentage rate or fee or charge 

applicable following the increase does 

not exceed the rate that applied prior to 

the commencement of the workout or 

temporary hardship arrangement. 

Accordingly, the final rule amends 

§ 226.9(c)(2)(v)(D) and comment 

9(c)(2)(v)–11 to refer to fees required to 

be disclosed pursuant to 

§ 226.6(b)(2)(viii) (late payment fees), 

(b)(2)(ix) (over-the-limit fees), and 

(b)(2)(xi) (returned-payment fees). The 

Board believes that this expansion of the 

workout exception under 

§ 226.9(c)(2)(v) will encourage the 

waiver or reduction of penalty fees as 

part of a workout or other temporary 

hardship arrangement, which may be 

beneficial to consumers who are subject 

to such arrangements. 


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Variable Rate Exception 

Section 226.9(c)(2)(v)(C) contains an 

exception to the 45-day advance notice 

requirements for increases in variable 

annual percentage rates in accordance 

with a credit card agreement that 

provides for a change in the rate 

according to operation of an index that 

is not under the control of the creditor 

and is available to the general public. In 

November 2010, the Board proposed to 

correct a typographical error in 

§ 226.9(c)(2)(v)(C). In the proposal that 

led to the February 2010 Final Rule, 

proposed § 226.9(c)(2)(v)(C) referred to 

an increase ‘‘in accordance with a credit 

card or other account agreement.’’ In the 

February 2010 Final Rule, the phrase ‘‘or 

other account’’ was inadvertently 

deleted, without explanation in the 

supplementary information. The Board’s 

intent was for the exception in 

§ 226.9(c)(2)(v)(C) to apply both to credit 

card accounts and to other open-end 

(not home-secured) consumer credit 

plans. Accordingly, the Board proposed 

to insert the phrase ‘‘or other account’’ 

into § 226.9(c)(2)(v)(C). 

The exception to the advance notice 

requirements for an increase in a 

variable annual percentage rate is 

conditioned on the rate varying 

according to the operation of an index 

that is not under the control of the 

creditor and is available to the general 

public. Comment 9(c)(2)(v)–11 contains 

a cross-reference to comment 55(b)(2)–2 

for guidance on when an index is 

deemed to be under the ‘‘card issuer’s’’ 

control. The Board noted in the 

proposal that there has been some 

confusion regarding the relationship 

between comment 55(b)(2)–2 and the 

exception set forth in § 226.9(c)(2)(v)(C). 

Comment 55(b)(2)–2 provides that an 

index is under a card issuer’s control if, 

among other things, the variable rate is 

subject to a fixed minimum rate or 

similar requirement that does not permit 

the variable rate to decrease consistent 

with reductions in the index. The 

substantive limitations on rate increases 

in § 226.55 and comment 55(b)(2)–2 

apply only to credit card accounts under 

an open-end (not home-secured) 

consumer credit plan, while the 

advance notice requirements in 

§ 226.9(c)(2) and the variable-rate 

exception in § 226.9(c)(2)(v)(C) apply to 

all open-end (not home-secured) 

consumer credit plans. Thus, the Board 

has been asked whether the variable-rate 

exception to the advance notice 

requirements set forth in 

§ 226.9(c)(2)(v)(C) applies to an openend (not home-secured) consumer credit 

plan that is not a credit card account, if 

the variable rate is subject to a fixed 

minimum or ‘‘floor.’’ 

The Board proposed to clarify that a 

variable rate plan that is subject to a 

fixed minimum or ‘‘floor’’ does not meet 

the conditions of the exception to the 

advance notice requirements set forth in 

§ 226.9(c)(2)(v)(C). The Board stated that 

is appropriate to adopt a consistent 

interpretation of ‘‘an index that is not 

under the control of the creditor’’ for all 

open-end (not home-secured) credit. 

Accordingly, the Board proposed to 

amend comment 9(c)(2)(v)–11 

(renumbered as comment 9(c)(2)(v)–12) 

to refer to guidance on when an index 

is deemed to be under ‘‘a creditor’s’’ 

control, rather than ‘‘the card issuer’s’’ 

control. The substantive provisions of 

§ 226.55 would have continued to apply 

only to credit card accounts under an 

open-end (not home-secured) consumer 

credit plan; however, the proposed 

change clarified that 45 days’ advance 

notice is required prior to a rate increase 

on a variable-rate plan subject to a fixed 

minimum or floor, for all open-end (not 

home-secured) plans. 

Consumer groups supported both 

aspects of the proposed changes to 

§ 226.9(c)(2)(v)(C), and stated that 

variable rate ‘‘floors’’ should be 

discouraged for all types of open-end 

credit. Several industry commenters 

opposed the portion of the guidance that 

would apply consistent guidance 

regarding when a variable rate plan is 

deemed to be outside of a creditor’s 

control to all open-end (not homesecured) plans. These commenters 

stated that it is unnecessary to establish 

a consistent interpretation and that it 

would stifle competitive pricing. These 

commenters further argued that this 

clarification exceeds Congressional 

intent and the scope of the Credit Card 

Act. 

The Board is adopting the changes to 

§ 226.9(c)(2)(v)(C) and comment 

9(c)(2)(v)–12 as proposed. The Board 

notes that it is adopting this clarification 

using its TILA Section 105(a) authority, 

rather than pursuant to the Credit Card 

Act, because this clarification pertains 

to open-end (not home-secured) credit 

that is not a credit card under an openend (not home-secured) consumer credit 

plan. The Board continues to believe 

that, for consistency, it is appropriate to 

limit the variable rate exception to the 

change-in-terms notice requirements to 

only those rates that vary according to 

the operation of an index that is not 

under the control of the creditor and is 

available to the general public. The 

Board notes that for open-end (not 

home-secured) plans that are not credit 

card accounts under an open-end (not 

home-secured) consumer credit plan, 

the regulation does not prohibit variable 

rates that are subject to a minimum or 

‘‘floor,’’ but for such rates the creditor 

must comply with the advance notice 

requirements of § 226.9(c). 

9(e) Disclosures Upon Renewal of Credit 

or Charge Card 

Section 226.9(e), which implements 

TILA Section 127(d), sets forth the 

disclosures that card issuers must 

provide in connection with renewal of 

a consumer’s credit or charge card 

account. Section 226.9(e)(1) requires, in 

part, that a card issuer that has amended 

any term of a cardholder’s account 

required to be disclosed under 

§ 226.6(b)(1) and (b)(2) that has not 

previously been disclosed to the 

consumer must mail or deliver a written 

renewal notice to the cardholder. 

The Board did not propose any 

amendments to § 226.9(e) or its 

associated commentary in the November 

2010 Proposed Rule. However, the 

Board has become aware of a 

typographical error in the title to 

comment 9(e)–10, which is currently 

entitled ‘‘Disclosure of changes in terms 

not required to be disclosed pursuant to 

§ 226.6(b)(1) and (b)(2).’’ For conformity 

with the substance of the comment and 

the rule set forth in § 226.9(e), the Board 

is correcting the error by deleting the 

word ‘‘not’’ from the title of comment 

9(e)–10. 

Section 226.10 Payments 

10(b) Specific Requirements for 

Payments 

10(b)(4) Nonconforming Payments 

Section 226.10 sets forth rules 

regarding the prompt crediting of 

payments and the permissibility of 

assessing fees to make expedited 

payments. Section 226.10(a) generally 

requires that payments be credited to a 

consumer’s account as of the date of 

receipt, except that § 226.10(b) permits 

creditors to specify reasonable 

requirements for payments provided 

that those requirements enable most 

consumers to make conforming 

payments. Section 226.10(b)(4) 

addresses the crediting of payments that 

do not conform to the requirements 

specified by the creditor; if a creditor 

specifies requirements for the consumer 

to follow in making payments as 

permitted under § 226.10 but accepts a 

payment that does not conform to the 

requirements, such nonconforming 

payments must be credited within five 

days of receipt. 

In November 2010, the Board 

proposed several amendments to 

§ 226.10 intended to address confusion 

regarding the distinction between 


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22970 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

8The Board notes that the requirements of 

§ 226.10(b)(3), when applicable, are not conditioned 

on whether the card issuer promotes in-person 

payments at its branches or offices. Section 

226.10(b)(3) applies to credit card accounts under 

an open-end (not home-secured) consumer credit 

plan and generally requires that payments made in 

person at a branch or office of a card issuer that is 

a financial institution be considered received on the 

date on which the consumer makes the payment. 

conforming payments, which must be 

credited as of the date of receipt, and 

nonconforming payments, which must 

be credited within five days of receipt. 

Currently, § 226.10(b)(4) refers to 

requirements specified ‘‘on or with the 

periodic statement,’’ which may be read 

to suggest that payments received by 

any means not specified on or with the 

periodic statement generally are 

nonconforming payments. However, the 

rule in § 226.10(b) that permits a 

creditor to specify reasonable 

requirements for making payments is 

silent as to the manner in which these 

requirements must be communicated to 

consumers in order for such payments 

to be considered conforming payments. 

In addition, comment 10(b)–2 expressly 

provides that if a creditor promotes 

electronic payment via its Web site, any 

payments made via the Web site are 

generally conforming payments for 

purposes of § 226.10(b), which indicates 

that conforming payments are not only 

those payments made via methods 

specified on the periodic statement. 

Specifically, the Board proposed to 

amend comment 10(b)–2 to provide that 

if a creditor promotes a specific 

payment method, any payments made 

via that method (prior to any cut-off 

time specified by the creditor to the 

extent permitted by § 226.10(b)(2)), are 

generally conforming payments for 

purposes of § 226.10(b). To provide 

further guidance, the Board also 

proposed to add two additional 

examples to comment 10(b)–2. Proposed 

comment 10(b)(2)–ii stated that if a 

creditor promotes payment by telephone 

(for example, by including the option to 

pay by telephone in a menu of options 

provided to consumers at a toll-free 

number disclosed on its periodic 

statement), payments made by 

telephone would generally be 

conforming payments for purposes of 

§ 226.10(b). Similarly, proposed 

comment 10(b)(2)–iii stated that if a 

creditor promotes in-person payments, 

for example by stating in an 

advertisement that payments may be 

made in person at its branch locations, 

such in-person payments made at a 

branch or office of the creditor generally 

would be conforming payments for 

purposes of § 226.10(b).8 In contrast, the 

supplementary information to the 

proposal noted that proposed comment 

10(b)–2 would not apply if the creditor 

makes a general promotional statement 

regarding payments that does not refer 

to a specific payment method, for 

example a statement that the creditor 

offers ‘‘many convenient payment 

options.’’ For conformity, the Board also 

proposed to amend § 226.10(b)(4), 

which addresses the treatment of 

nonconforming payments. The proposal 

amended § 226.10(b)(4) to provide that 

if a creditor specifies, on or with the 

periodic statement, requirements for the 

consumer to follow in making 

payments, but accepts a payment that 

does not conform to the requirements 

via a payment method that the creditor 

does not otherwise promote, the creditor 

shall credit the payment within five 

days of receipt. 

Consumer group commenters 

generally supported the Board’s 

proposal to clarify that payments made 

via any specific method of payment 

promoted by the creditor generally are 

conforming payments for purposes of 

§ 226.10. Consumer groups urged the 

Board to adopt a broad definition of 

what it means to ‘‘promote’’ a method of 

payment, and suggested that making any 

statement offering a particular payment 

option should constitute promotion. 

These commenters further urged the 

Board to clearly specify in the 

regulation that payments made via a 

promoted method are conforming 

payments. 

Industry commenters generally 

supported the Board’s efforts to clarify 

the definition of a ‘‘conforming 

payment.’’ However, industry 

commenters expressed concerns 

regarding the Board’s specific guidance 

regarding what constitutes ‘‘promotion’’ 

of a method of payment. Two such 

commenters noted that the Board’s 

proposed examples were helpful, but 

noted that they were not fully 

explanatory; these commenters asked 

the Board to provide further guidance as 

to the definition of ‘‘promotes.’’ Several 

industry commenters were concerned 

that the Board’s proposal would treat all 

payment methods made available to 

consumers as promoted, and therefore 

as conforming payments. These 

commenters argued that there is a 

distinction between actively promoting 

a payment option and responding to a 

consumer inquiry as to permissible 

alternatives for making payments, and 

urged the Board to adopt a narrower 

approach. One commenter stated that 

the final rule should be revised to 

indicate that there must be active 

advertising or encouragement of use of 

a particular payment method, rather 

than a mere listing of a method, in order 

for a method to be deemed promoted. 

This commenter stated that listing a 

payment option on a periodic statement 

or disclosing a payment option on a tollfree number should not, by itself, 

constitute promoting or advertising a 

particular payment option. 

Several industry commenters 

identified specific payment methods 

that they believe should not be treated 

as ‘‘conforming payments.’’ Many of 

these commenters urged the Board not 

to treat payments made through thirdparty payment intermediaries as 

promoted payment methods that 

constitute conforming payments. These 

commenters stated that a consumer 

might, for example, ask a customer 

service representative of the issuer for 

information about payment options. In 

response, the issuer’s representative 

might provide the consumer with a list 

of such options that includes, among 

others, a third-party payment option. 

The commenters stated that the use of 

the third-party payment option should 

not be considered a promoted payment 

option, because the card issuer has no 

control over the receipt and handling of 

the payment through that third party. 

Commenters noted that there might be 

particular operational concerns and 

costs associated with treating such 

payments as conforming and noted that 

some card issuers might cease to 

disclose such payment methods among 

their suggested payment alternatives. 

One other industry commenter 

indicated that the Board should clarify 

that payments made to a debt 

management program, a portion of 

which may ultimately be sent to a card 

issuer, should not be considered 

conforming payments. This commenter 

expressed concern that the required 

disclosure pursuant to 

§ 226.7(b)(12)(i)(E) of information 

regarding credit counseling services 

might be deemed to constitute 

promotion of debt management 

agencies. This commenter also asked the 

Board to clarify that payments made to 

third-party collection agencies do not 

constitute conforming payments. This 

commenter noted that a cardholder’s 

account must become delinquent before 

payments may be made to a third party 

collection agency and that issuers 

would accordingly be unlikely to 

promote third party collection agencies 

as a payment method. 

The Board continues to believe that 

additional clarification is appropriate 

regarding the distinction between 

conforming and nonconforming 

payments, in order to facilitate 

compliance with the rule and to ensure 

that payments are posted promptly in 

accordance with consumer expectations 


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and the intent of TILA Section 164. 

TILA Section 164, as amended by the 

Credit Card Act, provides in part that 

payments received from a consumer for 

an open-end consumer credit plan shall 

be posted promptly to the account as 

specified in regulations of the Board. 

The Board believes that, if a creditor 

promotes a specific method of making 

payments, the intent of TILA Section 

164 is best effectuated by a rule that 

requires payments made by that method 

to be credited as of the date of receipt. 

The Board believes that if a creditor 

promotes that payments may be made 

via a certain method, it would be 

inappropriate to permit the creditor to 

delay crediting such payments for five 

days after receipt. 

Accordingly, the Board is adopting 

the amendments to comment 10(b)–2 

and § 226.10(b)(4) generally as 

proposed. However, § 226.10(b)(4) has 

been restructured without intended 

substantive change from the proposal, to 

more clearly provide that payments 

made via a promoted method are 

conforming payments. For the reasons 

discussed above, the Board is adopting 

a new § 226.10(b)(4)(ii) which states that 

if a creditor promotes a method for 

making payments, such payments shall 

be considered conforming payments 

under § 226.10(b) and shall be credited 

to the consumer’s account as of the date 

of receipt, except when a delay in 

crediting does not result in a finance or 

other charge. 

The Board acknowledges, however, 

that additional guidance would be 

helpful as to whether certain actions by 

the creditor constitute promotion of a 

particular payment method. The Board 

believes that as a practical matter, not 

every payment method made available 

or disclosed to consumers is 

‘‘promoted,’’ and accordingly is 

declining to adopt a rule providing that 

every statement offering a particular 

payment option constitutes promotion. 

Whether promotion has occurred is a 

fact-specific determination and, 

accordingly, the Board believes that 

‘‘promotion’’ is best defined by a set of 

illustrative examples, including those 

examples that were proposed in 

November 2010 and are being adopted 

as part of comment 10(b)–2. 

In addition, the Board is adopting a 

new comment 10(b)–2.iv to address 

payments made via a third-party 

payment method. Comment 10(b)–2.iv 

states that if a creditor promotes that 

payments may be made through an 

unaffiliated third party, such as by 

disclosing the Web site address of that 

third party on the periodic statement, 

payments made via that third party’s 

Web site generally are conforming 

payments for purposes of § 226.10(b). In 

contrast, if a customer service 

representative of the creditor confirms 

to a consumer that payments may be 

made via an unaffiliated third party, but 

the creditor does not otherwise promote 

that method of payment, § 226.10(b) 

permits the creditor to treat payments 

made via such third party as 

nonconforming payments in accordance 

with § 226.10(b)(4). The Board believes 

that if a creditor advertises or 

prominently discloses a third-party 

payment method on the periodic 

statement, it would be inconsistent with 

consumer expectations for payments 

made by that method to be credited only 

after five days. However, the Board 

acknowledges that same-day crediting of 

payments made via unaffiliated third 

parties may raise special operational 

concerns and that mere confirmation by 

a customer service representative that a 

payment may be made via a specific 

third party does not by itself constitute 

‘‘promotion.’’ 

The Board is not adopting any 

additional guidance at this time 

regarding payments made to debt 

management programs or third-party 

collection agencies. The Board believes 

that whether a payment must be treated 

as conforming is best determined by 

looking at whether the creditor 

promotes the payment method rather 

than to the identity of the party 

accepting the payment. Accordingly, a 

payment made to a debt management 

program or third-party collection agency 

would not constitute a conforming 

payment unless the creditor promotes 

that method of payment. In addition, the 

required disclosure pursuant to 

§ 226.7(b)(12)(i)(E) of information 

regarding credit counseling services 

does not by itself constitute promotion 

of debt management programs as 

payment methods. The disclosure 

required pursuant to § 226.7(b)(12)(i)(E) 

is a general statement regarding the 

availability of credit counseling 

services; as set forth on Model Forms G– 

18(C), this disclosure consists solely of 

a toll-free telephone number and a 

statement that the consumer may call 

this number for more information about 

credit counseling services. The required 

disclosure does not suggest that a 

consumer may make payments via this 

toll-free number and, accordingly, the 

Board does not believe that this 

constitutes promotion of payment 

through a debt management program. In 

addition, while the Board believes it 

will depend on the specific facts and 

circumstances in any given case, the 

Board agrees with commenters that 

creditors do not generally promote 

payments via third party collection 

agencies, because promotion of such 

payments would entail promoting that 

consumers may permit their accounts to 

become delinquent. 

10(e) Limitations on Fees Related to 

Method of Payment 

Section 226.10(e), which implements 

TILA Section 127(l), generally prohibits 

a card issuer from imposing a separate 

fee for allowing consumers to make a 

payment by any method, unless such 

payment method involves expedited 

service by a customer service 

representative of the card issuer. The 

Board understands that card issuers may 

use third-party service providers to 

provide payment-related services on 

behalf of the issuer, such as receiving or 

processing payments from consumers. 

In some circumstances, in lieu of the 

card issuer imposing a fee for making a 

payment, the third-party service 

provider may charge consumers a fee for 

making a payment. Proposed comment 

10(e)–4 clarified that third-party service 

providers or other third parties who 

receive payments on behalf of a card 

issuer are prohibited from charging a 

separate fee for payment, except as 

otherwise permitted by paragraph (e). 

Several industry commenters 

requested that the Board clarify that the 

proposal does not apply to independent 

payment services which receive 

payments on behalf of the consumer and 

transmit the payments to an issuer at the 

direction of the consumer. In addition, 

one commenter asserted that the 

restriction on imposing a fee in 

paragraph (e) should not apply to third 

parties simply because the issuer makes 

administrative arrangements to receive 

payments through a third party or 

arranges for a discounted payment rate 

for customers to make a payment 

through a third party. Commenters 

expressed concern that the proposal 

would inhibit innovation in or 

availability of payment methods. One 

commenter also requested further 

clarification regarding payments 

initiated from a deposit account at a 

financial institution that offers bill 

payment services and also issues credit 

cards. 

Consumer group commenters 

generally supported the proposed 

clarification. A member of Congress also 

supported the proposed clarification 

and asserted that permitting third-party 

service providers to charge a fee to 

allow a consumer to make a payment 

would undermine the intent of the 

Credit Card Act, which adopted TILA 

Section 127(l). 

Based on the comments and further 

analysis, the Board believes that it 


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would be inconsistent with the intent of 

the Credit Card Act for consumers to 

pay a separate fee for making a payment 

through a third party that provides 

payment-related services, such as 

collecting, receiving, or processing a 

payment, on behalf of an issuer, unless 

the issuer itself would be permitted to 

charge the fee. Accordingly, in order to 

effectuate the purposes of the Credit 

Card Act and to prevent circumvention, 

the Board is revising § 226.10(e) and 

adopting comment 10(e)–4 with 

revisions and illustrative examples. The 

Board is adopting these amendments in 

order to clarify that a third party that 

collects, receives, or processes payments 

on behalf of an issuer is prohibited from 

charging a consumer a separate fee for 

making a payment, except as otherwise 

permitted by paragraph (e). 

For example, if an issuer uses a 

service provider to receive, collect, or 

process payments made through the 

issuer’s Web site or made through an 

automated telephone payment service, 

the limitation in § 226.10(e) applies 

because the third party is processing or 

receiving payments on behalf of the card 

issuer. In contrast, however, if a 

consumer makes a payment to the card 

issuer from a checking account at a 

depository institution using a payment 

service provided by the depository 

institution, the limitation in § 226.10(e) 

would not apply because the depository 

institution is not collecting, receiving, 

or processing a payment on behalf of the 

card issuer. 

10(f) Changes by Card Issuer 

The Board proposed to replace a 

reference to ‘‘consumer’’ in comment 

226.10(f)–3.ii with ‘‘card issuer’’ in order 

to correct a typographical error. The 

Board received no significant comment 

on this aspect of the proposal, which is 

adopted as proposed. 

Section 226.12 Special Credit Card 

Provisions 

12(c) Right of Cardholder to Assert 

Claims or Defenses Against Card Issuer 

Section 226.12(c)(1) provides that, 

when a cardholder asserts a claim or 

defense against a card issuer, the 

cardholder may withhold payment up to 

the amount of credit outstanding for the 

property or services that gave rise to the 

dispute and any finance or other charges 

imposed on that amount. Comment 

12(c)–4 clarifies that the amount of the 

claim or defense that the cardholder 

may assert shall not exceed the amount 

of credit outstanding for the disputed 

transaction at the time the cardholder 

first notifies the card issuer or the 

person honoring the credit card of the 

existence of the claim or defense. It 

further clarifies that, to determine the 

amount of credit outstanding, payments 

and other credits shall be applied to: 

Late charges in the order of entry to the 

account; then to finance charges in the 

order of entry to the account; and then 

to any other debits in the order of entry 

to the account. It also clarifies that, if 

more than one item is included in a 

single extension of credit, credits are to 

be distributed pro rata according to 

prices and applicable taxes. Although 

the February 2010 Final Rule moved 

this language into the commentary from 

a footnote to § 226.12, the guidance 

itself remained unchanged. 

The Board understands that there has 

been some confusion about the 

interaction between the guidance on 

applying payments in comment 12(c)–4 

and the payment allocation 

requirements in § 226.53. For credit card 

accounts under an open-end (not homesecured) consumer credit plan, § 226.53 

generally requires card issuers to apply 

payments above the minimum first to 

the balance with the highest rate. 

However, comment 53–3 clarifies that, 

when a consumer has asserted a claim 

or defense against a card issuer pursuant 

to § 226.12(c), the card issuer must 

apply any payment above the minimum 

in a manner that avoids or minimizes 

any reduction in the amount subject to 

that claim or defense. Illustrative 

examples are provided. 

In order to remove any inconsistency 

and to facilitate compliance, the Board 

proposed to revise comment 12(c)–4 to 

clarify that, with respect to credit card 

accounts under an open-end (not homesecured) consumer credit plan, § 226.53 

and the guidance in comment 53–3 

control. However, with respect to other 

types of credit card accounts (such as 

credit cards that access home-equity 

plans), the Board proposed to retain the 

long-standing guidance in comment 

12(c)–4. 

Commenters generally supported the 

proposed revisions to comment 12(c)–4, 

which—except as discussed below—are 

adopted with non-substantive, 

organizational changes. One industry 

commenter noted that some card issuers 

use a single platform to service all types 

of credit card accounts, regardless of 

whether an account is a credit card 

account under an open-end (not homesecured) consumer credit plan subject to 

§ 226.53. This commenter requested 

clarification that, for purposes of 

comment 12(c)–4, issuers are permitted 

to apply a single set of payment 

allocation procedures to all credit card 

accounts by following § 226.53 and 

comment 53–3. Because a card issuer’s 

voluntary compliance with the guidance 

in comment 53–3 will generally 

minimize the assessment of interest 

charges and any reduction in disputed 

amounts, the Board has revised 

comment 12(c)–4 to provide the 

requested guidance. 

Section 226.13 Billing Error Resolution 

13(c) Time for Resolution; General 

Procedures 

Section 226.13(c)(2) generally requires 

a creditor to complete the billing error 

investigation procedures within two 

billing cycles (but no later than 90 days) 

after receiving a billing error notice. To 

ensure that creditors promptly complete 

their investigations under TILA, the 

Board adopted a new comment 13(c)(2)– 

2 in the February 2010 Final Rule to 

clarify that a creditor must conclusively 

determine whether an error occurred 

within two complete billing cycles (but 

in no event later than 90 days) after 

receiving a billing error notice. Once 

this period has expired, the comment 

further clarified that the creditor may 

not reverse any amounts previously 

credited for an asserted billing error, 

even if the creditor subsequently obtains 

evidence indicating that the billing error 

did not occur as asserted. 

Since adoption of the comment, the 

Board has received questions regarding 

whether § 226.13(c)(2) would prohibit a 

creditor from reversing amounts 

previously credited by the creditor after 

conclusion of the two billing cycle time 

frame if the consumer subsequently 

receives a credit in the amount of the 

error from the merchant or person that 

had honored the credit card. Such an 

occurrence might arise, for example, 

because the error investigation time 

frames under card network rules 

provide merchants additional time 

beyond the time frame under § 226.13 to 

respond to a consumer error claim. As 

a result, a merchant may not issue a 

credit to the consumer’s account until 

after the creditor has already resolved 

the error claim in the consumer’s favor 

in order to comply with the time frame 

established under Regulation Z. In those 

cases, the consumer could receive more 

than one credit for the same billing 

error, one from the creditor and another 

from the merchant or other person 

honoring the credit card. 

The purpose of the billing error 

resolution time frame is to enable 

consumers to have their error claims 

investigated and resolved promptly. 

That is, TILA Section 161, as 

implemented by § 226.13, is intended to 

bring finality to the billing error 

resolution process, and to avoid the 

potential of undue surprise for 

consumers caused by the reversal of 


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previously credited funds when a 

creditor fails to complete its 

investigation in a timely manner. In 

contrast, the potential for consumer 

harm would not arise when a consumer 

has already been made whole for the 

error by the person honoring the credit 

card. In such a case, the Board believes 

that the creditor should be permitted to 

reverse amounts previously credited by 

the creditor to correct the error in order 

to avoid giving the consumer a windfall 

for that transaction. 

Accordingly, the Board proposed to 

revise comment 13(c)(2)–2 to clarify that 

the requirement to complete an error 

investigation within two billing cycles 

does not prevent a creditor from 

reversing amounts it has previously 

credited to a consumer’s account in 

circumstances where a consumer’s 

account has been credited more than 

once for the same billing error. The 

proposed comment further clarified that 

the reversal of the credit by the creditor 

is appropriate so long as the total 

amount of the remaining credits is equal 

to or more than the amount of the error 

and the consumer does not incur any 

fees or other charges as a result of the 

timing of the creditor’s reversal. 

Industry and consumer group 

commenters supported these revisions, 

which are adopted as proposed. 

Accordingly, to ensure compliance with 

the requirements of § 226.13, a creditor 

should delay the reversal of the amounts 

the creditor has previously credited to 

the consumer’s account until after the 

subsequent merchant credit has posted 

to the consumer’s account. An 

illustrative example is set forth in the 

comment. 

Section 226.14 Determination of 

Annual Percentage Rate 

14(a) General Rule 

The Board proposed to clarify the 

effect of a leap year on determining the 

annual percentage rate for disclosures 

required for open-end (not homesecured) credit accounts. Proposed 

comment 14(a)–6 clarified that a 

creditor generally may disregard any 

variance in the annual percentage rate 

which occurs solely by reason of the 

addition of February 29 in a leap year. 

For example, a creditor may use 365 

days as the number of periods in a leap 

year when computing an annual 

percentage rate. In addition, if an annual 

percentage rate is computed using 366 

days as the number of periods in a leap 

year, a variance in rate which occurs 

solely because of the addition of 

February 29 in the annual percentage 

rate computation would not trigger 

disclosure and other requirements 

under §§ 226.9 and 226.55. One 

industry commenter supported the 

Board’s proposed clarification. The 

Board believes that the clarification 

promotes accuracy in the disclosure of 

annual percentage rates and minimizes 

potential consumer confusion and 

operational burden for creditors. 

Accordingly, the Board is adopting 

comment 14(a)–6 as proposed. 

Section 226.16 Advertising 

16(g) Promotional Rates and Fees 

Section 226.16(g) currently sets forth 

the requirements for advertisements of 

promotional or introductory rates on 

open-end (not home-secured) plans. In 

general, § 226.16(g) requires that certain 

advertisements of promotional or 

introductory rates state the promotional 

period, post-promotional rate, and, in 

some cases, the term ‘‘introductory’’ or 

‘‘intro,’’ in order to promote consumer 

understanding of the terms of such a 

promotional or introductory rate offer. 

As discussed elsewhere in this 

supplementary information, the Board is 

adopting changes to §§ 226.9(c)(2) and 

226.55 to implement additional 

disclosure requirements and limitations 

for offers of temporary reduced or 

promotional fees. The Board proposed 

conforming changes to § 226.16(g) to 

require that certain advertisements of 

promotional fees also state the 

promotional period, post-promotional 

fee, and, in some cases, the term 

‘‘introductory’’ or ‘‘intro,’’ in order to 

promote consumer understanding of the 

terms of such promotional or 

introductory fee offers. The Board 

proposed these changes using its 

authority under TILA Section 105(a) to 

effectuate the purposes of TILA. 

The disclosure requirements under 

proposed § 226.16(g) generally applied 

to ‘‘promotional fee[s],’’ as defined in 

new § 226.16(g)(2)(iv). In particular, 

proposed § 226.16(g)(2)(iv) defined 

‘‘promotional fee’’ as a fee required to be 

disclosed under § 226.6(b)(1) and (b)(2) 

on an open-end (not home-secured) plan 

for a specified period of time that is 

lower than the fee that will be in effect 

at the end of that period. Accordingly, 

the proposed advertising requirements 

for promotional fee offers applied only 

when the promotional fee being offered 

is a fee required to be disclosed in the 

account-opening table provided 

pursuant to § 226.6(b). As noted in the 

November 2010 Proposed Rule, based in 

part on the Board’s consumer testing, 

§ 226.6(b)(1) and (b)(2) require 

disclosure of the fees that are the most 

important to consumers. Accordingly, 

the Board believes that these key fees 

are those for which a creditor is the 

most likely to advertise a promotion. In 

addition, the application of the 

§ 226.16(g) disclosure requirements to 

fees required to be disclosed pursuant to 

§ 226.6(b)(1) and (b)(2) is consistent 

with the approach that the Board has 

taken in § 226.9(c)(2)(ii) when defining 

‘‘significant changes in account terms.’’ 

The Board also proposed several 

additional amendments to § 226.16(g) 

and the associated commentary in order 

to conform the advertising disclosures 

for promotional fees to the advertising 

disclosures for promotional rate offers 

in § 226.16(g). 

Commenters on this aspect of the 

proposal generally supported the 

proposed amendments to § 226.16(g) 

that would impose advertising 

requirements similar to those for 

promotional rate offers on promotional 

fees. Accordingly, the Board is adopting 

amendments to § 226.16(g) and the 

related commentary generally as 

proposed. The Board continues to 

believe that requiring that creditors 

clearly disclose the conditions of a 

promotional fee offer will promote the 

informed use of credit by consumers. 

One commenter stated that the Board 

should revise the definition of 

‘‘promotional fee’’ in proposed 

§ 226.16(g)(2)(iv) to clarify that a 

promotional fee offer may be limited to 

a specific balance or specific 

transaction. The Board agrees that it is 

appropriate to clarify that a promotional 

fee offer may be limited in this manner 

and notes that such a limitation would 

be consistent with the definition of 

‘‘promotional rate’’ in § 226.16(g)(2)(i). 

Accordingly, the final rule defines 

‘‘promotional fee’’ as a fee required to be 

disclosed under § 226.6(b)(1) and (b)(2) 

applicable to an open-end (not homesecured) plan, or to one or more 

balances or transactions on an open-end 

(not home-secured) plan, for a specified 

period of time that is lower than the fee 

that will be in effect at the end of that 

period for such plan or types of balances 

or transactions. The Board notes that as 

adopted, § 226.16(g)(2)(i) clarifies that 

promotional fees may apply either to the 

plan as a whole, such as an annual fee, 

or to particular balances or transactions, 

such as a balance transfer fee. 

The Board has included a reference to 

‘‘types’’ of balances or transactions in 

§ 226.16(g)(2)(i) to reflect the fact that a 

creditor may structure an introductory 

fee offer such that a creditor will waive 

or reduce a fee only for one or more 

specific transactions, while other 

transactions of the same type will be 

subject to a standard fee set forth in the 

account agreement. In such 

circumstances, the waived or reduced 

fee is nonetheless a ‘‘promotional fee’’ 


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9Section 226.51(b) also implements TILA Section 

127(p), which requires that, when a cosigner has 

assumed joint liability for a credit card account 

issued to an underage consumer, the account’s 

credit limit may not be increased unless the 

cosigner approves in writing, and assumes joint 

liability for, the increase. 

for purposes of § 226.16(g)(2)(i). For 

example, a card issuer may waive the 

balance transfer fee on any balances 

transferred at account opening; for other 

balance transfers, the issuer imposes a 

standard balance transfer fee of 3% of 

the amount of the balance. Although no 

fee will be imposed on the balance 

transfer made pursuant to the 

introductory offer, because other 

transactions of the same type are subject 

to a standard 3% fee, the $0 fee imposed 

on the balance transferred at account 

opening constitutes a ‘‘promotional fee’’ 

pursuant to § 226.16(g)(2)(i). 

Several industry commenters objected 

to the Board’s proposal to require 

creditors to disclose the term 

‘‘introductory’’ or ‘‘intro’’ in immediate 

proximity to each listing of the 

introductory fee in a written or 

electronic advertisement pursuant to 

proposed § 226.16(g)(3). These 

commenters asked the Board to consider 

providing additional flexibility, to 

permit creditors to use phrases such as 

‘‘no annual fee for the first year’’ or ‘‘$40 

annual fee waived for the first year,’’ and 

noted that they believe these phrases to 

be more understandable and succinct 

than use of the term ‘‘introductory,’’ as 

required by the proposal. One 

commenter stated that for one-time fees 

(such as a waiver of balance transfer fees 

associated with the application), the 

term ‘‘introductory’’ would not add 

value to the consumer, because there 

will never be a balance transfer fee 

associated with the specific balance 

transfer that was the subject of the 

promotional fee offer. 

The Board is adopting the 

requirement to use the term 

‘‘introductory’’ or ‘‘intro,’’ as proposed, in 

connection with written or electronic 

advertisements of introductory fees. The 

Board believes that having consistent 

rules for advertisements of introductory 

rates and introductory fees will promote 

consumer understanding of introductory 

fees. In particular, the Board has 

concerns that permitting different 

terminology for introductory fees than 

introductory rates may detract from 

consumer understanding that 

introductory fees are, like introductory 

rates, being offered only for a limited 

time or on a particular transaction or 

transactions. Accordingly, the Board is 

not revising § 226.16(g)(3) to permit 

statements such as ‘‘no annual fee for 

the first year’’ and ‘‘$40 annual fee 

waived for the first year,’’ and the final 

rule requires, consistent with the 

proposal, that issuers use the word 

‘‘introductory’’ or ‘‘intro’’ to highlight the 

temporary nature of such offers. 

Section 226.30 Limitation on Rates 

The Board proposed to make a 

technical correction to comment 30– 

8.i.C to correct a typographical error. 

The Board did not receive any 

significant comments on this aspect of 

the proposal, which is adopted as 

proposed. 

Section 226.51 Ability to Pay 

The Credit Card Act and the Board’s 

February 2010 Final Rule 

In its February 2010 Final Rule, the 

Board adopted § 226.51, which 

implements the provisions of the Credit 

Card Act that require card issuers to 

assess a consumer’s ability to pay before 

opening a new credit card account or 

increasing the credit limit on an existing 

account. Section 226.51(a) implements 

TILA Section 150, which provides that 

‘‘[a] card issuer may not open any credit 

card account for any consumer under an 

open end consumer credit plan, or 

increase any credit limit applicable to 

such account, unless the card issuer 

considers the ability of the consumer to 

make the required payments under the 

terms of such account.’’ Section 

226.51(b) implements TILA Section 

127(c)(8), which prohibits a card issuer 

from opening a credit card account for 

a consumer who is under the age of 21 

unless the consumer has submitted a 

written application that meets certain 

requirements. Specifically, the 

application must require either: (1) 

‘‘submission by the consumer of 

financial information, including through 

an application, indicating an 

independent means of repaying any 

obligation arising from the proposed 

extension of credit in connection with 

the account’’; or (2) the signature of a 

cosigner who has such means, is 21 or 

older, and assumes joint liability for the 

account.9

The Board generally intended 

§ 226.51 to establish consistent 

standards for evaluating a consumer’s 

ability to pay. Specifically, § 226.51 

requires that card issuers establish and 

maintain reasonable written policies 

and procedures to consider the income 

or assets and the current obligations of 

all consumers, regardless of age. See 

§ 226.51(a)(1)(ii), (b)(1)(i), and 

(b)(2)(ii)(B). For all consumers, a card 

issuer must consider either the ratio of 

debt obligations to income, the ratio of 

debt obligations to assets, or the income 

the consumer will have after paying 

debt obligations. See id. Furthermore, 

regardless of a consumer’s age, it would 

be unreasonable for a card issuer not to 

review any information about a 

consumer’s income, assets, or current 

obligations, or to issue a credit card to 

a consumer who does not have any 

income or assets. See id. 

Section 226.51 does not require card 

issuers to verify a consumer’s income or 

assets before opening a new account or 

increasing the credit limit on an existing 

account. Instead, a card issuer may 

consider a consumer’s income or assets 

based on information from a variety of 

sources, including information provided 

by a consumer on a credit card 

application. See comment 51(a)(1)–4. In 

the February 2010 Final Rule, the Board 

stated that verification was not required 

by TILA Section 150 and could be 

burdensome for both consumers and 

card issuers, especially when accounts 

are opened at point of sale or by 

telephone. For example, a consumer 

who wants to open a credit card account 

in a store to get a discount or a 

promotional rate on a purchase is 

unlikely to be carrying paystubs or other 

documents that verify his or her income. 

Similarly, because these types of 

documents typically contain personally 

identifiable information about the 

consumer, the card issuer would need to 

establish procedures for safeguarding 

that information. The Board concluded 

that these burdens outweighed the 

benefits of requiring verification 

because, unlike the subprime mortgage 

market, there was no evidence of 

widespread inflation of consumers’ 

incomes in the credit card market. The 

Board also noted that, because credit 

card accounts are generally unsecured, 

card issuers have the incentive to verify 

income when either the information 

supplied by the consumer is 

inconsistent with the data the card 

issuer has already obtained or when the 

risk in the amount of the credit line 

warrants such verification. See 75 FR 

7721. 

November 2010 Proposed Rule 

Some card issuers request on their 

application forms that applicants 

provide their ‘‘income’’ or ‘‘salary,’’ while 

other issuers request that applicants 

provide their ‘‘household income.’’ In 

the November 2010 Proposed Rule, the 

Board acknowledged that there has been 

some confusion as to whether 

information provided by a consumer in 

response to a request for ‘‘household 

income’’ can be used by a card issuer to 

satisfy the requirements of § 226.51. In 

particular, the Board noted that there 

has been uncertainty as to whether 


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10See Credit Card Act § 2 (granting the Board the 

authority to ‘‘issue such rules * * * as it considers 

necessary to carry out this Act. * * *’’). 11Regulation B prohibits a creditor from 

discriminating against an applicant on a prohibited 

basis (which includes marital status) regarding any 

aspect of a credit transaction. See 12 CFR 202.2(z), 

202.4(a). Under Regulation B, a creditor 

discriminates against an applicant if it treats the 

applicant less favorably than other applicants. See 

12 CFR 202.2(n). 

§ 226.51 established different standards 

for underage and adult consumers with 

respect to the consideration of 

household income and assets. 

In order to resolve this confusion, the 

November 2010 Proposed Rule would 

have amended § 226.51 to require that, 

regardless of the consumer’s age, a card 

issuer must consider the consumer’s 

independent ability to make the 

required payments. The Board further 

proposed to clarify in a revised 

comment 51(a)(1)–4 that consideration 

of information regarding the consumer’s 

household income or assets does not by 

itself satisfy this requirement. Thus, if a 

card issuer requested on its application 

forms that applicants state their 

‘‘household income,’’ the proposed rule 

generally would not have been 

permitted the issuer to use the income 

information provided by an applicant to 

satisfy the ability-to-pay requirement. In 

contrast, however, the income 

information provided by an applicant 

could be used if a card issuer requested 

on its application forms that applicants 

simply state their ‘‘income’’ or ‘‘salary.’’ 

Comments 

Consumer group commenters 

supported the proposed rule, noting that 

it would limit card issuers’ ability to 

extend credit to consumers who do not 

have sufficient income or assets and 

must rely on the income or assets of a 

spouse or other household member who 

is not liable on the account. In 

particular, these commenters expressed 

concern that, while a married couple 

may have sufficient collective income to 

make the required payments on their 

credit card debts during the marriage, 

the spouse who is solely liable for those 

debts may not have sufficient income to 

make the payments if the marriage ends. 

Thus, they argued, consumers and 

issuers are better protected if spouses 

apply jointly and are collectively liable 

for credit card debt incurred during a 

marriage. 

Comments from members of Congress, 

credit card issuers, retailers, trade 

associations, and individual consumers 

generally supported applying the 

proposed limitations on the 

consideration of spousal and other 

household income when an applicant or 

accountholder is under the age of 21. 

However, these commenters strongly 

objected to the application of these 

limitations to consumers who are 21 or 

older. They argued that this aspect of 

the proposed rule was inconsistent with 

the Credit Card Act and the Board’s 

Regulation B and would reduce access 

to credit, particularly for married 

women who do not work outside the 

home. 

Final Rule 

Pursuant to its authority under TILA 

Section 105(a) and Section 2 of the 

Credit Card Act, the Board is generally 

adopting the amendments to § 226.51 

and its commentary as proposed. 

Specifically, the Board is amending 

§ 226.51 to require that a card issuer 

consider a consumer’s independent 

ability to make the required payments 

on a credit card account, regardless of 

the consumer’s age. Furthermore, the 

Board is revising comment 51(a)(1)–4 to 

clarify that a card issuer may not use the 

income or assets of a person who is not 

liable for debts incurred on the account 

to satisfy the requirements of § 226.51, 

unless a Federal or State statute or 

regulation grants a consumer who is 

liable on the account an ownership 

interest in such income or assets. Thus, 

if a card issuer prompts an applicant to 

provide his or her ‘‘household income’’ 

on a credit card application, the card 

issuer cannot rely solely on the 

information provided by an applicant to 

satisfy the requirements of § 226.51. 

Instead, the card issuer would need to 

obtain additional information about an 

applicant’s independent income (such 

as by contacting the applicant). 

However, if a card issuer requests that 

applicants provide their income without 

reference to household income (such as 

by requesting ‘‘income’’ or ‘‘salary’’), the 

issuer may rely on the information 

provided by applicants to satisfy the 

requirements of § 226.51. 

As discussed below, the Board 

believes that this final rule effectuates 

the purpose of the Credit Card Act’s 

ability-to-pay requirement by protecting 

consumers from incurring unaffordable 

levels of credit card debt. The following 

discussion also addresses concerns 

raised by commenters. 

Consistency with the Credit Card Act. 

The Board believes that applying an 

independent ability-to-pay requirement 

to consumers age 21 and older is 

consistent with both the language and 

the intent of TILA Section 150. 

Specifically, TILA Section 150 requires 

card issuers to consider ‘‘the ability of 

the consumer to make the required 

payments’’ (emphasis added), which 

indicates that Congress intended card 

issuers to consider only the ability to 

pay of the consumer or consumers who 

are responsible for making payments on 

the account. Thus, it would be 

inconsistent with TILA Section 150 to 

permit card issuers to establish a 

consumer’s ability to pay based on the 

income or assets of individuals who are 

not liable for debts incurred on the 

account. 

Some industry commenters argued 

that the Credit Card Act’s use of the 

term ‘‘independent’’ in TILA Section 

127(c)(8)(B)(ii) but not in TILA Section 

150 indicates Congress’ intent to 

establish a less stringent standard for 

consideration of spousal or other 

household income when the consumer 

is 21 or older. However, as discussed 

above, the Board believes that 

interpreting the Credit Card Act to 

permit card issuers to establish a 

consumer’s ability to pay based on the 

income or assets of individuals who are 

not responsible for making payments on 

the account would be inconsistent with 

the language and intent of TILA Section 

150. Furthermore, the Board believes 

that it would be contrary to the intent 

of the Credit Card Act to interpret the 

differences between TILA Section 

127(c)(8)(B)(ii) and TILA Section 150 as 

limiting the Board’s authority to 

establish reasonable standards for 

evaluating a consumer’s ability to pay.10

Other commenters argued that a 

spouse who has access to household 

income has the ‘‘ability * * * to make 

the required payments,’’ even if the 

spouse does not have a legal ownership 

interest in the income. Under this 

interpretation, if the income of an 

applicant’s spouse is deposited into a 

checking or other account to which the 

applicant has access, the applicant 

would have the ability to use that 

income to make the required payments. 

The Board agrees that TILA Section 150 

could be interpreted in this manner. 

However, this interpretation could not 

be limited to circumstances involving 

spouses without requiring card issuers 

to treat unmarried consumers less 

favorably than married consumers, 

which would be inconsistent with the 

Equal Credit Opportunity Act, 15 U.S.C. 

1691 (ECOA), as implemented in the 

Board’s Regulation B (12 CFR Part 

202).11

Furthermore, the Board is concerned 

that, if this interpretation were applied 

to all consumers regardless of marital 

status, it could encourage consumers to 

provide—and card issuers to extend 

credit based on—overstated income 

information. Specifically, a consumer 

may understand a credit card 

application asking for ‘‘household 

income’’ to request the income of all 


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12See 73 FR 44522, 44539–44551 (July 30, 2008) 

(discussing the Board’s concerns regarding 

overstated income in the context of higher-priced 

mortgage loans secured by the consumer’s principal 

dwelling). 

13Some card issuers stated that credit card 

accounts opened based on household income do 

not have a higher rate of delinquency or loss than 

accounts opened based on individual income. 

However, they did not provide any data in support 

of this statement. 

14See 12 CFR 202.5(c). However, Regulation B 

does permit a creditor to request information 

concerning an applicant’s spouse if, for example, 

the spouse will be permitted to use the account, the 

spouse will be contractually liable on the account, 

the applicant is relying on the spouse’s income as 

a basis for repayment of the credit requested, or the 

applicant resides in a community property state. 

See 12 CFR 202.5(c)(2). 

15The Board notes, however, that commenters 

did not submit any data supporting this statement. 

16Again, commenters generally did not submit 

data substantiating this contention. One credit card 

issuer estimated that, if the proposed rule were 

adopted, over 10% of applications that are currently 

approved would be denied. However, the issuer did 

not provide any information about how this 

estimate was made. 

household members, including those 

who are not liable for debts incurred on 

the account. For example, if an adult 

applicant lives with his or her parents, 

the applicant may understand 

‘‘household income’’ to include the 

parents’ income even if the parents are 

not liable on the account. In the 

subprime mortgage lending market, the 

Board found that lenders relying on 

overstated incomes to make loans could 

not accurately assess consumers’ 

repayment ability.12 The Board believes 

that TILA Section 150 was intended to 

prevent similar practices in the credit 

card market.13

Consistency with Regulation B. In the 

November 2020 Proposed Rule, the 

Board noted that there has been some 

confusion as to whether Regulation B 

requires a card issuer to consider 

spousal or other household income 

when considering a consumer’s ability 

to pay under § 226.51. Accordingly, the 

Board clarified that Regulation B does 

not compel a card issuer to consider 

spousal or other household income 

when considering an applicant’s ability 

to pay under either § 226.51(a) or (b). 

Furthermore, in the proposal, the Board 

clarified that card issuers would not 

violate Regulation B by virtue of 

complying with the requirements in 

§ 226.51(a) or (b). Thus, to the extent 

that § 226.51 does not permit a card 

issuer to consider spousal or other 

household income, the Board’s 

November 2010 Proposed Rule stated 

that the card issuer does not violate 

Regulation B by excluding such income 

from consideration. 

Nevertheless, some commenters 

raised concerns that this aspect of the 

proposed rule was inconsistent with 

Regulation B. In particular, these 

commenters argued that, because 

Regulation B limits card issuers’ ability 

to request information concerning an 

applicant’s spouse (such as the spouse’s 

income),14 issuers must request 

‘‘household income’’ on their 

application forms in order to avoid 

violating Regulation B. 

These commenters did not raise any 

new issues with respect to the 

relationship between § 226.51 and 

Regulation B. Thus, as in the proposal, 

the Board concludes that a card issuer 

does not violate Regulation B by virtue 

of complying with § 226.51. Several 

commenters requested that the Board 

delay finalizing this rule until such time 

as Regulation B could be amended to 

resolve any conflicts. However, because 

this rule does not conflict with 

Regulation B, the Board does not believe 

that such amendments are necessary. 

Effect on access to credit. Comments 

from members of Congress, credit card 

issuers, retailers, trade associations, and 

individual consumers expressed 

concern that the proposed rule would 

unfairly restrict access to credit for 

consumers who do not work outside the 

home, particularly married women. 

These commenters stated that, in 

families where only one spouse is 

employed outside the home, the other 

spouse is often responsible for managing 

the family’s finances and making major 

purchases that require access to credit 

(such as opening a new credit card 

account in a store in order to finance the 

purchase of an appliance).15 These 

commenters argued that, if a spouse 

who is not employed cannot rely on the 

employed spouse’s income when 

applying for credit, the application 

would likely be denied, despite the fact 

that the employed spouse’s income can 

be used to make the required payments 

on the account.16 Commenters also 

raised similar concerns with respect to 

low-income families where both 

spouses work (particularly military 

families) because the spouses may need 

to pool their incomes in order to satisfy 

the ability-to-pay requirements of 

§ 226.51. 

The Board believes that TILA Section 

150 was intended to strengthen credit 

card underwriting standards in order to 

protect consumers from incurring 

unaffordable levels of credit card debt. 

Consistent with this intent, the Board 

adopted § 226.51, which requires that, 

before opening a new credit card 

account or increasing the credit limit on 

an existing account, card issuers must 

evaluate whether a consumer has the 

income or assets necessary to make the 

required payments on the credit card 

account and on any other debts. Thus, 

to the extent that credit card issuers 

previously extended credit to 

consumers who lacked sufficient 

income or assets to repay debts incurred 

on the account, § 226.51 now prohibits 

them from doing so. Similarly, to the 

extent that card issuers are currently 

extending credit based on the income of 

persons who are not liable on the 

account, the Board believes that it is 

consistent with the purposes of TILA 

Section 150 and § 226.51 to restrict this 

practice. 

Furthermore, for the following 

reasons, the Board believes that married 

women who do not work outside the 

home and low-income families will 

continue to have access to credit. First, 

the final rule permits card issuers to ask 

for ‘‘income’’ or ‘‘salary’’ on their 

application forms and to use the 

information provided by applicants to 

satisfy the ability-to-pay requirement. 

As noted above, some card issuers 

currently request ‘‘income’’ or ‘‘salary’’ 

on their applications, while other 

issuers request ‘‘household income.’’ 

The Board is unaware of any evidence 

that card issuers who request ‘‘income’’ 

or ‘‘salary’’ extend less credit to married 

women who do not work outside the 

home or to low-income families than 

issuers that request ‘‘household 

income.’’ 

Second, nothing in § 226.51 prohibits 

card issuers from considering the 

combined incomes of spouses or other 

household members who apply for 

credit jointly. Indeed, comment 

51(a)(1)–6 currently states that, when 

two or more consumers open an account 

jointly, the card issuer may consider 

their collective ability to make the 

required payments. Thus, a consumer 

who does not have sufficient income to 

open a credit card account 

independently can open an account by 

applying jointly with a spouse who has 

sufficient income. The Board 

understands that a joint application 

could be inconvenient or impracticable 

in certain circumstances, such as when 

a consumer’s spouse is not available to 

apply in a retail setting. However, the 

Board does not believe that these 

concerns warrant permitting issuers to 

extend credit based on the income of 

persons who are not liable on the 

account. 

Third, consumers without sufficient 

income to open a credit card account 

independently can obtain access to 

credit and build a credit history by 

becoming authorized users on the credit 

card account of a spouse, which is a 

common practice. In particular, the 

Board notes that a long-standing 


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17See 12 CFR 202.10. 

18See 12 CFR 202.5(c)(2)(iv), (d)(1). 

19Late payment fees, over-the-limit fees, and 

returned payment fees are exempt from this 

requirement, as are fees that the consumer is not 

required to pay with respect to the account. See 

§ 226.52(a)(2). 

provision of Regulation B provides that, 

when a consumer is permitted to use a 

spouse’s account, a creditor that 

furnishes credit information to the 

credit bureaus generally must reflect the 

participation of both spouses for that 

account.17

Finally, as noted above, the final rule 

permits a card issuer to consider the 

income of a consumer’s spouse if a 

Federal or State statute or regulation 

grants the consumer an ownership 

interest in that income. For example, in 

community property states such as 

California and Texas, spouses are 

presumed to have joint ownership of 

property acquired during the marriage. 

Thus, if an applicant resides in a 

community property state, the 

applicant’s income would generally 

include the income of the applicant’s 

spouse for purposes of § 226.51(a). In 

these circumstances, a card issuer 

could—consistent with Regulation B— 

request that applicants who reside in 

community property states provide 

information regarding their spouses’ 

incomes.18

Additional Revisions to Commentary 

The Board has also made the 

following revisions to the commentary 

to § 226.51: 

• Comments 51(a)(1)–1 and –2 have 

been amended to clarify that, consistent 

with the revisions to § 226.51(a), card 

issuers must consider the consumer’s 

independent ability to make the 

required payments. 

• Comments 51(a)(1)–4 and –6 and 

comment 51(b)(1)–2 have been amended 

to clarify that card issuers generally are 

not permitted to consider the income or 

assets of persons who are not liable for 

debts incurred on the account (such as 

authorized users). 

• In order to improve clarity, the 

guidance in comment 51(a)(1)–4 has 

been reorganized into three 

subparagraphs. 

• Consistent with the proposed 

amendments to §§ 226.9, 226.16, and 

226.55 regarding fees that increase after 

a specified period of time, comment 

51(a)(2)–3 has been amended to clarify 

that, when estimating the required 

minimum periodic payments for 

purposes of the safe harbor in 

§ 226.51(a)(2)(ii), the issuer must use the 

fee that will apply after the specified 

period. This approach is consistent with 

the guidance regarding promotional 

rates in comment 51(a)(2)–2. 

• The Board has adopted a new 

comment 51(b)(1)–2 to clarify that 

information regarding income and assets 

that satisfies the requirements of 

§ 226.51(a) also satisfies the 

requirements in § 226.51(b)(1) for 

consumers under the age of 21. 

Section 226.52 Limitations on Fees 

52(a) Limitations Prior to Account 

Opening and During First Year After 

Account Opening 

Section 226.52(a)(1) generally limits 

the total amount of fees that a consumer 

may be required to pay with respect to 

a credit card account under an open-end 

(not home-secured) consumer credit 

plan to 25 percent of the account’s 

credit limit at account opening.19 This 

limitation applies ‘‘during the first year 

after the account is opened.’’ However, 

the Board understands that some card 

issuers are requiring consumers to pay 

application, processing, or similar fees 

prior to account opening that, when 

combined with other fees charged after 

account opening, exceed the 25 percent 

threshold in § 226.52(a)(1). As discussed 

below, to the extent that § 226.52(a)(1) 

permits this practice, the Board is 

concerned that the regulation is 

inconsistent with the purposes of TILA 

(as amended by the Credit Card Act). 

Accordingly, pursuant to its authority 

under TILA Section 105(a) and Section 

2 of the Credit Card Act, the Board 

proposed to amend § 226.52(a)(1) to 

apply to fees the consumer is required 

to pay prior to account opening. 

The Credit Card Act amended TILA 

Section 127 by creating a new paragraph 

(n). See Credit Card Act § 105. Section 

127(n)(1) provides that, ‘‘[i]f the terms of 

a credit card account under an open end 

consumer credit plan require the 

payment of any fees (other than any late 

fee, over-the-limit fee, or fee for a 

payment returned for insufficient funds) 

by the consumer in the first year during 

which the account is opened in an 

aggregate amount in excess of 25 

percent of the total amount of credit 

authorized under the account when the 

account is opened, no payment of any 

fees (other than any late fee, over-thelimit fee, or fee for a payment returned 

for insufficient funds) may be made 

from the credit made available under 

the terms of the account.’’ 15 U.S.C. 

1637(n)(1). Section 127(n)(2) further 

provides that Section 127(n) may not 

‘‘be construed as authorizing any 

imposition or payment of advance fees 

otherwise prohibited by any provision 

of law.’’ 15 U.S.C. 1637(n)(2). 

As discussed in the February 2010 

Final Rule, the Board believes that 

Section 127(n) was intended to prevent 

card issuers from requiring consumers 

to pay excessive fees in order to obtain 

a credit card account. See 75 FR 7724– 

7726. Many subprime credit card issuers 

require payment of substantial one-time 

fees when an account is opened (such 

as application fees, program fees, and 

annual fees). By linking the maximum 

amount of permissible fees to the 

amount of credit extended, Section 

127(n)(1) and § 226.52(a)(1) establish a 

direct relationship between the costs 

and benefits associated with opening a 

credit card account. If, for example, a 

card issuer provides a consumer with a 

$500 credit limit when the account is 

opened, the issuer is prohibited from 

requiring the consumer to pay more 

than $125 in non-exempt fees at account 

opening. Furthermore, in order to 

ensure that the statutory relationship 

between fees and the account’s credit 

limit is maintained for a reasonable 

period of time, Section 127(n)(1) and 

§ 226.52(a)(1) apply for one year after an 

account is opened. Thus, a card issuer 

that charges non-exempt fees that equal 

25 percent of the credit limit at account 

opening cannot require the consumer to 

pay any transaction fees, monthly 

maintenance fees, or other non-exempt 

fees for one year after account opening. 

52(a)(1) General Rule 

Fees Charged Prior to Account Opening 

The Board understands that, because 

§ 226.52(a)(1) states that its limitations 

apply ‘‘during the first year after the 

account is opened,’’ there has been some 

uncertainty as to whether those 

limitations apply to fees that a 

consumer is required to pay prior to 

account opening. As noted above, some 

card issuers are currently requiring 

consumers to pay application or 

processing fees prior to account opening 

that, when combined with other fees 

charged to the account after account 

opening, exceed 25 percent of the 

account’s initial credit limit. While this 

practice is consistent with the current 

language of § 226.52(a)(1), the Board 

believes that it is inconsistent with the 

intent of Section 127(n)(1) insofar as it 

alters the statutory relationship between 

the costs and benefits of opening a 

credit card account. Accordingly, in 

order to effectuate the purpose of 

Section 127(n)(1), the Board proposed to 

use its authority under TILA Section 

105(a) and Section 2 of the Credit Card 

Act to amend § 226.52(a)(1) to apply the 

25 percent limitation to fees the 

consumer is required to pay before 


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20Although TILA Section 127(n)(2) refers to the 

‘‘imposition or payment of advance fees,’’ the Board 

does not interpret this reference as excluding 

‘‘advance fees’’ from the application of Section 

127(n)(1). On the contrary, Section 127(n)(2) 

specifically states that Section 127(n) cannot ‘‘be 

construed as authorizing any imposition or 

payment of advance fees otherwise prohibited by 

any provision of law,’’ which the Board understands 

to mean that a fee that falls under the 25 percent 

threshold may nevertheless be subject to other legal 

restrictions. For example, comment 52(a)(3)–1 cites 

16 CFR § 310.4(a)(4), which prohibits any 

telemarketer or seller from ‘‘[r]equesting or receiving 

payment of any fee or consideration in advance of 

obtaining a loan or other extension of credit when 

the seller or telemarketer has guaranteed or 

represented a high likelihood of success in 

obtaining or arranging a loan or other extension of 

credit for a person.’’ 

21See 74 FR 5498, 5511 (Jan. 29, 2009) 

(discussing rationale behind adoption of a 21-day 

period between mailing or delivery of periodic 

statements and the payment due date); see also 

Credit Card Act § 106(b) (adopting same 21-day 

period in revised TILA Section 163). 

account opening and during the first 

year after account opening.20

Consumer groups, a member of 

Congress, and a credit card issuer 

supported the proposed amendment on 

the grounds that it would prevent 

evasion and further the purposes of 

TILA Section 127(n). In contrast, the 

proposal was opposed by other industry 

commenters (including employees of a 

credit card issuer that focuses on the 

subprime market). These commenters 

argued that the proposed amendment 

was inconsistent with the plain 

language of the Credit Card Act insofar 

as it would apply the 25 percent 

limitation to fees charged prior to 

account opening. They also argued that 

the proposal would force subprime 

credit card issuers to reduce credit 

availability by limiting revenue derived 

from fees. However, for the reasons 

discussed above, the Board believes that 

the proposed rule is necessary to 

preserve the statutory relationship 

between the costs and benefits of 

opening a credit card account. 

Accordingly, in order to effectuate the 

purposes of TILA Section 127(n) and to 

prevent evasion, the Board is adopting 

this aspect of the proposal in the final 

rule. See TILA Section 105(a); Credit 

Card Act § 2. 

Account Opening 

The proposed rule noted that some 

confusion exists regarding when the 

one-year period in § 226.52(a)(1) begins 

and ends. In order to resolve any 

uncertainty as to when the 25 percent 

limitation in § 226.52(a)(1) ceases to 

apply, the Board proposed to amend 

§ 226.52(a)(1) to provide that, for 

purposes of that paragraph, an account 

is considered open no earlier than the 

date on which the account may first be 

used by the consumer to engage in 

transactions. This approach is generally 

consistent with § 226.5(b)(1)(i), which 

provides that the account-opening 

disclosures required by § 226.6 must be 

provided before the first transaction is 

made under the plan. Although 

§ 226.5(b)(1)(iv) and (b)(1)(v) permit 

creditors to collect membership fees and 

application fees excludable from the 

finance charge under § 226.4(c)(1) before 

providing account-opening disclosures 

in certain circumstances, the Board is 

concerned that, because the ability to 

engage in transactions is a primary 

benefit of a credit card account, it would 

be inconsistent with the purpose of 

Section 127(n)(1) if the one-year period 

expired less than one year after the 

consumer could first use the account for 

transactions. 

Although consumer groups supported 

this aspect of the proposal, industry 

commenters noted that, in certain 

circumstances, it would be 

operationally burdensome to track the 

precise date on which a particular 

account can first be used for 

transactions. These commenters 

conceded that the date an account is 

opened on a card issuer’s system will 

coincide with the date the account can 

first be used for transactions when the 

account is opened at the point of sale in 

order to purchase merchandise. 

However, they stated that these dates 

will not coincide when a credit card is 

mailed to a consumer because the date 

the account can first be used for 

transactions will depend on how long it 

takes for the card to be delivered and 

how long the consumer waits after 

delivery to activate the card. Industry 

commenters recommended that, in 

order to establish a consistent standard, 

the first year after account opening 

under § 226.52(a) instead be measured 

from the date the account is opened on 

the card issuer’s system. 

The Board is concerned that 

deducting delivery time from the oneyear period in TILA Section 127(n) 

would reduce protections for 

consumers. However, in order to reduce 

the operational burden on card issuers, 

the Board is adopting new comment 

52(a)(1)–4 to provide additional 

guidance regarding how a card issuer 

determines the date on which the 

account may first be used by the 

consumer to engage in transactions. As 

an initial matter, this comment clarifies 

that a card issuer may consider an 

account open for purposes of 

§ 226.52(a)(1) on the date the account is 

first used by the consumer for a 

transaction (such as when an account is 

opened at point of sale in order to make 

a purchase). In addition, to address 

circumstances in which a credit card 

and account-opening disclosures are 

mailed or delivered to consumers, the 

comment provides several alternative 

methods of determining the date on 

which the account may first be used for 

transactions (even if the account is not 

actually used for a transaction on that 

date). 

First, if a card issuer requires 

consumers to comply with reasonable 

activation procedures for preventing 

fraud or unauthorized use of a new 

account (such as requiring the consumer 

to provide information that verifies his 

or her identity over the telephone after 

receiving the card) before permitting the 

consumer to use the account for 

transactions, the card issuer may 

consider the account open on the date 

the consumer complies with those 

procedures, provided that the account 

may be used for transactions on that 

date. 

Second, a card issuer may consider an 

account open for purposes of 

§ 226.52(a)(1) on the date that is seven 

days after the card issuer mails or 

delivers to the consumer accountopening disclosures that are consistent 

with § 226.6, provided that the 

consumer may use the account for 

transactions after complying with any 

reasonable activation procedures for 

preventing fraud or unauthorized use. 

The Board has previously used seven 

days as a general measure of the amount 

of time required for credit card mailings 

to reach consumers.21 Accordingly, the 

Board believes that a seven-day period 

reasonably estimates the amount of time 

required for account-opening 

disclosures to reach consumers by mail. 

The following example illustrates the 

application of this guidance: Assume 

that a card issuer approves a consumer’s 

application for a credit card account 

under an open-end (not home-secured) 

consumer credit plan and establishes 

the account on its internal systems on 

July 1 of year one. On July 5, the card 

issuer mails or delivers to the consumer 

account-opening disclosures that are 

consistent with § 226.6. If the consumer 

may use the account for transactions 

after complying with any reasonable 

procedures imposed by the card issuer 

for preventing fraud and unauthorized 

use, the card issuer may consider the 

account open on July 12 of year one for 

purposes of § 226.52(a)(1) regardless of 

when the consumer actually activates 

the account. Accordingly, § 226.52(a)(1) 

ceases to apply to the account on July 

12 of year two. 

While this guidance should alleviate 

much of the burden associated with 

tracking the date on which an account 

is opened for purposes of § 226.52(a), 


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22See Credit Card Act § 106(b); § 226.5(b)(2). 23The Board notes that the account-opening 

definition in § 226.52(a)(1) and the guidance in the 

accompanying commentary should not be 

construed as altering the timing requirements for 

the provision of account-opening disclosures under 

§ 226.5(b)(1)(i), which—as discussed above— 

require creditors to provide account-opening 

disclosures that are consistent with § 226.6 before 

the first transaction is made on the account. 

the Board recognizes that, in some 

cases, it may be difficult for card issuers 

to determine the specific date on which 

account-opening disclosures are mailed 

or delivered to a particular consumer. 

Accordingly, comment 52(a)(1)–4 

further clarifies that, if a card issuer has 

reasonable procedures designed to 

ensure that account-opening disclosures 

that are consistent with § 226.6 are 

mailed or delivered to consumers no 

later than a certain number of days after 

the card issuer establishes the account 

on its system, the card issuer may add 

that number of days to the seven-day 

period for purposes of determining 

when the account was opened under 

§ 226.52(a)(1). As discussed above, 

Congress and the Board have adopted a 

similar ‘‘reasonable procedures’’ 

standard for the provision of credit card 

periodic statements.22 Accordingly, for 

purposes of § 226.52(a)(1), the Board 

believes that the same standard is 

appropriate for the provision of credit 

card account-opening disclosures.23

Using the facts in the example above, 

if the card issuer establishes the account 

on its internal systems on July 1 of year 

one and has adopted reasonable 

procedures designed to ensure that 

account-opening disclosures are mailed 

or delivered to consumers no later than 

three days after an account is 

established, the issuer may consider the 

account open on July 11 of year one for 

purposes of § 226.52(a)(1). Therefore, 

§ 226.52(a)(1) ceases to apply to the 

account on July 11 of year two. 

Additional Amendments 

The Board understands that the 

references in § 226.52(a)(1) and 

comment 52(a)(1)–1 to the charging of 

fees to a credit card account have raised 

concerns as to whether § 226.52(a)(1) 

permits card issuers to require 

consumers to pay an unlimited amount 

of fees with respect to a credit card 

account so long as none of those fees are 

actually charged to the account. 

Although this language was based on 

the language of the Credit Card Act, the 

Board does not believe that Congress 

intended to permit card issuers to evade 

the 25 percent limitation by collecting 

fees from the consumer by other means. 

Indeed, as discussed in the February 

2010 Final Rule, the Board believes that 

Congress intended the 25 percent 

limitation to apply not only to fees 

charged to a credit card account but also 

to fees collected from other sources with 

respect to the account (such as fees that 

are charged to a consumer’s deposit 

account). See 75 FR 7724–7726. 

Accordingly, in order to resolve any 

ambiguity, the Board proposed to use its 

authority under TILA Section 105(a) 

and Section 2 of the Credit Card Act to 

simplify § 226.52(a)(1) by removing this 

language. The Board also proposed to 

amend the commentary to § 226.52(a)(1) 

for consistency with the proposed 

revisions discussed above and to make 

certain non-substantive clarifications 

and corrections. Consumer groups and 

most industry commenters supported 

this aspect of the proposal. Although 

some industry commenters argued that 

the Board should strictly apply the 

statutory language, the Board believes 

that doing so would undermine the 

purpose of the Credit Card Act. 

Accordingly, the Board is adopting this 

aspect of the proposal. 

52(a)(2) Fees Not Subject to Limitations 

The Board understands that there has 

been some uncertainty as to whether 

minimum interest charges are subject to 

§ 226.52(a)(1). The Board has previously 

concluded elsewhere in Regulation Z 

that such charges should be treated as 

fees. See comment 7(b)(6)-4. 

Accordingly, for consistency, the Board 

proposed to amend comment 52(a)(2)–1 

to clarify that, while § 226.52(a)(1) does 

not apply to charges attributable to 

periodic interest rates, it applies to 

charges imposed as a substitute for 

interest when the interest charge would 

not otherwise exceed a minimum 

threshold. In addition, the Board 

proposed to clarify that § 226.52(a)(1) 

applies to other fixed finance charges. 

Consumer group commenters 

supported the proposed revisions. 

However, one industry commenter 

requested that, because § 226.52(a)(1) 

does not apply to accrued interest, only 

the difference between the accrued 

interest and the minimum interest 

charge be considered a fee. For example, 

the commenter suggested that, if the 

interest accrued during a billing cycle is 

40 cents and the minimum interest 

charge is $1.00, only 60 cents should be 

considered a fee under § 226.52(a)(1). 

The Board declines to adopt this 

approach because, in these 

circumstances, the card issuer is not 

imposing accrued interest. Instead, the 

card issuer has chosen to impose a 

higher, pre-determined charge in lieu of 

interest. Furthermore, subdividing the 

minimum interest charge into accrued 

interest and fee portions would be 

inconsistent with the disclosure of 

minimum interest charges in the tables 

provided with applications and 

solicitations and at account opening. 

Sections 226.5a and 226.6 require that 

the minimum interest charge be 

disclosed in the tables with headings, 

content, and format substantially similar 

to the model forms in Appendix G–10 

and G–17, which disclose the minimum 

interest charge as a single, specific 

amount. See §§ 226.5a(a)(2), (b)(3); 

226.6(b)(1), (b)(2)(iii). Furthermore, as 

noted above, card issuers are required to 

treat the entire minimum interest charge 

as a fee for purposes of the periodic 

statement disclosures required by 

§ 226.7(b)(6). The Board is concerned 

that permitting issuers to subdivide the 

minimum interest charge into interest 

and fees in these disclosures would be 

confusing to consumers. Similarly, if 

issuers were permitted to subdivide the 

minimum interest charge for purposes 

of § 226.52(a) but not for purposes of the 

disclosures in § 226.7, consumers would 

not be able to, for example, use the fee 

disclosures on their periodic statements 

to determine whether the total amount 

of fees imposed are consistent with the 

25 percent limitation. Accordingly, the 

revisions to comment 52(a)(2)–1 are 

adopted as proposed. 

52(a)(3) Rule of Construction 

The Board proposed to correct a 

typographical error in § 226.52(a)(3) by 

replacing the words ‘‘This paragraph (a)’’ 

with ‘‘Paragraph (a) of this section.’’ The 

Board did not receive any significant 

comment on this correction, which is 

adopted as proposed. 

52(b) Limitations on Penalty Fees 

Section 226.52(b)(1) prohibits card 

issuers from imposing fees for violating 

the terms or other requirements of an 

open-end (not home-secured) consumer 

credit plan unless the dollar amount of 

the fee either represents a reasonable 

proportion of the total costs incurred by 

the issuer as a result of the type of 

violation or complies with the 

applicable safe harbor amount. 

Furthermore, under § 226.52(b)(2), the 

dollar amount of the fee cannot exceed 

the dollar amount associated with the 

violation and a card issuer cannot 

impose more than one fee based on a 

single event or transaction. In order to 

facilitate compliance, the Board 

proposed to amend § 226.52(b) and the 

accompanying commentary to provide 

additional guidance and illustrative 

examples. As discussed below, those 

amendments are generally adopted as 

proposed. 


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22980 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

24 In particular, the Board proposed to move the 

language in § 226.52(b)(1)(ii)(A) and (B) regarding 

adjustments to the safe harbor amounts based on 

changes in the Consumer Price Index to a new 

§ 226.52(b)(1)(ii)(D). 

52(b)(1)(ii) Safe Harbors 

The safe harbors in 

§ 226.52(b)(1)(ii)(A)–(B) provide that a 

card issuer generally may impose a fee 

of $25 for an initial violation and a fee 

of $35 for any additional violation of the 

same type during the next six billing 

cycles. As discussed below, the Board 

proposed to make several significant 

amendments to § 226.52(b)(1)(ii) and its 

commentary. In addition, the Board 

proposed several non-substantive 

clarifying or organizational 

amendments.24 Except as noted below, 

these amendments were generally 

supported by commenters and are 

adopted as proposed. 

Multiple Violations During a Billing 

Cycle 

The safe harbors in § 226.52(b)(1)(ii) 

address circumstances in which a 

violation is repeated in one of the six 

billing cycles following the billing cycle 

during which the initial violation 

occurred. However, the safe harbors do 

not expressly address circumstances in 

which a repeated violation occurs in the 

same billing cycle as the initial 

violation. The Board proposed to correct 

this oversight by amending 

§ 226.52(b)(1)(ii)(B) to state that a card 

issuer may impose a $35 fee for a 

subsequent violation of the same type 

that occurs during the same billing cycle 

or during the next six billing cycles. 

There are relatively few 

circumstances in which a card issuer 

may impose multiple fees for multiple 

violations of the same type during a 

billing cycle. Section 226.56(j)(1) 

prohibits card issuers from imposing 

more than one over-the-limit fee per 

billing cycle. Furthermore, 

§ 226.52(b)(2)(ii) prohibits the 

imposition of more than one penalty fee 

based on a single event or transaction, 

which prevents card issuers from 

imposing more than one late payment 

fee during a billing cycle. In addition, as 

discussed in comment 52(b)(2)(i)–1, a 

card issuer may not impose multiple 

returned payment fees by submitting the 

same check for payment multiple times. 

Although consumer group commenters 

suggested that multiple returned 

payment fees could be prohibited in 

these circumstances, the Board believes 

that a card issuer should be permitted 

to impose two returned payment fees 

during a billing cycle if a consumer 

makes two separate payments that are 

returned during that billing cycle. 

Furthermore, in these circumstances, 

the Board believes that it is consistent 

with the purpose of the safe harbors in 

§ 226.52(b)(1)(ii)(A)–(B) to permit the 

card issuer to impose a $35 fee for the 

second returned payment. Accordingly, 

the Board has revised 

§ 226.52(b)(1)(ii)(B) to clarify that this is 

permitted. The Board has also amended 

comment 52(b)(1)(ii)–1 for consistency 

with the revisions to 

§ 226.52(b)(1)(ii)(A)–(B) and provided 

an illustrative example in comment 

52(b)(2)(ii)–1. 

Multiple Over-the-Limit Fees 

The Board has adopted the proposed 

revisions to comment 52(b)(1)(ii)–1.ii in 

order to provide additional guidance 

regarding the relationship between the 

safe harbors in § 226.52(b)(1)(ii), the 

prohibition on imposing multiple fees 

based on a single event or transaction in 

§ 226.52(b)(2)(ii), and the limitations on 

fees for exceeding the credit limit in 

§ 226.56(j)(1). Consistent with the Credit 

Card Act, § 226.56(j)(1) permits card 

issuers to impose multiple over-thelimit fees based on a single over-thelimit transaction when the consumer 

does not make payments sufficient to 

bring the balance under the credit limit 

by the next payment due date (although 

no more than three fees may be imposed 

with respect to any single transaction). 

See Credit Card Act § 102(a); TILA 

Section 127(k); see also 75 FR 7751– 

7752. Consumer group commenters 

argued that, notwithstanding this 

statutory language, the Board should use 

its authority under TILA Section 105(a) 

and Section 2 of the Credit Card Act to 

prohibit the imposition of multiple 

over-the-limit fees in these 

circumstances. However, because it 

appears that Congress intended to 

permit this practice, the Board does not 

believe that it would be appropriate to 

interpret § 226.52(b) as prohibiting such 

fees. Accordingly, the Board has 

provided additional guidance in 

comment 52(b)(1)(ii)–1.ii clarifying that, 

to the extent permitted by § 226.56(j)(1), 

§ 226.52(b)(2)(ii) does not prohibit a 

card issuer from imposing fees for 

exceeding the credit limit in 

consecutive billing cycles based on a 

single over-the-limit transaction. The 

Board has further clarified that, in these 

circumstances, the second and third 

over-the-limit fees permitted by 

§ 226.56(j)(1) may be $35, consistent 

with the safe harbor for repeated 

violations in § 226.52(b)(1)(ii)(B). A 

cross-reference has been inserted to 

comment 52(b)(2)(ii)–1, where similar 

guidance and an illustrative example are 

also be provided. 

Waiver of Penalty Fees 

As discussed in the June 2010 Final 

Rule, the safe harbor in § 226.52(b)(1)(ii) 

was designed to permit card issuers to 

increase the penalty for repeated 

violations of the same type in order to, 

among other things, deter consumers 

from engaging in future violations. See 

75 FR 37531–37534, 37540–37543. In 

order to accomplish this purpose, the 

Board proposed to revise 

§ 226.52(b)(1)(ii)(B) to clarify that, under 

the safe harbor, the higher $35 fee could 

only be imposed if the card issuer had 

previously imposed the lower $25 fee 

for a violation of the same type. The 

Board is adopting these revisions as 

proposed. 

However, industry commenters raised 

concerns about when a fee would be 

considered ‘‘imposed’’ under the 

proposed amendment. In particular, 

these commenters noted that card 

issuers often voluntarily choose to 

waive the penalty fee for an initial 

violation but would lose the incentive 

do so if they could not impose the 

higher fee for subsequent violations. 

Because the waiver of penalty fees is 

beneficial to consumers, the Board has 

clarified in comment 52(b)(1)(ii)–1.i that 

a fee has been imposed for purposes of 

§ 226.52(b)(1)(ii) even if the card issuer 

waives or rebates all or part of the fee. 

Thus, under the safe harbor, a card 

issuer may waive the $25 fee for an 

initial violation and still impose a $35 

fee for a repeated violation of the same 

type during the same billing cycle or the 

next six billing cycles. 

The Board notes that, in order to 

demonstrate compliance with the safe 

harbors in § 266.52(b)(1)(ii), a card 

issuer must be able to establish that the 

$35 fee was not imposed for the first 

violation of a particular type during the 

relevant billing cycles. One method that 

card issuers may use to accomplish this 

is to disclose the imposition of the 

initial $25 fee and the waiver of that fee 

on the consumer’s periodic statements. 

52(b)(2)(i) Fees That Exceed Dollar 

Amount Associated With Violation 

Section 226.52(b)(2)(i)(B)(2) prohibits 

a card issuer from imposing a fee based 

on account inactivity (including the 

consumer’s failure to use the account for 

a particular number or dollar amount of 

transactions or a particular type of 

transaction). As an illustrative example, 

comment 52(b)(2)(i)–5 states that 

§ 226.52(b)(2)(i)(B)(2) prohibits a card 

issuer from imposing a $50 fee when a 

consumer fails to use the account for 

$2,000 in purchases over the course of 

a year. Furthermore, to prevent 

circumvention, the comment clarifies 


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25The promotion of waivers and rebates is 

discussed in detail below with respect to 

§ 226.55(e). 

that § 226.52(b)(2)(i)(B)(2) prohibits a 

card issuer from imposing a $50 annual 

fee on all accounts but waiving the fee 

if the consumer uses the account for 

$2,000 in purchases over the course of 

a year. 

The Board understands that comment 

52(b)(2)(i)–5 has created some confusion 

as to whether card issuers are prohibited 

from considering account activity as a 

factor when, for example, responding to 

an individual consumer’s request that 

an annual fee be waived. This was not 

the Board’s intent. Instead, the example 

in comment 52(b)(2)(i)–5 was intended 

to clarify that card issuers are prohibited 

from achieving indirectly through a 

systematic waiver of annual fees a result 

that is directly prohibited by 

§ 226.52(b)(2)(i)(B)(2): establishing a 

program under which only consumers 

who do not use an account for at least 

$2,000 in purchases over the course of 

a year are charged an additional $50. 

Accordingly, the Board proposed to 

amend comment 52(b)(2)(i)–5 to clarify 

that, if a card issuer does not promote 

the waiver or rebate of the annual fee for 

purposes of § 226.55(e), 

§ 226.52(b)(2)(i)(B)(2) does not prohibit 

the issuer from considering account 

activity when waiving or rebating 

annual fees on individual accounts 

(such as in response to a consumer’s 

request).25

Industry commenters generally 

supported the proposed revisions. 

However, consumer group commenters 

requested that waivers based on account 

activity only be permitted when 

requested by the consumer, even if the 

possibility of a waiver is not promoted 

to consumers. As discussed in greater 

detail below with respect to § 226.55(e), 

the Board believes that a card issuer 

waiver program or policy that is not 

promoted does not raise the same 

circumvention concerns as a promoted 

program or policy. Accordingly, the 

amendments to comment 52(b)(2)(i)–5 

are adopted as proposed, with nonsubstantive revisions. 

52(b)(2)(ii) Multiple Fees Based on a 

Single Event or Transaction 

The Board proposed to amend 

comment 52(b)(2)(ii)–1 to provide 

additional examples further illustrating 

the application of § 226.52(b)(2)(ii). 

Among other things, these examples 

clarify that—if the required minimum 

periodic payment is not made during a 

billing cycle and a late payment fee is 

imposed—the card issuer may include 

the unpaid amount in the required 

minimum periodic payment due during 

the next billing cycle and impose a 

second late payment fee under 

§ 226.52(b)(2)(ii) if the consumer fails to 

make the second minimum payment. 

However, the examples also clarify 

that—if a consumer makes a required 

minimum periodic payment by the 

applicable due date—the card issuer 

may not impose a late payment fee 

based on the consumer’s failure to also 

pay past due amounts that the card 

issuer chose not to include in that 

required minimum periodic payment. 

The Board understands that, for loss 

mitigation and other purposes, some 

card issuers do not include past due 

amounts in the required minimum 

periodic payment. The Board 

acknowledges that this practice is 

beneficial to consumers to the extent 

that it prevents some delinquent 

consumers from becoming even more 

delinquent. For example, if a card issuer 

does not include past due amounts in 

the required minimum periodic 

payment, a consumer could remain one 

payment past due indefinitely without 

ever becoming more than 60 days 

delinquent and thereby avoid the 

application of a penalty rate to existing 

balances pursuant to § 226.55(b)(4). 

However, a consumer who makes the 

required minimum periodic payment 

reflected on the periodic statement by 

the due date should not be charged a 

late payment fee. It is inconsistent with 

the purpose of § 226.52(b)(2)(ii) for a 

consumer to be charged more than one 

late payment fee based on the failure to 

make a single required minimum 

periodic payment. 

Consumer group and one industry 

commenter supported this aspect of the 

proposal. In contrast, two industry 

commenters opposed it on the grounds 

that the card issuer cannot include the 

past due amount in the next minimum 

payment when a payment is returned 

after the periodic statement has been 

mailed or delivered to the consumer. 

However, it is unclear how often this 

scenario occurs. Furthermore, although 

the card issuer cannot impose a late 

payment fee if the consumer pays the 

amount reflected on the statement by 

the due date, the card issuer is 

permitted to impose a fee based on the 

returned payment. Accordingly, for the 

reasons discussed above, the revisions 

to comment 52(b)(2)(ii)–1 are adopted as 

proposed. 

Section 226.53 Allocation of Payments 

53(b) Special Rules 

Section 226.53(a) implements TILA 

Section 164(b)(1), which requires that 

card issuers generally allocate amounts 

paid by the consumer in excess of the 

required minimum periodic payment 

first to the balance with the highest 

annual percentage rate and then to other 

balances in descending order based on 

the applicable rate. However, TILA 

Section 164(b)(2) and § 226.53(b)(1) set 

forth a special rule for accounts with 

balances subject to a deferred interest or 

similar program. In these circumstances, 

a card issuer is required to allocate 

excess payments first to the balance 

subject to the program during the two 

billing cycles immediately preceding 

expiration of the program. In addition, 

in the February 2010 Final Rule, the 

Board used its authority under TILA 

Section 105(a) and Section 2 of the 

Credit Card Act to adopt § 226.53(b)(2), 

which permits card issuers to allocate 

excess payments among the balances in 

the manner requested by the consumer 

when a balance on the account is 

subject to a deferred interest or similar 

program. See 75 FR 7728–7729. 

The Board understands that there is 

some concern regarding the appropriate 

allocation of payments when an account 

has multiple balances, one of which is 

secured. For example, some private 

label credit cards permit consumers to 

purchase equipment that is subject to a 

security interest (such as a motorcycle, 

snowmachine, or riding lawnmower) as 

well as related items that are not (such 

as helmets and other accessories). If the 

rate that applies to an unsecured 

balance is higher than the rate that 

applies to the secured balance, 

§ 226.53(a) currently requires the card 

issuer to apply excess payments first to 

the unsecured balance. While this 

allocation method is generally beneficial 

to consumers insofar as it minimizes 

interest charges, it could also make it 

difficult for a consumer to pay off the 

secured balance in order to obtain a 

release of the security interest. For 

example, if a consumer wishes to pay 

off the secured balance in order to sell, 

trade in, or otherwise dispose of the 

property in which the card issuer has a 

security interest, § 226.53(a) requires the 

consumer to pay off not only the 

secured balance but also any other 

balances to which a higher rate applies. 

The Board believes that, in this 

narrow set of circumstances, it is 

beneficial to consumers to provide 

greater flexibility regarding the 

allocation of excess payments. 

Accordingly, pursuant to its authority 

under TILA Section 105(a) and Section 

2 of the Credit Card Act, the Board 

proposed to redesignate the special 

rules for accounts with deferred interest 

or similar balances as § 226.53(b)(1)(i) 

and (b)(1)(ii) and to adopt a new special 

rule for accounts with secured balances 


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22982 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

in § 226.53(b)(2). Specifically, revised 

§ 226.53(b)(2) provided that, when a 

balance on a credit card account under 

an open-end (not home-secured) 

consumer credit plan is secured, the 

card issuer may, at its option, allocate 

any amount paid by the consumer in 

excess of the required minimum 

periodic payment to that balance if 

requested by the consumer, even if a 

higher rate applies to another balance. 

The Board also proposed to revise the 

commentary to § 226.53 consistent with 

the proposed revisions to § 226.53(b). In 

particular, the Board proposed to clarify 

that the guidance in comment 53(b)–3 

on what constitutes a consumer request 

when an account has a deferred interest 

or similar balance also applies when an 

account has a secured balance. 

Industry and consumer group 

commenters generally supported the 

proposal, although consumer groups 

expressed concern that a special 

payment allocation rule for secured 

credit card balances could encourage 

the use of open-end credit accounts for 

transactions that are more appropriately 

treated as closed-end credit. 

Accordingly, the Board is adopting the 

proposed revisions to § 226.53 and its 

commentary pursuant to its authority 

under TILA Section 105(a) and Section 

2 of the Credit Card Act, while 

specifically noting that, in order to 

qualify as open-end credit under 

Regulation Z, an account must meet the 

definition of open-end credit in 

§ 226.2(a)(20) and its commentary. 

Section 226.55 Limitations on 

Increasing Annual Percentage Rates, 

Fees, and Charges 

55(a) General Rule 

Section 226.55 implements the 

restrictions on increases in annual 

percentage rates and certain fees and 

charges in TILA Sections 171 and 172. 

Section 226.55(a) prohibits card issuers 

from increasing an annual percentage 

rate or any fee or charge required to be 

disclosed under § 226.6(b)(2)(ii), 

(b)(2)(iii), or (b)(2)(xii) unless 

specifically permitted by one of the 

exceptions in § 226.55(b). The Board 

understands that there has been some 

confusion as to whether an increase in 

a rate, fee, or charge is subject to this 

prohibition when the consumer was 

previously notified of the circumstances 

giving rise to the increase. Accordingly, 

in order to remove any ambiguity, the 

Board proposed to amend comment 

55(a)–1 to clarify that—except as 

specifically provided in § 226.55(b)—the 

prohibition in § 226.55(a) applies even if 

the circumstances under which an 

increase will occur are disclosed in 

advance. Commenters generally 

supported this revision, which is 

adopted as proposed. 

55(b) Exceptions 

Section 226.55(b) contains exceptions 

to the general rule in § 226.55(a). As a 

general matter, these exceptions are not 

mutually exclusive, and a card issuer 

may increase a rate, fee, or charge 

pursuant to one exception even if that 

increase would not be permitted under 

a different exception. Comment 55(b)–1 

provides illustrative examples of the 

interaction between the different 

exceptions in § 226.55(b). 

The Board proposed to amend 

comment 55(b)–1 to provide additional 

guidance regarding the interaction 

between the exception in § 226.55(b)(4) 

for accounts that become more than 60 

days delinquent, the exception in 

§ 226.55(b)(5) for accounts subject to a 

workout or temporary hardship 

arrangement, and the exception in 

§ 226.55(b)(6) for accounts subject to the 

SCRA or a similar Federal or State 

statute or regulation. Section 

226.55(b)(4)(ii) implements the ‘‘cure’’ 

provision in TILA Section 171(b)(4)(B), 

which allows a consumer whose rate 

has been increased as a result of a 

delinquency of more than 60 days to 

‘‘terminate’’ the increase (in other words, 

reduce the rate to the pre-existing value) 

by making the next six required 

minimum payments by the due date. 

For example, if the rate on a $1,000 

balance was increased from 12% to 30% 

on January 31 based on a delinquency 

of more than 60 days, § 226.55(b)(4)(ii) 

requires the card issuer to reduce the 

rate on any remaining portion of the 

$1,000 balance to 12% if the consumer 

makes the required minimum periodic 

payments for February, March, April, 

May, June, and July by the relevant due 

date. 

However, the Board understands that, 

in certain circumstances, a consumer 

may enter into a workout or temporary 

hardship arrangement or enter military 

service after a rate has been increased 

based on a delinquency of more than 60 

days but before the consumer has made 

the six timely payments necessary to 

obtain a reduction under 

§ 226.55(b)(4)(ii). Section 226.55(b)(5) 

implements TILA Section 171(b)(3), 

which provides that a card issuer may 

increase the rate on an existing balance 

when a workout or temporary hardship 

arrangement is completed or fails, so 

long as the increased rate does not 

exceed the rate that applied prior to the 

arrangement. For example, if a card 

issuer reduced a consumer’s rate on a 

$1,000 balance from 30% to 15% as part 

of a workout or temporary hardship 

arrangement, § 226.55(b)(5) would 

permit the card issuer to increase the 

rate on any remaining portion of the 

$2,000 balance to 30% upon completion 

or failure of the arrangement. 

Similarly, when the rate that applies 

to a balance is reduced pursuant to the 

SCRA because the consumer enters 

military service, § 226.55(b)(6) permits 

the card issuer to reinstate the preexisting rate for that balance once the 

consumer leaves military service. For 

example, if a card issuer reduced a 

consumer’s rate on a $1,000 balance 

from 30% to 6% pursuant to the SCRA, 

§ 226.55(b)(6) would permit the card 

issuer to increase the rate on any 

remaining portion of the $1,000 balance 

to 30% once the consumer leaves 

military service and the SCRA no longer 

applies. 

Accordingly, when a consumer 

obtains a § 226.55(b)(4)(ii) reduction 

during a workout or temporary hardship 

arrangement or while in military 

service, it is unclear whether 

§ 226.55(b)(5) or (b)(6) would permit the 

card issuer to negate that reduction by 

returning existing balances to the rate 

that applied prior to commencement of 

the arrangement or military service. 

Because § 226.55(b)(4)(ii) implements a 

specific statutory requirement that a rate 

increase based on a delinquency of more 

than 60 days be terminated if the 

consumer makes the next six required 

minimum payments on time, the Board 

believes it would be inconsistent with 

the intent of that requirement to 

interpret the exceptions in § 226.55(b)(5) 

and (b)(6) as overriding the reduction in 

rate. Thus, the Board proposed revisions 

to comment 55(b)–1 clarifying that, if 

§ 226.55(b)(4)(ii) requires a card issuer 

to decrease the rate, fee, or charge that 

applies to a balance while the account 

is subject to a workout or temporary 

hardship arrangement or subject to the 

SCRA or a similar Federal or State 

statute or regulation, the card issuer 

may not impose a higher rate, fee, or 

charge on that balance pursuant to 

§ 226.55(b)(5) or (b)(6). 

The Board also proposed the 

following illustrative example: Assume 

that, on January 1, the annual 

percentage rate that applies to a $1,000 

balance is increased from 12% to 30% 

pursuant to § 226.55(b)(4). On February 

1, the rate on that balance is decreased 

from 30% to 15% consistent with 

§ 226.55(b)(5) as a part of a workout or 

temporary hardship arrangement. On 

July 1, § 226.55(b)(4)(ii) requires the 

card issuer to reduce the rate that 

applies to any remaining portion of the 

$1,000 balance from 15% to 12%. If the 

consumer subsequently completes or 

fails to comply with the terms of the 


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workout or temporary hardship 

arrangement, the card issuer may not 

increase the 12% rate on any remaining 

portion of the $1,000 balance pursuant 

to § 226.55(b)(5). 

Consumer group commenters 

supported this aspect of the proposal, 

while one industry commenter argued 

that the proposed amendments would 

make card issuers less inclined to 

provide workout or temporary hardship 

arrangements. Because workout and 

temporary hardship arrangements can 

provide important benefits to card 

issuers as well as consumers by 

reducing the likelihood that a 

delinquent account will become a loss, 

the Board does not believe that the 

proposed revisions to comment 55(b)–1 

will result in a significant reduction in 

the availability of such arrangements. 

Accordingly, for the reasons discussed 

above, the Board is adopting this aspect 

of the proposal. 

55(b)(1) Temporary Rate, Fee, or Charge 

Exception 

Section 226.55(b)(1) implements TILA 

Section 171(b)(1), which permits a card 

issuer to increase a temporary or 

promotional rate upon expiration of a 

period of at least six months, provided 

that the card issuer discloses in advance 

the length of the period and the rate that 

will apply after expiration. However, 

neither § 226.55(b)(1) nor TILA Section 

171(b)(1) addresses circumstances in 

which an annual fee or other fee or 

charge subject to § 226.55 increases after 

a specified period of time. As discussed 

above, the Board declined to adopt a 

specific exception for temporary or 

promotional fee programs in the 

February 2010 Final Rule because the 

Credit Card Act did not contain such an 

exception and because an exception did 

not appear to be necessary. See 75 FR 

7734 n. 48; see also id. 7699, 7706– 

7707. Indeed, the Board noted that 

nothing in the February 2010 Final Rule 

prohibited a creditor from providing 

notice of an increase in a fee at the same 

time it temporarily reduces the fee, 

provided that information regarding the 

reduction is not interspersed with the 

content required to be disclosed 

pursuant to § 226.9(c)(2)(iv). See 75 FR 

7699; see also comment 5a(b)(2)–4. 

Nevertheless, as discussed above with 

respect to § 226.9(c)(2)(v)(B), the Board 

believes that, upon further review, it is 

appropriate to use its authority under 

TILA Section 105(a) and Section 2 of the 

Credit Card Act to specifically address 

temporary or promotional programs for 

fees or charges subject to § 226.55 in 

order to encourage issuers to disclose 

and structure such programs in a 

consistent manner that enables 

consumers to understand the associated 

costs. Accordingly, the Board proposed 

to amend § 226.55(b)(1) to apply to 

temporary or promotional programs for 

fees and charges required to be 

disclosed under § 226.6(b)(2)(ii), 

(b)(2)(iii), or (b)(2)(xii). Thus, 

§ 226.55(b)(1), as amended, would 

permit a card issuer to, for example, 

increase an annual fee after a specified 

period of time if the card issuer 

provides the consumer in advance with 

a clear and conspicuous written 

disclosure of the length of the period 

and the fee or charge that will apply 

after expiration of the period. 

In addition, the Board proposed to 

amend comments 55(b)(1)–2–4 for 

consistency with the proposed revisions 

to § 226.55(b)(1), to provide additional 

illustrative examples, and to make other 

non-substantive clarifications. The 

Board also proposed a new comment 

55(b)(1)–5 to clarify that, although the 

limitations in § 226.55(b)(1)(ii) on 

applying an increased rate to certain 

types of transactions would also apply 

to increased fees or charges subject to 

§ 226.55, card issuers generally are not 

prohibited from increasing a fee or 

charge that applies to the account as 

whole (to the extent consistent with the 

notice requirements in §§ 226.9 and 

226.55(b)(3)). Finally, the Board 

proposed to add an additional example 

to comment 55(b)–3 to clarify the 

application of § 226.55 when the 

specified time periods for temporary 

rates overlap. 

Commenters generally supported the 

proposed revisions, although several 

industry commenters argued that 

promotional fee reductions should be 

exempted from the requirement in 

§ 226.55(b)(1) that promotional 

reductions last at least six months. In 

support of this argument, these 

commenters noted that § 226.55(b)(1)’s 

six-month requirement implements 

TILA Section 172(b), which applies only 

to promotional reductions in rates. See 

Credit Card Act § 101(d). However, as 

discussed above and in the February 

2010 Final Rule, the Credit Card Act 

does not contain any exception for 

promotional fee reductions. Thus, in 

using its authority under TILA Section 

105(a) and Section 2 of the Credit Card 

Act to establish such an exception, the 

Board believes that it is important to 

ensure that consumers receive the same 

protections with respect to promotional 

fee reductions that they receive with 

respect to promotional rate reductions. 

Accordingly, the Board adopts the 

revisions to § 226.55(b)(1) and its 

commentary as proposed. 

55(b)(3) Advance Notice Exception 

Section 226.55(b)(3) provides that a 

card issuer may generally increase the 

rate, fee, or charge that will apply to 

new transactions after complying with 

the notice requirements in § 226.9. 

However, § 226.55(b)(3)(iii) further 

provides that a card issuer cannot use 

this exception to increase a rate, fee, or 

charge during the first year after account 

opening. 

The Board understands that there has 

been some confusion regarding the 

circumstances under which an 

increased fee or charge applies to an 

existing balance (as opposed to the 

account as a whole) and therefore does 

not qualify for the exception in 

§ 226.55(b)(3). In particular, there has 

been uncertainty as to whether an 

increased fee or charge can be applied 

to a closed account or an account on 

which transaction privileges have been 

suspended. Because an account cannot 

be used for new transactions in these 

circumstances, an increased fee or 

charge subject to § 226.55 could only be 

applied to the account’s existing 

balance. In addition, 

§§ 226.52(b)(2)(i)(B)(3) and 226.55(d)(1) 

generally prohibit a card issuer from 

applying a new or increased fee or 

charge to a closed account. Accordingly, 

to provide greater clarity, the Board 

proposed to amend § 226.55(b)(3)(iii) to 

state that § 226.55(b)(3) does not permit 

a card issuer to increase a rate, fee, or 

charge subject to § 226.55 while an 

account is closed or while the card 

issuer does not permit the consumer to 

use the account for new transactions. 

Consumer group commenters 

supported the proposed revisions, but 

industry commenters raised concerns 

regarding the burden of determining 

whether an account is closed or 

transaction privileges are suspended 

before increasing a rate, fee, or charge. 

These commenters noted that 

transaction privileges on an account 

may be temporarily suspended because 

the consumer has exceeded his or her 

credit limit, because the account is more 

than 60 days’ delinquent, because the 

account is subject to a workout or 

temporary hardship agreement, or 

because the issuer is investigating 

potential fraudulent use of the account. 

They also noted that an account may be 

open and transactions may be permitted 

when the card issuer provides 45 days’ 

advance notice of the increase 

consistent with § 226.9, but the account 

may be closed or transaction privileges 

may be suspended by the time the card 

issuer is permitted to implement the 

increase. 


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Industry commenters argued that 

issuers should be permitted to increase 

rates, fees, and charges on closed 

accounts and accounts where 

transaction privileges have been 

suspended, noting that § 226.55 would 

still prevent issuers from applying 

increased rates to existing balances and 

that consumers would still have the 

right to reject an increased fee or charge 

under § 226.9(h). However, when an 

account cannot be used for new 

transactions, the Board believes that it 

would be inconsistent with the purpose 

of the Credit Card Act to permit 

increases that can only be applied to the 

account’s existing balance. Furthermore, 

with respect to increases in fees and 

charges, the Board is concerned that 

consumers will be less likely to notice 

changes to a closed account and 

therefore less likely to exercise their 

right to reject. Accordingly, the Board is 

adopting the proposed amendment to 

§ 226.55(b)(3)(iii) clarifying that issuers 

are prohibited from increasing rates and 

fees and charges subject to § 226.55 

when an account is closed or while the 

card issuer does not permit the 

consumer to use the account for new 

transactions. 

However, the Board recognizes that 

certain suspensions of transaction 

privileges (particularly those related to 

potential fraudulent use of the account) 

may last for relatively short periods of 

time. In these circumstances, the Board 

does not believe that, as a general 

matter, it is necessary for the card issuer 

to provide an additional § 226.9 notice 

simply because transaction privileges 

may have been suspended on the date 

the original notice was sent, the date the 

increase was scheduled to go into effect, 

or some date in between. Accordingly, 

the Board has adopted a new comment 

55(b)(3)–6, which clarifies that, if 

§ 226.9 permits a card issuer to apply an 

increased rate, fee, or charge on a 

particular date and the account is closed 

on that date or transaction privileges are 

suspended on that date, the card issuer 

may delay application of the increased 

rate, fee, or charge until the first day of 

the following billing cycle without 

relinquishing the ability to apply that 

rate, fee, or charge. This guidance is 

consistent with the guidance provided 

by the Board in comment 55(b)–2.iii for 

mid-cycle increases. However, comment 

55(b)(3)–6 would further clarify that, if 

the account is closed or the card issuer 

does not permit the consumer to use the 

account for new transactions on the first 

day of the following billing cycle, then 

the card issuer must provide a new 

notice of the increased rate, fee, or 

charge consistent with § 226.9. 

Finally, consistent with the 

amendments to § 226.52(a)(1), the Board 

has clarified that, for purposes of 

§ 226.55(b)(3)(iii), an account is 

considered open no earlier than the date 

on which the account may first be used 

by the consumer to engage in 

transactions. In addition, the Board has 

adopted a new comment 55(b)(3)–7, 

which clarifies that an account is 

considered open for purposes of 

§ 226.55(b)(3)(iii) on any date that the 

card issuer may consider the account 

open for purposes of § 226.52(a)(1). 

55(b)(6) Servicemembers Civil Relief Act 

Exception 

Section 226.55(b)(6) provides that, 

when a card issuer is required by the 

SCRA to reduce the annual percentage 

rate for an account to 6% when the 

consumer enters military service, the 

card issuer may increase the rate once 

the SCRA no longer applies, subject to 

certain limitations. However, 

§ 226.55(b)(6) does not address 

circumstances in which the SCRA’s 

broad definition of ‘‘interest’’ requires 

the card issuer to reduce not only the 

annual percentage rate but also fees or 

charges while the consumer is in 

military service. See 50 U.S.C. app. 

527(d)(1) (defining ‘‘interest’’ as 

including ‘‘service charges, renewal 

charges, fees, or any other charges 

(except bona fide insurance) with 

respect to an obligation or liability’’). 

Accordingly, the Board proposed to 

amend § 226.55(b)(6) and the relevant 

commentary to clarify that, to the extent 

the SCRA also requires the card issuer 

to reduce a fee or charge required to be 

disclosed under § 226.6(b)(2)(ii), 

(b)(2)(iii), or (b)(2)(xii), the card issuer is 

generally permitted to increase that fee 

or charge once the SCRA no longer 

applies. 

The Board also understands that 

many states have enacted statutes that— 

like the SCRA—require creditors to 

reduce rates, fees, and charges while a 

consumer is in military service. See, 

e.g., La. Rev. Stat. Ann. § 29:312; N.Y. 

Mil. Law art. 13 § 323–a; R.I. Gen. Laws 

§ 30–7–10; Utah Code Ann. § 39–7–111. 

Accordingly, in order to clarify that 

§ 226.55 does not prevent a card issuer 

from increasing a rate, fee, or charge to 

the pre-existing amount once a state law 

requirement no longer applies, the 

Board proposed to amend the exception 

in § 226.55(b)(6) to apply to decreases 

imposed pursuant to the SCRA or ‘‘a 

similar federal or state statute or 

regulation.’’ The Board also proposed 

corresponding amendments to the 

relevant commentary. 

Finally, the Board noted in the 

proposal that, while the SCRA and some 

similar state statutes only require 

creditors to reduce the rates, fees, and 

charges that apply to obligations 

incurred before the consumer enters 

military service, some card issuers 

voluntarily apply the reduced rate, fee, 

or charge to transactions that occur after 

the consumer has entered military 

service. Accordingly, the Board 

proposed to adopt a new comment 

55(b)(6)–2 clarifying that, if a card issuer 

decreases all rates, fees, and charges to 

amounts that are consistent with the 

SCRA or a similar Federal or State 

statute or regulation (including rates, 

fees, and charges that apply to new 

transactions), the card issuer may 

increase those rates, fees, and charges 

consistent with § 226.55(b)(6). The 

Board also proposed to revise the 

example in current comment 55(b)(6)–2 

to illustrate the application of this 

guidance and redesignate that example 

as comment 55(b)(6)–3. 

Commenters generally supported the 

proposed revisions. However, consumer 

group commenters expressed concern 

that the guidance in new comment 

55(b)(6)–2 could be construed to permit 

increases in rates, fee, or charges that 

are unrelated to a consumer leaving 

military service. Because this was not 

the Board’s intent, the proposed 

comment has been revised to clarify that 

the guidance applies only when other 

rates, fees, or charges have been reduced 

pursuant to the SCRA or a similar 

Federal or State statute or regulation. 

Otherwise, the revisions to 

§ 226.55(b)(6) and its commentary are 

adopted as proposed. 

55(c) Treatment of Protected Balances 

Section 226.55(c) addresses the 

treatment of ‘‘protected balances,’’ which 

are the existing balances to which a card 

issuer may not apply an increased rate, 

fee, or charge under § 226.55. Comment 

55(c)(1)–3 provides guidance regarding 

the application of increased fees or 

charges to protected balances. In 

particular, this comment clarifies that, 

while a card issuer is prohibited from 

applying an increased fee or charge that 

is subject to § 226.55 to a protected 

balance, a card issuer is not prohibited 

from increasing a fee or charge that 

applies to the account as a whole or to 

balances other than the protected 

balance. The Board has revised this 

comment to clarify that a card issuer’s 

ability to increase a fee or charge is also 

subject to the limitations in 

§ 226.55(b)(3)(iii) on increasing fees 

during the first year after account 

opening, while an account is closed, or 

while transaction privileges are 

suspended. 


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The Board also proposed to add a new 

comment 55(c)(1)–4 clarifying that 

nothing in § 226.55 prohibits a card 

issuer from changing the balance 

computation method that applies to new 

transactions as well as protected 

balances. The Board did not receive any 

significant comment on this guidance, 

which is adopted as proposed. However, 

the Board notes that, before changing 

the balance computation method, a card 

issuer must comply with the notice 

requirements in § 226.9(c)(2). 

55(e) Promotional Waivers or Rebates of 

Interest, Fees, and Other Charges 

Some card issuers offer promotional 

programs under which interest charges 

or fees will be waived or rebated so long 

as the consumer pays on time and 

otherwise complies with the account 

terms. For example, a card issuer might 

offer a promotion under which interest 

accrues on purchases at an annual 

percentage rate of 15% but will be 

waived for six months if the consumer 

pays on time each billing cycle. While 

this type of promotional program may 

be intended to encourage timely 

payment, a consumer who relies on the 

promotion when making transactions 

and then, for example, inadvertently 

pays one day late will experience a 

significant and potentially unexpected 

increase in the cost of those 

transactions. In contrast, if a consumer 

relies on a promotional rate when 

making transactions, TILA Section 

171(b)(1) and § 226.55(b)(1) do not 

permit the card issuer to increase the 

cost of those transactions by revoking 

the promotional rate unless the account 

becomes more than 60 days past due. 

Thus, the Board is concerned that the 

revocation of promotional waiver or 

rebate programs based on so-called ‘‘hair 

trigger’’ violations of the account terms 

may be inconsistent with the purposes 

of the Credit Card Act. 

In order to address these concerns, the 

Board proposed to use its authority 

under TILA Section 105(a) and Section 

2 of the Credit Card Act to add a new 

§ 226.55(e), which clarified that, if a 

card issuer promotes the waiver or 

rebate of interest, fees, or other charges 

subject to § 226.55, any cessation of the 

waiver or rebate constitutes an increase 

in a rate, fee, or charge for purposes of 

§ 226.55. Thus, for example, if a card 

issuer promotes an interest waiver 

program, the card issuer must comply 

with § 226.55(b)(1) by disclosing the 

length of the promotion and the rate that 

will apply after the promotion expires. 

Furthermore, the card issuer would be 

prohibited from effectively increasing 

the interest charges for existing balances 

by ceasing or terminating the waiver 

during the promotional period, unless 

the account becomes more than 60 days 

delinquent consistent with 

§ 226.55(b)(4). 

Comments from a member of 

Congress, consumer groups, and a credit 

card issuer supported § 226.55(e) on the 

grounds that it is necessary to prevent 

evasion of the Credit Card Act’s 

limitations on card issuers’ ability to 

increase the costs associated with 

existing balances. In contrast, some 

industry commenters opposed 

§ 226.55(e), arguing that it would 

unnecessarily restrict issuers’ ability to 

offer waivers and rebates that benefit 

consumers. However, because 

§ 226.55(e) permits card issuers to offer 

waiver or rebate programs that are 

consistent with the Credit Card Act’s 

limitations and generally does not 

restrict issuers’ ability to waive or rebate 

interest, fee, and other charges on an 

individualized basis (as discussed 

below), the Board does not believe that 

it will result in a substantial reduction 

in benefits for consumers. Accordingly, 

in order to ensure that consumers’ 

existing credit card balances receive the 

protections in the Credit Card Act and 

§ 226.55, the Board is adopting 

§ 226.55(e) as proposed. 

As discussed in the proposal, 

§ 226.55(e) is intended to address 

promotional programs involving 

waivers or rebates of interest, fees, and 

charges. The Board does not intend to 

restrict a card issuer’s ability to waive 

or rebate interest, fees, or other charges 

in order to resolve disputes, address 

compliance concerns, or retain 

customers. Accordingly, proposed 

comment 55(e)–1 clarified that nothing 

in § 226.55 prohibits a card issuer from 

waiving or rebating finance charges due 

to a periodic interest rate or a fee or 

charge required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii). 

This proposed comment also provided 

examples of promotional waiver or 

rebate programs that would comply 

with § 226.55. In order to address 

concerns raised by consumer group 

commenters, the Board has revised this 

comment to clarify that § 226.55(e) 

applies to both temporary and 

permanent terminations of waivers or 

rebates as well as to both partial and full 

terminations. Otherwise, this comment 

is adopted as proposed. 

Proposed comment 55(e)–2 clarified 

the circumstances under which a card 

issuer would be considered to promote 

a waiver or rebate program for purposes 

of § 226.55(e). As a general matter, this 

comment followed the existing guidance 

regarding advertisements in § 226.2(a)(2) 

and the accompanying commentary. 

Thus, under the proposed guidance, a 

card issuer promotes a waiver or rebate 

program for purposes of § 226.55(e) if, 

for example, it discloses the waiver or 

rebate in a newspaper, magazine, leaflet, 

promotional flyer, catalog, sign, or 

point-of-sale display. Similarly, a card 

issuer promotes a waiver or rebate 

program for purposes of § 226.55(e) if it 

discloses the waiver or rebate on radio 

or television or through electronic 

advertisements (such as on the Internet). 

See comment 2(a)(2)–1.i. In contrast, a 

card issuer generally does not promote 

a program for purposes of § 226.55(e) if 

it discloses the waiver or rebate in a 

communication that is not an 

advertisement for purposes of 

§ 226.2(a)(2), such as in educational 

materials that do not solicit business. 

See comment 2(a)(2)–1.ii. 

However, the proposed comment 

deviated from the guidance in comment 

2(a)(2)–1 in one important respect. 

Comments 2(a)(2)–1.ii.A and F provide, 

respectively, as examples of 

communications that are not 

advertisements ‘‘direct personal 

contacts’’ and ‘‘[c]ommunications about 

an existing credit account (for example, 

a promotion encouraging additional or 

different uses of an existing credit card 

account).’’ While these exclusions are 

appropriate for purposes of § 226.2(a)(2), 

the Board believes that it would be 

inconsistent with the purpose of 

§ 226.55(e) to exclude from coverage 

direct personal contacts regarding 

waiver or rebate programs or the 

promotion of waiver or rebate programs 

to existing accountholders. Accordingly, 

proposed comment 55(e)–2 clarified that 

programs disclosed to existing 

accountholders through direct personal 

contacts or otherwise are generally 

subject to § 226.55(e), unless the 

disclosure is either provided in relation 

to an inquiry or dispute about a specific 

charge or occurs after the card issuer has 

waived or rebated the interest, fees, or 

other charges. Thus, the comment 

clarified that a card issuer is not 

promoting a waiver or rebate for 

purposes of § 226.55(e) if, for example, 

a consumer calls the issuer to dispute a 

fee that appears on his or her periodic 

statement and the issuer offers to waive 

the fee in order to resolve the dispute. 

Similarly, a card issuer is not promoting 

a waiver or rebate if it waives interest 

charges that were erroneously imposed 

and then discloses that waiver on a 

periodic statement or in a letter. This 

guidance is consistent with the Board’s 

desire to avoid restricting card issuers’ 

ability to waive or rebate interest, fees, 

or other charges in order to resolve 

disputes, address compliance concerns, 

or retain customers. 


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Proposed comment 55(e)–2 also 

provided a number of additional 

examples of circumstances in which a 

waiver or rebate is not promoted for 

purposes of § 226.55(e), including when 

a card issuer communicates with a 

consumer about a waiver or rebate in 

relation to an inquiry or dispute about 

a specific charge, when a card issuer 

waives or rebates interest, fees, or other 

charges in order to comply with a legal 

requirement (such as the fee limitations 

in § 226.52(a)), when a card issuer 

discloses a grace period, and when a 

card issuer provides an undisclosed 

period after the payment due date 

during which interest, fees, or other 

charges are waived or rebated even if a 

payment has not been received. The 

Board solicited comment on other 

examples of circumstances in which a 

card issuer may waive or rebate interest, 

fees, or charges subject to § 226.55 

without promoting the waiver or rebate. 

Industry commenters argued that a 

number of additional categories of 

communications should not be 

considered promotion under § 226.55(e), 

including any offer of a waiver or rebate 

in connection with a ‘‘customer 

accommodation’’ or ‘‘customer service 

policy,’’ an offer of a waiver or rebate 

made to ‘‘maintain a relationship,’’ or 

‘‘actions or conditions outside the credit 

card account relationship.’’ The Board is 

concerned that these exclusions would 

be too vague to accomplish the purposes 

of § 226.55(e) or to provide clear 

guidance to card issuers. Furthermore, 

as noted above, comment 55(e)–2 

clarifies that § 226.55(e) does not 

interfere with a card issuer’s ability to 

accommodate customers or maintain 

customer relationships by, for example, 

disclosing a waiver in relation to a 

consumer’s inquiry or dispute about a 

specific charge or disclosing a waiver 

after the fact. In addition, although 

industry commenters suggested that 

communications regarding waivers or 

rebates offered in relation to workout or 

temporary hardship arrangements not be 

considered promotions for purposes of 

§ 226.55(e), the Board does not believe 

that such an exclusion is necessary 

because, consistent with § 226.55(b)(5), 

a card issuer may waive or rebate fees 

and charges subject to § 226.55 during a 

workout or temporary hardship 

arrangement and then return the fee or 

charge to its previous amount once the 

arrangement ends. 

Consumer group commenters argued 

that, for purposes of § 226.55(e), 

promotion should include any 

disclosure of a prospective waiver or 

rebate unless the waiver or rebate is 

provided in response to a consumer 

inquiry or dispute. The Board is 

concerned, however, that this definition 

of promotion may be overbroad. 

Consumer group commenters also 

objected to the guidance in proposed 

comment 55(e)–2 clarifying that a card 

issuer is not promoting a waiver or 

rebate for purposes of § 226.55(e) if it 

provides benefits (such as rewards 

points or cash back based on purchases 

or finance charges) that can be applied 

to the account as credits, provided that 

the benefits are not promoted as 

reducing interest, fees, or other charges 

subject to § 226.55. These commenters 

argued that such programs are 

sufficiently similar to promotional 

waiver or rebate programs that they 

should be subject to the same 

requirements. The Board disagrees, 

provided that—as stated in comment 

55(e)–2—the card issuer does not 

promote the rewards as reducing 

interest, fees, or other charges. 

In the proposal, the Board noted that 

many card issuers promote rewards 

programs under which consumers can 

earn points, cash back, or similar 

benefits based on purchases, interest 

charges, or other factors. The Board 

further noted that some card issuers 

condition these benefits on the 

consumer making timely payments and 

otherwise complying with the account 

terms. Because TILA Sections 171 and 

172 do not address these types of 

benefits, the loss of rewards generally 

does not raise the same concerns 

regarding circumvention as the loss of a 

waiver or rebate of interest, fees, or 

other charges subject to § 226.55. 

Accordingly, although the Board has 

made certain non-substantive revisions 

to comment 55(e)–2, it is otherwise 

adopted as proposed. 

Finally, proposed comment 55(e)–3 

provided guidance regarding the 

relationship between § 226.55(e) and a 

grace period. Specifically, this comment 

clarified that § 226.55(e) does not apply 

to the waiver of finance charges due to 

a periodic rate consistent with a grace 

period, as defined in § 226.5(b)(2)(ii)(3). 

The Board did not receive any 

significant comment on this guidance, 

which is adopted as proposed. 

Section 226.58 Internet Posting of 

Credit Card Agreements 

58(b) Definitions 

58(b)(1) Agreement 

Section 226.58(b)(1) defines 

‘‘agreement’’ or ‘‘credit card agreement’’ 

as a written document or documents 

evidencing the terms of the legal 

obligation or the prospective legal 

obligation between a card issuer and a 

consumer for a credit card account 

under an open-end (not home-secured) 

consumer credit plan, as defined in 

§ 226.2(a)(15). The Board did not 

propose any changes to § 226.58(b)(1). 

One commenter asked the Board to 

exclude from the scope of § 226.58 lines 

of credit accessed by debit cards that 

can be used only at automated teller 

machines. These products are credit 

card accounts under an open-end (not 

home-secured) consumer credit plan, as 

defined in § 226.2(a)(15), and 

agreements related to these products 

therefore fall within the § 226.58(b)(1) 

definition. The commenter argued that 

these products do not function like 

other credit cards and that including 

agreements for these products in the 

Board’s database would not facilitate 

comparison shopping by consumers. 

The Board is not adopting this 

suggested change. When adopting the 

February 2010 Final Rule, the Board 

considered several comments requesting 

that the Board exclude lines of credit 

accessed by a debit card that can be 

used only at automated teller machines 

from the requirements of the Credit Card 

Act generally. The Board declined to 

exclude these products, citing 

Congress’s apparent intent that the 

Credit Card Act apply broadly and the 

lack of an alternative regulatory regime 

for these products. See 75 FR 7664. 

Consistent with the approach the Board 

has taken in implementing other 

sections of the Credit Card Act, lines of 

credit accessed by debit cards that can 

be used only at automated teller 

machines remain subject to § 226.58. 

58(b)(4) Card Issuer 

The Board proposed to add new 

§ 226.58(b)(4) to define the term ‘‘card 

issuer’’ solely for purposes of § 226.58. 

The proposed definition provided that, 

solely for purposes of § 226.58, card 

issuer or issuer means the entity to 

which a consumer is legally obligated, 

or would be legally obligated, under the 

terms of a credit card agreement. The 

Board also proposed to add new 

comment 58(b)(4)–1 to provide an 

example of how the definition of card 

issuer would apply. 

One commenter objected to the 

addition of the definition of card issuer. 

This commenter stated that, given the 

complex nature of the relationships 

between institutions that partner to 

issue credit cards, the Board should not 

mandate which institution must make 

quarterly submissions to the Board or 

post agreements on its Web site under 

§ 226.58. This commenter also argued 

that the Board should not adopt the 

proposed definition unless the Board is 

aware of actual confusion regarding the 

allocation of responsibilities under 

§ 226.58. 


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The Board continues to believe that it 

is appropriate to adopt the definition of 

card issuer as proposed. It is precisely 

because of the complex nature of 

relationships between institutions that 

partner to issue credit cards that the 

Board believes it is beneficial to adopt 

the proposed definition. The Board 

understands that these relationships can 

vary, for example, with respect to which 

institution uses its name and brand in 

marketing materials, develops and 

implements underwriting criteria, sets 

interest rates and other terms, approves 

applications, provides monthly 

statements and other disclosures to 

consumers, collects payments, and 

absorbs the risk of default or fraud. 

Without a bright-line rule defining 

which institution is the issuer, 

institutions may find it difficult to 

determine their obligations under 

§ 226.58. Indeed, the Board understands 

that there is significant uncertainty 

regarding the application of § 226.58 

where institutions partner to issue 

credit cards. For example: 

• The de minimis exception in 

§ 226.58(c)(5) provides that an issuer is 

not required to submit agreements to the 

Board under § 226.58(c)(1) if the issuer 

has fewer than 10,000 open credit card 

accounts as of the last business day of 

the calendar quarter. If two institutions 

are involved in issuing a credit card, 

one institution may have fewer than 

10,000 open accounts while the other 

has more than 10,000 open accounts. It 

may be difficult to determine whether 

the de minimis exception applies in 

such a case. 

• Section 226.58(d) requires an issuer 

to post and maintain on its publicly 

available Web site the credit card 

agreements the issuer is required to 

submit to the Board. Where two 

institutions are involved in issuing a 

credit card, it may be unclear which 

institution should post and maintain the 

agreements on its Web site. 

• Similarly, § 226.58(e)(2) provides 

that an issuer that does not maintain an 

interactive Web site is permitted to 

allow individual cardholders to request 

copies of their agreements solely by 

calling a readily available telephone 

line, rather than both by using the 

issuer’s Web site and by calling a 

readily available telephone line. If two 

institutions are involved in issuing a 

credit card, one institution may 

maintain a Web site from which 

cardholders can access specific 

information about their accounts while 

the other does not. In such cases, it may 

be difficult to determine whether the 

§ 226.58(e)(2) special rule applies. 

The Board is adopting the 

§ 226.58(b)(4) definition of card issuer 

and comment 58(b)(4)–1 as proposed. 

The definition would apply solely with 

respect to § 226.58 and would not 

change the definition of card issuer for 

purposes of other provisions of 

Regulation Z. Also as proposed, the 

Board is renumbering § 226.58(b)(4), 

(b)(5), (b)(6), and (b)(7) as § 226.58(b)(5), 

(b)(6), (b)(7), and (b)(8), respectively, 

and is making conforming changes to 

references to these subsections. 

Based on its review of the comments 

and further analysis, the final rule also 

includes new comments 58(b)(4)–2 and 

58(b)(4)–3, which provide additional 

clarification regarding the application of 

§ 226.58 to institutions that partner to 

issue credit cards. Comment 58(b)(4)–2 

provides that an institution that is the 

card issuer as defined in § 226.58(b)(4) 

has a legal obligation to comply with the 

requirements of § 226.58. However, the 

comment clarifies that a card issuer 

generally may use a third-party service 

provider to satisfy its obligations under 

§ 226.58, provided that the issuer acts in 

accordance with regulatory guidance 

regarding use of third-party service 

providers and other applicable 

regulatory guidance. In some cases, an 

issuer may wish to arrange for the 

institution with which it partners to 

issue credit cards to fulfill the 

requirements of § 226.58 on the issuer’s 

behalf. 

For example, a retailer and a bank 

work together to issue credit cards. 

Under § 226.58(b)(4), the bank is the 

issuer of these credit cards for purposes 

of § 226.58. However, the retailer 

services the credit card accounts, 

including mailing account opening 

materials and periodic statements to 

cardholders. While the bank is 

responsible for ensuring compliance 

with § 226.58, the bank may arrange for 

the retailer (or another appropriate 

third-party service provider) to submit 

credit card agreements to the Board 

under § 226.58 on the bank’s behalf. The 

bank must comply with regulatory 

guidance regarding use of third-party 

service providers and other applicable 

regulatory guidance. 

Comment 58(b)(4)–3 provides 

additional information regarding the 

posting of agreements on issuer Web 

sites when institutions partner to issue 

credit cards. As explained in comments 

58(d)–2 and 58(e)–3, discussed below, if 

an issuer provides cardholders with 

access to specific information about 

their individual accounts, such as 

balance information or copies of 

statements, through a third-party Web 

site, the issuer is deemed to maintain 

that Web site for purposes of § 226.58. 

Such a Web site is deemed to be 

maintained by the issuer for purposes of 

§ 226.58 even where, for example, an 

unaffiliated entity designs the Web site 

and owns and maintains the 

information technology infrastructure 

that supports the Web site, cardholders 

with credit cards from multiple issuers 

can access individual account 

information through the same Web site, 

and the Web site is not labeled, 

branded, or otherwise held out to the 

public as belonging to the issuer. A 

partner institution’s Web site is an 

example of a third-party Web site that 

may be deemed to be maintained by the 

issuer for purposes of § 226.58. 

For example, a retailer and a bank 

work together to issue credit cards. 

Under § 226.58(b)(4), the bank is the 

issuer of these credit cards for purposes 

of § 226.58. The bank does not have a 

Web site. However, cardholders can 

access information about their 

individual accounts, such as balance 

information and copies of statements, 

through a Web site maintained by the 

retailer. The retailer designs the Web 

site and owns and maintains the 

information technology infrastructure 

that supports the Web site. The Web site 

is branded and held out to the public as 

belonging to the retailer. Because 

cardholders can access information 

about their individual accounts through 

this Web site, the Web site is deemed to 

be maintained by the bank for purposes 

of § 226.58. The bank therefore may 

comply with § 226.58(d) by ensuring 

that agreements offered to the public are 

posted on the retailer’s Web site in 

accordance with § 226.58(d). The bank 

may comply with § 226.58(e) by 

ensuring that cardholders can request 

copies of their individual agreements 

through the retailer’s Web site in 

accordance with § 226.58(e)(1). The 

bank need not create and maintain a 

Web site branded and held out to the 

public as belonging to the bank in order 

to comply with § 226.58(d) and (e) as 

long as the bank ensures that the 

retailer’s Web site complies with these 

sections. 

Comment 58(b)(4)–3 also notes that 

§ 226.58(d)(1) provides that, with 

respect to an agreement offered solely 

for accounts under one or more private 

label credit card plans, an issuer may 

comply with § 226.58(d) by posting the 

agreement on the publicly available 

Web site of at least one of the merchants 

at which credit cards issued under each 

private label credit card plan with 

10,000 or more open accounts may be 

used. The comment clarifies that this 

rule is not conditioned on cardholders’ 

ability to access account-specific 

information through the merchant’s 

Web site. 


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58(b)(6) Pricing Information 

The Board proposed to amend the 

§ 226.58(b)(6) definition of ‘‘pricing 

information’’ to omit the information 

listed in § 226.6(b)(4). The Board 

solicited comment on whether the 

definition of pricing information should 

continue to include some or all of the 

additional disclosure regarding rates 

specified in § 226.6(b)(4), or whether the 

Board should omit this disclosure from 

the definition. Commenters generally 

supported this revision, which is 

adopted as proposed. 

58(c) Submission of Agreements to 

Board 

58(c)(1) Quarterly Submissions 

Quarterly Submission Deadlines. The 

Board proposed to amend § 226.58(c)(1) 

to state that quarterly submissions must 

be sent to the Board no later than the 

first business day on or after January 31, 

April 30, July 31, and October 31 of 

each year. These quarterly submission 

deadlines were inadvertently omitted 

from the February 2010 Final Rule. The 

Board received no comments objecting 

to this change and is adopting the 

amendment to § 226.58(c)(1) as 

proposed. 

Submission of Amended Agreements. 

The Board proposed to revise 

§ 226.58(c)(1)(iii) to clarify that an issuer 

is required to submit an amended 

agreement to the Board only if the issuer 

offered the amended agreement to the 

public as of the last business day of the 

preceding calendar quarter. Amended 

agreements that the issuer no longer 

offered to the public as of the last 

business day of the preceding calendar 

quarter are not required to be submitted 

to the Board. 

The Board received no comments 

objecting to this change and is adopting 

the proposed revision to 

§ 226.58(c)(1)(iii). The Board also is 

adopting the corresponding revisions to 

§ 226.58(c)(3), as discussed below. 

Notice of Withdrawal of Agreements. 

The Board proposed to amend 

§ 226.58(c)(1)(iv) to include cross 

references to § 226.58(c)(6) and (c)(7), in 

addition to § 226.58(c)(4) and (c)(5). 

These cross references were 

unintentionally omitted from the 

February 2010 Final Rule. The Board 

received no comments objecting to this 

change and is adopting the amendment 

to § 226.58(c)(1)(iv) as proposed. 

58(c)(2) Timing of First Two 

Submissions 

The Board proposed to delete the 

special rules in § 226.58(c)(2) for the 

initial and second submissions to the 

Board and to reserve § 226.58(c)(2). 

Section 226.58(c)(2) provided special 

rules for the timing and contents of 

submissions required to be sent to the 

Board by February 22, 2010, and August 

2, 2010. Because the February 22, 2010, 

and August 2, 2010, deadlines have 

passed, § 226.58(c)(2) has no 

prospective relevance. The Board 

received no comments objecting to this 

change. As proposed, the special rules 

are deleted and § 226.58(c)(2) is 

reserved. 

58(c)(3) Amended Agreements 

The Board proposed to amend 

§ 226.58(c)(3) to clarify that an issuer is 

required to submit an amended 

agreement to the Board only if the issuer 

offered the amended agreement to the 

public as of the last business day of the 

preceding calendar quarter. Amended 

agreements that the issuer no longer 

offered to the public as of the last 

business day of the calendar quarter 

should not be submitted to the Board. 

The Board also proposed to revise 

comment 58(c)(3)–2 to reflect this 

clarification and to add new comment 

58(c)(3)–3, which provides an example 

of the application of revised 

§ 226.58(c)(3). The Board also proposed 

to renumber existing comment 58(c)(3)– 

3, regarding change-in-terms notices, as 

58(c)(3)–4. The Board received no 

comments objecting to these changes 

and is adopting them as proposed. 

58(c)(8) Form and Content of 

Agreements Submitted to the Board 

The Board proposed to revise 

§ 226.58(c)(8)(i)(C)(1) to clarify that 

billing rights notices are not deemed to 

be part of the agreement for purposes of 

§ 226.58 and therefore are not required 

to be included in agreements submitted 

to the Board. As the Board noted in its 

proposal, § 226.58(c)(8)(i)(C)(1) is not 

intended to provide an exhaustive list of 

the State and Federal law disclosures 

that are not deemed to be part of an 

agreement under § 226.58. As indicated 

by the use of the phrase ‘‘such as,’’ the 

listed disclosures are merely examples 

of ‘‘disclosures required by state or 

federal law.’’ The Board does not believe 

it is feasible to include in 

§ 226.58(c)(8)(i)(C)(1) a comprehensive 

list of all such disclosures, as such a list 

would be extensive and would change 

as State and Federal laws and 

regulations are amended. However, 

because billing rights notices appear to 

be a specific source of confusion for 

card issuers and others, the Board 

proposed to address their treatment by 

amending § 226.58(c)(8)(i)(C)(1). 

Two commenters expressed their 

support for this change. No commenters 

objected. The Board is adopting the 

revision to § 226.58(c)(8)(i)(C)(1) as 

proposed. 

Section 226.58(c)(8)(ii)(A) states that 

pricing information must be set forth in 

a single addendum that contains only 

the pricing information. The Board did 

not propose any changes to 

§ 226.58(c)(8)(ii)(A). However, one 

commenter asked the Board to allow 

creditors submitting agreements to the 

Board to include additional disclosures 

in the addendum. The commenter stated 

that some creditors use complex 

automated systems to prepare the 

addenda that are submitted to the 

Board. Removing information that is not 

required therefore may impose 

burdensome programming costs on 

some issuers. 

Section 226.58(c)(8)(i)(C) specifies 

that certain items, such as disclosures 

required by State or Federal law, are not 

deemed to be part of an agreement for 

purposes of § 226.58 and therefore are 

not required to be included in 

submissions to the Board. The Board 

notes, however, that issuers are not 

prohibited by this or any other 

provision of § 226.58 from including 

these items in submitted agreements if 

an issuer chooses to do so. The Board 

believes it is appropriate to provide 

similar flexibility with respect to 

information included in the pricing 

information addendum under 

§ 226.58(c)(8)(ii) and therefore is 

amending this section. 

As amended, § 226.58(c)(8)(ii)(A) 

continues to provide that pricing 

information must be set forth in a single 

addendum to the agreement. However, 

under amended § 226.58(c)(8)(ii)(A), 

issuers are permitted, but not required, 

to include in this addendum any other 

information listed in § 226.6(b) 

regarding account-opening disclosures 

for open-end (not home-secured) plans, 

provided that the information is 

complete and accurate as of the 

applicable date under § 226.58. 

The Board continues to believe that 

certain information listed in § 226.6(b) 

is unlikely to substantially assist 

consumers in shopping for a credit card, 

and therefore should not be required in 

agreements submitted to the Board 

under § 226.58. For example, the Board 

continues to believe that the Web site 

reference and billing error rights 

reference required to be included in 

account-opening disclosures by 

§§ 226.6(b)(2)(xiv) and (b)(2)(xv) are not 

useful bases for comparison shopping 

because they do not vary, and therefore 

are not necessary in agreements 

submitted to the Board under § 226.58. 

However, it appears that amending 

§ 226.58(c)(8)(ii)(A) to permit the 

inclusion of other information listed in 


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26The proposal would have renumbered existing 

comments 59(a)(1)–3 and 59(a)(1)–4 accordingly. 

§ 226.6(b) will reduce the compliance 

burden for some issuers without 

undermining the usefulness of the 

agreements provided pursuant to 

§ 226.58. 

58(d) Posting of Agreements Offered to 

the Public 

Section 226.58(d) requires card 

issuers to post and maintain on their 

publicly available Web site the credit 

card agreements that the issuer submits 

to the Board under § 226.58(c). As 

discussed above, the Board understands 

that there has been some confusion 

regarding the application of § 226.58 

where institutions partner to issue 

credit cards. In order to provide 

additional information regarding the 

application of § 226.58 to these 

relationships, the Board is adopting new 

§ 226.58(b)(4), defining card issuer for 

purposes of § 226.58, and new 

comments 58(b)(4)–1, 58(b)(4)–2, and 

58(b)(4)–3, discussed above. The Board 

also is revising comment 58(e)–3 to 

clarify the application of § 226.58(e) to 

institutions that provide cardholders 

with access to account-specific 

information through Web sites 

maintained by third parties, as 

discussed below. Because the Board 

believes it also would be beneficial to 

provide similar clarification regarding 

§ 226.58(d), the final rule includes 

corresponding revisions to comment 

58(d)–2. 

Comment 58(d)–2 explains that, 

unlike § 226.58(e), § 226.58(d) does not 

include a special rule for card issuers 

that do not otherwise maintain a Web 

site. If a card issuer is required to 

submit one or more agreements to the 

Board under § 226.58(c), that card issuer 

must post those agreements on a 

publicly available Web site it maintains 

(or, with respect to a private label credit 

card, on the publicly available Web site 

of at least one of the merchants at which 

the card may be used, as provided in 

§ 226.58(d)(1)). As revised, comment 

58(d)–2 clarifies that if an issuer 

provides cardholders with access to 

specific information about their 

individual accounts, such as balance 

information or copies of statements, 

through a third-party Web site, the 

issuer is deemed to maintain that Web 

site for purposes of § 226.58. Such a 

Web site is deemed to be maintained by 

the issuer for purposes of § 226.58 even 

where, for example, an unaffiliated 

entity designs the Web site and owns 

and maintains the information 

technology infrastructure that supports 

the Web site, cardholders with credit 

cards from multiple issuers can access 

individual account information through 

the same Web site, and the Web site is 

not labeled, branded, or otherwise held 

out to the public as belonging to the 

issuer. Therefore, issuers that provide 

cardholders with access to accountspecific information through a thirdparty Web site can comply with 

§ 226.58(d) by ensuring that the 

agreements the issuer submits to the 

Board are posted on the third-party Web 

site in accordance with § 226.58(d). To 

avoid potential confusion, revised 

comment 58(d)–2 also notes that, in 

contrast, the § 226.58(d)(1) rule 

regarding agreements for private label 

credit cards is not conditioned on 

cardholders’ ability to access accountspecific information through the 

merchant’s Web site. 

58(e) Agreements for All Open Accounts 

58(e)(2) Special Rule for Issuers Without 

Interactive Web Sites 

The Board proposed to revise 

comment 58(e)–3 to clarify the 

application of § 226.58(e)(2) to issuers 

that provide online access to individual 

account information through third-party 

interactive Web sites. Section 

226.58(e)(2) provides that an issuer that 

does not maintain an interactive Web 

site (i.e., a Web site from which a 

cardholder can access specific 

information about his or her individual 

account) may provide cardholders with 

the ability to request a copy of their 

agreements by calling a readily available 

telephone line, the number for which is: 

(1) Displayed on the issuer’s Web site 

and clearly identified as to purpose; or 

(2) included on each periodic statement 

sent to the cardholder and clearly 

identified as to purpose. 

The Board understands that some 

issuers provide cardholders with access 

to specific information about their 

individual accounts, such as balance 

information or copies of statements, 

through a third-party interactive Web 

site. As revised, comment 58(e)–3 

clarifies that, in these circumstances, an 

issuer is considered to maintain an 

interactive Web site for purposes of the 

§ 226.58(e)(2) special rule. Such a Web 

site is deemed to be maintained by the 

issuer for purposes of § 226.58(e)(2) 

even where, for example, an unaffiliated 

entity designs the Web site and owns 

and maintains the information 

technology infrastructure that supports 

the Web site, cardholders with credit 

cards from multiple issuers can access 

individual account information through 

the same Web site, and the Web site is 

not labeled, branded, or otherwise held 

out to the public as belonging to the 

issuer. An issuer that provides 

cardholders with access to specific 

information about their individual 

accounts through such a Web site is not 

permitted to use the procedures 

described in the § 226.58(e)(2) special 

rule. Instead, such an issuer must 

comply with § 226.58(e)(1). 

The Board did not receive any 

comments objecting to the proposed 

revision of comment 58(e)–3. The 

comment is revised as proposed. 

Section 226.59 Reevaluation of Rate 

Increases 

59(a) General Rule 

Section 226.59 implements TILA 

Section 148, which was added by the 

Credit Card Act. TILA Section 148, as 

implemented in § 226.59(a), generally 

requires card issuers that increase an 

annual percentage rate applicable to a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan, based on the credit risk of the 

consumer, market conditions, or other 

factors, to evaluate factors described in 

the rule no less frequently than once 

every six months and, as appropriate 

based upon that review, reduce the 

annual percentage rate applicable to the 

consumer’s account. Consistent with 

TILA Section 148, § 226.59 generally 

applies to rate increases made on or 

after January 1, 2009. 

Since publication of the June 2010 

Final Rule, several issuers requested 

additional clarification regarding what 

constitutes a rate increase for purposes 

of § 226.59. In particular, issuers 

requested additional guidance regarding 

the circumstances in which a change in 

the type of rate—for example, from a 

non-variable rate to a variable rate—is 

considered to be a rate increase 

triggering review obligations under 

§ 226.59. 

The Board proposed new comment 

59(a)(1)–3 to clarify the applicability of 

the rate reevaluation requirements when 

a card issuer changes the type of rate 

applicable to a credit card account 

under an open-end (not home-secured) 

consumer credit plan.26 Proposed 

comment 59(a)(1)–3.i provided that a 

change from a variable rate to a nonvariable rate or from a non-variable rate 

to a variable rate generally is not a rate 

increase for purposes of § 226.59, if the 

rate in effect immediately prior to the 

change in the type of rate is equal to or 

greater than to the rate in effect 

immediately after the change. The 

proposed comment stated that, for 

example, a change from a variable rate 

of 15.99% to a non-variable rate of 

15.99% is not a rate increase for 

purposes of § 226.59 at the time of the 

change. Proposed comment 59(a)(1)–3.i 


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22990 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

also cross-referenced § 226.55 for 

limitations on the permissibility of 

changing from a non-variable rate to a 

variable rate. 

Proposed comment 59(a)(1)–3.ii set 

forth special guidance regarding a 

change from a non-variable to a variable 

rate. Proposed comment 59(a)(1)–3.ii 

stated that a change from a non-variable 

to a variable rate constitutes a rate 

increase for purposes of § 226.59 if the 

variable rate exceeds the non-variable 

rate that would have applied if the 

change in type of rate had not occurred. 

The proposed comment illustrated the 

applicability of § 226.59 to a change 

from a non-variable to a variable rate 

with the following example: assume a 

new credit card account under an openend (not home-secured) consumer credit 

plan is opened on January 1 of year 1 

and that a non-variable annual 

percentage rate of 12% applies to all 

transactions on the account. On January 

1 of year 2, upon 45 days’ advance 

notice pursuant to § 226.9(c)(2), the rate 

on all new transactions is changed to a 

variable rate that is currently 12% and 

is determined by adding a margin of 10 

percentage points to a publicly-available 

index not under the card issuer’s 

control. The change from the 12% nonvariable rate to the 12% variable rate is 

not a rate increase for purposes of 

§ 226.59(a). On April 1 of year 2, the 

value of the variable rate increases to 

12.5%. The increase in the variable rate 

from 12% to 12.5% is a rate increase for 

purposes of § 226.59, and the card issuer 

must begin periodically conducting 

reviews of the account pursuant to 

§ 226.59. 

Similarly, proposed comment 

59(a)(1)–3.iii stated that a change from 

a variable to a non-variable rate 

constitutes a rate increase for purposes 

of § 226.59 if the non-variable rate 

exceeds the variable rate that would 

have applied if the change in the type 

of rate had not occurred. The proposed 

comment set forth the following 

illustrative example: assume a new 

credit card account under an open-end 

(not home-secured) consumer credit 

plan is opened on January 1 of year 1 

and that a variable annual percentage 

rate that is currently 15% and is 

determined by adding a margin of 10 

percentage points to a publicly-available 

index not under the card issuer’s control 

applies to all transactions on the 

account. On January 1 of year 2, upon 

45 days’ advance notice pursuant to 

§ 226.9(c)(2), the rate on all existing 

balances and new transactions is 

changed to a non-variable rate that is 

currently 15%. The change from the 

15% variable rate to the 15% nonvariable rate on January 1 of year 2 is 

not a rate increase for purposes of 

§ 226.59(a). On April 1 of year 2, the 

value of the variable rate that would 

have applied to the account decreases to 

12.5%. Accordingly, on April 1 of year 

2, the non-variable rate of 15% exceeds 

the 12.5% variable rate that would have 

applied but for the change in type of 

rate. At this time, the change to the nonvariable rate of 15% constitutes a rate 

increase for purposes of § 226.59, and 

the card issuer must begin periodically 

conducting reviews of the account 

pursuant to § 226.59. 

One credit union trade association 

supported proposed comment 59(a)(1)– 

3. Other industry commenters generally 

supported the portion of the proposal 

that clarified that a change to the type 

of rate is not a rate increase for purposes 

of § 226.59 if the rate following the 

change is equal or less than to the rate 

prior to the change. However, industry 

commenters opposed the proposed 

commentary to § 226.59(a) that provided 

that such a change in type of rate does 

constitute a rate increase for purposes of 

§ 226.59 at the point in time when the 

rate that applies (whether variable or 

non-variable) exceeds the rate that 

would have applied if the change in the 

type of rate had not occurred. Several of 

these commenters argued that 

reevaluation of a rate increase due to a 

change in a predisclosed index that is 

beyond the control of the issuer is not 

necessary and that TILA Section 148 

was not intended to cover rate increases 

where the change is due to an increase 

in an index beyond the issuer’s control. 

These commenters urged the Board to 

modify the proposal to provide that 

issuers must conduct a rate reevaluation 

under § 226.59 only if the rate that 

applies immediately after the change in 

type of rate exceeds the rate that applied 

prior to the change. One commenter 

raised particular concerns regarding 

portfolio-wide changes to variable rate 

structures, such as the removal of rate 

floors or conversions from non-variable 

to variable rates, that were implemented 

in order to facilitate compliance with 

the Credit Card Act. 

Consumer group commenters, on the 

other hand, opposed the portion of 

proposed comment 59(a)(1)–3 that 

would provide that a change in type of 

rate is not an increase when, at the time 

of the change, the result is an equal or 

lower rate. These commenters expressed 

particular concern regarding changes 

from non-variable to variable rates and 

urged the Board to treat the change in 

type of rate as triggering review 

requirements under § 226.59, in all 

cases, at the time of the change. 

Consumer groups were particularly 

concerned that, as proposed, comment 

59(a)(1)–3 could permit an issuer to 

review only the increase in the index 

used to compute the variable rate, and 

would not require consideration of the 

margin selected for determination of the 

new variable rate at the time of the 

change. These commenters raised an 

example of a consumer’s rate being 

changed from a non-variable rate of 15% 

to a rate determined by adding a margin 

of 10% to a prime rate. As proposed, 

these commenters were concerned that 

§ 226.59 and comment 59(a)(1)–3 would 

not require the issuer to review the 

decision to impose a margin of 10% on 

the consumer’s account. 

The Board is generally adopting 

comment 59(a)(1)–3 as proposed. The 

Board believes, as stated in the 

supplementary information to the June 

2010 Final Rule, that the rate 

reevaluation requirements of TILA 

Section 148 as implemented in § 226.59 

should not apply to an increase in a 

variable rate due to fluctuations in the 

index on which that rate is based. See 

75 FR 37549. Accordingly, the Board 

used its authority under TILA Section 

105(a) to provide that § 226.59(a) 

applies only to those rate increases for 

which 45 days’ advance notice is 

required under § 226.9(c)(2) or (g). For 

example, if a card issuer discloses at 

account-opening a variable rate 

applicable to purchases, currently 

15.99%, that will vary based on an 

index outside the issuer’s control, there 

is no review requirement when that 

variable rate increases to 16.99% due to 

fluctuations in the index. However, the 

Board believes that it would be 

inconsistent with the intent of TILA 

Section 148 to create an exception to the 

review requirements of § 226.59 in the 

circumstances where the rate increase 

would not have occurred but for the 

issuer changing the type of rate. In those 

circumstances, from the consumer’s 

perspective, the change in type of rate 

resulted in a rate increase relative to the 

rate that would otherwise have applied 

to the account. 

For example, assume that a consumer 

opens an account on January 1 of year 

one where the disclosed rate applicable 

to purchases is a non-variable rate of 

12%. On June 1 of year 2, after 

providing 45 days’ advance notice 

pursuant to § 226.9(c)(2), the issuer 

changes the rate applicable to the 

consumer’s new purchases to a variable 

rate that is currently 12%. On 

September 1 of year 2, the variable rate 

increases to 12.99% due to fluctuations 

in an index outside of the control of the 

issuer. Given that the rate now exceeds 

the 12% rate disclosed to the consumer 

at account opening, the Board believes 

that a rate increase has occurred and 


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that it would be inappropriate to except 

this rate increase from § 226.59. The 

Board believes that it would be 

reasonable for a consumer in this 

situation to expect that purchases would 

continue to be subject to a 12% nonvariable rate and that, accordingly, the 

subsequent increase in the rate to 

12.99%, based on fluctuations in the 

value of the index, constitutes a rate 

increase from the perspective of that 

consumer. The Board believes that this 

situation is distinguishable from the 

situation where a consumer opens an 

account that is subject to a variable rate 

and, thus, is on notice from the time of 

account opening that the rate is subject 

to change in accordance with the 

relevant index. 

As discussed in the proposal, the 

Board notes that in several other 

contexts, Regulation Z treats a change in 

a type of rate as equivalent to a rate 

increase. For example, comments 

9(c)(2)(iv)–3 and 9(c)(2)(iv)–4 clarify 

that 45 days’ advance notice is generally 

required under § 226.9(c)(2) when the 

annual percentage rate on an open-end 

(not home-secured) consumer credit 

plan is changed from a variable to a 

non-variable rate or from a non-variable 

to a variable rate. In addition, comment 

55(b)(2)–4 treats changing a nonvariable rate to a variable rate as 

equivalent to a rate increase for 

purposes of § 226.55. 

The Board believes that this 

clarification regarding changes in types 

of rates is appropriate to effectuate the 

purposes of TILA Section 148. As 

discussed in the supplementary 

information to its final rule published 

on January 29, 2009, a change from one 

type of rate to another (e.g., variable or 

non-variable) may, over time, result in 

the new rate being higher than the rate 

that would have applied but for the 

change, even if at the time of the change 

the prior rate exceeded the new rate. See 

74 FR 5345. For this reason, as 

discussed above, comments 9(c)(2)(iv)– 

3 and 9(c)(2)(iv)–4 clarify that 45 days’ 

advance notice is generally required 

under § 226.9(c)(2) when the annual 

percentage rate on an open-end (not 

home-secured) consumer credit plan is 

changed from a variable to a nonvariable rate or from a non-variable to a 

variable rate. The Board believes that 

consistent treatment is generally 

appropriate under § 226.59, because a 

change in type of rate may, over time, 

result in a rate increase on a consumer’s 

account; however, the Board is applying 

the review requirement under § 226.59 

only if and when the new rate exceeds 

the rate that would have applied if the 

change in type of rate had not occurred. 

For example, a consumer who has an 

existing account with a non-variable 

rate may have an expectation that the 

rate generally will not change. However, 

if the issuer changes the non-variable 

rate to a variable rate, an increase in the 

index value may result in the rate 

applicable to the consumer’s account 

increasing, and exceeding the nonvariable rate that previously applied. 

Accordingly, the Board believes that in 

such circumstances a rate increase has 

occurred and must be reviewed under 

§ 226.59. 

The Board notes that the removal of 

variable rate floors would not, by itself, 

give rise to review requirements 

pursuant to § 226.59. The removal of a 

variable rate floor, in the absence of 

other changes, can only result in a 

reduction in the annual percentage rate 

imposed on a consumer’s account. See 

75 FR 37550. However, to the extent 

that an issuer concurrently removed the 

floor applicable to a consumer’s account 

and increased the margin at the same 

time, the Board believes that the change 

should be subject to the review 

requirements of § 226.59, if the rate 

following the change exceeds the rate in 

effect prior to the change. 

In addition, industry commenters 

indicated that developing and 

maintaining a system to track rate 

increases that are tied to an index over 

time would be burdensome. These 

commenters noted that because index 

values may continue to rise and fall over 

a period of months or years, the 

proposal would in effect require issuers 

to track the new rate and rate in effect 

prior to the change in type of rate 

indefinitely. Several commenters 

requested that the final rule permit an 

issuer to cease reviewing the change in 

the index after a single review. The 

Board is aware that new comment 

59(a)(1)–3 does impose an ongoing 

review requirement; however, the Board 

believes that this is consistent with the 

intent of TILA Section 148. In the June 

2010 Final Rule, the Board expressly 

declined to adopt a specific time limit 

for the review obligation under § 226.59. 

See 75 FR 37559. The Board noted that 

TILA Section 148 does not expressly 

create such a time limit. The Board 

continues to believe that many issuers 

will implement automated systems to 

perform the periodic reevaluation of rate 

increases and, accordingly, once these 

systems are in place, there should not be 

undue burden associated with the 

ongoing review of accounts subject to 

§ 226.59. 

The Board has modified comments 

59(a)(1)–3.ii and 59(a)(1)–3.iii from the 

proposal to address consumer groups’ 

concerns that, as proposed, § 226.59 

would require only that the issuer 

review changes in the index on which 

a variable rate is based rather than the 

margin applicable to the consumer’s 

account, when the rate increase results 

from a change in type of rate. As 

adopted, the examples in comments 

59(a)(1)–3.ii and 59(a)(1)–3.iii clarify 

that the relevant rate increase for 

purposes of the reevaluation under 

§ 226.59 is the increase from the rate 

(variable or non-variable) that would 

have applied if the change in type of 

rate had not occurred to the rate 

(variable or non-variable) that applies 

after the rate increase. For example, 

assume the consumer’s account was 

subject to a non-variable rate of 8% 

prior to the change and was converted 

to a variable rate (index plus margin) 

that was also 8% on the effective date 

of the change. After six months, the 

consumer’s rate increases—based on an 

increase in the index value—to a 

variable rate of 10%. The increase that 

must be evaluated for purposes of 

§ 226.59 is the increase from the nonvariable rate of 8% to a variable rate of 

10%. In other words, the issuer may not 

review just the increase in the index 

value, i.e., the change from a variable 

rate of 8% to a variable rate of 10%, but 

must also review the original rate 

conversion. 

Several industry commenters 

indicated that it was unclear how an 

issuer must conduct the review required 

by § 226.59, for rate increases resulting 

from a change in type of rate, and urged 

the Board to clarify that § 226.59 does 

not require issuers to revert to the type 

of rate that applied to the account prior 

to the change. For example, if an issuer 

converted an account from a nonvariable rate to a variable rate, these 

commenters urged the Board to provide 

that § 226.59 should under no 

circumstances require the issuer to 

convert the account back to a nonvariable rate. The Board agrees that 

§ 226.59 is not intended to dictate the 

type of rate that an issuer must apply to 

a consumer’s account. Accordingly, the 

Board is renumbering existing comment 

59(a)(1)–5 as comment 59(a)(1)–5.i and 

adopting a new comment 59(a)(1)–5.ii 

which would provide that if a rate 

increase subject to § 226.59 involves a 

change from a variable rate to a nonvariable rate or from a non-variable rate 

to a variable rate, § 226.59 does not 

require that the issuer reinstate the same 

type of rate that applied prior to the 

change. However, the comment would 

explain that the amount of any rate 

decrease that is required must be 

determined based upon the card issuer’s 

reasonable policies and procedures 


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22992 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

under § 226.59(b) for consideration of 

factors described in § 226.59(a) and (d). 

59(d) Factors 

Section 226.59(d) sets forth guidance 

regarding the factors that an issuer must 

consider when conducting reviews of a 

rate increase pursuant to § 226.59. 

Section 226.59(d)(1) sets forth the 

general rule and states that, except as 

provided in § 226.59(d)(2) (which is 

discussed below), a card issuer must 

review either: (1) the factors on which 

the increase in an annual percentage 

rate was originally based; or (2) the 

factors that the card issuer currently 

considers when determining the annual 

percentage rates applicable to similar 

new credit card accounts. Section 

226.59(d)(2) sets forth a special rule for 

certain rate increases imposed between 

January 1, 2009 and February 21, 2010. 

Section 226.59(d)(2) provides that, 

when conducting the first two reviews 

required under § 226.59(a) for rate 

increases imposed between January 1, 

2009 and February 21, 2010, an issuer 

must consider the factors that it 

currently considers when determining 

the annual percentage rates applicable 

to similar new credit card accounts, 

unless the rate increase was based solely 

upon factors specific to the consumer, 

such as a decline in the consumer’s 

credit risk, the consumer’s delinquency 

or default, or a violation of the terms of 

the account. 

As discussed in the supplementary 

information to the June 2010 Final Rule, 

§ 226.59(d)(2) was adopted to address 

the Board’s concerns regarding 

portfolio-wide rate increases made 

following the enactment of the Credit 

Card Act but prior to the effective date 

of many of the substantive protections 

contained in the statute. Some rate 

increases that occurred prior to 

February 22, 2010 resulted from 

adjustments in issuers’ pricing practices 

to take into account the limitations that 

the Credit Card Act imposed on rate 

increases on existing balances. The 

Board was concerned that permitting 

card issuers to review the factors on 

which the rate increase was based may 

not result in a meaningful review in 

these circumstances, because the legal 

restrictions imposed by the Credit Card 

Act have continuing application. In 

other words, if a card issuer were to 

consider the factors on which the rate 

increase was based—i.e., the enactment 

of the Credit Card Act’s legal restrictions 

regarding rate increases—it might 

determine that a rate decrease is not 

required. 

Accordingly, the Board adopted 

§ 226.59(d)(2) to require card issuers to 

consider, for a brief transition period, 

the factors that they use when setting 

the rates applicable to similar new 

accounts for rate increases imposed 

prior to February 22, 2010, if the rate 

increase was not based on consumerspecific factors. For the reasons 

discussed in the supplementary 

information to the June 2010 Final Rule, 

the requirement to consider the factors 

that an issuer evaluates when setting the 

rates applicable to similar new accounts 

applies only during the first two review 

periods following the effective date of 

§ 226.59 and only for rate increases 

imposed between January 1, 2009 and 

February 21, 2010. 

For rate increases based solely on 

consumer behavior or other consumerspecific factors, § 226.59(d) does not 

distinguish between rate increases 

imposed prior to or after February 22, 

2010. Accordingly, for such rate 

increases an issuer may consider either 

the factors on which the increase in an 

annual percentage rate was originally 

based or the factors that the card issuer 

currently considers when determining 

the annual percentage rates applicable 

to similar new credit card accounts. 

Consumer-specific factors, such as a 

consumer’s credit score or payment 

history on the account, can and do 

change over time. Accordingly, the 

Board noted in the supplementary 

information to the June 2010 Final Rule 

that it believes consideration of the 

consumer-specific factors that an issuer 

considered when imposing the rate 

increase would result in a meaningful 

review and, where appropriate, rate 

decreases, for rate increases imposed 

between January 1, 2009 and February 

21, 2010. 

As discussed in the supplementary 

information to the November 2010 

Proposed Rule, the Board understands 

that some confusion has arisen 

regarding compliance with the special 

rule set forth in § 226.59(d)(2) in the 

case where two rate increases occurred 

between January 1, 2009 and February 

21, 2010, one of which was based on 

conditions that are not specific to the 

consumer and one of which was based 

on consumer-specific behavior. The 

Board understands that there is 

particular concern regarding the 

application of the rule if the issuer made 

a market-based rate increase and 

subsequently increased the rate to a 

penalty rate, due to a late payment or 

other consumer behavior that violates 

the terms of the account. The Board 

proposed a new comment 59(d)–6 to 

clarify the application of the rule in 

these circumstances. Proposed comment 

59(d)–6 noted that § 226.59(d)(2) applies 

if an issuer increased the rate applicable 

to a credit card account under an openend (not home-secured) consumer credit 

plan between January 1, 2009 and 

February 21, 2010, and the increase was 

not based solely upon factors specific to 

the consumer. The proposed comment 

further noted that in some cases, a credit 

card account may have been subject to 

multiple rate increases during the 

period from January 1, 2009 to February 

21, 2010. Some such rate increases may 

have been based solely upon factors 

specific to the consumer, while others 

may have been based on factors not 

specific to the consumer, such as the 

issuer’s cost of funds or market 

conditions. The proposed comment 

clarified that in such circumstances, 

when conducting the first two reviews 

required under § 226.59, the card issuer 

may separately review: (A) rate 

increases imposed based on factors not 

specific to the consumer, using the 

factors described in § 226.59(d)(1)(ii) (as 

required by § 226.59(d)(2)); and (B) rate 

increases imposed based on consumerspecific factors, using the factors 

described in § 226.59(d)(1)(i). If the 

review of factors described in 

§ 226.59(d)(1)(i) indicates that it is 

appropriate to continue to apply a 

penalty rate to the account as a result of 

the consumer’s payment history or other 

behavior on the account, proposed 

comment 59(d)–6 clarified that § 226.59 

permits the card issuer to continue to 

impose the penalty rate, even if the 

review of the factors described in 

§ 226.59(d)(1)(ii) would otherwise 

require a rate decrease. 

Proposed comment 59(d)–6.ii set forth 

the following example: Assume a credit 

card account was subject to a rate of 

15% on all transactions as of January 1, 

2009. On May 1, 2009, the issuer 

increased the rate on existing balances 

and new transactions to 18%, based 

upon market conditions or other factors 

not specific to the consumer or the 

consumer’s account. Subsequently, on 

September 1, 2009, based on a payment 

that was received five days after the due 

date, the issuer increased the applicable 

rate on existing balances and new 

transactions from 18% to a penalty rate 

of 25%. When conducting the first 

review required under § 226.59, the card 

issuer reviews the rate increase from 

15% to 18% using the factors described 

in § 226.59(d)(1)(ii) (as required by 

§ 226.59(d)(2)), and separately but 

concurrently reviews the rate increase 

from 18% to 25% using the factors 

described in paragraph § 226.59(d)(1)(i). 

The review of the rate increase from 

15% to 18% based upon the factors 

described in § 226.59(d)(1)(ii) indicates 

that a similarly situated new consumer 

would receive a rate of 17%. The review 


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of the rate increase from 18% to 25% 

based upon the factors described in 

§ 226.59(d)(1)(i) indicates that it is 

appropriate to continue to apply the 

25% penalty rate based upon the 

consumer’s late payment. Section 

226.59 permits the rate on the account 

to remain at 25%. 

The Board noted in the proposal that 

the intent of the special rule in 

§ 226.59(d)(2) was not to require card 

issuers to reduce penalty rates, if the 

consumer’s credit risk or behavior on 

the account justifies the maintenance of 

a penalty rate in order to account for the 

additional risk of nonpayment posed by 

the consumer. The Board indicated that 

the clarification in proposed comment 

59(d)–6 would be appropriate in order 

to ensure that § 226.59(d)(2) does not 

lead to unintended consequences in 

cases where a market-based rate 

increase and a rate increase due to the 

imposition of a penalty rate both 

occurred between January 1, 2009 and 

February 21, 2010. 

The Board received no significant 

comment opposing comment 59(d)–6. 

Two industry commenters supported 

proposed comment 59(d)–6 and stated 

that it was prudent in light of safe and 

sound underwriting considerations. One 

of these commenters stated that the 

Board should clarify that comment 

59(d)–6 applies to any rate increase 

based on factors specific to the 

consumer and not just to penalty rates. 

The Board is adopting comment 59(d)– 

6 generally as proposed, with several 

modifications to clarify that the 

comment applies to rates increased 

based on factors specific to the 

consumer, regardless of whether those 

rates are penalty rates. In particular, the 

last sentence of comment 59(d)–6.i as 

adopted states that if the review of 

factors described in § 226.59(d)(1)(i) 

indicates that it is appropriate to 

continue to apply a penalty or other 

increased rate to the account as a result 

of the consumer’s payment history or 

other factors specific to the consumer, 

§ 226.59 permits the card issuer to 

continue to impose the penalty or other 

increased rate, even if the review of the 

factors described in § 226.59(d)(1)(ii) 

would otherwise require a rate decrease. 

59(f) Termination of Obligation To 

Review Factors 

Section 226.59(f) generally provides 

that the obligation to conduct periodic 

reevaluations of a rate increase ceases to 

apply if the issuer reduces the annual 

percentage rate applicable to the 

account to a rate equal to or lower than 

the rate that was in effect immediately 

prior to the increase. The Board noted 

in the November 2010 Proposed Rule 

that some confusion had arisen 

regarding the relationship between the 

general rule in § 226.59(a) and the 

termination provision in § 226.59(f). For 

example, a card issuer may periodically 

review a consumer’s account on which 

the rate has been increased, consistent 

with § 226.59(d)(1)(ii), by evaluating the 

factors that it currently considers when 

determining the annual percentage rates 

applicable to similar new credit card 

accounts. In the course of conducting 

such a review, the card issuer may 

determine that it would offer a lower 

rate on a new account than the rate that 

applied, prior to the rate increase, to the 

existing account being reviewed. In 

these circumstances, issuers have asked 

the Board for guidance regarding the 

amount of the rate reduction required 

under § 226.59. 

The Board proposed to clarify that in 

these circumstances, § 226.59 requires 

that the rate on the existing account be 

reduced to the rate that was in effect 

prior to the rate increase, not to the 

lower rate that would be offered to a 

comparable new consumer. To clarify 

the relationship between § 226.59(a) and 

(f), the Board proposed to adopt a new 

comment 59(f)–2, which set forth the 

following illustrative example: Assume 

that on January 1, 2011, a consumer 

opens a new credit card account under 

an open-end (not home-secured) 

consumer credit plan. The annual 

percentage rate applicable to purchases 

is 15%. Upon providing 45 days’ 

advance notice and to the extent 

permitted under § 226.55, the card 

issuer increases the rate applicable to 

new purchases to 18%, effective on 

September 1, 2012. The card issuer 

conducts reviews of the increased rate 

in accordance with § 226.59 on January 

1, 2013 and July 1, 2013, based on the 

factors described in § 226.59(d)(1)(ii). 

Based on the January 1, 2013 review, the 

rate applicable to purchases remains at 

18%. In the review conducted on July 

1, 2013, the card issuer determines that, 

based on the relevant factors, the rate it 

would offer on a comparable new 

account would be 14%. Consistent with 

§ 226.59(f), § 226.59(a) requires that the 

card issuer reduce the rate on the 

existing account to the 15% rate that 

was in effect prior to the September 1, 

2012 rate increase. 

Commenters who addressed proposed 

comment 59(f)–2 supported this aspect 

of the proposal and, accordingly, 

comment 59(f)–2 is adopted as 

proposed. As noted in the 

supplementary information to the 

November 2010 Proposed Rule, the 

review requirements of TILA Section 

148 are triggered only if an annual 

percentage rate applicable to a credit 

card account is increased. The Board 

believes that if Congress had intended 

for all annual percentage rates on all 

credit card accounts to be reviewed 

indefinitely, regardless of whether the 

account is subject to a rate increase, it 

would have so provided in the Credit 

Card Act. Accordingly, the Board 

continues to believe that it would be 

inappropriate to require card issuers to 

reduce a rate on a credit card account 

to a rate that is lower than the rate that 

applied to the account prior to the 

increase. 

Appendix M1—Repayment Disclosures 

As discussed in the section-by-section 

analysis to § 226.7(b)(12), Appendix M1 

contains guidance for how to calculate 

the repayment disclosures required to 

be disclosed under § 226.7(b)(12). 

Specifically, § 226.7(b)(12)(i) generally 

requires card issuers to disclose the 

following repayment disclosures on 

each periodic statement: (1) A ‘‘warning’’ 

statement indicating that making only 

the minimum payment will increase the 

interest the consumer pays and the time 

it takes to repay the consumer’s balance; 

(2) the length of time it would take to 

repay the outstanding balance if the 

consumer pays only the required 

minimum monthly payments and no 

further advances are made; (3) the total 

cost to the consumer of paying the 

balance in full if the consumer pays 

only the required minimum monthly 

payments and no further advances are 

made; (4) the minimum payment 

amount that would be required for the 

consumer to pay off the outstanding 

balance in 36 months, if no further 

advances are made; (5) the total cost to 

the consumer of paying the balance in 

full if the consumer pays the balance 

over 36 months; (6) the total savings of 

paying the balance in 36 months (rather 

than making only minimum payments); 

and (7) a toll-free telephone number at 

which the consumer may receive 

information about accessing consumer 

credit counseling. 

Section 226.7(b)(12)(i) and (ii) 

provides that card issuers must round 

the following disclosures to the nearest 

whole dollar when disclosing them on 

the periodic statement: (1) The 

minimum payment total cost estimate, 

(2) the estimated minimum payment for 

repayment in 36 months, (3) the total 

cost estimate for repayment in 36 

months, and (4) the savings estimate for 

repayment in 36 months. See 

226.7(b)(12)(i)(C), (b)(12)(i)(F)(1)(i), 

(b)(12)(i)(F)(1)(iii), (b)(12)(i)(F)(1)(iv) and 

(b)(12)(ii)(C). For the reasons discussed 

in the section-by-section analysis to 

§ 226.7(b)(12), in the November 2010 

Proposed Rule, the Board proposed to 


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22994 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

revise § 226.7(b)(12)(i) and (ii) to allow 

card issuers to round these disclosures 

to either the nearest whole dollar or to 

the nearest cent when disclosing them 

on the periodic statement. Currently, 

paragraph (f) of Appendix M1 references 

rounding disclosures to the nearest 

whole dollar when calculating the total 

saving estimate for repayment in 36 

months. Specifically, paragraph (f) of 

Appendix M1 states that when 

calculating the savings estimate for 

repayment in 36 months, a card issuer 

must subtract the total cost estimate for 

repayment in 36 months calculated 

under paragraph (e) of Appendix M1 

(rounded to the nearest whole dollar as 

set forth in § 226.7(b)(12)(i)(F)(1)(iii)) 

from the minimum payment total cost 

estimate calculated under paragraph (c) 

of Appendix M1 (rounded to the nearest 

whole dollar as set forth in 

§ 226.7(b)(12)(i)(C)). 

Consistent with the proposed changes 

to § 226.7(b)(12), in the November 2010 

Proposed Rule, the Board proposed to 

revise paragraph (f) of Appendix M1 to 

indicate that a card issuer, at its option, 

may round the disclosures either to the 

nearest whole dollar or to the nearest 

cent in calculating the savings estimate 

for repayment in 36 months. Under the 

proposal, if a card issuer chose under 

§ 226.7(b)(12) to round the disclosures 

to the nearest whole dollar, the card 

issuer would have been required to 

calculate the savings estimate for 

repayment in 36 months by subtracting 

the total cost estimate for repayment in 

36 months calculated under paragraph 

(e) of Appendix M1 (rounded to the 

nearest whole dollar) from the 

minimum payment total cost estimate 

calculated under paragraph (c) of 

Appendix M1 (rounded to the nearest 

whole dollar). If a card issuer chose, 

however, to round the disclosures to the 

nearest cent, the card issuer would have 

been required to calculate the savings 

estimate for repayment in 36 months by 

subtracting the total cost estimate for 

repayment in 36 months calculated 

under paragraph (e) of Appendix M1 

(rounded to the nearest cent) from the 

minimum payment total cost estimate 

calculated under paragraph (c) of 

Appendix M1 (rounded to the nearest 

cent). The Board believed that this 

would ensure that the savings estimate 

for repayment in 36 months would be 

calculated consistent with how the 

other disclosures would be shown on 

the periodic statement. 

The Board received several comments 

supporting the proposed changes to 

Appendix M1, and no comments 

opposing them. For the reasons 

discussed above, the Board adopts these 

changes as proposed. 

IV. Mandatory Compliance Dates 

A. Mandatory compliance date. 

Consistent with TILA Section 105(d), 

this final rule is effective and 

compliance is mandatory on October 1, 

2011. However, creditors may, at their 

option, comply with this rule prior to 

that date. 

Most commenters requested an 

October 1, 2011 effective date. Although 

some industry commenters requested 

additional time to comply, the Board 

believes that, given the largely technical 

nature of this final rule, an October 1, 

2011 effective date provides creditors 

with sufficient time to bring their 

systems and practices into compliance. 

B. Prospective application. This final 

rule is prospective in application. The 

following paragraphs set forth 

additional guidance and examples as to 

how a creditor must comply with the 

final rule by the mandatory compliance 

date. Except as otherwise stated, the 

final rule applies to existing as well as 

new accounts and balances. 

C. Tabular summaries that 

accompany applications or solicitations 

(§ 226.5a). Credit and charge card 

applications provided or made available 

to consumers on or after October 1, 2011 

must comply with the final rule, 

including format and terminology 

requirements. For example, if a directmail application or solicitation is 

mailed to a consumer on September 30, 

2011, it is not required to comply with 

the new requirements, even if the 

consumer does not receive it until 

October 7, 2011. In contrast, a directmail application or solicitation that is 

mailed to consumers on or after October 

1, 2011 must comply with the final rule. 

If a creditor makes an application or 

solicitation available to the general 

public (such as ‘‘take-one’’ applications), 

any new applications or solicitations 

issued by the creditor on or after 

October 1, 2011 must comply with the 

new rule. However, if a creditor issues 

an application or solicitation by making 

it available to the public prior to 

October 1, 2011 (for example, by 

restocking an in-store display of ‘‘takeone’’ applications on September 15, 

2011), those applications need not 

comply with the new rule, even if a 

consumer may pick up one of the 

applications from the display after 

October 1, 2011. Any ‘‘take-one’’ 

applications that the creditor uses to 

restock the display on or after October 

1, 2011, however, must comply with the 

final rule. 

D. Account-opening disclosures 

(§ 226.6). Account-opening disclosures 

furnished on or after October 1, 2011 

must comply with the final rule, 

including format and terminology 

requirements. The relevant date for 

purposes of this requirement is the date 

on which the disclosures are furnished, 

not when the consumer applies for the 

account. For example, if a consumer 

applies for an account on September 30, 

2011 but the account-opening 

disclosures are not mailed until October 

2, 2011, those disclosures must comply 

with the final rule. In addition, if the 

disclosures are furnished by mail, the 

relevant date is the day on which the 

disclosures were sent, not the day on 

which the consumer receives the 

disclosures. Thus, if a creditor mails the 

account-opening disclosures on 

September 30, 2011, the disclosures are 

not required to comply with the final 

rule, even if the consumer receives 

those disclosures on October 7, 2011. 

E. Periodic statements (§§ 226.5(b)(2) 

and 226.7). Periodic statements mailed 

or delivered on or after October 1, 2011 

must comply with §§ 226.5(b)(2) and 

226.7, as revised by the final rule. For 

example, if a creditor mails a periodic 

statement to the consumer on 

September 30, 2011, that statement is 

not required to comply with the final 

rule, even if the consumer does not 

receive the statement until October 7, 

2011. However, a statement mailed on 

October 1, 2011 must comply with the 

final rule. 

F. Checks that access a credit card 

account (§ 226.9(b)). A creditor must 

comply with the disclosure 

requirements of § 226.9(b)(3) (as revised 

by the final rule) for checks that access 

a credit account that are provided on or 

after October 1, 2011. Thus, for 

example, if a creditor mails access 

checks to a consumer on September 30, 

2011, these checks are not required to 

comply with new § 226.9(b)(3), even if 

the consumer receives them on October 

7, 2011. However, checks mailed on 

October 1, 2011 must comply with the 

final rule. 

G. Notices of changes in terms and 

penalty rate increases (§ 226.9(c)(2)). 

In general. The relevant date for 

determining whether a change-in-terms 

notice must comply with the new 

requirements of revised § 226.9(c)(2) is 

the date on which the notice is 

provided, not the effective date of the 

change. Thus, the requirements of the 

final rule apply to notices mailed or 

delivered on or after October 1, 2011. 

For example, if a creditor provides a 

notice on September 30, 2011, the 

notice is not required to comply with 

new § 226.9(c)(2), even if the consumer 

receives the notice on October 7, 2011 

and the change disclosed in the notice 

is effective on November 15, 2011. 


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Promotional fees. The final rule 

applies the existing requirements for 

promotional rate programs in 

§ 226.9(c)(2)(v)(B) to promotional 

programs under which a fee will 

increase after a specified period of time. 

Some creditors may have outstanding 

promotional fee programs that were in 

place before the effective date of this 

final rule, but under which the 

promotional fee will not expire until 

after October 1, 2011. For example, on 

January 1, 2010, a creditor may have 

opened an account with annual fee of $0 

for the first year and a $50 annual fee 

thereafter. These creditors may have 

concerns about whether the disclosures 

that they have provided to consumers 

regarding these promotional programs 

are sufficient to qualify for the 

exception in revised § 226.9(c)(2)(v)(B). 

In order to address these concerns, the 

Board is providing the following 

guidance, which is modeled after the 

guidance provided with respect to 

promotional rates in the July 2009 

Interim Final Rule and the February 

2010 Final Rule. See 74 FR 36091– 

36092; 75 FR 7783–7784. 

The Board notes that, as revised by 

this final rule, § 226.9(c)(2)(v)(B) 

requires written disclosures of the term 

of the promotional fee and the fee that 

will apply when the promotional fee 

expires. The final rule further requires 

that the term of the promotional fee and 

the fee that will apply when the 

promotional fee expires be disclosed in 

close proximity and equally prominent 

to the disclosure of the promotional fee. 

The Board anticipates that many 

creditors offering such a promotional fee 

program may already have complied 

with these advance notice requirements 

in connection with offering the 

promotional program. 

The Board is nonetheless aware that 

some other creditors may be uncertain 

as to whether written disclosures 

provided at the time an existing 

promotional fee program was offered are 

sufficient to comply with the exception 

in § 226.9(c)(2)(v)(B). For example, for 

promotional fee offers provided after 

October 1, 2011, the disclosure under 

§ 226.9(c)(2)(v)(B)(1) must include the 

fee that will apply after the expiration 

of the promotional period. For an 

existing promotional fee program, a 

creditor might instead have disclosed 

this fee narratively—for example, by 

stating that the annual fee would be 

reduced to $0 for one year and that the 

‘‘standard’’ or ‘‘pre-existing’’ annual fee 

would apply thereafter. The Board does 

not believe that it is appropriate to 

require a creditor to provide 45 days’ 

advance notice before expiration of the 

promotional period when the creditor 

provided disclosures that were generally 

consistent with § 226.9(c)(2)(v)(B) but 

were not technically compliant because 

they described the post-promotional fee 

narratively. This would have the impact 

of imposing the requirements of this 

final rule retroactively, to disclosures 

given prior to the October 1, 2011 

effective date. Therefore, a creditor that 

made disclosures prior to October 1, 

2011 that generally complied with 

§ 226.9(c)(2)(v)(B) but that described the 

type of post-promotional fee rather than 

disclosing the actual fee is not required 

to provide an additional notice pursuant 

to § 226.9(c)(2) before expiration of the 

promotional fee in order to use the 

exception. 

Similarly, the Board acknowledges 

that there may be some creditors with 

outstanding promotional fee programs 

that did not make—or, without 

conducting extensive research, are not 

aware if they made—written disclosures 

of the length of the promotional period 

and the post-promotional fee. For 

example, some creditors may have made 

these disclosures orally. For the same 

reasons described in the foregoing 

paragraph, the Board believes that it 

would be inappropriate to preclude use 

of the § 226.9(c)(2)(v)(B) exception by 

creditors offering these promotional fee 

programs. That interpretation of the rule 

would in effect require creditors to 

comply with the precise requirements of 

the exception before issuance of this 

final rule or its October 1, 2011 effective 

date. 

However, the Board believes at the 

same time that it would be inconsistent 

with the final rule for creditors that 

provided no advance notice of the term 

of the promotion and the postpromotional fee to receive an exemption 

from the general notice requirements of 

§ 229.9(c)(2). Consequently, any creditor 

that, prior to October 1, 2011, provides 

a written disclosure to consumers 

subject to an existing promotional fee 

program stating the length of the 

promotional period and the fee that will 

apply after the promotional fee expires 

is not required to provide an additional 

notice pursuant to § 226.9(c)(2) prior to 

applying the post-promotional fee. In 

addition, any creditor that provided, 

prior to October 1, 2011, oral 

disclosures of the length of the 

promotional period and the fee that will 

apply after the promotional period also 

need not provide an additional notice 

under § 226.9(c)(2). However, any 

creditor subject to § 226.9(c)(2) that has 

not provided advance notice of the term 

of a promotion and the fee that will 

apply upon expiration of that promotion 

in the manner described above prior to 

October 1, 2011 will be required to 

provide 45 days’ advance notice 

containing the content set forth in this 

final rule before raising the fee. 

H. Advertising rules (§ 226.16). 

Advertisements occurring on or after 

October 1, 2011, such as an 

advertisement broadcast on the radio, 

published in a newspaper, or mailed on 

October 1, 2011 or later, must comply 

with revised § 226.16. 

I. Ability to pay rules (§ 226.51). The 

revisions to § 226.51 apply to the 

opening of new accounts on or after 

October 1, 2011 as well as to credit line 

increases on existing accounts on or 

after October 1, 2011. However, 

consistent with the February 2010 Final 

Rule, revised § 226.51 does not apply to 

accounts opened in response to firm 

offers of credit made consistent with the 

Fair Credit Reporting Act before October 

1, 2011, provided that the income 

requirements established by the creditor 

as specific criteria prior to prescreening 

were consistent with the version of 

§ 226.51 in effect at that time. See 75 FR 

7785; see also 15 U.S.C. 1681(l)(1)(A). 

In addition, if an application is 

required to comply with the revised 

disclosure requirements in § 226.5a (as 

discussed above), the application must 

also request income information in a 

manner consistent with revised § 226.51 

if the card issuer intends to rely on the 

information to comply with § 226.51. 

For example, if direct-mail applications 

requesting that consumers age 21 or 

older provide their ‘‘household income’’ 

are mailed to consumers on September 

30, 2011, the card issuer may rely on the 

income information provided by 

consumers on the applications for 

purposes of § 226.51, even if the 

applications were not received by 

consumers until October 7, 2011. 

However, if the same applications are 

mailed to consumers on or after October 

1, 2011, the card issuer cannot rely 

solely on the income information 

provided by consumers on the 

applications. 

Similarly, if a card issuer makes 

applications available to the general 

public (such as ‘‘take-one’’ applications), 

any new applications issued by the card 

issuer on or after October 1, 2011 must 

request income information in a manner 

consistent with revised § 226.51 if the 

card issuer intends to rely on the 

information to comply with § 226.51. 

For example, if a card issuer restocks an 

in-store display of ‘‘take-one’’ 

applications requesting that consumers 

age 21 or older provide their ‘‘household 

income’’ on September 15, 2011, the 

card issuer may rely on the income 

information provided by consumers on 

the applications for purposes of 

§ 226.51, even though a consumer may 


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22996 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

27 In the proposal, the Board noted that the 

amendments to § 226.9(c)(2)(v)(B) permit a card 

issuer to provide the consumer in advance with 

certain written disclosures of a fee increase upon 

expiration of a specified period of time, without 

providing 45 days’ advance notice pursuant to 

§ 226.9(c)(2). The Board anticipated that the 

proposed rule would impose no additional burden 

on card issuers that are small entities because the 

clarification provides an alternative means of 

complying with disclosures that are otherwise 

required by § 226.9(c)(2). The Board did not receive 

any significant comment on this preliminary 

determination, which is adopted in this final rule. 

pick up one of the applications from the 

display after October 1, 2011. However, 

any ‘‘take-one’’ applications that the card 

issuer uses to restock the display on or 

after October 1, 2011 must request 

income information in a manner 

consistent with revised § 226.51 if the 

card issuer intends to rely on the 

information to comply with § 226.51. 

J. Limitations on fees (§ 226.52). 

Limitations on fees imposed prior to 

or during first year (§ 226.52(a)). The 

revisions to § 226.52(a) are effective on 

October 1, 2011. Accordingly, the 

revised limitations on the imposition of 

fees in § 226.52(a) apply to accounts 

opened and fees imposed on or after 

October 1, 2011. However, revised 

§ 226.52(a) does not require card issuers 

to waive or rebate fees imposed prior to 

October 1, 2011. For example, assume 

that a card issuer imposes a $50 

application fee on August 1, 2011, the 

account is opened on August 2 with a 

$400 credit limit, and $100 in accountopening fees are imposed on August 3. 

Revised § 226.52(a) does not require the 

card issuer to waive or rebate $50 in fees 

on October 1, 2011. However, beginning 

on October 1, 2011, revised § 226.52(a) 

prohibits the card issuer from imposing 

any additional non-exempt fees with 

respect to the account until August 2, 

2012. 

The revised definition of account 

opening in § 226.52(a) applies only to 

accounts opened on or after October 1, 

2011. Because many card issuers 

currently track only the date that 

accounts are opened on their systems, it 

would be difficult for card issuers to 

determine the account-opening date 

consistent with revised § 226.52(a) for 

accounts opened prior to October 1. 

Limitations on penalty fees 

(§ 226.52(b)). The revisions to 

§ 226.52(b) are effective on October 1, 

2011. However, the final rule does not 

require card issuers to waive or rebate 

fees imposed prior to October 1, 2011. 

For example, assume that a card issuer 

does not impose a late payment fee 

when a consumer pays late in August 

2011, but imposes a $35 late payment 

when the consumer pays late in 

September 2011. Revised 

§ 226.52(b)(1)(ii)(B) does not require the 

issuer to waive or rebate $10 on October 

1, 2011, nor does it prevent the card 

issuer from imposing a $35 fee if the 

consumer pays late again in November 

2011. 

K. Limitations on increasing annual 

percentage rates, fees, and charges 

(§ 226.55). The revisions to § 226.55 are 

effective on October 1, 2011. 

Temporary fees (§ 226.55(b)(1)). See 

the transition guidance provided above 

regarding § 226.9(c)(2)(v)(B) for 

guidance regarding application of the 

disclosure requirements in 

§ 226.55(b)(1)(i) to promotional fee 

programs established prior to October 1, 

2011. The requirement in § 226.55(b)(1) 

that temporary fees expire after a period 

of no less than six months applies to 

temporary fees offered on or after 

October 1, 2011. Thus, for example, if a 

card issuer offered a temporary fee on 

September 1, 2011 that applied until 

January 1, 2012, § 226.55(b)(1) would 

not prohibit the card issuer from 

applying an increased fee on January 1 

so long as the card issuer previously 

disclosed the period during which the 

temporary fee would apply and the 

increased fee that would apply 

thereafter. 

Increases in rates and certain fees and 

charges that apply to new transactions 

(§ 226.55(b)(3)); treatment of protected 

balances (§ 226.55(c)). The revisions to 

§ 226.55(b)(3)(iii) regarding the 

circumstances under which an 

increased fee or charge that is subject to 

§ 226.55 applies to an existing balance 

(as opposed to the account as a whole) 

apply to any increase in a fee or charge 

on or after October 1, 2011. However, a 

card issuer is not required to waive, 

rebate, or reduce any fee or charge 

imposed consistent with Regulation Z 

prior to October 1, 2011. Furthermore, 

as discussed above with respect to 

§ 226.52(a), the revised definition of 

account opening under 

§ 226.55(b)(3)(iii) applies only to 

accounts opened on or after October 1, 

2011. 

Promotional waivers or rebates of 

interest, fees, and charges (§ 226.55(e)). 

New § 226.55(e) applies to any waiver or 

rebate of interest, fees, or charges 

subject to § 226.55 that is promoted by 

a card issuer and applied to an account 

on or after October 1, 2011. If a card 

issuer waives or rebates interest, fees, or 

charges subject to § 226.55 prior to 

October 1, 2011, § 226.55(e) does not 

prohibit the issuer from ceasing to 

waive or rebate such interest, fees, or 

charges on or after October 1 unless the 

card issuer promotes the waiver or 

rebate on or after October 1. 

L. Internet posting of credit card 

agreements (§ 226.58). Because the final 

rule becomes effective on October 1, 

2011, the submissions that issuers must 

send to the Board by May 2, 2011 

(reflecting agreements offered to the 

public as of the end of the first calendar 

quarter, March 31, 2011) and by August 

1, 2011 (reflecting agreements offered to 

the public as of the end of the second 

calendar quarter, June 30, 2011) are not 

subject to the final rule. Compliance 

with the final rule is required for 

submissions that issuers must send to 

the Board by October 31, 2011 

(reflecting agreements offered as of the 

end of the third calendar quarter, 

September 30, 2011) and to subsequent 

submissions. 

V. Regulatory Analysis 

This final rule clarifies aspects of the 

Board’s February and June 2010 Final 

Rules implementing the Credit Card 

Act. Section VI of the supplementary 

information to the February 2010 Final 

Rule and section VII of the 

supplementary information to the June 

2010 Final Rule set forth the Board’s 

analyses and determinations under the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.) (RFA) with respect to those 

rules. See 75 FR 7789–7791, 75 FR 

37565–37567. In addition, section VII of 

the supplementary information to the 

February 2010 Final Rule and section 

VIII of the supplementary information to 

the June 2010 Final Rule set forth the 

Board’s analyses and determinations 

under the Paperwork Reduction Act 

(PRA) of 1995 (44 U.S.C. 3506; 5 CFR 

Part 1320 Appendix A.1) with respect to 

those rules. See 75 FR 7791, 75 FR 

37567–37568. Because the final rule’s 

amendments are clarifications and do 

not alter the substance of these analyses 

and determinations, the Board 

continues to rely on those analyses and 

determinations for purposes of this 

rulemaking.27

RFA. The Small Business 

Administration’s Office of Advocacy 

(SBA) submitted a comment on the 

initial regulatory flexibility analysis 

(IRFA) in the Board’s proposed rule. 

Otherwise, the Board did not receive 

substantive comments specifically 

addressing this analysis. Section 1601 of 

the Small Business Jobs Act of 2010 and 

Executive Order 13272 generally require 

Federal agencies to respond in a final 

rule to written comments submitted by 

the SBA on a proposed rule, unless the 

public interest is not served by doing so. 

The Board’s response to the SBA’s 

comment letter is set forth below. 

The SBA expressed concern that the 

Board’s IRFA did not adequately assess 

the impact of the proposed rule on small 

entities. The SBA encouraged the Board 


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to issue a second IRFA to determine the 

impact on small entities and to consider 

alternatives that meet the Board’s 

objectives while minimizing the impact 

on small entities. For the reasons stated 

below, the Board believes the analysis 

in its IRFA complied with the 

requirements of the RFA. Accordingly, 

the Board is proceeding with a final 

rule. 

This rulemaking is part of a series of 

rules that have extensively revised and 

expanded the regulatory requirements 

for entities that offer open-end (not 

home-secured) consumer credit, 

particularly credit card accounts. In 

January 2009, the Board adopted a final 

rule that comprehensively amended the 

requirements of Regulation Z that apply 

to credit card accounts and other openend (not home-secured) consumer 

credit. See 74 FR 5244 (Jan. 29, 2009). 

In that rule, the Board performed a RFA 

analysis and determined that the 

amendments would have a significant 

economic impact on a substantial 

number of small entities. See id. at 

5390–5392. 

In May 2009, the Credit Card 

Accountability, Responsibility, and 

Disclosure Act of 2009 (Credit Card Act) 

was signed in to law, which required 

the Board to extensively revise the 

January 2009 final rule and to issue 

three stages of additional rules. See Pub. 

L. No. 111–24, 123 Stat. 1734 (2009); see 

also 75 FR 37526 (describing 

rulemaking requirements of the Credit 

Card Act). Consistent with the 

requirements of the Credit Card Act, the 

Board issued an interim final rule in 

July 2009 and final rules in February 

and June 2010. See 74 FR 36077 (July 

22, 2009); 75 FR 7658 (Feb. 22, 2010); 

75 FR 37526 (June 29, 2010). In each of 

these rules, the Board conducted an 

RFA analysis and determined that the 

amendments to Regulation Z would 

have a significant economic impact on 

a substantial number of small entities, 

relying in part on the RFA analyses and 

determinations in the Board’s prior 

credit card rules. See 74 FR 36092– 

36093; 75 FR 7789–7791; 75 FR 37565– 

37567. These analyses and 

determinations were not challenged by 

the SBA or other commenters. 

Most recently, the Board issued a 

proposed rule in November 2010 to 

clarify aspects of the February and June 

2010 credit card rules in order to 

facilitate compliance. See 75 FR 67459 

(Nov. 2, 2010). In that proposal, the 

Board stated that it would continue to 

rely on the RFA analyses and 

determinations in its prior credit card 

rulemakings because the proposed 

clarifications would not, if adopted, 

alter the substance of those analyses and 

determinations. See id. 67486. 

The SBA suggested in its comment 

letter that the Board’s reliance on the 

RFA analyses and determinations in 

prior credit card rulemakings was not 

appropriate. However, the RFA 

specifically provides that, ‘‘[i]n order to 

avoid duplicative action, an agency may 

consider a series of closely related rules 

as one rule for the purposes of [the RFA 

analysis].’’ 5 U.S.C. 605(c). Thus, the 

Board has met or exceeded the 

requirements of the RFA by performing 

separate analyses for each of the credit 

card rulemakings preceding the 

November 2010 proposed clarifications. 

The SBA also commented that the 

Board failed to consider updated 

information about the number of small 

entities that may be impacted by the 

proposed clarifications. Although the 

total number of small entities likely to 

be affected by the Board’s regulations is 

unknown because the open-end credit 

provisions of Regulation Z have broad 

applicability to individuals and 

businesses that extend even small 

amounts of consumer credit, the Board 

estimated in prior rulemakings that, 

based on data from Reports of Condition 

and Income (call reports), there were 

approximately 4,100 card issuers with 

assets of $175 million or less. See 74 FR 

5391 (citing June 2008 call report data). 

Based on the most recent final call 

report data (from September 2010), the 

Board estimates that there are 

approximately 3,700 such issuers. 

Notwithstanding this reduction in the 

number of affected small entities, the 

Board continues to believe that its credit 

card regulations (including this final 

rule) will have a significant economic 

impact on a substantial number of small 

entities. 

Finally, the SBA suggested that the 

Board did not sufficiently address 

alternatives to the proposed rule which 

would minimize the impact on small 

entities. However, the Board solicited 

comment on alternatives to several of 

the proposed requirements. See, e.g., 75 

FR 67474. Furthermore, as discussed 

above in III. Section-by-Section 

Analysis, the Board has provided 

specific model language and transition 

guidance based on the comments in 

order to ease compliance and 

operational burden on small entities. 

PRA. The Board has a continuing 

interest in the public’s opinion of the 

collection of information. Comments on 

the collection of information should be 

sent to Cynthia Ayouch, Acting Federal 

Reserve Board Clearance Officer, 

Division of Research and Statistics, Mail 

Stop 95–A, Board of Governors of the 

Federal Reserve System, Washington, 

DC 20551, with copies of such 

comments sent to the Office of 

Management and Budget, Paperwork 

Reduction Project (7100–0199), 

Washington, DC 20503. 

VI. List of Revisions to Official Staff 

Interpretations 

For clarity, the following is a list of 

revisions made by this final rule to the 

Official Staff Interpretations: 

Section 226.2—Definitions and Rules 

of Construction, 2(a)(15) Credit card: 

Paragraphs 2. and 3. are revised and 

paragraph 4. is added. 

Section 226.5—General Disclosure 

Requirements, 5(b)(2) Periodic 

statements: 

(1) Paragraph 5(b)(2)(ii): Paragraphs 1. 

through 4. are revised; and 

(2) The heading Paragraph 5(b)(2)(iii) 

and paragraph 1. under that heading are 

deleted. 

Section 226.5a—Credit and Charge 

Card Applications and Solicitations, 

5a(b) Required disclosures: 

(1) 5a(b)(1) Annual percentage rate: 

Paragraph 5. is revised; 

(2) 5a(b)(2) Fees for issuance or 

availability: paragraph 4. is revised; 

(3) 5a(b)(5) Grace period: Paragraph 1. 

is revised and paragraph 4. is deleted; 

and 

(4) 5a(b)(6) Balance computation 

method: Paragraph 1. is revised. 

Section 226.6—Account-Opening 

Disclosures, 6(b) Rules affecting openend (not home-secured) plans, 6(b)(2) 

Required disclosures for accountopening table for open-end (not homesecured) plans: 

(1) 6(b)(2)(v) Grace period: Paragraphs 

1. and 3. are revised and paragraph 4. 

is deleted; and 

(2) 6(b)(2)(vi) Balance computation 

method: Paragraph 1. is revised and 

paragraph 2. is added. 

Section 226.7—Periodic Statement, 

7(b) Rules affecting open-end (not 

home-secured) plans: 

(1) Paragraph 1. is revised; 

(2) 7(b)(5) Balance on which finance 

charge computed: Paragraphs 7. and 8. 

are revised; 

(3) 7(b)(6) Charges imposed: 

Paragraph 3. is revised; 

(4) 7(b)(8) Grace period: Paragraph 3. 

is revised; and 

(5) 7(b)(12) Repayment disclosures: 

Paragraph 1. is added. 

Section 226.9–Subsequent Disclosure 

Requirements: 

(1) 9(b) Disclosures for supplemental 

credit access devices and additional 

features, 9(b)(3) Checks that access a 

credit card account: 

(i) 9(b)(3)(i) Disclosures: Paragraph 2. 

is added; and 

(ii) 9(b)(3)(i)(D): Paragraph 1. is 

revised; 


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(2) 9(c) Change in terms, 9(c)(2) Rules 

affecting open-end (not home-secured) 

plans: 

(i) Paragraph 1. is revised; 

(ii) 9(c)(2)(iii) Charges not covered by 

§ 226.6(b)(1) and (b)(2): Paragraph 1. is 

revised; 

(iii) 9(c)(2)(iv) Disclosure 

requirements: Paragraphs 3. and 4. are 

revised; 

(iv) 9(c)(2)(v) Notice not required: 

Paragraphs 2., 3., 4., 5., 6., 7., 10., 11., 

and 12. are revised and paragraph 13. is 

added; and 

(v) 9(e) Disclosures upon renewal of 

credit or charge card: Paragraph 10. is 

revised. 

Section 226.10—Payments: 

(1) 10(b) Specific requirements for 

payments: Paragraph 2. is revised; 

(2) 10(e) Limitations on fees related to 

method of payment: Paragraph 4. is 

added; and 

(3) 10(f) Changes by card issuer: 

Paragraph 3. is revised. 

Section 226.12—Special Credit Card 

Provisions, 12(c) Right of cardholder to 

assert claims or defenses against card 

issuer: Paragraph 4. is revised. 

Section 226.13—Billing Error 

Resolution, 13(c) Time for resolution; 

general procedures, Paragraph 13(c)(2): 

Paragraph 2. is revised. 

Section 226.14—Determination of 

Annual Percentage Rate, 14(a) General 

rule: Paragraph 6. is added. 

Section 226.16—Advertising: 

(1) Paragraphs 1. and 2. are revised; 

and 

(2) 16(g) Promotional rates: 

Paragraphs 2., 3., and 4. are revised. 

Section 226.30—Limitation on Rates: 

Paragraph 8. is revised. 

Section 226.51—Ability to Pay: 

(1) 51(a) General rule, 51(a)(1) 

Consideration of ability to pay: 

Paragraphs 1., 2., 4. and 6. are revised; 

(2) 51(a)(2) Minimum periodic 

payments: Paragraph 3. is revised; and 

(3) 51(b) Rules affecting young 

consumers, 51(b)(1) Applications from 

young consumers: Paragraph 2. is 

revised. 

Section 226.52—Limitations on Fees: 

(1) 52(a) Limitations during first year 

after account opening: 

(i) The subheading 52(a) Limitations 

during first year after account opening 

is revised to read 52(a) Limitations prior 

to account opening and during first year 

after account opening; 

(ii) 52(a)(1) General rule: Paragraphs 

1., 2., and 3. are revised and paragraph 

4. is added; and 

(iii) 52(a)(2) Fees not subject to 

limitations: Paragraph 1. is revised; 

(2) 52(b) Limitations on penalty fees: 

(i) 52(b)(1)(ii) Safe harbors: Paragraph 

1. is revised; and 

(ii) 52(b)(2) Prohibited fees: 

(A) 52(b)(2)(i) Fees that exceed dollar 

amount associated with violation: 

paragraph 5. is revised; and 

(B) 52(b)(2)(ii) Multiple fees based on 

single event or transaction: Paragraph 1. 

is revised. 

Section 226.53—Allocation of 

Payments: 

(1) Paragraphs 4. and 5. are revised; 

and 

(2) The subheading 53(b) Special rule 

for accounts with balances subject to 

deferred interest or similar programs is 

revised to read 53(b) Special rules and, 

under that subheading, paragraphs 1., 

2., and 3. are revised. 

Section 226.55— Limitations on 

Increasing Annual Percentage Rates, 

Fees, and Charges: 

(1) 55(a) General rule: Paragraph 1. is 

revised; 

(2) 55(b) Exceptions: Paragraphs 1. 

and 3. are revised; 

(3) The subheading 55(b)(1) 

Temporary rate exception is revised to 

read 55(b)(1) Temporary rate, fee, or 

charge exception and, under that 

subheading, paragraphs 2. and 4. are 

revised and paragraph 5. is added; 

(4) 55(b)(3) Advance notice exception: 

Paragraphs 6. and 7. are added; 

(5) 55(b)(6) Servicemembers Civil 

Relief Act exception: Paragraphs 1. and 

2. are revised and paragraph 3. is added; 

(6) 55(c) Treatment of protected 

balances, 55(c)(1) Definition of 

protected balance: Paragraph 3. is 

revised and paragraph 4. is added; and 

(7) The subheading 55(e) Promotional 

waivers or rebates of interest, fees, and 

other charges is added and, under that 

subheading, paragraphs 1., 2., and 3. are 

added. 

Section 226.58—Internet Posting of 

Credit Card Agreements: 

(1) 58(b) Definitions: 

(i) 58(b)(1) Agreement: Paragraph 1. is 

revised; 

(ii) 58(b)(2) Amends: Paragraph 1. is 

revised; 

(iii) The subheading 58(b)(4) Card 

issuer is added and paragraphs 1., 2., 

and 3. are added under that subheading; 

(iv) The subheading 58(b)(4) Offers is 

revised to read 58(b)(5) Offers; 

(v) The subheading 58(b)(5) Open 

account is revised to read 58(b)(6) Open 

account; and 

(vi) The subheading 58(b)(7) Private 

label credit card account and private 

label credit card plan is revised to read 

58(b)(8) Private label credit card 

account and private label credit card 

plan and, under that subheading, 

paragraphs 2. and 4. are revised; 

(2) 58(c) Submission of agreements to 

Board, 58(c)(3) Amended agreements: 

Paragraph 2. is revised, paragraph 3. is 

renumbered as paragraph 4., and a new 

paragraph 3. is added; 

(3) 58(d) Posting of agreements 

offered to the public: Paragraph 2. is 

revised; and 

(4) 58(e) Agreements for all open 

accounts: Paragraph 3. is revised. 

Section 226.59—Reevaluation of Rate 

Increases: 

(1) 59(a) General rule, 59(a)(1) 

Evaluation of increased rate: Paragraphs 

3. and 4. are renumbered as paragraphs 

4. and 5. and a new paragraph 3. is 

added; 

(2) 59(d) Factors: Paragraph 6. is 

added; and 

(3) 59(f) Termination of obligation to 

review factors: Paragraph 2. is added. 

List of Subjects in 12 CFR Part 226 

Advertising, Consumer protection, 

Federal Reserve System, Reporting and 

recordkeeping requirements, Truth in 

Lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Board amends Regulation 

Z, 12 CFR part 226, as set forth below: 

PART 226—TRUTH IN LENDING 

(REGULATION Z) 

■ 1. The authority citation for part 226 

continues to read as follows: 

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 

1637(c)(5), and 1639(l); Pub. L. No. 111–24 

§ 2, 123 Stat. 1734; Pub. L. No. 111–203, 124 

Stat. 1376. 

Subpart B—Open-End Credit 

■ 2. Section 226.2(a)(15)(ii) is revised to 

read as follows: 

§ 226.2 Definitions and rules of 

construction. 

(a) * * * 

(15) * * * 

(ii) Credit card account under an 

open-end (not home-secured) consumer 

credit plan means any open-end credit 

account that is accessed by a credit card, 

except: 

(A) A home-equity plan subject to the 

requirements of § 226.5b that is accessed 

by a credit card; or 

(B) An overdraft line of credit that is 

accessed by a debit card or an account 

number. 

* * * * * 

■ 3. Section 226.5 is amended by 

revising the heading for paragraph 

(b)(2)(ii)(A) and revising paragraph 

(b)(2)(ii)(B) to read as follows: 

§ 226.5 General disclosure requirements. 

* * * * * 

(b) * * * 


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10 [Reserved] 

(2) * * * 

(ii) * * * 

(A) Credit card accounts under an 

open-end (not home-secured) consumer 

credit plan. * * * 

* * * * * 

(B) Open-end consumer credit plans. 

For accounts under an open-end 

consumer credit plan, a creditor must 

adopt reasonable procedures designed 

to ensure that: 

(1) If a grace period applies to the 

account: 

(i) Periodic statements are mailed or 

delivered at least 21 days prior to the 

date on which the grace period expires; 

and 

(ii) The creditor does not impose 

finance charges as a result of the loss of 

the grace period if a payment that 

satisfies the terms of the grace period is 

received by the creditor within 21 days 

after mailing or delivery of the periodic 

statement. 

(2) Regardless of whether a grace 

period applies to the account: 

(i) Periodic statements are mailed or 

delivered at least 14 days prior to the 

date on which the required minimum 

periodic payment must be received in 

order to avoid being treated as late for 

any purpose; and 

(ii) The creditor does not treat as late 

for any purpose a required minimum 

periodic payment received by the 

creditor within 14 days after mailing or 

delivery of the periodic statement. 

(3) For purposes of paragraph 

(b)(2)(ii)(B) of this section, ‘‘grace 

period’’ means a period within which 

any credit extended may be repaid 

without incurring a finance charge due 

to a periodic interest rate.10

* * * * * 

■ 4. Section 226.5a is amended by 

revising paragraphs (a)(2)(iii), (b)(1)(i), 

and (b)(1)(iv) to read as follows: 

§ 226.5a Credit and charge card 

applications and solicitations. 

(a) * * * 

(2) * * * 

(iii) Disclosures required by 

paragraphs (b)(1)(iv)(B), (b)(1)(iv)(C) and 

(b)(6) of this section must be placed 

directly beneath the table. 

* * * * * 

(b) * * * 

(1) * * * 

(i) Variable rate information. If a rate 

disclosed under paragraph (b)(1) of this 

section is a variable rate, the card issuer 

shall also disclose the fact that the rate 

may vary and how the rate is 

determined. In describing how the 

applicable rate will be determined, the 

card issuer must identify the type of 

index or formula that is used in setting 

the rate. The value of the index and the 

amount of the margin that are used to 

calculate the variable rate shall not be 

disclosed in the table. A disclosure of 

any applicable limitations on rate 

increases shall not be included in the 

table. 

* * * * * 

(iv) Penalty rates. (A) In general. 

Except as provided in paragraph 

(b)(1)(iv)(B) and (C) of this section, if a 

rate may increase as a penalty for one 

or more events specified in the account 

agreement, such as a late payment or an 

extension of credit that exceeds the 

credit limit, the card issuer must 

disclose pursuant to this paragraph 

(b)(1) the increased rate that may apply, 

a brief description of the event or events 

that may result in the increased rate, 

and a brief description of how long the 

increased rate will remain in effect. 

(B) Introductory rates. If the issuer 

discloses an introductory rate, as that 

term is defined in § 226.16(g)(2)(ii), in 

the table or in any written or electronic 

promotional materials accompanying 

applications or solicitations subject to 

paragraph (c) or (e) of this section, the 

issuer must briefly disclose directly 

beneath the table the circumstances, if 

any, under which the introductory rate 

may be revoked, and the type of rate 

that will apply after the introductory 

rate is revoked. 

(C) Employee preferential rates. If a 

card issuer discloses in the table a 

preferential annual percentage rate for 

which only employees of the card 

issuer, employees of a third party, or 

other individuals with similar 

affiliations with the card issuer or third 

party, such as executive officers, 

directors, or principal shareholders are 

eligible, the card issuer must briefly 

disclose directly beneath the table the 

circumstances under which such 

preferential rate may be revoked, and 

the rate that will apply after such 

preferential rate is revoked. 

* * * * * 

■ 5. Section 226.6 is amended by 

revising paragraphs (b)(1)(ii), (b)(2)(i)(B), 

and (b)(2)(i)(D) to read as follows: 

§ 226.6 Account-opening disclosures. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) Location. Only the information 

required or permitted by paragraphs 

(b)(2)(i) through (v) (except for 

(b)(2)(i)(D)(2)) and (b)(2)(vii) through 

(xiv) of this section shall be in the table. 

Disclosures required by paragraphs 

(b)(2)(i)(D)(2), (b)(2)(i)(D)(3), (b)(2)(vi), 

and (b)(2)(xv) of this section shall be 

placed directly below the table. 

Disclosures required by paragraphs 

(b)(3) through (5) of this section that are 

not otherwise required to be in the table 

and other information may be presented 

with the account agreement or accountopening disclosure statement, provided 

such information appears outside the 

required table. 

* * * * * 

(2) * * * 

(i) * * * 

(B) Discounted initial rates. If the 

initial rate is an introductory rate, as 

that term is defined in § 226.16(g)(2)(ii), 

the creditor must disclose the rate that 

would otherwise apply to the account 

pursuant to paragraph (b)(2)(i) of this 

section. Where the rate is not tied to an 

index or formula, the creditor must 

disclose the rate that will apply after the 

introductory rate expires. In a variablerate account, the creditor must disclose 

a rate based on the applicable index or 

formula in accordance with the 

accuracy requirements of paragraph 

(b)(4)(ii)(G) of this section. Except as 

provided in paragraph (b)(2)(i)(F) of this 

section, the creditor is not required to, 

but may disclose in the table the 

introductory rate along with the rate 

that would otherwise apply to the 

account if the creditor also discloses the 

time period during which the 

introductory rate will remain in effect, 

and uses the term ‘‘introductory’’ or 

‘‘intro’’ in immediate proximity to the 

introductory rate. 

* * * * * 

(D) Penalty rates. (1) In general. 

Except as provided in paragraph 

(b)(2)(i)(D)(2) and (b)(2)(i)(D)(3) of this 

section, if a rate may increase as a 

penalty for one or more events specified 

in the account agreement, such as a late 

payment or an extension of credit that 

exceeds the credit limit, the creditor 

must disclose pursuant to paragraph 

(b)(2)(i) of this section the increased rate 

that may apply, a brief description of 

the event or events that may result in 

the increased rate, and a brief 

description of how long the increased 

rate will remain in effect. If more than 

one penalty rate may apply, the creditor 

at its option may disclose the highest 

rate that could apply, instead of 

disclosing the specific rates or the range 

of rates that could apply. 

(2) Introductory rates. If the creditor 

discloses in the table an introductory 

rate, as that term is defined in 

§ 226.16(g)(2)(ii), creditors must briefly 

disclose directly beneath the table the 

circumstances under which the 

introductory rate may be revoked, and 


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23000 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

the rate that will apply after the 

introductory rate is revoked. 

(3) Employee preferential rates. If a 

creditor discloses in the table a 

preferential annual percentage rate for 

which only employees of the creditor, 

employees of a third party, or other 

individuals with similar affiliations 

with the creditor or third party, such as 

executive officers, directors, or principal 

shareholders are eligible, the creditor 

must briefly disclose directly beneath 

the table the circumstances under which 

such preferential rate may be revoked, 

and the rate that will apply after such 

preferential rate is revoked. 

* * * * * 

■ 6. Section 226.7 is amended by 

revising paragraphs (b)(12) and (b)(14) 

to read as follows: 

§ 226.7 Periodic statement. 

* * * * * 

(b) * * * 

(12) Repayment disclosures. (i) In 

general. Except as provided in 

paragraphs (b)(12)(ii) and (b)(12)(v) of 

this section, for a credit card account 

under an open-end (not home-secured) 

consumer credit plan, a card issuer must 

provide the following disclosures on 

each periodic statement: 

(A) The following statement with a 

bold heading: ‘‘Minimum Payment 

Warning: If you make only the 

minimum payment each period, you 

will pay more in interest and it will take 

you longer to pay off your balance;’’ 

(B) The minimum payment repayment 

estimate, as described in Appendix M1 

to this part. If the minimum payment 

repayment estimate is less than 2 years, 

the card issuer must disclose the 

estimate in months. Otherwise, the 

estimate must be disclosed in years and 

rounded to the nearest whole year; 

(C) The minimum payment total cost 

estimate, as described in Appendix M1 

to this part. The minimum payment 

total cost estimate must be rounded 

either to the nearest whole dollar or to 

the nearest cent, at the card issuer’s 

option; 

(D) A statement that the minimum 

payment repayment estimate and the 

minimum payment total cost estimate 

are based on the current outstanding 

balance shown on the periodic 

statement. A statement that the 

minimum payment repayment estimate 

and the minimum payment total cost 

estimate are based on the assumption 

that only minimum payments are made 

and no other amounts are added to the 

balance; 

(E) A toll-free telephone number 

where the consumer may obtain from 

the card issuer information about credit 

counseling services consistent with 

paragraph (b)(12)(iv) of this section; and 

(F)(1) Except as provided in paragraph 

(b)(12)(i)(F)(2) of this section, the 

following disclosures: 

(i) The estimated monthly payment 

for repayment in 36 months, as 

described in Appendix M1 to this part. 

The estimated monthly payment for 

repayment in 36 months must be 

rounded either to the nearest whole 

dollar or to the nearest cent, at the card 

issuer’s option; 

(ii) A statement that the card issuer 

estimates that the consumer will repay 

the outstanding balance shown on the 

periodic statement in 3 years if the 

consumer pays the estimated monthly 

payment each month for 3 years; 

(iii) The total cost estimate for 

repayment in 36 months, as described in 

Appendix M1 to this part. The total cost 

estimate for repayment in 36 months 

must be rounded either to the nearest 

whole dollar or to the nearest cent, at 

the card issuer’s option; and 

(iv) The savings estimate for 

repayment in 36 months, as described in 

Appendix M1 to this part. The savings 

estimate for repayment in 36 months 

must be rounded either to the nearest 

whole dollar or to the nearest cent, at 

the card issuer’s option. 

(2) The requirements of paragraph 

(b)(12)(i)(F)(1) of this section do not 

apply to a periodic statement in any of 

the following circumstances: 

(i) The minimum payment repayment 

estimate that is disclosed on the 

periodic statement pursuant to 

paragraph (b)(12)(i)(B) of this section 

after rounding is three years or less; 

(ii) The estimated monthly payment 

for repayment in 36 months, as 

described in Appendix M1 to this part, 

after rounding as set forth in paragraph 

(b)(12)(f)(1)(i) of this section that is 

calculated for a particular billing cycle 

is less than the minimum payment 

required for the plan for that billing 

cycle; and 

(iii) A billing cycle where an account 

has both a balance in a revolving feature 

where the required minimum payments 

for this feature will not amortize that 

balance in a fixed amount of time 

specified in the account agreement and 

a balance in a fixed repayment feature 

where the required minimum payment 

for this fixed repayment feature will 

amortize that balance in a fixed amount 

of time specified in the account 

agreement which is less than 36 months. 

(ii) Negative or no amortization. If 

negative or no amortization occurs 

when calculating the minimum 

payment repayment estimate as 

described in Appendix M1 of this part, 

a card issuer must provide the following 

disclosures on the periodic statement 

instead of the disclosures set forth in 

paragraph (b)(12)(i) of this section: 

(A) The following statement: 

‘‘Minimum Payment Warning: Even if 

you make no more charges using this 

card, if you make only the minimum 

payment each month we estimate you 

will never pay off the balance shown on 

this statement because your payment 

will be less than the interest charged 

each month’’; 

(B) The following statement: ‘‘If you 

make more than the minimum payment 

each period, you will pay less in interest 

and pay off your balance sooner’’; 

(C) The estimated monthly payment 

for repayment in 36 months, as 

described in Appendix M1 to this part. 

The estimated monthly payment for 

repayment in 36 months must be 

rounded either to the nearest whole 

dollar or to the nearest cent, at the 

issuer’s option; 

(D) A statement that the card issuer 

estimates that the consumer will repay 

the outstanding balance shown on the 

periodic statement in 3 years if the 

consumer pays the estimated monthly 

payment each month for 3 years; and 

(E) A toll-free telephone number 

where the consumer may obtain from 

the card issuer information about credit 

counseling services consistent with 

paragraph (b)(12)(iv) of this section. 

* * * * * 

(14) Deferred interest or similar 

transactions. For accounts with an 

outstanding balance subject to a 

deferred interest or similar program, the 

date by which that outstanding balance 

must be paid in full in order to avoid 

the obligation to pay finance charges on 

such balance must be disclosed on the 

front of any page of each periodic 

statement issued during the deferred 

interest period beginning with the first 

periodic statement issued during the 

deferred interest period that reflects the 

deferred interest or similar transaction. 

The disclosure provided pursuant to 

this paragraph must be substantially 

similar to Sample G–18(H) in Appendix 

G to this part. 

■ 7. Section 226.9 is amended by adding 

paragraph (b)(3)(ii) and by revising 

paragraphs (c)(2)(i)(A), (c)(2)(ii), 

(c)(2)(iii), (c)(2)(iv)(A)(1), (c)(2)(iv)(B), 

(c)(2)(iv)(D), (c)(2)(v)(B)(1) through (3), 

(c)(2)(v)(C), and (c)(2)(v)(D). 

The additions and revisions read as 

follows: 

§ 226.9 Subsequent disclosure 

requirements. 

* * * * * 

(b) * * * 

(3) * * * 


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(iii) Variable rates. If any annual 

percentage rate required to be disclosed 

pursuant to paragraph (b)(3)(i) of this 

section is a variable rate, the card issuer 

shall also disclose the fact that the rate 

may vary and how the rate is 

determined. In describing how the 

applicable rate will be determined, the 

card issuer must identify the type of 

index or formula that is used in setting 

the rate. The value of the index and the 

amount of the margin that are used to 

calculate the variable rate shall not be 

disclosed in the table. A disclosure of 

any applicable limitations on rate 

increases shall not be included in the 

table. 

(c) * * * 

(2) * * * 

(i) * * * 

(A) General. For plans other than 

home-equity plans subject to the 

requirements of § 226.5b, except as 

provided in paragraphs (c)(2)(i)(B), 

(c)(2)(iii) and (c)(2)(v) of this section, 

when a significant change in account 

terms as described in paragraph (c)(2)(ii) 

of this section is made, a creditor must 

provide a written notice of the change 

at least 45 days prior to the effective 

date of the change to each consumer 

who may be affected. The 45-day timing 

requirement does not apply if the 

consumer has agreed to a particular 

change as described in paragraph 

(c)(2)(i)(B) of this section; for such 

changes, notice must be given in 

accordance with the timing 

requirements of paragraph (c)(2)(i)(B) of 

this section. Increases in the rate 

applicable to a consumer’s account due 

to delinquency, default or as a penalty 

described in paragraph (g) of this 

section that are not due to a change in 

the contractual terms of the consumer’s 

account must be disclosed pursuant to 

paragraph (g) of this section instead of 

paragraph (c)(2) of this section. 

* * * * * 

(ii) Significant changes in account 

terms. For purposes of this section, a 

‘‘significant change in account terms’’ 

means a change to a term required to be 

disclosed under § 226.6(b)(1) and (b)(2), 

an increase in the required minimum 

periodic payment, a change to a term 

required to be disclosed under 

§ 226.6(b)(4), or the acquisition of a 

security interest. 

(iii) Charges not covered by 

§ 226.6(b)(1) and (b)(2). Except as 

provided in paragraph (c)(2)(vi) of this 

section, if a creditor increases any 

component of a charge, or introduces a 

new charge, required to be disclosed 

under § 226.6(b)(3) that is not a 

significant change in account terms as 

described in paragraph (c)(2)(ii) of this 

section, a creditor must either, at its 

option: 

(A) Comply with the requirements of 

paragraph (c)(2)(i) of this section; or 

(B) Provide notice of the amount of 

the charge before the consumer agrees to 

or becomes obligated to pay the charge, 

at a time and in a manner that a 

consumer would be likely to notice the 

disclosure of the charge. The notice may 

be provided orally or in writing. 

(iv) * * * 

(A) * * * 

(1) A summary of the changes made 

to terms required by § 226.6(b)(1) and 

(b)(2) or § 226.6(b)(4), a description of 

any increase in the required minimum 

periodic payment, and a description of 

any security interest being acquired by 

the creditor; 

* * * * * 

(B) Right to reject for credit card 

accounts under an open-end (not homesecured) consumer credit plan. In 

addition to the disclosures in paragraph 

(c)(2)(iv)(A) of this section, if a card 

issuer makes a significant change in 

account terms on a credit card account 

under an open-end (not home-secured) 

consumer credit plan, the creditor must 

generally provide the following 

information on the notice provided 

pursuant to paragraph (c)(2)(i) of this 

section. This information is not required 

to be provided in the case of an increase 

in the required minimum periodic 

payment, an increase in a fee as a result 

of a reevaluation of a determination 

made under § 226.52(b)(1)(i) or an 

adjustment to the safe harbors in 

§ 226.52(b)(1)(ii) to reflect changes in 

the Consumer Price Index, a change in 

an annual percentage rate applicable to 

a consumer’s account, an increase in a 

fee previously reduced consistent with 

50 U.S.C. app. 527 or a similar Federal 

or State statute or regulation if the 

amount of the increased fee does not 

exceed the amount of that fee prior to 

the reduction, or when the change 

results from the creditor not receiving 

the consumer’s required minimum 

periodic payment within 60 days after 

the due date for that payment: 

* * * * * 

(D) Format requirements. (1) Tabular 

format. The summary of changes 

described in paragraph (c)(2)(iv)(A)(1) of 

this section must be in a tabular format 

(except for a summary of any increase 

in the required minimum periodic 

payment, a summary of a term required 

to be disclosed under § 226.6(b)(4) that 

is not required to be disclosed under 

§ 226.6(b)(1) and (b)(2), or a description 

of any security interest being acquired 

by the creditor), with headings and 

format substantially similar to any of the 

account-opening tables found in G–17 

in appendix G to this part. The table 

must disclose the changed term and 

information relevant to the change, if 

that relevant information is required by 

§ 226.6(b)(1) and (b)(2). The new terms 

shall be described in the same level of 

detail as required when disclosing the 

terms under § 226.6(b)(2). 

* * * * * 

(v) * * * 

(B) When the change is an increase in 

an annual percentage rate or fee upon 

the expiration of a specified period of 

time, provided that: 

(1) Prior to commencement of that 

period, the creditor disclosed in writing 

to the consumer, in a clear and 

conspicuous manner, the length of the 

period and the annual percentage rate or 

fee that would apply after expiration of 

the period; 

(2) The disclosure of the length of the 

period and the annual percentage rate or 

fee that would apply after expiration of 

the period are set forth in close 

proximity and in equal prominence to 

the first listing of the disclosure of the 

rate or fee that applies during the 

specified period of time; and 

(3) The annual percentage rate or fee 

that applies after that period does not 

exceed the rate or fee disclosed 

pursuant to paragraph (c)(2)(v)(B)(1) of 

this paragraph or, if the rate disclosed 

pursuant to paragraph (c)(2)(v)(B)(1) of 

this section was a variable rate, the rate 

following any such increase is a variable 

rate determined by the same formula 

(index and margin) that was used to 

calculate the variable rate disclosed 

pursuant to paragraph (c)(2)(v)(B)(1); 

(C) When the change is an increase in 

a variable annual percentage rate in 

accordance with a credit card or other 

account agreement that provides for 

changes in the rate according to 

operation of an index that is not under 

the control of the creditor and is 

available to the general public; or 

(D) When the change is an increase in 

an annual percentage rate, a fee or 

charge required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), (b)(2)(viii), 

(b)(2)(ix), (b)(2)(ix) or (b)(2)(xii), or the 

required minimum periodic payment 

due to the completion of a workout or 

temporary hardship arrangement by the 

consumer or the consumer’s failure to 

comply with the terms of such an 

arrangement, provided that: 

* * * * * 

■ 8. Section 226.10 is amending by 

revising paragraphs (b)(4) and (e) to read 

as follows: 

§ 226.10 Payments. 

* * * * * 


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(b) * * * 

(4) Nonconforming payments. (i) In 

general. Except as provided in 

paragraph (b)(4)(ii) of this section, if a 

creditor specifies, on or with the 

periodic statement, requirements for the 

consumer to follow in making payments 

as permitted under this § 226.10, but 

accepts a payment that does not 

conform to the requirements, the 

creditor shall credit the payment within 

five days of receipt. 

(ii) Payment methods promoted by 

creditor. If a creditor promotes a method 

for making payments, such payments 

shall be considered conforming 

payments in accordance with this 

paragraph (b) and shall be credited to 

the consumer’s account as of the date of 

receipt, except when a delay in 

crediting does not result in a finance or 

other charge. 

* * * * * 

(e) Limitations on fees related to 

method of payment. For credit card 

accounts under an open-end (not homesecured) consumer credit plan, a 

creditor may not impose a separate fee 

to allow consumers to make a payment 

by any method, such as mail, electronic, 

or telephone payments, unless such 

payment method involves an expedited 

service by a customer service 

representative of the creditor. For 

purposes of paragraph (e) of this section, 

the term ‘‘creditor’’ includes a third 

party that collects, receives, or processes 

payments on behalf of a creditor. 

* * * * * 

■ 9. Section 226.16(g) is revised to read 

as follows: 

§ 226.16 Advertising. 

* * * * * 

(g) Promotional rates and fees. (1) 

Scope. The requirements of this 

paragraph apply to any advertisement of 

an open-end (not home-secured) plan, 

including promotional materials 

accompanying applications or 

solicitations subject to § 226.5a(c) or 

accompanying applications or 

solicitations subject to § 226.5a(e). 

(2) Definitions. (i) Promotional rate 

means any annual percentage rate 

applicable to one or more balances or 

transactions on an open-end (not homesecured) plan for a specified period of 

time that is lower than the annual 

percentage rate that will be in effect at 

the end of that period on such balances 

or transactions. 

(ii) Introductory rate means a 

promotional rate offered in connection 

with the opening of an account. 

(iii) Promotional period means the 

maximum time period for which a 

promotional rate or promotional fee may 

be applicable. 

(iv) Promotional fee means a fee 

required to be disclosed under 

§ 226.6(b)(1) and (2) applicable to an 

open-end (not home-secured) plan, or to 

one or more balances or transactions on 

an open-end (not home-secured) plan, 

for a specified period of time that is 

lower than the fee that will be in effect 

at the end of that period for such plan 

or types of balances or transactions. 

(v) Introductory fee means a 

promotional fee offered in connection 

with the opening of an account. 

(3) Stating the term ‘‘introductory’’. If 

any annual percentage rate or fee that 

may be applied to the account is an 

introductory rate or introductory fee, the 

term introductory or intro must be in 

immediate proximity to each listing of 

the introductory rate or introductory fee 

in a written or electronic advertisement. 

(4) Stating the promotional period 

and post-promotional rate or fee. If any 

annual percentage rate that may be 

applied to the account is a promotional 

rate under paragraph (g)(2)(i) of this 

section or any fee that may be applied 

to the account is a promotional fee 

under paragraph (g)(2)(iv) of this 

section, the information in paragraphs 

(g)(4)(i) and, as applicable, (g)(4)(ii) or 

(iii) of this section must be stated in a 

clear and conspicuous manner in the 

advertisement. If the rate or fee is stated 

in a written or electronic advertisement, 

the information in paragraphs (g)(4)(i) 

and, as applicable, (g)(4)(ii) or (iii) of 

this section must also be stated in a 

prominent location closely proximate to 

the first listing of the promotional rate 

or promotional fee. 

(i) When the promotional rate or 

promotional fee will end; 

(ii) The annual percentage rate that 

will apply after the end of the 

promotional period. If such rate is 

variable, the annual percentage rate 

must comply with the accuracy 

standards in §§ 226.5a(c)(2), 

226.5a(d)(3), 226.5a(e)(4), or 

226.16(b)(1)(ii), as applicable. If such 

rate cannot be determined at the time 

disclosures are given because the rate 

depends at least in part on a later 

determination of the consumer’s 

creditworthiness, the advertisement 

must disclose the specific rates or the 

range of rates that might apply; and 

(iii) The fee that will apply after the 

end of the promotional period. 

(5) Envelope excluded. The 

requirements in paragraph (g)(4) of this 

section do not apply to an envelope or 

other enclosure in which an application 

or solicitation is mailed, or to a banner 

advertisement or pop-up advertisement, 

linked to an application or solicitation 

provided electronically. 

* * * * * 

■ 10. Section 226.51 is amended by 

revising paragraphs (a)(1) 

and(b)(1)(ii)(B) to read as follows: 

§ 226.51 Ability to pay. 

(a) General rule. (1)(i) Consideration 

of ability to pay. A card issuer must not 

open a credit card account for a 

consumer under an open-end (not 

home-secured) consumer credit plan, or 

increase any credit limit applicable to 

such account, unless the card issuer 

considers the consumer’s independent 

ability to make the required minimum 

periodic payments under the terms of 

the account based on the consumer’s 

income or assets and current 

obligations. 

(ii) Reasonable policies and 

procedures. Card issuers must establish 

and maintain reasonable written 

policies and procedures to consider a 

consumer’s independent income or 

assets and current obligations. 

Reasonable policies and procedures to 

consider a consumer’s independent 

ability to make the required payments 

include the consideration of at least one 

of the following: The ratio of debt 

obligations to income; the ratio of debt 

obligations to assets; or the income the 

consumer will have after paying debt 

obligations. It would be unreasonable 

for a card issuer to not review any 

information about a consumer’s income, 

assets, or current obligations, or to issue 

a credit card to a consumer who does 

not have any independent income or 

assets. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) * * * 

(B) Financial information indicating 

such cosigner, guarantor, or joint 

applicant has the independent ability to 

make the required minimum periodic 

payments on such debts, consistent with 

paragraph (a) of this section. 

* * * * * 

■ 11. Section 226.52 is amended by 

revising the heading to paragraph (a) 

and by revising paragraphs (a)(1), (a)(3), 

and (b)(1)(ii) to read as follows: 

§ 226.52 Limitations on fees. 

(a) Limitations prior to account 

opening and during first year after 

account opening. (1) General rule. 

Except as provided in paragraph (a)(2) 

of this section, the total amount of fees 

a consumer is required to pay with 

respect to a credit card account under 

an open-end (not home-secured) 

consumer credit plan prior to account 

opening and during the first year after 

account opening must not exceed 25 

percent of the credit limit in effect when 


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the account is opened. For purposes of 

this paragraph, an account is considered 

open no earlier than the date on which 

the account may first be used by the 

consumer to engage in transactions. 

* * * * * 

(3) Rule of construction. Paragraph (a) 

of this section does not authorize the 

imposition or payment of fees or charges 

otherwise prohibited by law. 

(b) * * * 

(1) * * * 

(ii) Safe harbors. A card issuer may 

impose a fee for violating the terms or 

other requirements of an account if the 

dollar amount of the fee does not 

exceed, as applicable: 

(A) $25.00; 

(B) $35.00 if the card issuer 

previously imposed a fee pursuant to 

paragraph (b)(1)(ii)(A) of this section for 

a violation of the same type that 

occurred during the same billing cycle 

or one of the next six billing cycles; or 

(C) Three percent of the delinquent 

balance on a charge card account that 

requires payment of outstanding 

balances in full at the end of each 

billing cycle if the card issuer has not 

received the required payment for two 

or more consecutive billing cycles. 

(D) The amounts in paragraphs 

(b)(1)(ii)(A) and (b)(1)(ii)(B) of this 

section will be adjusted annually by the 

Board to reflect changes in the 

Consumer Price Index. 

* * * * * 

■ 12. Section 226.53 is amended by 

revising paragraph (b) to read as follows: 

§ 226.53 Allocation of payments. 

* * * * * 

(b) Special rules. (1) Accounts with 

balances subject to deferred interest or 

similar program. When a balance on a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan is subject to a deferred interest or 

similar program that provides that a 

consumer will not be obligated to pay 

interest that accrues on the balance if 

the balance is paid in full prior to the 

expiration of a specified period of time: 

(i) Last two billing cycles. The card 

issuer must allocate any amount paid by 

the consumer in excess of the required 

minimum periodic payment consistent 

with paragraph (a) of this section, 

except that, during the two billing 

cycles immediately preceding 

expiration of the specified period, the 

excess amount must be allocated first to 

the balance subject to the deferred 

interest or similar program and any 

remaining portion allocated to any other 

balances consistent with paragraph (a) 

of this section; or 

(ii) Consumer request. The card issuer 

may at its option allocate any amount 

paid by the consumer in excess of the 

required minimum periodic payment 

among the balances on the account in 

the manner requested by the consumer. 

(2) Accounts with secured balances. 

When a balance on a credit card account 

under an open-end (not home-secured) 

consumer credit plan is secured, the 

card issuer may at its option allocate 

any amount paid by the consumer in 

excess of the required minimum 

periodic payment to that balance if 

requested by the consumer. 

■ 13. Section 226.55 is amended by 

revising paragraphs (b)(1), (b)(3)(iii), and 

(b)(6), and by adding paragraph (e) to 

read as follows: 

§ 226.55 Limitations on increasing annual 

percentage rates, fees, and charges. 

* * * * * 

(b) * * * 

(1) Temporary rate, fee, or charge 

exception. A card issuer may increase 

an annual percentage rate or a fee or 

charge required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) 

upon the expiration of a specified 

period of six months or longer, provided 

that: 

(i) Prior to the commencement of that 

period, the card issuer disclosed in 

writing to the consumer, in a clear and 

conspicuous manner, the length of the 

period and the annual percentage rate, 

fee, or charge that would apply after 

expiration of the period; and 

(ii) Upon expiration of the specified 

period: 

(A) The card issuer must not apply an 

annual percentage rate, fee, or charge to 

transactions that occurred prior to the 

period that exceeds the annual 

percentage rate, fee, or charge that 

applied to those transactions prior to the 

period; 

(B) If the disclosures required by 

paragraph (b)(1)(i) of this section are 

provided pursuant to § 226.9(c), the card 

issuer must not apply an annual 

percentage rate, fee, or charge to 

transactions that occurred within 14 

days after provision of the notice that 

exceeds the annual percentage rate, fee, 

or charge that applied to that category 

of transactions prior to provision of the 

notice; and 

(C) The card issuer must not apply an 

annual percentage rate, fee, or charge to 

transactions that occurred during the 

period that exceeds the increased 

annual percentage rate, fee, or charge 

disclosed pursuant to paragraph (b)(1)(i) 

of this section. 

* * * * * 

(3) * * * 

(iii) This exception does not permit a 

card issuer to increase an annual 

percentage rate or a fee or charge 

required to be disclosed under 

§ 226.6(b)(2)(ii), (iii), or (xii) during the 

first year after the account is opened, 

while the account is closed, or while the 

card issuer does not permit the 

consumer to use the account for new 

transactions. For purposes of this 

paragraph, an account is considered 

open no earlier than the date on which 

the account may first be used by the 

consumer to engage in transactions. 

* * * * * 

(6) Servicemembers Civil Relief Act 

exception. If an annual percentage rate 

or a fee or charge required to be 

disclosed under § 226.6(b)(2)(ii), (iii), or 

(xii) has been decreased pursuant to 50 

U.S.C. app. 527 or a similar Federal or 

State statute or regulation, a card issuer 

may increase that annual percentage 

rate, fee, or charge once 50 U.S.C. app. 

527 or the similar statute or regulation 

no longer applies, provided that the 

card issuer must not apply to any 

transactions that occurred prior to the 

decrease an annual percentage rate, fee, 

or charge that exceeds the annual 

percentage rate, fee, or charge that 

applied to those transactions prior to the 

decrease. 

* * * * * 

(e) Promotional waivers or rebates of 

interest, fees, and other charges. If a 

card issuer promotes the waiver or 

rebate of finance charges due to a 

periodic interest rate or fees or charges 

required to be disclosed under 

§ 226.6(b)(2)(ii), (iii), or (xii) and applies 

the waiver or rebate to a credit card 

account under an open-end (not homesecured) consumer credit plan, any 

cessation of the waiver or rebate on that 

account constitutes an increase in an 

annual percentage rate, fee, or charge for 

purposes of this section. 

■ 14. Section 226.58 is amended by: 

■ A. Revising paragraphs (b)(1) and (2); 

■ B. Redesignating paragraphs (b)(4) 

through (7) as paragraphs (b)(5) through 

(8); 

■ C. Adding a new paragraph (b)(4); and 

■ D. Revising paragraphs (c)(1) and (3), 

removing and reserving paragraph (c)(2), 

and revising paragraph (c)(8) to read as 

follows: 

§ 226.58 Internet posting of credit card 

agreements. 

* * * * * 

(b) Definitions. (1) Agreement. For 

purposes of this section, ‘‘agreement’’ or 

‘‘credit card agreement’’ means the 

written document or documents 

evidencing the terms of the legal 

obligation, or the prospective legal 

obligation, between a card issuer and a 

consumer for a credit card account 

under an open-end (not home-secured) 


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consumer credit plan. ‘‘Agreement’’ or 

‘‘credit card agreement’’ also includes 

the pricing information, as defined in 

§ 226.58(b)(7). 

(2) Amends. For purposes of this 

section, an issuer ‘‘amends’’ an 

agreement if it makes a substantive 

change (an ‘‘amendment’’) to the 

agreement. A change is substantive if it 

alters the rights or obligations of the 

card issuer or the consumer under the 

agreement. Any change in the pricing 

information, as defined in 

§ 226.58(b)(7), is deemed to be 

substantive. 

* * * * * 

(4) Card issuer. For purposes of this 

section, ‘‘card issuer’’ or ‘‘issuer’’ means 

the entity to which a consumer is legally 

obligated, or would be legally obligated, 

under the terms of a credit card 

agreement. 

* * * * * 

(c) Submission of agreements to 

Board. (1) Quarterly submissions. A 

card issuer must make quarterly 

submissions to the Board, in the form 

and manner specified by the Board. 

Quarterly submissions must be sent to 

the Board no later than the first business 

day on or after January 31, April 30, July 

31, and October 31 of each year. Each 

submission must contain: 

(i) Identifying information about the 

card issuer and the agreements 

submitted, including the issuer’s name, 

address, and identifying number (such 

as an RSSD ID number or tax 

identification number); 

(ii) The credit card agreements that 

the card issuer offered to the public as 

of the last business day of the preceding 

calendar quarter that the card issuer has 

not previously submitted to the Board; 

(iii) Any credit card agreement 

previously submitted to the Board that 

was amended during the preceding 

calendar quarter and that the card issuer 

offered to the public as of the last 

business day of the preceding calendar 

quarter, as described in § 226.58(c)(3); 

and 

(iv) Notification regarding any credit 

card agreement previously submitted to 

the Board that the issuer is 

withdrawing, as described in 

§ 226.58(c)(4), (c)(5), (c)(6), and (c)(7). 

(2) [Reserved]. 

(3) Amended agreements. If a credit 

card agreement has been submitted to 

the Board, the agreement has not been 

amended and the card issuer continues 

to offer the agreement to the public, no 

additional submission regarding that 

agreement is required. If a credit card 

agreement that previously has been 

submitted to the Board is amended and 

the card issuer offered the amended 

agreement to the public as of the last 

business day of the calendar quarter in 

which the change became effective, the 

card issuer must submit the entire 

amended agreement to the Board, in the 

form and manner specified by the 

Board, by the first quarterly submission 

deadline after the last day of the 

calendar quarter in which the change 

became effective. 

* * * * * 

(8) Form and content of agreements 

submitted to the Board. (i) Form and 

content generally. (A) Each agreement 

must contain the provisions of the 

agreement and the pricing information 

in effect as of the last business day of 

the preceding calendar quarter. 

(B) Agreements must not include any 

personally identifiable information 

relating to any cardholder, such as 

name, address, telephone number, or 

account number. 

(C) The following are not deemed to 

be part of the agreement for purposes of 

§ 226.58, and therefore are not required 

to be included in submissions to the 

Board: 

(1) Disclosures required by State or 

Federal law, such as affiliate marketing 

notices, privacy policies, billing rights 

notices, or disclosures under the E-Sign 

Act; 

(2) Solicitation materials; 

(3) Periodic statements; 

(4) Ancillary agreements between the 

issuer and the consumer, such as debt 

cancellation contracts or debt 

suspension agreements; 

(5) Offers for credit insurance or other 

optional products and other similar 

advertisements; and 

(6) Documents that may be sent to the 

consumer along with the credit card or 

credit card agreement such as a cover 

letter, a validation sticker on the card, 

or other information about card security. 

(D) Agreements must be presented in 

a clear and legible font. 

(ii) Pricing information. (A) Pricing 

information must be set forth in a single 

addendum to the agreement. The 

addendum must contain all of the 

pricing information, as defined by 

§ 226.58(b)(7). The addendum may, but 

is not required to, contain any other 

information listed in § 226.6(b), 

provided that information is complete 

and accurate as of the applicable date 

under § 226.58. The addendum may not 

contain any other information. 

(B) Pricing information that may vary 

from one cardholder to another 

depending on the cardholder’s 

creditworthiness or state of residence or 

other factors must be disclosed either by 

setting forth all the possible variations 

(such as purchase APRs of 13 percent, 

15 percent, 17 percent, and 19 percent) 

or by providing a range of possible 

variations (such as purchase APRs 

ranging from 13 percent to 19 percent). 

(C) If a rate included in the pricing 

information is a variable rate, the issuer 

must identify the index or formula used 

in setting the rate and the margin. Rates 

that may vary from one cardholder to 

another must be disclosed by providing 

the index and the possible margins 

(such as the prime rate plus 5 percent, 

8 percent, 10 percent, or 12 percent) or 

range of margins (such as the prime rate 

plus from 5 to 12 percent). The value of 

the rate and the value of the index are 

not required to be disclosed. 

(iii) Optional variable terms 

addendum. Provisions of the agreement 

other than the pricing information that 

may vary from one cardholder to 

another depending on the cardholder’s 

creditworthiness or state of residence or 

other factors may be set forth in a single 

addendum to the agreement separate 

from the pricing information addendum. 

(iv) Integrated agreement. Issuers may 

not provide provisions of the agreement 

or pricing information in the form of 

change-in-terms notices or riders (other 

than the pricing information addendum 

and the optional variable terms 

addendum). Changes in provisions or 

pricing information must be integrated 

into the text of the agreement, the 

pricing information addendum or the 

optional variable terms addendum, as 

appropriate. 

* * * * * 

■ 15. Appendix M1 to part 226 is 

amended by revising paragraph (f) to 

read as follows: 

Appendix M1 to Part 226—Repayment 

Disclosures 

* * * * * 

(f) Calculating the savings estimate for 

repayment in 36 months. When calculating 

the savings estimate for repayment in 36 

months, if a card issuer chooses under 

§ 226.7(b)(12)(i) to round the disclosures to 

the nearest whole dollar when disclosing 

them on the periodic statement, the card 

issuer must calculate the savings estimate for 

repayment in 36 months by subtracting the 

total cost estimate for repayment in 36 

months calculated under paragraph (e) of this 

appendix (rounded to the nearest whole 

dollar) from the minimum payment total cost 

estimate calculated under paragraph (c) of 

this appendix (rounded to the nearest whole 

dollar). If a card issuer chooses under 

§ 227.7(b)(12)(i), however, to round the 

disclosures to the nearest cent when 

disclosing them on the periodic statement, 

the card issuer must calculate the savings 

estimate for repayment in 36 months by 

subtracting the total cost estimate for 

repayment in 36 months calculated under 

paragraph (e) of this appendix (rounded to 

the nearest cent) from the minimum payment 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23005 

total cost estimate calculated under 

paragraph (c) of this appendix (rounded to 

the nearest cent). The savings estimate for 

repayment in 36 months shall be considered 

accurate if it is based on the total cost 

estimate for repayment in 36 months that is 

calculated in accordance with paragraph (e) 

of this appendix and the minimum payment 

total cost estimate calculated under 

paragraph (c) of this appendix. 

■ 16. In Supplement I to Part 226: 

■ A. Under Section 226.2—Definitions 

and Rules of Construction, subheading 

2(a)(15) Credit card, paragraphs 2. and 

3. are revised and paragraph 4. is added. 

■ B. Under Section 226.5—General 

Disclosure Requirements, subheading 

5(b)(2) Periodic statements: 

■ i. Under Paragraph 5(b)(2)(ii), 

paragraphs 1. through 4. are revised; 

and 

■ ii. The heading Paragraph 5(b)(2)(iii) 

and paragraph 1. under that heading are 

removed. 

■ C. Under Section 226.5a—Credit and 

Charge Card Applications and 

Solicitations, 5a(b) Required disclosures 

is revised. 

■ D. Under Section 226.6—AccountOpening Disclosures, subheading 6(b) 

Rules affecting open-end (not homesecured) plans, 6(b)(2) Required 

disclosures for account-opening table 

for open-end (not home-secured) plans 

is revised. 

■ E. Under Section 226.7—Periodic 

Statement, 7(b) Rules affecting open-end 

(not home-secured) plans is revised. 

■ F. Under Section 226.9–Subsequent 

Disclosure Requirements: 

■ i. Under 9(b) Disclosures for 

supplemental credit access devices and 

additional features, 9(b)(3) Checks that 

access a credit card account is revised; 

■ ii. Under 9(c) Change in terms, 9(c)(2) 

Rules affecting open-end (not homesecured) plans is revised; 

■ iii. Under 9(e) Disclosures upon 

renewal of credit or charge card, 

paragraph 10. is revised. 

■ G. Under Section 226.10—Payments: 

■ i. Under 10(b) Specific requirements 

for payments, paragraph 2. is revised; 

■ ii. Under 10(e) Limitations on fees 

related to method of payment, 

paragraph 4. is added; and 

■ iii. Under 10(f) Changes by card 

issuer, paragraph 3. is revised. 

■ H. Under Section 226.12—Special 

Credit Card Provisions, subheading 

12(c) Right of cardholder to assert 

claims or defenses against card issuer, 

paragraph 4. is revised. 

■ I. Under Section 226.13—Billing Error 

Resolution, subheading 13(c) Time for 

resolution; general procedures, 

subheading Paragraph 13(c)(2), 

paragraph 2. is revised. 

■ J. Under Section 226.14— 

Determination of Annual Percentage 

Rate, subheading 14(a) General rule, 

paragraph 6. is added. 

■ K. Under Section 226.16— 

Advertising: 

■ i. Paragraphs 1. and 2. are revised; and 

■ ii. 16(g) Promotional rates is revised. 

■ L. Under Section 226.30—Limitation 

on Rates, paragraph 8. is revised. 

■ M. Section 226.51—Ability to Pay is 

revised. 

■ N. Section 226.52—Limitations on 

Fees is revised. 

■ O. Under Section 226.53— Allocation 

of Payments: 

■ i. Paragraphs 4. and 5. are revised; and 

■ ii. 53(b) is revised. 

■ P. Under Section 226.55— Limitations 

on Increasing Annual Percentage Rates, 

Fees, and Charges: 

■ i. 55(a) General rule is revised; 

■ ii. Under 55(b) Exceptions, paragraphs 

1. and 3. are revised; 

■ iii. 55(b)(1) Temporary rate exception 

is revised; 

■ iv. Under 55(b)(3) Advance notice 

exception, paragraphs 6. and 7. are 

added; 

■ v. 55(b)(6) Servicemembers Civil Relief 

Act exception is revised; 

■ vi. Under 55(c) Treatment of protected 

balances, 55(c)(1) Definition of 

protected balance is revised; and 

■ vii. 55(e) Promotional waivers or 

rebates of interest, fees, and other 

charges is added. 

■ Q. Under Section 226.58—Internet 

Posting of Credit Card Agreements: 

■ i. 58(b) Definitions is revised; 

■ ii. Under 58(c) Submission of 

agreements to Board, 58(c)(3) Amended 

agreements is revised; 

■ iii. 58(d) Posting of agreements offered 

to the public is revised; and 

■ iv. 58(e) Agreements for all open 

accounts is revised. 

■ R. Under Section 226.59–Reevaluation 

of Rate Increases: 

■ i. Under 59(a) General rule, 59(a)(1) 

Evaluation of increased rate is revised; 

■ ii. Under 59(d) Factors, paragraph 6. 

is added; and 

■ iii. 59(f) Termination of obligation to 

review factors is revised. 

The revisions and additions read as 

follows: 

Supplement I to Part 226—Official Staff 

Interpretations 

* * * * * 

Subpart A—General 

* * * * * 

§ 226.2—Definitions and Rules of 

Construction 

* * * * * 

2(a)(15) Credit card. 

* * * * * 

2. Examples. i. Examples of credit cards 

include: 

A. A card that guarantees checks or similar 

instruments, if the asset account is also tied 

to an overdraft line or if the instrument 

directly accesses a line of credit. 

B. A card that accesses both a credit and 

an asset account (that is, a debit-credit card). 

C. An identification card that permits the 

consumer to defer payment on a purchase. 

D. An identification card indicating loan 

approval that is presented to a merchant or 

to a lender, whether or not the consumer 

signs a separate promissory note for each 

credit extension. 

E. A card or device that can be activated 

upon receipt to access credit, even if the card 

has a substantive use other than credit, such 

as a purchase-price discount card. Such a 

card or device is a credit card 

notwithstanding the fact that the recipient 

must first contact the card issuer to access or 

activate the credit feature. 

ii. In contrast, credit card does not include, 

for example: 

A. A check-guarantee or debit card with no 

credit feature or agreement, even if the 

creditor occasionally honors an inadvertent 

overdraft. 

B. Any card, key, plate, or other device that 

is used in order to obtain petroleum products 

for business purposes from a wholesale 

distribution facility or to gain access to that 

facility, and that is required to be used 

without regard to payment terms. 

C. An account number that accesses a 

credit account, unless the account number 

can access an open-end line of credit to 

purchase goods or services. For example, if 

a creditor provides a consumer with an openend line of credit that can be accessed by an 

account number in order to transfer funds 

into another account (such as an asset 

account with the same creditor), the account 

number is not a credit card for purposes of 

§ 226.2(a)(15)(i). However, if the account 

number can also access the line of credit to 

purchase goods or services (such as an 

account number that can be used to purchase 

goods or services on the Internet), the 

account number is a credit card for purposes 

of § 226.2(a)(15)(i), regardless of whether the 

creditor treats such transactions as 

purchases, cash advances, or some other type 

of transaction. Furthermore, if the line of 

credit can also be accessed by a card (such 

as a debit card), that card is a credit card for 

purposes of § 226.2(a)(15)(i). 

3. Charge card. Generally, charge cards are 

cards used in connection with an account on 

which outstanding balances cannot be 

carried from one billing cycle to another and 

are payable when a periodic statement is 

received. Under the regulation, a reference to 

credit cards generally includes charge cards. 

In particular, references to credit card 

accounts under an open-end (not homesecured) consumer credit plan in Subparts B 

and G generally include charge cards. The 

term charge card is, however, distinguished 

from credit card or credit card account under 

an open-end (not home-secured) consumer 

credit plan in §§ 226.5a, 226.6(b)(2)(xiv), 

226.7(b)(11), 226.7(b)(12), 226.9(e), 226.9(f), 

226.28(d), 226.52(b)(1)(ii)(C), and appendices 

G–10 through G–13. 

4. Credit card account under an open-end 

(not home-secured) consumer credit plan. An 


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23006 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

open-end consumer credit account is a credit 

card account under an open-end (not homesecured) consumer credit plan for purposes 

of § 226.2(a)(15)(ii) if: 

i. The account is accessed by a credit card, 

as defined in § 226.2(a)(15)(i); and 

ii. The account is not excluded under 

§ 226.2(a)(15)(ii)(A) or (a)(15)(ii)(B). 

* * * * * 

Subpart B—Open-End Credit 

§ 226.5—General Disclosure Requirements 

* * * * * 

5(b)(2) Periodic statements. 

* * * * * 

Paragraph 5(b)(2)(ii). 

1. Mailing or delivery of periodic 

statements. A creditor is not required to 

determine the specific date on which a 

periodic statement is mailed or delivered to 

an individual consumer for purposes of 

§ 226.5(b)(2)(ii). A creditor complies with 

§ 226.5(b)(2)(ii) if it has adopted reasonable 

procedures designed to ensure that periodic 

statements are mailed or delivered to 

consumers no later than a certain number of 

days after the closing date of the billing cycle 

and adds that number of days to the 21-day 

or 14-day period required by § 226.5(b)(2)(ii) 

when determining, as applicable, the 

payment due date for purposes of 

§ 226.5(b)(2)(ii)(A), the date on which any 

grace period expires for purposes of 

§ 226.5(b)(2)(ii)(B)(1), or the date after which 

the payment will be treated as late for 

purposes of § 226.5(b)(2)(ii)(B)(2). For 

example: 

A. If a creditor has adopted reasonable 

procedures designed to ensure that periodic 

statements for a credit card account under an 

open-end (not home-secured) consumer 

credit plan or an account under an open-end 

consumer credit plan that provides a grace 

period are mailed or delivered to consumers 

no later than three days after the closing date 

of the billing cycle, the payment due date for 

purposes of § 226.5(b)(2)(ii)(A) and the date 

on which any grace period expires for 

purposes of § 226.5(b)(2)(ii)(B)(1) must be no 

less than 24 days after the closing date of the 

billing cycle. Similarly, in these 

circumstances, the limitations in 

§ 226.5(b)(2)(ii)(A) and (b)(2)(ii)(B)(1) on 

treating a payment as late and imposing 

finance charges apply for 24 days after the 

closing date of the billing cycle. 

B. If a creditor has adopted reasonable 

procedures designed to ensure that periodic 

statements for an account under an open-end 

consumer credit plan that does not provide 

a grace period are mailed or delivered to 

consumers no later than five days after the 

closing date of the billing cycle, the date on 

which a payment must be received in order 

to avoid being treated as late for purposes of 

§ 226.5(b)(2)(ii)(B)(2) must be no less than 19 

days after the closing date of the billing 

cycle. Similarly, in these circumstances, the 

limitation in § 226.5(b)(2)(ii)(B)(2) on treating 

a payment as late for any purpose applies for 

19 days after the closing date of the billing 

cycle. 

2. Treating a payment as late for any 

purpose. Treating a payment as late for any 

purpose includes increasing the annual 

percentage rate as a penalty, reporting the 

consumer as delinquent to a credit reporting 

agency, assessing a late fee or any other fee, 

initiating collection activities, or terminating 

benefits (such as rewards on purchases) 

based on the consumer’s failure to make a 

payment within a specified amount of time 

or by a specified date. The prohibitions in 

§ 226.5(b)(2)(ii)(A)(2) and (b)(2)(B)(2)(ii) on 

treating a payment as late for any purpose 

apply only during the 21-day or 14-day 

period (as applicable) following mailing or 

delivery of the periodic statement stating the 

due date for that payment and only if the 

required minimum periodic payment is 

received within that period. For example: 

i. Assume that, for a credit card account 

under an open-end (not home-secured) 

consumer credit plan, a periodic statement 

mailed on April 4 states that a required 

minimum periodic payment of $50 is due on 

April 25. If the card issuer does not receive 

any payment on or before April 25, 

§ 226.5(b)(2)(ii)(A)(2) does not prohibit the 

card issuer from treating the required 

minimum periodic payment as late. 

ii. Same facts as in paragraph i. above. On 

April 20, the card issuer receives a payment 

of $30 and no additional payment is received 

on or before April 25. Section 

226.5(b)(2)(ii)(A)(2) does not prohibit the 

card issuer from treating the required 

minimum periodic payment as late. 

iii. Same facts as in paragraph i. above. On 

May 4, the card issuer has not received the 

$50 required minimum periodic payment 

that was due on April 25. The periodic 

statement mailed on May 4 states that a 

required minimum periodic payment of $150 

is due on May 25. Section 

226.5(b)(2)(ii)(A)(2) does not permit the card 

issuer to treat the $150 required minimum 

periodic payment as late until April 26. 

However, the card issuer may continue to 

treat the $50 required minimum periodic 

payment as late during this period. 

iv. Assume that, for an account under an 

open-end consumer credit plan that does not 

provide a grace period, a periodic statement 

mailed on September 10 states that a required 

minimum periodic payment of $100 is due 

on September 24. If the creditor does not 

receive any payment on or before September 

24, § 226.5(b)(2)(ii)(B)(2)(ii) does not prohibit 

the creditor from treating the required 

minimum periodic payment as late. 

3. Grace periods. i. Definition of grace 

period. For purposes of § 226.5(b)(2)(ii)(B), 

‘‘grace period’’ means a period within which 

any credit extended may be repaid without 

incurring a finance charge due to a periodic 

interest rate. A deferred interest or similar 

promotional program under which the 

consumer is not obligated to pay interest that 

accrues on a balance if that balance is paid 

in full prior to the expiration of a specified 

period of time is not a grace period for 

purposes of § 226.5(b)(2)(ii)(B). Similarly, a 

period following the payment due date 

during which a late payment fee will not be 

imposed is not a grace period for purposes 

of § 226.5(b)(2)(ii)(B). See comments 

7(b)(11)–1, 7(b)(11)–2, and 54(a)(1)–2. 

ii. Applicability of § 226.5(b)(2)(ii)(B)(1). 

Section 226.5(b)(2)(ii)(B)(1) applies if an 

account is eligible for a grace period when 

the periodic statement is mailed or delivered. 

Section 226.5(b)(2)(ii)(B)(1) does not require 

the creditor to provide a grace period or 

prohibit the creditor from placing limitations 

and conditions on a grace period to the 

extent consistent with § 226.5(b)(2)(ii)(B) and 

§ 226.54. See comment 54(a)(1)–1. 

Furthermore, the prohibition in 

§ 226.5(b)(2)(ii)(B)(1)(ii) applies only during 

the 21-day period following mailing or 

delivery of the periodic statement and 

applies only when the creditor receives a 

payment within that 21-day period that 

satisfies the terms of the grace period. 

iii. Example. Assume that the billing cycles 

for an account begin on the first day of the 

month and end on the last day of the month 

and that the payment due date for the 

account is the twenty-fifth of the month. 

Assume also that, under the terms of the 

account, the balance at the end of a billing 

cycle must be paid in full by the following 

payment due date in order for the account to 

remain eligible for the grace period. At the 

end of the April billing cycle, the balance on 

the account is $500. The grace period applies 

to the $500 balance because the balance for 

the March billing cycle was paid in full on 

April 25. Accordingly, 

§ 226.5(b)(2)(ii)(B)(1)(i) requires the creditor 

to have reasonable procedures designed to 

ensure that the periodic statement reflecting 

the $500 balance is mailed or delivered on 

or before May 4. Furthermore, 

§ 226.5(b)(2)(ii)(B)(1)(ii) requires the creditor 

to have reasonable procedures designed to 

ensure that the creditor does not impose 

finance charges as a result of the loss of the 

grace period if a $500 payment is received on 

or before May 25. However, if the creditor 

receives a payment of $300 on April 25, 

§ 226.5(b)(2)(ii)(B)(1)(ii) would not prohibit 

the creditor from imposing finance charges as 

a result of the loss of the grace period (to the 

extent permitted by § 226.54). 

4. Application of § 226.5(b)(2)(ii) to charge 

card and charged-off accounts. i. Charge card 

accounts. For purposes of 

§ 226.5(b)(2)(ii)(A)(1), the payment due date 

for a credit card account under an open-end 

(not home-secured) consumer credit plan is 

the date the card issuer is required to 

disclose on the periodic statement pursuant 

to § 226.7(b)(11)(i)(A). Because 

§ 226.7(b)(11)(ii) provides that 

§ 226.7(b)(11)(i) does not apply to periodic 

statements provided solely for charge card 

accounts, § 226.5(b)(2)(ii)(A)(1) also does not 

apply to the mailing or delivery of periodic 

statements provided solely for such accounts. 

However, in these circumstances, 

§ 226.5(b)(2)(ii)(A)(2) requires the card issuer 

to have reasonable procedures designed to 

ensure that a payment is not treated as late 

for any purpose during the 21-day period 

following mailing or delivery of the 

statement. A card issuer that complies with 

§ 226.5(b)(2)(ii)(A) as discussed above with 

respect to a charge card account has also 

complied with § 226.5(b)(2)(ii)(B)(2). Section 

226.5(b)(2)(ii)(B)(1) does not apply to charge 

card accounts because, for purposes of 

§ 226.5(b)(2)(ii)(B), a grace period is a period 

within which any credit extended may be 

repaid without incurring a finance charge 

due to a periodic interest rate and, consistent 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23007 

with § 226.2(a)(15)(iii), charge card accounts 

do not impose a finance charge based on a 

periodic rate. 

ii. Charged-off accounts. For purposes of 

§ 226.5(b)(2)(ii)(A)(1), the payment due date 

for a credit card account under an open-end 

(not home-secured) consumer credit plan is 

the date the card issuer is required to 

disclose on the periodic statement pursuant 

to § 226.7(b)(11)(i)(A). Because 

§ 226.7(b)(11)(ii) provides that 

§ 226.7(b)(11)(i) does not apply to periodic 

statements provided for charged-off accounts 

where full payment of the entire account 

balance is due immediately, 

§ 226.5(b)(2)(ii)(A)(1) also does not apply to 

the mailing or delivery of periodic statements 

provided solely for such accounts. 

Furthermore, although § 226.5(b)(2)(ii)(A)(2) 

requires the card issuer to have reasonable 

procedures designed to ensure that a 

payment is not treated as late for any purpose 

during the 21-day period following mailing 

or delivery of the statement, 

§ 226.5(b)(2)(ii)(A)(2) does not prohibit a card 

issuer from continuing to treat prior 

payments as late during that period. See 

comment 5(b)(2)(ii)–2. Similarly, although 

§ 226.5(b)(2)(ii)(B)(2) applies to open-end 

consumer credit accounts in these 

circumstances, § 226.5(b)(2)(ii)(B)(2)(ii) does 

not prohibit a creditor from continuing 

treating prior payments as late during the 

14-day period following mailing or delivery 

of a periodic statement. Section 

226.5(b)(2)(ii)(B)(1) does not apply to 

charged-off accounts where full payment of 

the entire account balance is due 

immediately because such accounts do not 

provide a grace period. 

* * * * * 

§ 226.5a—Credit and Charge Card 

Applications and Solicitations 

* * * * * 

5a(b) Required disclosures. 

1. Tabular format. Provisions in § 226.5a(b) 

and its commentary provide that certain 

information must appear or is permitted to 

appear in a table. The tabular format is 

required for § 226.5a(b) disclosures given 

pursuant to § 226.5a(c), (d)(2), (e)(1) and (f). 

The tabular format does not apply to oral 

disclosures given pursuant to § 226.5a(d)(1). 

(See § 226.5a(a)(2).) 

2. Accuracy. Rules concerning accuracy of 

the disclosures required by § 226.5a(b), 

including variable rate disclosures, are stated 

in § 226.5a(c)(2), (d)(3), and (e)(4), as 

applicable. 

5a(b)(1) Annual percentage rate. 

1. Variable-rate accounts—definition. For 

purposes of § 226.5a(b)(1), a variable-rate 

account exists when rate changes are part of 

the plan and are tied to an index or formula. 

(See the commentary to § 226.6(b)(4)(ii) for 

examples of variable-rate plans.) 

2. Variable-rate accounts—fact that rate 

varies and how the rate will be determined. 

In describing how the applicable rate will be 

determined, the card issuer must identify in 

the table the type of index or formula used, 

such as the prime rate. In describing the 

index, the issuer may not include in the table 

details about the index. For example, if the 

issuer uses a prime rate, the issuer must 

disclose the rate as a ‘‘prime rate’’ and may 

not disclose in the table other details about 

the prime rate, such as the fact that it is the 

highest prime rate published in the Wall 

Street Journal two business days before the 

closing date of the statement for each billing 

period. The issuer may not disclose in the 

table the current value of the index (such as 

that the prime rate is currently 7.5 percent) 

or the amount of the margin or spread added 

to the index or formula in setting the 

applicable rate. A card issuer may not 

disclose any applicable limitations on rate 

increases or decreases in the table, such as 

describing that the rate will not go below a 

certain rate or higher than a certain rate. (See 

Samples G–10(B) and G–10(C) for guidance 

on how to disclose the fact that the 

applicable rate varies and how it is 

determined.) 

3. Discounted initial rates. i. Immediate 

proximity. If the term ‘‘introductory’’ is in the 

same phrase as the introductory rate, as that 

term is defined in § 226.16(g)(2)(ii), it will be 

deemed to be in immediate proximity of the 

listing. For example, an issuer that uses the 

phrase ‘‘introductory balance transfer APR X 

percent’’ has used the word ‘‘introductory’’ 

within the same phrase as the rate. (See 

Sample G–10(C) for guidance on how to 

disclose clearly and conspicuously the 

expiration date of the introductory rate and 

the rate that will apply after the introductory 

rate expires, if an introductory rate is 

disclosed in the table.) 

ii. Subsequent changes in terms. The fact 

that an issuer may reserve the right to change 

a rate subsequent to account opening, 

pursuant to the notice requirements of 

§ 226.9(c) and the limitations in § 226.55, 

does not, by itself, make that rate an 

introductory rate. For example, assume an 

issuer discloses an annual percentage rate for 

purchases of 12.99% but does not specify a 

time period during which that rate will be in 

effect. Even if that issuer subsequently 

increases the annual percentage rate for 

purchases to 15.99%, pursuant to a changein-terms notice provided under § 226.9(c), 

the 12.99% is not an introductory rate. 

iii. More than one introductory rate. If 

more than one introductory rate may apply 

to a particular balance in succeeding periods, 

the term ‘‘introductory’’ need only be used to 

describe the first introductory rate. For 

example, if an issuer offers a rate of 8.99% 

on purchases for six months, 10.99% on 

purchases for the following six months, and 

14.99% on purchases after the first year, the 

term ‘‘introductory’’ need only be used to 

describe the 8.99% rate. 

4. Premium initial rates—subsequent 

changes in terms. The fact that an issuer may 

reserve the right to change a rate subsequent 

to account opening, pursuant to the notice 

requirements of § 226.9(c) and the limitations 

in § 226.55 (as applicable), does not, by itself, 

make that rate a premium initial rate. For 

example, assume an issuer discloses an 

annual percentage rate for purchases of 

18.99% but does not specify a time period 

during which that rate will be in effect. Even 

if that issuer subsequently reduces the 

annual percentage rate for purchases to 

15.99%, the 18.99% is not a premium initial 

rate. If the rate decrease is the result of a 

change from a non-variable rate to a variable 

rate or from a variable rate to a non-variable 

rate, see comments 9(c)(2)(v)–3 and 

9(c)(2)(v)–4 for guidance on the notice 

requirements under § 226.9(c). 

5. Increased penalty rates. i. In general. For 

rates that are not introductory rates or 

employee preferential rates, if a rate may 

increase as a penalty for one or more events 

specified in the account agreement, such as 

a late payment or an extension of credit that 

exceeds the credit limit, the card issuer must 

disclose the increased rate that would apply, 

a brief description of the event or events that 

may result in the increased rate, and a brief 

description of how long the increased rate 

will remain in effect. The description of the 

specific event or events that may result in an 

increased rate should be brief. For example, 

if an issuer may increase a rate to the penalty 

rate because the consumer does not make the 

minimum payment by 5 p.m., Eastern Time, 

on its payment due date, the issuer should 

describe this circumstance in the table as 

‘‘make a late payment.’’ Similarly, if an issuer 

may increase a rate that applies to a 

particular balance because the account is 

more than 60 days late, the issuer should 

describe this circumstance in the table as 

‘‘make a late payment.’’ An issuer may not 

distinguish between the events that may 

result in an increased rate for existing 

balances and the events that may result in an 

increased rate for new transactions. (See 

Samples G–10(B) and G–10(C) (in the row 

labeled ‘‘Penalty APR and When it Applies’’) 

for additional guidance on the level of detail 

in which the specific event or events should 

be described.) The description of how long 

the increased rate will remain in effect also 

should be brief. If a card issuer reserves the 

right to apply the increased rate to any 

balances indefinitely, to the extent permitted 

by §§ 226.55(b)(4) and 226.59, the issuer 

should disclose that the penalty rate may 

apply indefinitely. The card issuer may not 

disclose in the table any limitations imposed 

by §§ 226.55(b)(4) and 226.59 on the duration 

of increased rates. For example, if the issuer 

generally provides that the increased rate 

will apply until the consumer makes twelve 

timely consecutive required minimum 

periodic payments, except to the extent that 

§§ 226.55(b)(4) and 226.59 apply, the issuer 

should disclose that the penalty rate will 

apply until the consumer makes twelve 

consecutive timely minimum payments. (See 

Samples G–10(B) and G–10(C) (in the row 

labeled ‘‘Penalty APR and When it Applies’’) 

for additional guidance on the level of detail 

which the issuer should use to describe how 

long the increased rate will remain in effect.) 

A card issuer will be deemed to meet the 

standard to clearly and conspicuously 

disclose the information required by 

§ 226.5a(b)(1)(iv)(A) if the issuer uses the 

format shown in Samples G–10(B) and G– 

10(C) (in the row labeled ‘‘Penalty APR and 

When it Applies’’) to disclose this 

information. 

ii. Introductory rates—general. An issuer is 

required to disclose directly beneath the table 

the circumstances under which an 

introductory rate, as that term is defined in 

§ 226.16(g)(2)(ii), may be revoked, and the 

rate that will apply after the revocation. This 


srobinson on DSKHWCL6B1PROD with RULES2
23008 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

information about revocation of an 

introductory rate and the rate that will apply 

after revocation must be provided even if the 

rate that will apply after the introductory rate 

is revoked is the rate that would have applied 

at the end of the promotional period. In a 

variable-rate account, the rate that would 

have applied at the end of the promotional 

period is a rate based on the applicable index 

or formula in accordance with the accuracy 

requirements set forth in § 226.5a(c)(2) or 

(e)(4). In describing the rate that will apply 

after revocation of the introductory rate, if 

the rate that will apply after revocation of the 

introductory rate is already disclosed in the 

table, the issuer is not required to repeat the 

rate, but may refer to that rate in a clear and 

conspicuous manner. For example, if the rate 

that will apply after revocation of an 

introductory rate is the standard rate that 

applies to that type of transaction (such as a 

purchase or balance transfer transaction), and 

the standard rates are labeled in the table as 

‘‘standard APRs,’’ the issuer may refer to the 

‘‘standard APR’’ when describing the rate that 

will apply after revocation of an introductory 

rate. (See Sample G–10(C) in the disclosure 

labeled ‘‘Loss of Introductory APR’’ directly 

beneath the table.) The description of the 

circumstances in which an introductory rate 

could be revoked should be brief. For 

example, if an issuer may increase an 

introductory rate because the account is more 

than 60 days late, the issuer should describe 

this circumstance directly beneath the table 

as ‘‘make a late payment.’’ In addition, if the 

circumstances in which an introductory rate 

could be revoked are already listed elsewhere 

in the table, the issuer is not required to 

repeat the circumstances again, but may refer 

to those circumstances in a clear and 

conspicuous manner. For example, if the 

circumstances in which an introductory rate 

could be revoked are the same as the event 

or events that may trigger a ‘‘penalty rate’’ as 

described in § 226.5a(b)(1)(iv)(A), the issuer 

may refer to the actions listed in the Penalty 

APR row, in describing the circumstances in 

which the introductory rate could be 

revoked. (See Sample G–10(C) in the 

disclosure labeled ‘‘Loss of Introductory 

APR’’ directly beneath the table for additional 

guidance on the level of detail in which to 

describe the circumstances in which an 

introductory rate could be revoked.) A card 

issuer will be deemed to meet the standard 

to clearly and conspicuously disclose the 

information required by § 226.5a(b)(1)(iv)(B) 

if the issuer uses the format shown in Sample 

G–10(C) to disclose this information. 

iii. Introductory rates—limitations on 

revocation. Issuers that are disclosing an 

introductory rate are prohibited by § 226.55 

from increasing or revoking the introductory 

rate before it expires unless the consumer 

fails to make a required minimum periodic 

payment within 60 days after the due date for 

the payment. In making the required 

disclosure pursuant to § 226.5a(b)(1)(iv)(B), 

issuers should describe this circumstance 

directly beneath the table as ‘‘make a late 

payment.’’ 

iv. Employee preferential rates. An issuer 

is required to disclose directly beneath the 

table the circumstances under which an 

employee preferential rate may be revoked, 

and the rate that will apply after the 

revocation. In describing the rate that will 

apply after revocation of the employee 

preferential rate, if the rate that will apply 

after revocation of the employee preferential 

rate is already disclosed in the table, the 

issuer is not required to repeat the rate, but 

may refer to that rate in a clear and 

conspicuous manner. For example, if the rate 

that will apply after revocation of an 

employee preferential rate is the standard 

rate that applies to that type of transaction 

(such as a purchase or balance transfer 

transaction), and the standard rates are 

labeled in the table as ‘‘standard APRs,’’ the 

issuer may refer to the ‘‘standard APR’’ when 

describing the rate that will apply after 

revocation of an employee preferential rate. 

The description of the circumstances in 

which an employee preferential rate could be 

revoked should be brief. For example, if an 

issuer may increase an employee preferential 

rate based upon termination of the 

employee’s employment relationship with 

the issuer or a third party, issuers may 

describe this circumstance as ‘‘if your 

employment with [issuer or third party] 

ends.’’ 

6. Rates that depend on consumer’s 

creditworthiness. i. In general. The card 

issuer, at its option, may disclose the 

possible rates that may apply as either 

specific rates, or a range of rates. For 

example, if there are three possible rates that 

may apply (9.99, 12.99 or 17.99 percent), an 

issuer may disclose specific rates (9.99, 12.99 

or 17.99 percent) or a range of rates (9.99 to 

17.99 percent). The card issuer may not 

disclose only the lowest, highest or median 

rate that could apply. (See Samples G–10(B) 

and G–10(C) for guidance on how to disclose 

a range of rates.) 

ii. Penalty rates. If the rate is a penalty rate, 

as described in § 226.5a(b)(1)(iv), the card 

issuer at its option may disclose the highest 

rate that could apply, instead of disclosing 

the specific rates or the range of rates that 

could apply. For example, if the penalty rate 

could be up to 28.99 percent, but the issuer 

may impose a penalty rate that is less than 

that rate depending on factors at the time the 

penalty rate is imposed, the issuer may 

disclose the penalty rate as ‘‘up to’’ 28.99 

percent. The issuer also must include a 

statement that the penalty rate for which the 

consumer may qualify will depend on the 

consumer’s creditworthiness, and other 

factors if applicable. 

iii. Other factors. Section 226.5a(b)(1)(v) 

applies even if other factors are used in 

combination with a consumer’s 

creditworthiness to determine the rate for 

which a consumer may qualify at account 

opening. For example, § 226.5a(b)(1)(v) 

would apply if the issuer considers the type 

of purchase the consumer is making at the 

time the consumer opens the account, in 

combination with the consumer’s 

creditworthiness, to determine the rate for 

which the consumer may qualify at account 

opening. If other factors are considered, the 

issuer should amend the statement about 

creditworthiness, to indicate that the rate for 

which the consumer may qualify at account 

opening will depend on the consumer’s 

creditworthiness and other factors. 

Nonetheless, § 226.5a(b)(1)(v) does not apply 

if a consumer’s creditworthiness is not one 

of the factors that will determine the rate for 

which the consumer may qualify at account 

opening (for example, if the rate is based 

solely on the type of purchase that the 

consumer is making at the time the consumer 

opens the account, or is based solely on 

whether the consumer has other banking 

relationships with the card issuer). 

7. Rate based on another rate on the 

account. In some cases, one rate may be 

based on another rate on the account. For 

example, assume that a penalty rate as 

described in § 226.5a(b)(1)(iv)(A) is 

determined by adding 5 percentage points to 

the current purchase rate, which is 10 

percent. In this example, the card issuer in 

disclosing the penalty rate must disclose 15 

percent as the current penalty rate. If the 

purchase rate is a variable rate, then the 

penalty rate also is a variable rate. In that 

case, the card issuer also must disclose the 

fact that the penalty rate may vary and how 

the rate is determined, such as ‘‘This APR 

may vary with the market based on the Prime 

Rate.’’ In describing the penalty rate, the 

issuer shall not disclose in the table the 

amount of the margin or spread added to the 

current purchase rate to determine the 

penalty rate, such as describing that the 

penalty rate is determined by adding 5 

percentage points to the purchase rate. (See 

§ 226.5a(b)(1)(i) and comment 5a(b)(1)–2 for 

further guidance on describing a variable 

rate.) 

8. Rates. The only rates that shall be 

disclosed in the table are annual percentage 

rates determined under § 226.14(b). Periodic 

rates shall not be disclosed in the table. 

9. Deferred interest or similar transactions. 

An issuer offering a deferred interest or 

similar plan, such as a promotional program 

that provides that a consumer will not be 

obligated to pay interest that accrues on a 

balance if that balance is paid in full prior 

to the expiration of a specified period of 

time, may not disclose a 0% rate as the rate 

applicable to deferred interest or similar 

transactions if there are any circumstances 

under which the consumer will be obligated 

for interest on such transactions for the 

deferred interest or similar period. 

5a(b)(2) Fees for issuance or availability. 

1. Membership fees. Membership fees for 

opening an account must be disclosed under 

this paragraph. A membership fee to join an 

organization that provides a credit or charge 

card as a privilege of membership must be 

disclosed only if the card is issued 

automatically upon membership. Such a fee 

shall not be disclosed in the table if 

membership results merely in eligibility to 

apply for an account. 

2. Enhancements. Fees for optional 

services in addition to basic membership 

privileges in a credit or charge card account 

(for example, travel insurance or cardregistration services) shall not be disclosed in 

the table if the basic account may be opened 

without paying such fees. Issuing a card to 

each primary cardholder (not authorized 

users) is considered a basic membership 

privilege and fees for additional cards, 

beyond the first card on the account, must be 

disclosed as a fee for issuance or availability. 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23009 

Thus, a fee to obtain an additional card on 

the account beyond the first card (so that 

each cardholder would have his or her own 

card) must be disclosed in the table as a fee 

for issuance or availability under 

§ 226.5a(b)(2). This fee must be disclosed 

even if the fee is optional; that is, if the fee 

is charged only if the cardholder requests one 

or more additional cards. (See the available 

credit disclosure in § 226.5a(b)(14).) 

3. One-time fees. Disclosure of nonperiodic fees is limited to fees related to 

opening the account, such as one-time 

membership or participation fees, or an 

application fee that is excludable from the 

finance charge under § 226.4(c)(1). The 

following are examples of fees that shall not 

be disclosed in the table: 

i. Fees for reissuing a lost or stolen card. 

ii. Statement reproduction fees. 

4. Waived or reduced fees. If fees required 

to be disclosed are waived or reduced for a 

limited time, the introductory fees or the fact 

of fee waivers may be disclosed in the table 

in addition to the required fees if the card 

issuer also discloses how long the reduced 

fees or waivers will remain in effect in 

accordance with the requirements of 

§§ 226.9(c)(2)(v)(B) and 226.55(b)(1). 

5. Periodic fees and one-time fees. A card 

issuer disclosing a periodic fee must disclose 

the amount of the fee, how frequently it will 

be imposed, and the annualized amount of 

the fee. A card issuer disclosing a nonperiodic fee must disclose that the fee is a 

one-time fee. (See Sample G–10(C) for 

guidance on how to meet these 

requirements.) 

5a(b)(3) Fixed finance charge; minimum 

interest charge. 

1. Example of brief statement. See Samples 

G–10(B) and G–10(C) for guidance on how to 

provide a brief description of a minimum 

interest charge. 

2. Adjustment of $1.00 threshold amount. 

Consistent with § 226.5a(b)(3), the Board will 

publish adjustments to the $1.00 threshold 

amount, as appropriate. 

5a(b)(4) Transaction charges. 

1. Charges imposed by person other than 

card issuer. Charges imposed by a third 

party, such as a seller of goods, shall not be 

disclosed in the table under this section; the 

third party would be responsible for 

disclosing the charge under § 226.9(d)(1). 

2. Foreign transaction fees. A transaction 

charge imposed by the card issuer for the use 

of the card for purchases includes any fee 

imposed by the issuer for purchases in a 

foreign currency or that take place outside 

the United States or with a foreign merchant. 

(See comment 4(a)–4 for guidance on when 

a foreign transaction fee is considered 

charged by the card issuer.) If an issuer 

charges the same foreign transaction fee for 

purchases and cash advances in a foreign 

currency, or that take place outside the 

United States or with a foreign merchant, the 

issuer may disclose this foreign transaction 

fee as shown in Samples G–10(B) and G– 

10(C). Otherwise, the issuer must revise the 

foreign transaction fee language shown in 

Samples G–10(B) and G–10(C) to disclose 

clearly and conspicuously the amount of the 

foreign transaction fee that applies to 

purchases and the amount of the foreign 

transaction fee that applies to cash advances. 

5a(b)(5) Grace period. 

1. How grace period disclosure is made. 

The card issuer must state any conditions on 

the applicability of the grace period. An 

issuer, however, may not disclose under 

§ 226.5a(b)(5) the limitations on the 

imposition of finance charges as a result of 

a loss of a grace period in § 226.54, or the 

impact of payment allocation on whether 

interest is charged on purchases as a result 

of a loss of a grace period. Some issuers may 

offer a grace period on all purchases under 

which interest will not be charged on 

purchases if the consumer pays the 

outstanding balance shown on a periodic 

statement in full by the due date shown on 

that statement for one or more billing cycles. 

In these circumstances, § 226.5a(b)(5) 

requires that the issuer disclose the grace 

period and the conditions for its applicability 

using the following language, or substantially 

similar language, as applicable: ‘‘Your due 

date is [at least] __ days after the close of 

each billing cycle. We will not charge you 

any interest on purchases if you pay your 

entire balance by the due date each month.’’ 

However, other issuers may offer a grace 

period on all purchases under which interest 

may be charged on purchases even if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by the 

due date shown on that statement each 

billing cycle. In these circumstances, 

§ 226.5a(b)(5) requires the issuer to amend 

the above disclosure language to describe 

accurately the conditions on the applicability 

of the grace period. 

2. No grace period. The issuer may use the 

following language to describe that no grace 

period on any purchases is offered, as 

applicable: ‘‘We will begin charging interest 

on purchases on the transaction date.’’ 

3. Grace period on some purchases. If the 

issuer provides a grace period on some types 

of purchases but no grace period on others, 

the issuer may combine and revise the 

language in comments 5a(b)(5)–1 and –2 as 

appropriate to describe to which types of 

purchases a grace period applies and to 

which types of purchases no grace period is 

offered. 

5a(b)(6) Balance computation method. 

1. Form of disclosure. In cases where the 

card issuer uses a balance computation 

method that is identified by name in 

§ 226.5a(g), the card issuer must disclose 

below the table only the name of the method. 

In cases where the card issuer uses a balance 

computation method that is not identified by 

name in § 226.5a(g), the disclosure below the 

table must clearly explain the method in as 

much detail as set forth in the descriptions 

of balance methods in § 226.5a(g). The 

explanation need not be as detailed as that 

required for the disclosures under 

§ 226.6(b)(4)(i)(D). 

2. Determining the method. In determining 

which balance computation method to 

disclose for purchases, the card issuer must 

assume that a purchase balance will exist at 

the end of any grace period. Thus, for 

example, if the average daily balance method 

will include new purchases only if purchase 

balances are not paid within the grace period, 

the card issuer would disclose the name of 

the average daily balance method that 

includes new purchases. The card issuer 

must not assume the existence of a purchase 

balance, however, in making other 

disclosures under § 226.5a(b). 

5a(b)(7) Statement on charge card 

payments. 

1. Applicability and content. The 

disclosure that charges are payable upon 

receipt of the periodic statement is applicable 

only to charge card accounts. In making this 

disclosure, the card issuer may make such 

modifications as are necessary to more 

accurately reflect the circumstances of 

repayment under the account. For example, 

the disclosure might read, ‘‘Charges are due 

and payable upon receipt of the periodic 

statement and must be paid no later than 15 

days after receipt of such statement.’’ 

5a(b)(8) Cash advance fee. 

1. Content. See Samples G–10(B) and G– 

10(C) for guidance on how to disclose clearly 

and conspicuously the cash advance fee. 

2. Foreign cash advances. Cash advance 

fees required to be disclosed under 

§ 226.5a(b)(8) include any charge imposed by 

the card issuer for cash advances in a foreign 

currency or that take place outside the 

United States or with a foreign merchant. 

(See comment 4(a)–4 for guidance on when 

a foreign transaction fee is considered 

charged by the card issuer.) If an issuer 

charges the same foreign transaction fee for 

purchases and cash advances in a foreign 

currency or that take place outside the 

United States or with a foreign merchant, the 

issuer may disclose this foreign transaction 

fee as shown in Samples G–10(B) and (C). 

Otherwise, the issuer must revise the foreign 

transaction fee language shown in Samples 

G–10(B) and (C) to disclose clearly and 

conspicuously the amount of the foreign 

transaction fee that applies to purchases and 

the amount of the foreign transaction fee that 

applies to cash advances. 

3. ATM fees. An issuer is not required to 

disclose pursuant to § 226.5a(b)(8) any 

charges imposed on a cardholder by an 

institution other than the card issuer for the 

use of the other institution’s ATM in a shared 

or interchange system. 

5a(b)(9) Late payment fee. 

1. Applicability. The disclosure of the fee 

for a late payment includes only those fees 

that will be imposed for actual, unanticipated 

late payments. (See the commentary to 

§ 226.4(c)(2) for additional guidance on late 

payment fees. See Samples G–10(B) and G– 

10(C) for guidance on how to disclose clearly 

and conspicuously the late payment fee.) 

5a(b)(10) Over-the-limit fee. 

1. Applicability. The disclosure of fees for 

exceeding a credit limit does not include fees 

for other types of default or for services 

related to exceeding the limit. For example, 

no disclosure is required of fees for 

reinstating credit privileges or fees for the 

dishonor of checks on an account that, if 

paid, would cause the credit limit to be 

exceeded. (See Samples G–10(B) and G–10(C) 

for guidance on how to disclose clearly and 

conspicuously the over-the-limit fee.) 

5a(b)(13) Required insurance, debt 

cancellation, or debt suspension coverage. 

1. Content. See Sample G–10(B) for 

guidance on how to comply with the 

requirements in § 226.5a(b)(13). 


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23010 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

5a(b)(14) Available credit. 

1. Calculating available credit. If the 15 

percent threshold test is met, the issuer must 

disclose the available credit excluding 

optional fees, and the available credit 

including optional fees. In calculating the 

available credit to disclose in the table, the 

issuer must consider all fees for the issuance 

or availability of credit described in 

§ 226.5a(b)(2), and any security deposit, that 

will be imposed and charged to the account 

when the account is opened, such as onetime issuance and set-up fees. For example, 

in calculating the available credit, issuers 

must consider the first year’s annual fee and 

the first month’s maintenance fee (as 

applicable) if they are charged to the account 

on the first billing statement. In calculating 

the amount of the available credit including 

optional fees, if optional fees could be 

charged multiple times, the issuer shall 

assume that the optional fee is only imposed 

once. For example, if an issuer charges a fee 

for each additional card issued on the 

account, the issuer in calculating the amount 

of the available credit including optional fees 

may assume that the cardholder requests 

only one additional card. In disclosing the 

available credit, the issuer shall round down 

the available credit amount to the nearest 

whole dollar. 

2. Content. See Sample G–10(C) for 

guidance on how to provide the disclosure 

required by § 226.5a(b)(14) clearly and 

conspicuously. 

5a(b)(15) Web site reference. 

1. Content. See Samples G–10(B) and G– 

10(C) for guidance on disclosing a reference 

to the Web site established by the Board and 

a statement that consumers may obtain on 

the Web site information about shopping for 

and using credit card accounts. 

* * * * * 

§ 226.6—Account-Opening Disclosures 

* * * * * 

6(b) Rules affecting open-end (not homesecured) plans. 

* * * * * 

6(b)(2) Required disclosures for accountopening table for open-end (not homesecured) plans. 

6(b)(2)(iii) Fixed finance charge; minimum 

interest charge. 

1. Example of brief statement. See Samples 

G–17(B), G–17(C), and G–17(D) for guidance 

on how to provide a brief description of a 

minimum interest charge. 

6(b)(2)(v) Grace period. 

1. Grace period. Creditors must state any 

conditions on the applicability of the grace 

period. A creditor, however, may not disclose 

under § 226.6(b)(2)(v) the limitations on the 

imposition of finance charges as a result of 

a loss of a grace period in § 226.54, or the 

impact of payment allocation on whether 

interest is charged on transactions as a result 

of a loss of a grace period. Some creditors 

may offer a grace period on all types of 

transactions under which interest will not be 

charged on transactions if the consumer pays 

the outstanding balance shown on a periodic 

statement in full by the due date shown on 

that statement for one or more billing cycles. 

In these circumstances, § 226.6(b)(2)(v) 

requires that the creditor disclose the grace 

period and the conditions for its applicability 

using the following language, or substantially 

similar language, as applicable: ‘‘Your due 

date is [at least] ll days after the close of 

each billing cycle. We will not charge you 

any interest on your account if you pay your 

entire balance by the due date each month.’’ 

However, other creditors may offer a grace 

period on all types of transactions under 

which interest may be charged on 

transactions even if the consumer pays the 

outstanding balance shown on a periodic 

statement in full by the due date shown on 

that statement each billing cycle. In these 

circumstances, § 226.6(b)(2)(v) requires the 

creditor to amend the above disclosure 

language to describe accurately the 

conditions on the applicability of the grace 

period. 

2. No grace period. Creditors may use the 

following language to describe that no grace 

period is offered, as applicable: ‘‘We will 

begin charging interest on [applicable 

transactions] on the transaction date.’’ 

3. Grace period on some features. Some 

creditors do not offer a grace period on cash 

advances and balance transfers, but offer a 

grace period for all purchases under which 

interest will not be charged on purchases if 

the consumer pays the outstanding balance 

shown on a periodic statement in full by the 

due date shown on that statement for one or 

more billing cycles. In these circumstances, 

§ 226.6(b)(2)(v) requires that the creditor 

disclose the grace period for purchases and 

the conditions for its applicability, and the 

lack of a grace period for cash advances and 

balance transfers using the following 

language, or substantially similar language, 

as applicable: ‘‘Your due date is [at least] ll 

days after the close of each billing cycle. We 

will not charge you any interest on purchases 

if you pay your entire balance by the due 

date each month. We will begin charging 

interest on cash advances and balance 

transfers on the transaction date.’’ However, 

other creditors may offer a grace period on 

all purchases under which interest may be 

charged on purchases even if the consumer 

pays the outstanding balance shown on a 

periodic statement in full by the due date 

shown on that statement each billing cycle. 

In these circumstances, § 226.6(a)(2)(v) 

requires the creditor to amend the above 

disclosure language to describe accurately 

the conditions on the applicability of the 

grace period. Also, some creditors may not 

offer a grace period on cash advances and 

balance transfers, and will begin charging 

interest on these transactions from a date 

other than the transaction date, such as the 

posting date. In these circumstances, 

§ 226.6(a)(2)(v) requires the creditor to amend 

the above disclosure language to be accurate. 

6(b)(2)(vi) Balance computation method. 

1. Use of same balance computation 

method for all features. In cases where the 

balance for each feature is computed using 

the same balance computation method, a 

single identification of the name of the 

balance computation method is sufficient. In 

this case, a creditor may use an appropriate 

name listed in § 226.5a(g) (e.g., ‘‘average daily 

balance (including new purchases)’’) to 

satisfy the requirement to disclose the name 

of the method for all features on the account, 

even though the name only refers to 

purchases. For example, if a creditor uses the 

average daily balance method including new 

transactions for all features, a creditor may 

use the name ‘‘average daily balance 

(including new purchases)’’ listed in 

§ 226.5a(g)(i) to satisfy the requirement to 

disclose the name of the balance computation 

method for all features. As an alternative, in 

this situation, a creditor may revise the 

balance computation names listed in 

§ 226.5a(g) to refer more broadly to all new 

credit transactions, such as using the 

language ‘‘new transactions’’ or ‘‘current 

transactions’’ (e.g., ‘‘average daily balance 

(including new transactions)’’), rather than 

simply referring to new purchases when the 

same method is used to calculate the 

balances for all features of the account. See 

Samples G–17(B) and G–17(C) for guidance 

on how to disclose the balance computation 

method where the same method is used for 

all features on the account. 

2. Use of balance computation names in 

§ 226.5a(g) for balances other than 

purchases. The names of the balance 

computation methods listed in § 226.5a(g) 

describe balance computation methods for 

purchases. When a creditor is disclosing the 

name of the balance computation methods 

separately for each feature, in using the 

names listed in § 226.5a(g) to satisfy the 

requirements of § 226.6(b)(2)(vi) for features 

other than purchases, a creditor must revise 

the names listed in § 226.5a(g) to refer to the 

other features. For example, when disclosing 

the name of the balance computation method 

applicable to cash advances, a creditor must 

revise the name listed in § 226.5a(g)(i) to 

disclose it as ‘‘average daily balance 

(including new cash advances)’’ when the 

balance for cash advances is figured by 

adding the outstanding balance (including 

new cash advances and deducting payments 

and credits) for each day in the billing cycle, 

and then dividing by the number of days in 

the billing cycle. Similarly, a creditor must 

revise the name listed in § 226.5a(g)(ii) to 

disclose it as ‘‘average daily balance 

(excluding new cash advances)’’ when the 

balance for cash advances is figured by 

adding the outstanding balance (excluding 

new cash advances and deducting payments 

and credits) for each day in the billing cycle, 

and then dividing by the number of days in 

the billing cycle. See comment 6(b)(2)(vi)–1 

for guidance on the use of one balance 

computation name when the same balance 

computation method is used for all features 

on the account. 

6(b)(2)(xiii) Available credit. 

1. Right to reject the plan. Creditors may 

use the following language to describe 

consumers’ right to reject a plan after 

receiving account-opening disclosures: ‘‘You 

may still reject this plan, provided that you 

have not yet used the account or paid a fee 

after receiving a billing statement. If you do 

reject the plan, you are not responsible for 

any fees or charges.’’ 

* * * * * 

§ 226.7—Periodic Statement 

* * * * * 

7(b) Rules affecting open-end (not homesecured) plans. 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23011 

1. Deferred interest or similar transactions. 

Creditors offer a variety of payment plans for 

purchases that permit consumers to avoid 

interest charges if the purchase balance is 

paid in full by a certain date. ‘‘Deferred 

interest’’ has the same meaning as in 

§ 226.16(h)(2) and associated commentary. 

The following provides guidance for a 

deferred interest or similar plan where, for 

example, no interest charge is imposed on a 

$500 purchase made in January if the $500 

balance is paid by July 31. 

i. Annual percentage rates. Under 

§ 226.7(b)(4), creditors must disclose each 

annual percentage rate that may be used to 

compute the interest charge. Under some 

plans with a deferred interest or similar 

feature, if the deferred interest balance is not 

paid by a certain date, July 31 in this 

example, interest charges applicable to the 

billing cycles between the date of purchase 

in January and July 31 may be imposed. 

Annual percentage rates that may apply to 

the deferred interest balance ($500 in this 

example) if the balance is not paid in full by 

July 31 must appear on periodic statements 

for the billing cycles between the date of 

purchase and July 31. However, if the 

consumer does not pay the deferred interest 

balance by July 31, the creditor is not 

required to identify, on the periodic 

statement disclosing the interest charge for 

the deferred interest balance, annual 

percentage rates that have been disclosed in 

previous billing cycles between the date of 

purchase and July 31. 

ii. Balances subject to periodic rates. 

Under § 226.7(b)(5), creditors must disclose 

the balances subject to interest during a 

billing cycle. The deferred interest balance 

($500 in this example) is not subject to 

interest for billing cycles between the date of 

purchase and July 31 in this example. 

Periodic statements sent for those billing 

cycles should not include the deferred 

interest balance in the balance disclosed 

under § 226.7(b)(5). This amount must be 

separately disclosed on periodic statements 

and identified by a term other than the term 

used to identify the balance disclosed under 

§ 226.7(b)(5) (such as ‘‘deferred interest 

balance’’). During any billing cycle in which 

an interest charge on the deferred interest 

balance is debited to the account, the balance 

disclosed under § 226.7(b)(5) should include 

the deferred interest balance for that billing 

cycle. 

iii. Amount of interest charge. Under 

§ 226.7(b)(6)(ii), creditors must disclose 

interest charges imposed during a billing 

cycle. For some deferred interest purchases, 

the creditor may impose interest from the 

date of purchase if the deferred interest 

balance ($500 in this example) is not paid in 

full by July 31 in this example, but otherwise 

will not impose interest for billing cycles 

between the date of purchase and July 31. 

Periodic statements for billing cycles 

preceding July 31 in this example should not 

include in the interest charge disclosed 

under § 226.7(b)(6)(ii) the amounts a 

consumer may owe if the deferred interest 

balance is not paid in full by July 31. In this 

example, the February periodic statement 

should not identify as interest charges 

interest attributable to the $500 January 

purchase. This amount must be separately 

disclosed on periodic statements and 

identified by a term other than ‘‘interest 

charge’’ (such as ‘‘contingent interest charge’’ 

or ‘‘deferred interest charge’’). The interest 

charge on a deferred interest balance should 

be reflected on the periodic statement under 

§ 226.7(b)(6)(ii) for the billing cycle in which 

the interest charge is debited to the account. 

iv. Due date to avoid obligation for finance 

charges under a deferred interest or similar 

program. Section 226.7(b)(14) requires 

disclosure on periodic statements of the date 

by which any outstanding balance subject to 

a deferred interest or similar program must 

be paid in full in order to avoid the 

obligation for finance charges on such 

balance. This disclosure must appear on the 

front of any page of each periodic statement 

issued during the deferred interest period 

beginning with the first periodic statement 

issued during the deferred interest period 

that reflects the deferred interest or similar 

transaction. 

7(b)(1) Previous balance. 

1. Credit balances. If the previous balance 

is a credit balance, it must be disclosed in 

such a way so as to inform the consumer that 

it is a credit balance, rather than a debit 

balance. 

2. Multifeatured plans. In a multifeatured 

plan, the previous balance may be disclosed 

either as an aggregate balance for the account 

or as separate balances for each feature (for 

example, a previous balance for purchases 

and a previous balance for cash advances). If 

separate balances are disclosed, a total 

previous balance is optional. 

3. Accrued finance charges allocated from 

payments. Some open-end credit plans 

provide that the amount of the finance charge 

that has accrued since the consumer’s last 

payment is directly deducted from each new 

payment, rather than being separately added 

to each statement and reflected as an increase 

in the obligation. In such a plan, the previous 

balance need not reflect finance charges 

accrued since the last payment. 

7(b)(2) Identification of transactions. 

1. Multifeatured plans. Creditors may, but 

are not required to, arrange transactions by 

feature (such as disclosing purchase 

transactions separately from cash advance 

transactions). Pursuant to § 226.7(b)(6), 

however, creditors must group all fees and all 

interest separately from transactions and may 

not disclose any fees or interest charges with 

transactions. 

2. Automated teller machine (ATM) 

charges imposed by other institutions in 

shared or interchange systems. A charge 

imposed on the cardholder by an institution 

other than the card issuer for the use of the 

other institution’s ATM in a shared or 

interchange system and included by the 

terminal-operating institution in the amount 

of the transaction need not be separately 

disclosed on the periodic statement. 

7(b)(3) Credits. 

1. Identification—sufficiency. The creditor 

need not describe each credit by type 

(returned merchandise, rebate of finance 

charge, etc.)—‘‘credit’’ would suffice—except 

if the creditor is using the periodic statement 

to satisfy the billing-error correction notice 

requirement. (See the commentary to 

§ 226.13(e) and (f).) Credits may be 

distinguished from transactions in any way 

that is clear and conspicuous, for example, 

by use of debit and credit columns or by use 

of plus signs and/or minus signs. 

2. Date. If only one date is disclosed (that 

is, the crediting date as required by the 

regulation), no further identification of that 

date is necessary. More than one date may be 

disclosed for a single entry, as long as it is 

clear which date represents the date on 

which credit was given. 

3. Totals. A total of amounts credited 

during the billing cycle is not required. 

7(b)(4) Periodic rates. 

1. Disclosure of periodic interest rates— 

whether or not actually applied. Except as 

provided in § 226.7(b)(4)(ii), any periodic 

interest rate that may be used to compute 

finance charges, expressed as and labeled 

‘‘Annual Percentage Rate,’’ must be disclosed 

whether or not it is applied during the billing 

cycle. For example: 

i. If the consumer’s account has both a 

purchase feature and a cash advance feature, 

the creditor must disclose the annual 

percentage rate for each, even if the 

consumer only makes purchases on the 

account during the billing cycle. 

ii. If the annual percentage rate varies 

(such as when it is tied to a particular index), 

the creditor must disclose each annual 

percentage rate in effect during the cycle for 

which the statement was issued. 

2. Disclosure of periodic interest rates 

required only if imposition possible. With 

regard to the periodic interest rate disclosure 

(and its corresponding annual percentage 

rate), only rates that could have been 

imposed during the billing cycle reflected on 

the periodic statement need to be disclosed. 

For example: 

i. If the creditor is changing annual 

percentage rates effective during the next 

billing cycle (either because it is changing 

terms or because of a variable-rate plan), the 

annual percentage rates required to be 

disclosed under § 226.7(b)(4) are only those 

in effect during the billing cycle reflected on 

the periodic statement. For example, if the 

annual percentage rate applied during May 

was 18%, but the creditor will increase the 

rate to 21% effective June 1, 18% is the only 

required disclosure under § 226.7(b)(4) for 

the periodic statement reflecting the May 

account activity. 

ii. If the consumer has an overdraft line 

that might later be expanded upon the 

consumer’s request to include secured 

advances, the rates for the secured advance 

feature need not be given until such time as 

the consumer has requested and received 

access to the additional feature. 

iii. If annual percentage rates applicable to 

a particular type of transaction changed after 

a certain date and the old rate is only being 

applied to transactions that took place prior 

to that date, the creditor need not continue 

to disclose the old rate for those consumers 

that have no outstanding balances to which 

that rate could be applied. 

3. Multiple rates—same transaction. If two 

or more periodic rates are applied to the 

same balance for the same type of transaction 

(for example, if the interest charge consists of 

a monthly periodic interest rate of 1.5% 


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applied to the outstanding balance and a 

required credit life insurance component 

calculated at 0.1% per month on the same 

outstanding balance), creditors must disclose 

the periodic interest rate, expressed as an 

18% annual percentage rate and the range of 

balances to which it is applicable. Costs 

attributable to the credit life insurance 

component must be disclosed as a fee under 

§ 226.7(b)(6)(iii). 

4. Fees. Creditors that identify fees in 

accordance with § 226.7(b)(6)(iii) need not 

identify the periodic rate at which a fee 

would accrue if the fee remains unpaid. For 

example, assume a fee is imposed for a late 

payment in the previous cycle and that the 

fee, unpaid, would be included in the 

purchases balance and accrue interest at the 

rate for purchases. The creditor need not 

separately disclose that the purchase rate 

applies to the portion of the purchases 

balance attributable to the unpaid fee. 

5. Ranges of balances. See comment 

6(b)(4)(i)(B)–1. A creditor is not required to 

adjust the range of balances disclosure to 

reflect the balance below which only a 

minimum charge applies. 

6. Deferred interest transactions. See 

comment 7(b)–1.i. 

7(b)(5) Balance on which finance charge 

computed. 

1. Split rates applied to balance ranges. If 

split rates were applied to a balance because 

different portions of the balance fall within 

two or more balance ranges, the creditor need 

not separately disclose the portions of the 

balance subject to such different rates since 

the range of balances to which the rates apply 

has been separately disclosed. For example, 

a creditor could disclose a balance of $700 

for purchases even though a monthly 

periodic rate of 1.5% applied to the first 

$500, and a monthly periodic rate of 1% to 

the remainder. This option to disclose a 

combined balance does not apply when the 

interest charge is computed by applying the 

split rates to each day’s balance (in contrast, 

for example, to applying the rates to the 

average daily balance). In that case, the 

balances must be disclosed using any of the 

options that are available if two or more daily 

rates are imposed. (See comment 7(b)(5)–4.) 

2. Monthly rate on average daily balance. 

Creditors may apply a monthly periodic rate 

to an average daily balance. 

3. Multifeatured plans. In a multifeatured 

plan, the creditor must disclose a separate 

balance (or balances, as applicable) to which 

a periodic rate was applied for each feature. 

Separate balances are not required, however, 

merely because a grace period is available for 

some features but not others. A total balance 

for the entire plan is optional. This does not 

affect how many balances the creditor must 

disclose—or may disclose—within each 

feature. (See, for example, comments 7(b)(5)– 

4 and 7(b)(4)–5.) 

4. Daily rate on daily balance. i. If a 

finance charge is computed on the balance 

each day by application of one or more daily 

periodic interest rates, the balance on which 

the interest charge was computed may be 

disclosed in any of the following ways for 

each feature: 

ii. If a single daily periodic interest rate is 

imposed, the balance to which it is 

applicable may be stated as: 

A. A balance for each day in the billing 

cycle. 

B. A balance for each day in the billing 

cycle on which the balance in the account 

changes. 

C. The sum of the daily balances during the 

billing cycle. 

D. The average daily balance during the 

billing cycle, in which case the creditor may, 

at its option, explain that the average daily 

balance is or can be multiplied by the 

number of days in the billing cycle and the 

periodic rate applied to the product to 

determine the amount of interest. 

iii. If two or more daily periodic interest 

rates may be imposed, the balances to which 

the rates are applicable may be stated as: 

A. A balance for each day in the billing 

cycle. 

B. A balance for each day in the billing 

cycle on which the balance in the account 

changes. 

C. Two or more average daily balances, 

each applicable to the daily periodic interest 

rates imposed for the time that those rates 

were in effect. The creditor may, at its option, 

explain that interest is or may be determined 

by (1) multiplying each of the average 

balances by the number of days in the billing 

cycle (or if the daily rate varied during the 

cycle, by multiplying by the number of days 

the applicable rate was in effect), (2) 

multiplying each of the results by the 

applicable daily periodic rate, and (3) adding 

these products together. 

5. Information to compute balance. In 

connection with disclosing the interest 

charge balance, the creditor need not give the 

consumer all of the information necessary to 

compute the balance if that information is 

not otherwise required to be disclosed. For 

example, if current purchases are included 

from the date they are posted to the account, 

the posting date need not be disclosed. 

6. Non-deduction of credits. The creditor 

need not specifically identify the total dollar 

amount of credits not deducted in computing 

the finance charge balance. Disclosure of the 

amount of credits not deducted is 

accomplished by listing the credits 

(§ 226.7(b)(3)) and indicating which credits 

will not be deducted in determining the 

balance (for example, ‘‘credits after the 15th 

of the month are not deducted in computing 

the interest charge.’’). 

7. Use of one balance computation method 

explanation when multiple balances 

disclosed. Sometimes the creditor will 

disclose more than one balance to which a 

periodic rate was applied, even though each 

balance was computed using the same 

balance computation method. For example, if 

a plan involves purchases and cash advances 

that are subject to different rates, more than 

one balance must be disclosed, even though 

the same computation method is used for 

determining the balance for each feature. In 

these cases, one explanation or a single 

identification of the name of the balance 

computation method is sufficient. Sometimes 

the creditor separately discloses the portions 

of the balance that are subject to different 

rates because different portions of the 

balance fall within two or more balance 

ranges, even when a combined balance 

disclosure would be permitted under 

comment 7(b)(5)–1. In these cases, one 

explanation or a single identification of the 

name of the balance computation method is 

also sufficient (assuming, of course, that all 

portions of the balance were computed using 

the same method). In these cases, a creditor 

may use an appropriate name listed in 

§ 226.5a(g) (e.g., ‘‘average daily balance 

(including new purchases)’’) as the single 

identification of the name of the balance 

computation method applicable to all 

features, even though the name only refers to 

purchases. For example, if a creditor uses the 

average daily balance method including new 

transactions for all features, a creditor may 

use the name ‘‘average daily balance 

(including new purchases)’’ listed in 

§ 226.5a(g)(i) to satisfy the requirement to 

disclose the name of the balance computation 

method for all features. As an alternative, in 

this situation, a creditor may revise the 

balance computation names listed in 

§ 226.5a(g) to refer more broadly to all new 

credit transactions, such as using the 

language ‘‘new transactions’’ or ‘‘current 

transactions’’ (e.g., ‘‘average daily balance 

(including new transactions)’’), rather than 

simply referring to new purchases, when the 

same method is used to calculate the 

balances for all features of the account. 

8. Use of balance computation names in 

§ 226.5a(g) for balances other than 

purchases. The names of the balance 

computation methods listed in § 226.5a(g) 

describe balance computation methods for 

purchases. When a creditor is disclosing the 

name of the balance computation methods 

separately for each feature, in using the 

names listed in § 226.5a(g) to satisfy the 

requirements of § 226.7(b)(5) for features 

other than purchases, a creditor must revise 

the names listed in § 226.5a(g) to refer to the 

other features. For example, when disclosing 

the name of the balance computation method 

applicable to cash advances, a creditor must 

revise the name listed in § 226.5a(g)(i) to 

disclose it as ‘‘average daily balance 

(including new cash advances)’’ when the 

balance for cash advances is figured by 

adding the outstanding balance (including 

new cash advances and deducting payments 

and credits) for each day in the billing cycle, 

and then dividing by the number of days in 

the billing cycle. Similarly, a creditor must 

revise the name listed in § 226.5a(g)(ii) to 

disclose it as ‘‘average daily balance 

(excluding new cash advances)’’ when the 

balance for cash advances is figured by 

adding the outstanding balance (excluding 

new cash advances and deducting payments 

and credits) for each day in the billing cycle, 

and then dividing by the number of days in 

the billing cycle. See comment 7(b)(5)–7 for 

guidance on the use of one balance 

computation method explanation or name 

when multiple balances are disclosed. 

7(b)(6) Charges imposed. 

1. Examples of charges. See commentary to 

§ 226.6(b)(3). 

2. Fees. Costs attributable to periodic rates 

other than interest charges shall be disclosed 

as a fee. For example, if a consumer obtains 

credit life insurance that is calculated at 

0.1% per month on an outstanding balance 

and a monthly interest rate of 1.5% applies 

to the same balance, the creditor must 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23013 

disclose the dollar cost attributable to interest 

as an ‘‘interest charge’’ and the credit 

insurance cost as a ‘‘fee.’’ 

3. Total fees and interest charged for 

calendar year to date. 

i. Monthly statements. Some creditors send 

monthly statements but the statement periods 

do not coincide with the calendar month. For 

creditors sending monthly statements, the 

following comply with the requirement to 

provide calendar year-to-date totals. 

A. A creditor may disclose calendar-yearto-date totals at the end of the calendar year 

by separately aggregating finance charges 

attributable to periodic interest rates and fees 

for 12 monthly cycles, starting with the 

period that begins during January and 

finishing with the period that begins during 

December. For example, if statement periods 

begin on the 10th day of each month, the 

statement covering December 10, 2011 

through January 9, 2012, may disclose the 

separate year-to-date totals for interest 

charged and fees imposed from January 10, 

2011, through January 9, 2012. Alternatively, 

the creditor could provide a statement for the 

cycle ending January 9, 2012, showing the 

separate year-to-date totals for interest 

charged and fees imposed January 1, 2011, 

through December 31, 2011. 

B. A creditor may disclose calendar-yearto-date totals at the end of the calendar year 

by separately aggregating finance charges 

attributable to periodic interest rates and fees 

for 12 monthly cycles, starting with the 

period that begins during December and 

finishing with the period that begins during 

November. For example, if statement periods 

begin on the 10th day of each month, the 

statement covering November 10, 2011 

through December 9, 2011, may disclose the 

separate year-to-date totals for interest 

charged and fees imposed from December 10, 

2010, through December 9, 2011. 

ii. Quarterly statements. Creditors issuing 

quarterly statements may apply the guidance 

set forth for monthly statements to comply 

with the requirement to provide calendar 

year-to-date totals on quarterly statements. 

4. Minimum charge in lieu of interest. A 

minimum charge imposed if a charge would 

otherwise have been determined by applying 

a periodic rate to a balance except for the fact 

that such charge is smaller than the 

minimum must be disclosed as a fee. For 

example, assume a creditor imposes a 

minimum charge of $1.50 in lieu of interest 

if the calculated interest for a billing period 

is less than that minimum charge. If the 

interest calculated on a consumer’s account 

for a particular billing period is 50 cents, the 

minimum charge of $1.50 would apply. In 

this case, the entire $1.50 would be disclosed 

as a fee; the periodic statement would reflect 

the $1.50 as a fee, and $0 in interest. 

5. Adjustments to year-to-date totals. In 

some cases, a creditor may provide a 

statement for the current period reflecting 

that fees or interest charges imposed during 

a previous period were waived or reversed 

and credited to the account. Creditors may, 

but are not required to, reflect the adjustment 

in the year-to-date totals, nor, if an 

adjustment is made, to provide an 

explanation about the reason for the 

adjustment. Such adjustments should not 

affect the total fees or interest charges 

imposed for the current statement period. 

6. Acquired accounts. An institution that 

acquires an account or plan must include, as 

applicable, fees and charges imposed on the 

account or plan prior to the acquisition in the 

aggregate disclosures provided under 

§ 226.7(b)(6) for the acquired account or plan. 

Alternatively, the institution may provide 

separate totals reflecting activity prior and 

subsequent to the account or plan 

acquisition. For example, a creditor that 

acquires an account or plan on August 12 of 

a given calendar year may provide one total 

for the period from January 1 to August 11 

and a separate total for the period beginning 

on August 12. 

7. Account upgrades. A creditor that 

upgrades, or otherwise changes, a consumer’s 

plan to a different open-end credit plan must 

include, as applicable, fees and charges 

imposed for that portion of the calendar year 

prior to the upgrade or change in the 

consumer’s plan in the aggregate disclosures 

provided pursuant to § 226.7(b)(6) for the 

new plan. For example, assume a consumer 

has incurred $125 in fees for the calendar 

year to date for a retail credit card account, 

which is then replaced by a cobranded credit 

card account also issued by the creditor. In 

this case, the creditor must reflect the $125 

in fees incurred prior to the replacement of 

the retail credit card account in the calendar 

year-to-date totals provided for the 

cobranded credit card account. Alternatively, 

the institution may provide two separate 

totals reflecting activity prior and subsequent 

to the plan upgrade or change. 

7(b)(7) Change-in-terms and increased 

penalty rate summary for open-end (not 

home-secured) plans. 

1. Location of summary tables. If a changein-terms notice required by § 226.9(c)(2) is 

provided on or with a periodic statement, a 

tabular summary of key changes must appear 

on the front of the statement. Similarly, if a 

notice of a rate increase due to delinquency 

or default or as a penalty required by 

§ 226.9(g)(1) is provided on or with a 

periodic statement, information required to 

be provided about the increase, presented in 

a table, must appear on the front of the 

statement. 

7(b)(8) Grace period. 

1. Terminology. In describing the grace 

period, the language used must be consistent 

with that used on the account-opening 

disclosure statement. (See § 226.5(a)(2)(i).) 

2. Deferred interest transactions. See 

comment 7(b)–1.iv. 

3. Limitation on the imposition of finance 

charges in § 226.54. Section 226.7(b)(8) does 

not require a card issuer to disclose the 

limitations on the imposition of finance 

charges as a result of a loss of a grace period 

in § 226.54, or the impact of payment 

allocation on whether interest is charged on 

transactions as a result of a loss of a grace 

period. 

7(b)(9) Address for notice of billing errors. 

1. Terminology. The periodic statement 

should indicate the general purpose for the 

address for billing-error inquiries, although a 

detailed explanation or particular wording is 

not required. 

2. Telephone number. A telephone 

number, e-mail address, or Web site location 

may be included, but the mailing address for 

billing-error inquiries, which is the required 

disclosure, must be clear and conspicuous. 

The address is deemed to be clear and 

conspicuous if a precautionary instruction is 

included that telephoning or notifying the 

creditor by e-mail or Web site will not 

preserve the consumer’s billing rights, unless 

the creditor has agreed to treat billing error 

notices provided by electronic means as 

written notices, in which case the 

precautionary instruction is required only for 

telephoning. 

7(b)(10) Closing date of billing cycle; new 

balance. 

1. Credit balances. See comment 7(b)(1)–1. 

2. Multifeatured plans. In a multifeatured 

plan, the new balance may be disclosed for 

each feature or for the plan as a whole. If 

separate new balances are disclosed, a total 

new balance is optional. 

3. Accrued finance charges allocated from 

payments. Some plans provide that the 

amount of the finance charge that has 

accrued since the consumer’s last payment is 

directly deducted from each new payment, 

rather than being separately added to each 

statement and therefore reflected as an 

increase in the obligation. In such a plan, the 

new balance need not reflect finance charges 

accrued since the last payment. 

7(b)(11) Due date; late payment costs. 

1. Informal periods affecting late 

payments. Although the terms of the account 

agreement may provide that a card issuer 

may assess a late payment fee if a payment 

is not received by a certain date, the card 

issuer may have an informal policy or 

practice that delays the assessment of the late 

payment fee for payments received a brief 

period of time after the date upon which a 

card issuer has the contractual right to 

impose the fee. A card issuer must disclose 

the due date according to the legal obligation 

between the parties, and need not consider 

the end of an informal ‘‘courtesy period’’ as 

the due date under § 226.7(b)(11). 

2. Assessment of late payment fees. Some 

state or other laws require that a certain 

number of days must elapse following a due 

date before a late payment fee may be 

imposed. In addition, a card issuer may be 

restricted by the terms of the account 

agreement from imposing a late payment fee 

until a payment is late for a certain number 

of days following a due date. For example, 

assume a payment is due on March 10 and 

the account agreement or state law provides 

that a late payment fee cannot be assessed 

before March 21. A card issuer must disclose 

the due date under the terms of the legal 

obligation (March 10 in this example), and 

not a date different than the due date, such 

as when the card issuer is restricted by the 

account agreement or state or other law from 

imposing a late payment fee unless a 

payment is late for a certain number of days 

following the due date (March 21 in this 

example). Consumers’ rights under state law 

to avoid the imposition of late payment fees 

during a specified period following a due 

date are unaffected by the disclosure 

requirement. In this example, the card issuer 

would disclose March 10 as the due date for 

purposes of § 226.7(b)(11), but could not, 

under state law, assess a late payment fee 

before March 21. 


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3. Fee or rate triggered by multiple events. 

If a late payment fee or penalty rate is 

triggered after multiple events, such as two 

late payments in six months, the card issuer 

may, but is not required to, disclose the late 

payment and penalty rate disclosure each 

month. The disclosures must be included on 

any periodic statement for which a late 

payment could trigger the late payment fee or 

penalty rate, such as after the consumer made 

one late payment in this example. For 

example, if a cardholder has already made 

one late payment, the disclosure must be on 

each statement for the following five billing 

cycles. 

4. Range of late fees or penalty rates. A 

card issuer that imposes a range of late 

payment fees or rates on a credit card 

account under an open-end (not homesecured) consumer credit plan may state the 

highest fee or rate along with an indication 

lower fees or rates could be imposed. For 

example, a phrase indicating the late 

payment fee could be ‘‘up to $29’’ complies 

with this requirement. 

5. Penalty rate in effect. If the highest 

penalty rate has previously been triggered on 

an account, the card issuer may, but is not 

required to, delete the amount of the penalty 

rate and the warning that the rate may be 

imposed for an untimely payment, as not 

applicable. Alternatively, the card issuer 

may, but is not required to, modify the 

language to indicate that the penalty rate has 

been increased due to previous late payments 

(if applicable). 

6. Same day each month. The requirement 

that the due date be the same day each month 

means that the due date must generally be 

the same numerical date. For example, a 

consumer’s due date could be the 25th of 

every month. In contrast, a due date that is 

the same relative date but not numerical date 

each month, such as the third Tuesday of the 

month, generally would not comply with this 

requirement. However, a consumer’s due 

date may be the last day of each month, even 

though that date will not be the same 

numerical date. For example, if a consumer’s 

due date is the last day of each month, it will 

fall on February 28th (or February 29th in a 

leap year) and on August 31st. 

7. Change in due date. A creditor may 

adjust a consumer’s due date from time to 

time provided that the new due date will be 

the same numerical date each month on an 

ongoing basis. For example, a creditor may 

choose to honor a consumer’s request to 

change from a due date that is the 20th of 

each month to the 5th of each month, or may 

choose to change a consumer’s due date from 

time to time for operational reasons. See 

comment 2(a)(4)–3 for guidance on 

transitional billing cycles. 

8. Billing cycles longer than one month. 

The requirement that the due date be the 

same day each month does not prohibit 

billing cycles that are two or three months, 

provided that the due date for each billing 

cycle is on the same numerical date of the 

month. For example, a creditor that 

establishes two-month billing cycles could 

send a consumer periodic statements 

disclosing due dates of January 25, March 25, 

and May 25. 

9. Payment due date when the creditor 

does not accept or receive payments by mail. 

If the due date in a given month falls on a 

day on which the creditor does not receive 

or accept payments by mail and the creditor 

is required to treat a payment received the 

next business day as timely pursuant to 

§ 226.10(d), the creditor must disclose the 

due date according to the legal obligation 

between the parties, not the date as of which 

the creditor is permitted to treat the payment 

as late. For example, assume that the 

consumer’s due date is the 4th of every 

month and the creditor does not accept or 

receive payments by mail on Thursday, July 

4. Pursuant to § 226.10(d), the creditor may 

not treat a mailed payment received on the 

following business day, Friday, July 5, as late 

for any purpose. The creditor must 

nonetheless disclose July 4 as the due date 

on the periodic statement and may not 

disclose a July 5 due date. 

7(b)(12) Repayment disclosures. 

1. Rounding. In disclosing on the periodic 

statement the minimum payment total cost 

estimate, the estimated monthly payment for 

repayment in 36 months, the total cost 

estimate for repayment in 36 months, and the 

savings estimate for repayment in 36 months 

under § 226.7(b)(12)(i) or (b)(12)(ii) as 

applicable, a card issuer, at its option, must 

either round these disclosures to the nearest 

whole dollar or to the nearest cent. 

Nonetheless, an issuer’s rounding for all of 

these disclosures must be consistent. An 

issuer may round all of these disclosures to 

the nearest whole dollar when disclosing 

them on the periodic statement, or may 

round all of these disclosures to the nearest 

cent. An issuer may not, however, round 

some of the disclosures to the nearest whole 

dollar, while rounding other disclosures to 

the nearest cent. 

Paragraph 7(b)(12)(i)(F). 

1. Minimum payment repayment estimate 

disclosed on the periodic statement is three 

years or less. Section 226.7(b)(12)(i)(F)(2)(i) 

provides that a credit card issuer is not 

required to provide the disclosures related to 

repayment in 36 months if the minimum 

payment repayment estimate disclosed under 

§ 226.7(b)(12)(i)(B) after rounding is 3 years 

or less. For example, if the minimum 

payment repayment estimate is 2 years 6 

months to 3 years 5 months, issuers would 

be required under § 226.7(b)(12)(i)(B) to 

disclose that it would take 3 years to pay off 

the balance in full if making only the 

minimum payment. In these cases, an issuer 

would not be required to disclose the 36- 

month disclosures on the periodic statement 

because the minimum payment repayment 

estimate disclosed to the consumer on the 

periodic statement (after rounding) is 3 years 

or less. 

7(b)(12)(iv) Provision of information about 

credit counseling services. 

1. Approved organizations. Section 

226.7(b)(12)(iv)(A) requires card issuers to 

provide information regarding at least three 

organizations that have been approved by the 

United States Trustee or a bankruptcy 

administrator pursuant to 11 U.S.C. 111(a)(1) 

to provide credit counseling services in, at 

the card issuer’s option, either the state in 

which the billing address for the account is 

located or the state specified by the 

consumer. A card issuer does not satisfy the 

requirements in § 226.7(b)(12)(iv)(A) by 

providing information regarding providers 

that have been approved pursuant to 11 

U.S.C. 111(a)(2) to offer personal financial 

management courses. 

2. Information regarding approved 

organizations. i. Provision of information 

obtained from United States Trustee or 

bankruptcy administrator. A card issuer 

complies with the requirements of 

§ 226.7(b)(12)(iv)(A) if, through the toll-free 

number disclosed pursuant to 

§ 226.7(b)(12)(i) or (b)(12)(ii), it provides the 

consumer with information obtained from 

the United States Trustee or a bankruptcy 

administrator, such as information obtained 

from the Web site operated by the United 

States Trustee. Section 226.7(b)(12)(iv)(A) 

does not require a card issuer to provide 

information that is not available from the 

United States Trustee or a bankruptcy 

administrator. If, for example, the Web site 

address for an organization approved by the 

United States Trustee is not available from 

the Web site operated by the United States 

Trustee, a card issuer is not required to 

provide a Web site address for that 

organization. However, § 226.7(b)(12)(iv)(B) 

requires the card issuer to, at least annually, 

update the information it provides for 

consistency with the information provided 

by the United States Trustee or a bankruptcy 

administrator. 

ii. Provision of information consistent with 

request of approved organization. If 

requested by an approved organization, a 

card issuer may at its option provide, in 

addition to the name of the organization 

obtained from the United States Trustee or a 

bankruptcy administrator, another name used 

by that organization through the toll-free 

number disclosed pursuant to 

§ 226.7(b)(12)(i) or (b)(12)(ii). In addition, if 

requested by an approved organization, a 

card issuer may at its option provide through 

the toll-free number disclosed pursuant to 

§ 226.7(b)(12)(i) or (b)(12)(ii) a street address, 

telephone number, or Web site address for 

the organization that is different than the 

street address, telephone number, or Web site 

address obtained from the United States 

Trustee or a bankruptcy administrator. 

However, if requested by an approved 

organization, a card issuer must not provide 

information regarding that organization 

through the toll-free number disclosed 

pursuant to § 226.7(b)(12)(i) or (b)(12)(ii). 

iii. Information regarding approved 

organizations that provide credit counseling 

services in a language other than English. A 

card issuer may at its option provide through 

the toll-free number disclosed pursuant to 

§ 226.7(b)(12)(i) or (b)(12)(ii) information 

regarding approved organizations that 

provide credit counseling services in 

languages other than English. In the 

alternative, a card issuer may at its option 

state that such information is available from 

the Web site operated by the United States 

Trustee. Disclosing this Web site address 

does not by itself constitute a statement that 

organizations have been approved by the 

United States Trustee for purposes of 

comment 7(b)(12)(iv)–2.iv. 

iv. Statements regarding approval by the 

United States Trustee or a bankruptcy 


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administrator. Section 226.7(b)(12)(iv) does 

not require a card issuer to disclose through 

the toll-free number disclosed pursuant to 

§ 226.7(b)(12)(i) or (b)(12)(ii) that 

organizations have been approved by the 

United States Trustee or a bankruptcy 

administrator. However, if a card issuer 

chooses to make such a disclosure, 

§ 226.7(b)(12)(iv) requires that the card issuer 

also disclose that: 

A. The United States Trustee or a 

bankruptcy administrator has determined 

that the organizations meet the minimum 

requirements for nonprofit pre-bankruptcy 

budget and credit counseling; 

B. The organizations may provide other 

credit counseling services that have not been 

reviewed by the United States Trustee or a 

bankruptcy administrator; and 

C. The United States Trustee or the 

bankruptcy administrator does not endorse or 

recommend any particular organization. 

3. Automated response systems or devices. 

At their option, card issuers may use toll-free 

telephone numbers that connect consumers 

to automated systems, such as an interactive 

voice response system, through which 

consumers may obtain the information 

required by § 226.7(b)(12)(iv) by inputting 

information using a touch-tone telephone or 

similar device. 

4. Toll-free telephone number. A card 

issuer may provide a toll-free telephone 

number that is designed to handle customer 

service calls generally, so long as the option 

to receive the information required by 

§ 226.7(b)(12)(iv) is prominently disclosed to 

the consumer. For automated systems, the 

option to receive the information required by 

§ 226.7(b)(12)(iv) is prominently disclosed to 

the consumer if it is listed as one of the 

options in the first menu of options given to 

the consumer, such as ‘‘Press or say ‘3’ if you 

would like information about credit 

counseling services.’’ If the automated system 

permits callers to select the language in 

which the call is conducted and in which 

information is provided, the menu to select 

the language may precede the menu with the 

option to receive information about accessing 

credit counseling services. 

5. Third parties. At their option, card 

issuers may use a third party to establish and 

maintain a toll-free telephone number for use 

by the issuer to provide the information 

required by § 226.7(b)(12)(iv). 

6. Web site address. When making the 

repayment disclosures on the periodic 

statement pursuant to § 226.7(b)(12), a card 

issuer at its option may also include a 

reference to a Web site address (in addition 

to the toll-free telephone number) where its 

customers may obtain the information 

required by § 226.7(b)(12)(iv), so long as the 

information provided on the Web site 

complies with § 226.7(b)(12)(iv). The Web 

site address disclosed must take consumers 

directly to the Web page where information 

about accessing credit counseling may be 

obtained. In the alternative, the card issuer 

may disclose the Web site address for the 

Web page operated by the United States 

Trustee where consumers may obtain 

information about approved credit 

counseling organizations. Disclosing this 

Web site address does not by itself constitute 

a statement that organizations have been 

approved by the United States Trustee for 

purposes of comment 7(b)(12)(iv)–2.iv. 

7. Advertising or marketing information. If 

a consumer requests information about credit 

counseling services, the card issuer may not 

provide advertisements or marketing 

materials to the consumer (except for 

providing the name of the issuer) prior to 

providing the information required by 

§ 226.7(b)(12)(iv). Educational materials that 

do not solicit business are not considered 

advertisements or marketing materials for 

this purpose. Examples: 

i. Toll-free telephone number. As described 

in comment 7(b)(12)(iv)–4, an issuer may 

provide a toll-free telephone number that is 

designed to handle customer service calls 

generally, so long as the option to receive the 

information required by § 226.7(b)(12)(iv) 

through that toll-free telephone number is 

prominently disclosed to the consumer. Once 

the consumer selects the option to receive the 

information required by § 226.7(b)(12)(iv), 

the issuer may not provide advertisements or 

marketing materials to the consumer (except 

for providing the name of the issuer) prior to 

providing the required information. 

ii. Web page. If the issuer discloses a link 

to a Web site address as part of the 

disclosures pursuant to comment 

7(b)(12)(iv)–6, the issuer may not provide 

advertisements or marketing materials 

(except for providing the name of the issuer) 

on the Web page accessed by the address 

prior to providing the information required 

by § 226.7(b)(12)(iv). 

7(b)(12)(v) Exemptions. 

1. Billing cycle where paying the minimum 

payment due for that billing cycle will pay 

the outstanding balance on the account for 

that billing cycle. Under § 226.7(b)(12)(v)(C), 

a card issuer is exempt from the repayment 

disclosure requirements set forth in 

§ 226.7(b)(12) for a particular billing cycle 

where paying the minimum payment due for 

that billing cycle will pay the outstanding 

balance on the account for that billing cycle. 

For example, if the entire outstanding 

balance on an account for a particular billing 

cycle is $20 and the minimum payment is 

$20, an issuer would not need to comply 

with the repayment disclosure requirements 

for that particular billing cycle. In addition, 

this exemption would apply to a charged-off 

account where payment of the entire account 

balance is due immediately. 

7(b)(13) Format requirements. 

1. Combined deposit account and credit 

account statements. Some financial 

institutions provide information about 

deposit account and open-end credit account 

activity on one periodic statement. For 

purposes of providing disclosures on the 

front of the first page of the periodic 

statement pursuant to § 226.7(b)(13), the first 

page of such a combined statement shall be 

the page on which credit transactions first 

appear. 

* * * * * 

§ 226.9—Subsequent Disclosure 

Requirements 

* * * * * 

9(b) Disclosures for supplemental credit 

access devices and additional features. 

* * * * * 

9(b)(3) Checks that access a credit card 

account. 

9(b)(3)(i) Disclosures. 

1. Front of the page containing the checks. 

The following would comply with the 

requirement that the tabular disclosures 

provided pursuant to § 226.9(b)(3) appear on 

the front of the page containing the checks: 

i. Providing the tabular disclosure on the 

front of the first page on which checks 

appear, for an offer where checks are 

provided on multiple pages; 

ii. Providing the tabular disclosure on the 

front of a mini-book or accordion booklet 

containing the checks; or 

iii. Providing the tabular disclosure on the 

front of the solicitation letter, when the 

checks are printed on the front of the same 

page as the solicitation letter even if the 

checks can be separated by the consumer 

from the solicitation letter using perforations. 

2. Combined disclosures for checks and 

other transactions subject to the same terms. 

A card issuer may include in the tabular 

disclosure provided pursuant to § 226.9(b)(3) 

disclosures regarding the terms offered on 

non-check transactions, provided that such 

transactions are subject to the same terms 

that are required to be disclosed pursuant to 

§ 226.9(b)(3)(i) for the checks that access a 

credit card account. However, a card issuer 

may not include in the table information 

regarding additional terms that are not 

required disclosures for checks that access a 

credit card account pursuant to § 226.9(b)(3). 

Paragraph 9(b)(3)(i)(D). 

1. Grace period. A creditor may not 

disclose under § 226.9(b)(3)(i)(D) the 

limitations on the imposition of finance 

charges as a result of a loss of a grace period 

in § 226.54, or the impact of payment 

allocation on whether interest is charged on 

transactions as a result of a loss of a grace 

period. Some creditors may offer a grace 

period on credit extended by the use of an 

access check under which interest will not be 

charged on the check transactions if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by the 

due date shown on that statement for one or 

more billing cycles. In these circumstances, 

§ 226.9(b)(3)(i)(D) requires that the creditor 

disclose the grace period using the following 

language, or substantially similar language, 

as applicable: ‘‘Your due date is [at least] 

__ days after the close of each billing cycle. 

We will not charge you any interest on check 

transactions if you pay your entire balance by 

the due date each month.’’ However, other 

creditors may offer a grace period on check 

transactions under which interest may be 

charged on check transactions even if the 

consumer pays the outstanding balance 

shown on a periodic statement in full by the 

due date shown on that statement each 

billing cycle. In these circumstances, 

§ 226.9(b)(3)(i)(D) requires the creditor to 

amend the above disclosure language to 

describe accurately the conditions on the 

applicability of the grace period. Creditors 

may use the following language to describe 

that no grace period on check transactions is 

offered, as applicable: ‘‘We will begin 


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charging interest on these checks on the 

transaction date.’’ 

9(c) Change in terms. 

* * * * * 

9(c)(2) Rules affecting open-end (not homesecured) plans. 

1. Changes initially disclosed. Except as 

provided in § 226.9(g)(1), no notice of a 

change in terms need be given if the specific 

change is set forth initially consistent with 

any applicable requirements, such as rate or 

fee increases upon expiration of a specific 

period of time that were disclosed in 

accordance with § 226.9(c)(2)(v)(B) or rate 

increases under a properly disclosed 

variable-rate plan in accordance with 

§ 226.9(c)(2)(v)(C). In contrast, notice must be 

given if the contract allows the creditor to 

increase a rate or fee at its discretion. 

2. State law issues. Some issues are not 

addressed by § 226.9(c)(2) because they are 

controlled by state or other applicable laws. 

These issues include the types of changes a 

creditor may make, to the extent otherwise 

permitted by this regulation. 

3. Change in billing cycle. Whenever the 

creditor changes the consumer’s billing cycle, 

it must give a change-in-terms notice if the 

change affects any of the terms described in 

§ 226.9(c)(2)(i), unless an exception under 

§ 226.9(c)(2)(v) applies; for example, the 

creditor must give advance notice if the 

creditor initially disclosed a 28-day grace 

period on purchases and the consumer will 

have fewer days during the billing cycle 

change. See also § 226.7(b)(11)(i)(A) 

regarding the general requirement that the 

payment due date for a credit card account 

under an open-end (not home-secured) 

consumer credit plan must be the same day 

each month. 

4. Relationship to § 226.9(b). If a creditor 

adds a feature to the account on the type of 

terms otherwise required to be disclosed 

under § 226.6, the creditor must satisfy: The 

requirement to provide the finance charge 

disclosures for the added feature under 

§ 226.9(b); and any applicable requirement to 

provide a change-in-terms notice under 

§ 226.9(c), including any advance notice that 

must be provided. For example, if a creditor 

adds a balance transfer feature to an account 

more than 30 days after account-opening 

disclosures are provided, it must give the 

finance charge disclosures for the balance 

transfer feature under § 226.9(b) as well as 

comply with the change-in-terms notice 

requirements under § 226.9(c), including 

providing notice of the change at least 45 

days prior to the effective date of the change. 

Similarly, if a creditor makes a balance 

transfer offer on finance charge terms that are 

higher than those previously disclosed for 

balance transfers, it would also generally be 

required to provide a change-in-terms notice 

at least 45 days in advance of the effective 

date of the change. A creditor may provide 

a single notice under § 226.9(c) to satisfy the 

notice requirements of both paragraphs (b) 

and (c) of § 226.9. For checks that access a 

credit card account subject to the disclosure 

requirements in § 226.9(b)(3), a creditor is not 

subject to the notice requirements under 

§ 226.9(c) even if the applicable rate or fee is 

higher than those previously disclosed for 

such checks. Thus, for example, the creditor 

need not wait 45 days before applying the 

new rate or fee for transactions made using 

such checks, but the creditor must make the 

required disclosures on or with the checks in 

accordance with § 226.9(b)(3). 

9(c)(2)(i) Changes where written advance 

notice is required. 

1. Affected consumers. Change-in-terms 

notices need only go to those consumers who 

may be affected by the change. For example, 

a change in the periodic rate for check 

overdraft credit need not be disclosed to 

consumers who do not have that feature on 

their accounts. If a single credit account 

involves multiple consumers that may be 

affected by the change, the creditor should 

refer to § 226.5(d) to determine the number 

of notices that must be given. 

2. Timing—effective date of change. The 

rule that the notice of the change in terms be 

provided at least 45 days before the change 

takes effect permits mid-cycle changes when 

there is clearly no retroactive effect, such as 

the imposition of a transaction fee. Any 

change in the balance computation method, 

in contrast, would need to be disclosed at 

least 45 days prior to the billing cycle in 

which the change is to be implemented. 

3. Changes agreed to by the consumer. See 

also comment 5(b)(1)(i)–6. 

4. Form of change-in-terms notice. Except 

if § 226.9(c)(2)(iv) applies, a complete new 

set of the initial disclosures containing the 

changed term complies with § 226.9(c)(2)(i) if 

the change is highlighted on the disclosure 

statement, or if the disclosure statement is 

accompanied by a letter or some other insert 

that indicates or draws attention to the term 

being changed. 

5. Security interest change—form of notice. 

A creditor must provide a description of any 

security interest it is acquiring under 

§ 226.9(c)(2)(iv). A copy of the security 

agreement that describes the collateral 

securing the consumer’s account may also be 

used as the notice, when the term change is 

the addition of a security interest or the 

addition or substitution of collateral. 

6. Examples. See comment 55(a)–1 and 

55(b)–3 for examples of how a card issuer 

that is subject to § 226.55 may comply with 

the timing requirements for notices required 

by § 226.9(c)(2)(i). 

9(c)(2)(iii) Charges not covered by 

§ 226.6(b)(1) and (b)(2). 

1. Applicability. Generally, if a creditor 

increases any component of a charge, or 

introduces a new charge, that is imposed as 

part of the plan under § 226.6(b)(3) but is not 

required to be disclosed as part of the 

account-opening summary table under 

§ 226.6(b)(1) and (b)(2), the creditor must 

either, at its option (i) provide at least 45 

days’ written advance notice before the 

change becomes effective to comply with the 

requirements of § 226.9(c)(2)(i), or (ii) 

provide notice orally or in writing, or 

electronically if the consumer requests the 

service electronically, of the amount of the 

charge to an affected consumer before the 

consumer agrees to or becomes obligated to 

pay the charge, at a time and in a manner that 

a consumer would be likely to notice the 

disclosure. (See the commentary under 

§ 226.5(a)(1)(iii) regarding disclosure of such 

changes in electronic form.) For example, a 

fee for expedited delivery of a credit card is 

a charge imposed as part of the plan under 

§ 226.6(b)(3) but is not required to be 

disclosed in the account-opening summary 

table under § 226.6(b)(1) and (b)(2). If a 

creditor changes the amount of that 

expedited delivery fee, the creditor may 

provide written advance notice of the change 

to affected consumers at least 45 days before 

the change becomes effective. Alternatively, 

the creditor may provide oral or written 

notice, or electronic notice if the consumer 

requests the service electronically, of the 

amount of the charge to an affected consumer 

before the consumer agrees to or becomes 

obligated to pay the charge, at a time and in 

a manner that the consumer would be likely 

to notice the disclosure. (See comment 

5(b)(1)(ii)–1 for examples of disclosures given 

at a time and in a manner that the consumer 

would be likely to notice them.) 

9(c)(2)(iv) Disclosure requirements. 

1. Changing margin for calculating a 

variable rate. If a creditor is changing a 

margin used to calculate a variable rate, the 

creditor must disclose the amount of the new 

rate (as calculated using the new margin) in 

the table described in § 226.9(c)(2)(iv), and 

include a reminder that the rate is a variable 

rate. For example, if a creditor is changing 

the margin for a variable rate that uses the 

prime rate as an index, the creditor must 

disclose in the table the new rate (as 

calculated using the new margin) and 

indicate that the rate varies with the market 

based on the prime rate. 

2. Changing index for calculating a 

variable rate. If a creditor is changing the 

index used to calculate a variable rate, the 

creditor must disclose the amount of the new 

rate (as calculated using the new index) and 

indicate that the rate varies and how the rate 

is determined, as explained in 

§ 226.6(b)(2)(i)(A). For example, if a creditor 

is changing from using a prime rate to using 

the LIBOR in calculating a variable rate, the 

creditor would disclose in the table the new 

rate (using the new index) and indicate that 

the rate varies with the market based on the 

LIBOR. 

3. Changing from a variable rate to a nonvariable rate. If a creditor is changing a rate 

applicable to a consumer’s account from a 

variable rate to a non-variable rate, the 

creditor generally must provide a notice as 

otherwise required under § 226.9(c) even if 

the variable rate at the time of the change is 

higher than the non-variable rate. However, 

a creditor is not required to provide a notice 

under § 226.9(c) if the creditor provides the 

disclosures required by § 226.9(c)(2)(v)(B) or 

(c)(2)(v)(D) in connection with changing a 

variable rate to a lower non-variable rate. 

Similarly, a creditor is not required to 

provide a notice under § 226.9(c) when 

changing a variable rate to a lower nonvariable rate in order to comply with 50 

U.S.C. app. 527 or a similar Federal or State 

statute or regulation. Finally, a creditor is not 

required to provide a notice under § 226.9(c) 

when changing a variable rate to a lower nonvariable rate in order to comply with 

§ 226.55(b)(4). 

4. Changing from a non-variable rate to a 

variable rate. If a creditor is changing a rate 

applicable to a consumer’s account from a 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23017 

non-variable rate to a variable rate, the 

creditor generally must provide a notice as 

otherwise required under § 226.9(c) even if 

the non-variable rate is higher than the 

variable rate at the time of the change. 

However, a creditor is not required to 

provide a notice under § 226.9(c) if the 

creditor provides the disclosures required by 

§ 226.9(c)(2)(v)(B) or (c)(2)(v)(D) in 

connection with changing a non-variable rate 

to a lower variable rate. Similarly, a creditor 

is not required to provide a notice under 

§ 226.9(c) when changing a non-variable rate 

to a lower variable rate in order to comply 

with 50 U.S.C. app. 527 or a similar Federal 

or State statute or regulation. Finally, a 

creditor is not required to provide a notice 

under § 226.9(c) when changing a nonvariable rate to a lower variable rate in order 

to comply with § 226.55(b)(4). See comment 

55(b)(2)–4 regarding the limitations in 

§ 226.55(b)(2) on changing the rate that 

applies to a protected balance from a nonvariable rate to a variable rate. 

5. Changes in the penalty rate, the triggers 

for the penalty rate, or how long the penalty 

rate applies. If a creditor is changing the 

amount of the penalty rate, the creditor must 

also redisclose the triggers for the penalty 

rate and the information about how long the 

penalty rate applies even if those terms are 

not changing. Likewise, if a creditor is 

changing the triggers for the penalty rate, the 

creditor must redisclose the amount of the 

penalty rate and information about how long 

the penalty rate applies. If a creditor is 

changing how long the penalty rate applies, 

the creditor must redisclose the amount of 

the penalty rate and the triggers for the 

penalty rate, even if they are not changing. 

6. Changes in fees. If a creditor is changing 

part of how a fee that is disclosed in a tabular 

format under § 226.6(b)(1) and (b)(2) is 

determined, the creditor must redisclose all 

relevant information related to that fee 

regardless of whether this other information 

is changing. For example, if a creditor 

currently charges a cash advance fee of 

‘‘Either $5 or 3% of the transaction amount, 

whichever is greater. (Max: $100),’’ and the 

creditor is only changing the minimum dollar 

amount from $5 to $10, the issuer must 

redisclose the other information related to 

how the fee is determined. For example, the 

creditor in this example would disclose the 

following: ‘‘Either $10 or 3% of the 

transaction amount, whichever is greater. 

(Max: $100).’’ 

7. Combining a notice described in 

§ 226.9(c)(2)(iv) with a notice described in 

§ 226.9(g)(3). If a creditor is required to 

provide a notice described in § 226.9(c)(2)(iv) 

and a notice described in § 226.9(g)(3) to a 

consumer, the creditor may combine the two 

notices. This would occur if penalty pricing 

has been triggered, and other terms are 

changing on the consumer’s account at the 

same time. 

8. Content. Sample G–20 contains an 

example of how to comply with the 

requirements in § 226.9(c)(2)(iv) when a 

variable rate is being changed to a nonvariable rate on a credit card account. The 

sample explains when the new rate will 

apply to new transactions and to which 

balances the current rate will continue to 

apply. Sample G–21 contains an example of 

how to comply with the requirements in 

§ 226.9(c)(2)(iv) when the late payment fee on 

a credit card account is being increased, and 

the returned payment fee is also being 

increased. The sample discloses the 

consumer’s right to reject the changes in 

accordance with § 226.9(h). 

9. Clear and conspicuous standard. See 

comment 5(a)(1)-1 for the clear and 

conspicuous standard applicable to 

disclosures required under 

§ 226.9(c)(2)(iv)(A)(1). 

10. Terminology. See § 226.5(a)(2) for 

terminology requirements applicable to 

disclosures required under 

§ 226.9(c)(2)(iv)(A)(1). 

11. Reasons for increase. i. In general. 

Section 226.9(c)(2)(iv)(A)(8) requires card 

issuers to disclose the principal reason(s) for 

increasing an annual percentage rate 

applicable to a credit card account under an 

open-end (not home-secured) consumer 

credit plan. The regulation does not mandate 

a minimum number of reasons that must be 

disclosed. However, the specific reasons 

disclosed under § 226.9(c)(2)(iv)(A)(8) are 

required to relate to and accurately describe 

the principal factors actually considered by 

the card issuer in increasing the rate. A card 

issuer may describe the reasons for the 

increase in general terms. For example, the 

notice of a rate increase triggered by a 

decrease of 100 points in a consumer’s credit 

score may state that the increase is due to ‘‘a 

decline in your creditworthiness’’ or ‘‘a 

decline in your credit score.’’ Similarly, a 

notice of a rate increase triggered by a 10% 

increase in the card issuer’s cost of funds 

may be disclosed as ‘‘a change in market 

conditions.’’ In some circumstances, it may 

be appropriate for a card issuer to combine 

the disclosure of several reasons in one 

statement. However, § 226.9(c)(2)(iv)(A)(8) 

requires that the notice specifically disclose 

any violation of the terms of the account on 

which the rate is being increased, such as a 

late payment or a returned payment, if such 

violation of the account terms is one of the 

four principal reasons for the rate increase. 

ii. Example. Assume that a consumer made 

a late payment on the credit card account on 

which the rate increase is being imposed, 

made a late payment on a credit card account 

with another card issuer, and the consumer’s 

credit score decreased, in part due to such 

late payments. The card issuer may disclose 

the reasons for the rate increase as a decline 

in the consumer’s credit score and the 

consumer’s late payment on the account 

subject to the increase. Because the late 

payment on the credit card account with the 

other issuer also likely contributed to the 

decline in the consumer’s credit score, it is 

not required to be separately disclosed. 

However, the late payment on the credit card 

account on which the rate increase is being 

imposed must be specifically disclosed even 

if that late payment also contributed to the 

decline in the consumer’s credit score. 

9(c)(2)(v) Notice not required. 

1. Changes not requiring notice. The 

following are examples of changes that do 

not require a change-in-terms notice: 

i. A change in the consumer’s credit limit 

except as otherwise required by 

§ 226.9(c)(2)(vi). 

ii. A change in the name of the credit card 

or credit card plan. 

iii. The substitution of one insurer for 

another. 

iv. A termination or suspension of credit 

privileges. 

v. Changes arising merely by operation of 

law; for example, if the creditor’s security 

interest in a consumer’s car automatically 

extends to the proceeds when the consumer 

sells the car. 

2. Skip features. i. Skipped or reduced 

payments. If a credit program allows 

consumers to skip or reduce one or more 

payments during the year, no notice of the 

change in terms is required either prior to the 

reduction in payments or upon resumption of 

the higher payments if these features are 

explained on the account-opening disclosure 

statement (including an explanation of the 

terms upon resumption). For example, a 

merchant may allow consumers to skip the 

December payment to encourage holiday 

shopping, or a teacher’s credit union may not 

require payments during summer vacation. 

Otherwise, the creditor must give notice prior 

to resuming the original payment schedule, 

even though no notice is required prior to the 

reduction. The change-in-terms notice may 

be combined with the notice offering the 

reduction. For example, the periodic 

statement reflecting the skip feature may also 

be used to notify the consumer of the 

resumption of the original payment schedule, 

either by stating explicitly when the higher 

resumes or by indicating the duration of the 

skip option. Language such as ‘‘You may skip 

your October payment’’ may serve as the 

change-in-terms notice. 

ii. Temporary reductions in interest rates 

or fees. If a credit program involves 

temporary reductions in an interest rate or 

fee, no notice of the change in terms is 

required either prior to the reduction or upon 

resumption of the original rate or fee if these 

features are disclosed in advance in 

accordance with the requirements of 

§ 226.9(c)(2)(v)(B). Otherwise, the creditor 

must give notice prior to resuming the 

original rate or fee, even though no notice is 

required prior to the reduction. The notice 

provided prior to resuming the original rate 

or fee must comply with the timing 

requirements of § 226.9(c)(2)(i) and the 

content and format requirements of 

§ 226.9(c)(2)(iv)(A), (B) (if applicable), (C) (if 

applicable), and (D). See comment 55(b)–3 

for guidance regarding the application of 

§ 226.55 in these circumstances. 

3. Changing from a variable rate to a nonvariable rate. See comment 9(c)(2)(iv)–3. 

4. Changing from a non-variable rate to a 

variable rate. See comment 9(c)(2)(iv)–4. 

5. Temporary rate or fee reductions offered 

by telephone. The timing requirements of 

§ 226.9(c)(2)(v)(B) are deemed to have been 

met, and written disclosures required by 

§ 226.9(c)(2)(v)(B) may be provided as soon 

as reasonably practicable after the first 

transaction subject to a rate that will be in 

effect for a specified period of time (a 

temporary rate) or the imposition of a fee that 

will be in effect for a specified period of time 

(a temporary fee) if: 

i. The consumer accepts the offer of the 

temporary rate or temporary fee by 

telephone; 


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23018 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

ii. The creditor permits the consumer to 

reject the temporary rate or temporary fee 

offer and have the rate or rates or fee that 

previously applied to the consumer’s 

balances reinstated for 45 days after the 

creditor mails or delivers the written 

disclosures required by § 226.9(c)(2)(v)(B), 

except that the creditor need not permit the 

consumer to reject a temporary rate or 

temporary fee offer if the rate or rates or fee 

that will apply following expiration of the 

temporary rate do not exceed the rate or rates 

or fee that applied immediately prior to 

commencement of the temporary rate or 

temporary fee; and 

iii. The disclosures required by 

§ 226.9(c)(2)(v)(B) and the consumer’s right to 

reject the temporary rate or temporary fee 

offer and have the rate or rates or fee that 

previously applied to the consumer’s account 

reinstated, if applicable, are disclosed to the 

consumer as part of the temporary rate or 

temporary fee offer. 

6. First listing. The disclosures required by 

§ 226.9(c)(2)(v)(B)(1) are only required to be 

provided in close proximity and in equal 

prominence to the first listing of the 

temporary rate or fee in the disclosure 

provided to the consumer. For purposes of 

§ 226.9(c)(2)(v)(B), the first statement of the 

temporary rate or fee is the most prominent 

listing on the front side of the first page of 

the disclosure. If the temporary rate or fee 

does not appear on the front side of the first 

page of the disclosure, then the first listing 

of the temporary rate or fee is the most 

prominent listing of the temporary rate on 

the subsequent pages of the disclosure. For 

advertising requirements for promotional 

rates, see § 226.16(g). 

7. Close proximity—point of sale. Creditors 

providing the disclosures required by 

§ 226.9(c)(2)(v)(B) of this section in person in 

connection with financing the purchase of 

goods or services may, at the creditor’s 

option, disclose the annual percentage rate or 

fee that would apply after expiration of the 

period on a separate page or document from 

the temporary rate or fee and the length of 

the period, provided that the disclosure of 

the annual percentage rate or fee that would 

apply after the expiration of the period is 

equally prominent to, and is provided at the 

same time as, the disclosure of the temporary 

rate or fee and length of the period. 

8. Disclosure of annual percentage rates. If 

a rate disclosed pursuant to 

§ 226.9(c)(2)(v)(B) or (c)(2)(v)(D) is a variable 

rate, the creditor must disclose the fact that 

the rate may vary and how the rate is 

determined. For example, a creditor could 

state ‘‘After October 1, 2009, your APR will 

be 14.99%. This APR will vary with the 

market based on the Prime Rate.’’ 

9. Deferred interest or similar programs. If 

the applicable conditions are met, the 

exception in § 226.9(c)(2)(v)(B) applies to 

deferred interest or similar promotional 

programs under which the consumer is not 

obligated to pay interest that accrues on a 

balance if that balance is paid in full prior 

to the expiration of a specified period of 

time. For purposes of this comment and 

§ 226.9(c)(2)(v)(B), ‘‘deferred interest’’ has the 

same meaning as in § 226.16(h)(2) and 

associated commentary. For such programs, a 

creditor must disclose pursuant to 

§ 226.9(c)(2)(v)(B)(1) the length of the 

deferred interest period and the rate that will 

apply to the balance subject to the deferred 

interest program if that balance is not paid 

in full prior to expiration of the deferred 

interest period. Examples of language that a 

creditor may use to make the required 

disclosures under § 226.9(c)(2)(v)(B)(1) 

include: 

i. ‘‘No interest if paid in full in 6 months. 

If the balance is not paid in full in 6 months, 

interest will be imposed from the date of 

purchase at a rate of 15.99%.’’ 

ii. ‘‘No interest if paid in full by December 

31, 2010. If the balance is not paid in full by 

that date, interest will be imposed from the 

transaction date at a rate of 15%.’’ 

10. Relationship between 

§§ 226.9(c)(2)(v)(B) and 226.6(b). A 

disclosure of the information described in 

§ 226.9(c)(2)(v)(B)(1) provided in the accountopening table in accordance with § 226.6(b) 

complies with the requirements of 

§ 226.9(c)(2)(v)(B)(2), if the listing of the 

introductory rate in such tabular disclosure 

also is the first listing as described in 

comment 9(c)(2)(v)–6. 

11. Disclosure of the terms of a workout or 

temporary hardship arrangement. In order 

for the exception in § 226.9(c)(2)(v)(D) to 

apply, the disclosure provided to the 

consumer pursuant to § 226.9(c)(2)(v)(D)(2) 

must set forth: 

i. The annual percentage rate that will 

apply to balances subject to the workout or 

temporary hardship arrangement; 

ii. The annual percentage rate that will 

apply to such balances if the consumer 

completes or fails to comply with the terms 

of, the workout or temporary hardship 

arrangement; 

iii. Any reduced fee or charge of a type 

required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), (b)(2)(viii), 

(b)(2)(ix), (b)(2)(xi), or (b)(2)(xii) that will 

apply to balances subject to the workout or 

temporary hardship arrangement, as well as 

the fee or charge that will apply if the 

consumer completes or fails to comply with 

the terms of the workout or temporary 

hardship arrangement; 

iv. Any reduced minimum periodic 

payment that will apply to balances subject 

to the workout or temporary hardship 

arrangement, as well as the minimum 

periodic payment that will apply if the 

consumer completes or fails to comply with 

the terms of the workout or temporary 

hardship arrangement; and 

v. If applicable, that the consumer must 

make timely minimum payments in order to 

remain eligible for the workout or temporary 

hardship arrangement. 

12. Index not under creditor’s control. See 

comment 55(b)(2)–2 for guidance on when an 

index is deemed to be under a creditor’s 

control. 

13. Temporary rates—relationship to 

§ 226.59. i. General. Section 226.59 requires 

a card issuer to review rate increases 

imposed due to the revocation of a temporary 

rate. In some circumstances, § 226.59 may 

require an issuer to reinstate a reduced 

temporary rate based on that review. If, based 

on a review required by § 226.59, a creditor 

reinstates a temporary rate that had been 

revoked, the card issuer is not required to 

provide an additional notice to the consumer 

when the reinstated temporary rate expires, 

if the card issuer provided the disclosures 

required by § 226.9(c)(2)(v)(B) prior to the 

original commencement of the temporary 

rate. See § 226.55 and the associated 

commentary for guidance on the 

permissibility and applicability of rate 

increases. 

ii. Example. A consumer opens a new 

credit card account under an open-end (not 

home-secured) consumer credit plan on 

January 1, 2011. The annual percentage rate 

applicable to purchases is 18%. The card 

issuer offers the consumer a 15% rate on 

purchases made between January 1, 2012 and 

January 1, 2014. Prior to January 1, 2012, the 

card issuer discloses, in accordance with 

§ 226.9(c)(2)(v)(B), that the rate on purchases 

made during that period will increase to the 

standard 18% rate on January 1, 2014. In 

March 2012, the consumer makes a payment 

that is ten days late. The card issuer, upon 

providing 45 days’ advance notice of the 

change under § 226.9(g), increases the rate on 

new purchases to 18% effective as of June 1, 

2012. On December 1, 2012, the issuer 

performs a review of the consumer’s account 

in accordance with § 226.59. Based on that 

review, the card issuer is required to reduce 

the rate to the original 15% temporary rate 

as of January 15, 2013. On January 1, 2014, 

the card issuer may increase the rate on 

purchases to 18%, as previously disclosed 

prior to January 1, 2012, without providing 

an additional notice to the consumer. 

* * * * * 

9(e) Disclosures upon renewal of credit or 

charge card. 

* * * * * 

10. Disclosure of changes in terms required 

to be disclosed pursuant to § 226.6(b)(1) and 

(b)(2). Clear and conspicuous disclosure of a 

changed term on a periodic statement 

provided to a consumer prior to renewal of 

the consumer’s account constitutes prior 

disclosure of that term for purposes of 

§ 226.9(e)(1). Card issuers should refer to 

§ 226.9(c)(2) for additional timing, content, 

and formatting requirements that apply to 

certain changes in terms under that 

paragraph. 

* * * * * 

§ 226.10—Payments 

* * * * * 

10(b) Specific requirements for payments. 

* * * * * 

2. Payment methods promoted by creditor. 

If a creditor promotes a specific payment 

method, any payments made via that method 

(prior to any cut-off time specified by the 

creditor, to the extent permitted by 

§ 226.10(b)(2)) are generally conforming 

payments for purposes of § 226.10(b). For 

example: 

i. If a creditor promotes electronic payment 

via its Web site (such as by disclosing on the 

Web site itself that payments may be made 

via the Web site), any payments made via the 

creditor’s Web site prior to the creditor’s 

specified cut-off time, if any, would generally 

be conforming payments for purposes of 

§ 226.10(b). 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23019 

ii. If a creditor promotes payment by 

telephone (for example, by including the 

option to pay by telephone in a menu of 

options provided to consumers at a toll-free 

number disclosed on its periodic statement), 

payments made by telephone would 

generally be conforming payments for 

purposes of § 226.10(b). 

iii. If a creditor promotes in-person 

payments, for example by stating in an 

advertisement that payments may be made in 

person at its branch locations, such in-person 

payments made at a branch or office of the 

creditor generally would be conforming 

payments for purposes of § 226.10(b). 

iv. If a creditor promotes that payments 

may be made through an unaffiliated third 

party, such as by disclosing the Web site 

address of that third party on the periodic 

statement, payments made via that third 

party’s Web site generally would be 

conforming payments for purposes of 

§ 226.10(b). In contrast, if a customer service 

representative of the creditor confirms to a 

consumer that payments may be made via an 

unaffiliated third party, but the creditor does 

not otherwise promote that method of 

payment, § 226.10(b) permits the creditor to 

treat payments made via such third party as 

nonconforming payments in accordance with 

§ 226.10(b)(4). 

* * * * * 

10(e) Limitations on fees related to method 

of payment. 

* * * * * 

4. Creditor. For purposes of § 226.10(e), the 

term ‘‘creditor’’ includes a third party that 

collects, receives, or processes payments on 

behalf of a creditor. For example: 

i. Assume that a creditor uses a service 

provider to receive, collect, or process on the 

creditor’s behalf payments made through the 

creditor’s Web site or made through an 

automated telephone payment service. In 

these circumstances, the service provider 

would be considered a creditor for purposes 

of paragraph (e). 

ii. Assume that a consumer pays a fee to 

a money transfer or payment service in order 

to transmit a payment to the creditor on the 

consumer’s behalf. In these circumstances, 

the money transfer or payment service would 

not be considered a creditor for purposes of 

paragraph (e). 

iii. Assume that a consumer has a checking 

account at a depository institution. The 

consumer makes a payment to the creditor 

from the checking account using a bill 

payment service provided by the depository 

institution. In these circumstances, the 

depository institution would not be 

considered a creditor for purposes of 

paragraph (e). 

* * * * * 

10(f) Changes by card issuer. 

* * * * * 

3. Safe harbor. i. General. A card issuer 

may elect not to impose a late fee or finance 

charge on a consumer’s account for the 60- 

day period following a change in address for 

receiving payment or procedures for 

handling cardholder payments which could 

reasonably be expected to cause a material 

delay in crediting of a payment to the 

consumer’s account. For purposes of 

§ 226.10(f), a late fee or finance charge is not 

imposed if the fee or charge is waived or 

removed, or an amount equal to the fee or 

charge is credited to the account. 

ii. Retail location. For a material change in 

the address of a retail location or procedures 

for handling cardholder payments at a retail 

location, a card issuer may impose a late fee 

or finance charge on a consumer’s account 

for a late payment during the 60-day period 

following the date on which the change took 

effect. However, if a card issuer is notified by 

a consumer no later than 60 days after the 

card issuer transmitted the first periodic 

statement that reflects the late fee or finance 

charge for a late payment that the late 

payment was caused by such change, the 

card issuer must waive or remove any late fee 

or finance charge, or credit an amount equal 

to any late fee or finance charge, imposed on 

the account during the 60-day period 

following the date on which the change took 

effect. 

* * * * * 

§ 226.12—Special Credit Card Provisions 

* * * * * 

12(c) Right of cardholder to assert claims 

or defenses against card issuer. 

* * * * * 

4. Method of calculating the amount of 

credit outstanding. The amount of the claim 

or defense that the cardholder may assert 

shall not exceed the amount of credit 

outstanding for the disputed transaction at 

the time the cardholder first notifies the card 

issuer or the person honoring the credit card 

of the existence of the claim or defense. 

However, when a consumer has asserted a 

claim or defense against a creditor pursuant 

to § 226.12(c), the creditor must apply any 

payment or other credit in a manner that 

avoids or minimizes any reduction in the 

amount subject to that claim or defense. 

Accordingly, to determine the amount of 

credit outstanding for purposes of this 

section, payments and other credits must be 

applied first to amounts other than the 

disputed transaction. 

i. For examples of how to comply with 

§§ 226.12 and 226.53 for credit card accounts 

under an open-end (not home-secured) 

consumer credit plan, see comment 53–3. 

ii. For other types of credit card accounts, 

creditors may, at their option, apply 

payments consistent with § 226.53 and 

comment 53–3. In the alternative, payments 

and other credits may be applied to: Late 

charges in the order of entry to the account; 

then to finance charges in the order of entry 

to the account; and then to any debits other 

than the transaction subject to the claim or 

defense in the order of entry to the account. 

In these circumstances, if more than one item 

is included in a single extension of credit, 

credits are to be distributed pro rata 

according to prices and applicable taxes. 

* * * * * 

§ 226.13—Billing Error Resolution 

* * * * * 

13(c) Time for resolution; general 

procedures. 

* * * * * 

Paragraph 13(c)(2). 

* * * * * 

2. Finality of error resolution procedure. A 

creditor must comply with the error 

resolution procedures and complete its 

investigation to determine whether an error 

occurred within two complete billing cycles 

as set forth in § 226.13(c)(2). Thus, for 

example, § 226.13(c)(2) prohibits a creditor 

from reversing amounts previously credited 

for an alleged billing error even if the creditor 

obtains evidence after the error resolution 

time period has passed indicating that the 

billing error did not occur as asserted by the 

consumer. Similarly, if a creditor fails to mail 

or deliver a written explanation setting forth 

the reason why the billing error did not occur 

as asserted, or otherwise fails to comply with 

the error resolution procedures set forth in 

§ 226.13(f), the creditor generally must credit 

the disputed amount and related finance or 

other charges, as applicable, to the 

consumer’s account. However, if a consumer 

receives more than one credit to correct the 

same billing error, § 226.13 does not prevent 

a creditor from reversing amounts it has 

previously credited to correct that error, 

provided that the total amount of the 

remaining credits is equal to or more than the 

amount of the error and that the consumer 

does not incur any fees or other charges as 

a result of the timing of the creditor’s 

reversal. For example, assume that a 

consumer asserts a billing error with respect 

to a $100 transaction and that the creditor 

posts a $100 credit to the consumer’s account 

to correct that error during the time period 

set forth in § 226.13(c)(2). However, 

following that time period, a merchant or 

other person honoring the credit card issues 

a $100 credit to the consumer to correct the 

same error. In these circumstances, 

§ 226.13(c)(2) does not prohibit the creditor 

from reversing its $100 credit once the $100 

credit from the merchant or other person has 

posted to the consumer’s account. 

* * * * * 

§ 226.14—Determination of Annual 

Percentage Rate 

14(a) General rule. 

* * * * * 

6. Effect of leap year. Any variance in the 

annual percentage rate that occurs solely by 

reason of the addition of February 29 in a 

leap year, may be disregarded, and such a 

rate may be disclosed without regard to such 

variance. 

* * * * * 

§ 226.16—Advertising 

1. Clear and conspicuous standard— 

general. Section 226.16 is subject to the 

general ‘‘clear and conspicuous’’ standard for 

subpart B (see § 226.5(a)(1)) but prescribes no 

specific rules for the format of the necessary 

disclosures, other than the format 

requirements related to the disclosure of a 

promotional rate or payment under 

§ 226.16(d)(6), a promotional rate or 

promotional fee under § 226.16(g), or a 

deferred interest or similar offer under 

§ 226.16(h). Other than the disclosure of 

certain terms described in §§ 226.16(d)(6), 

(g), or (h), the credit terms need not be 


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23020 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

printed in a certain type size nor need they 

appear in any particular place in the 

advertisement. 

2. Clear and conspicuous standard— 

promotional rates or payments; deferred 

interest or similar offers. i. For purposes of 

§ 226.16(d)(6), a clear and conspicuous 

disclosure means that the required 

information in § 226.16(d)(6)(ii)(A)–(C) is 

disclosed with equal prominence and in 

close proximity to the promotional rate or 

payment to which it applies. If the 

information in § 226.16(d)(6)(ii)(A)–(C) is the 

same type size and is located immediately 

next to or directly above or below the 

promotional rate or payment to which it 

applies, without any intervening text or 

graphical displays, the disclosures would be 

deemed to be equally prominent and in close 

proximity. Notwithstanding the above, for 

electronic advertisements that disclose 

promotional rates or payments, compliance 

with the requirements of § 226.16(c) is 

deemed to satisfy the clear and conspicuous 

standard. 

ii. For purposes of § 226.16(g)(4) as it 

applies to written or electronic 

advertisements only, a clear and conspicuous 

disclosure means the required information in 

§ 226.16(g)(4)(i) and, as applicable, (g)(4)(ii) 

and (g)(4)(iii) must be equally prominent to 

the promotional rate or promotional fee to 

which it applies. If the information in 

§ 226.16(g)(4)(i) and, as applicable, (g)(4)(ii) 

and (g)(4)(iii) is the same type size as the 

promotional rate or promotional fee to which 

it applies, the disclosures would be deemed 

to be equally prominent. For purposes of 

§ 226.16(h)(3) as it applies to written or 

electronic advertisements only, a clear and 

conspicuous disclosure means the required 

information in § 226.16(h)(3) must be equally 

prominent to each statement of ‘‘no interest,’’ 

‘‘no payments,’’ ‘‘deferred interest,’’ ‘‘same as 

cash,’’ or similar term regarding interest or 

payments during the deferred interest period. 

If the information required to be disclosed 

under § 226.16(h)(3) is the same type size as 

the statement of ‘‘no interest,’’ ‘‘no payments,’’ 

‘‘deferred interest,’’ ‘‘same as cash,’’ or similar 

term regarding interest or payments during 

the deferred interest period, the disclosure 

would be deemed to be equally prominent. 

* * * * * 

16(g) Promotional rates. 

1. Rate in effect at the end of the 

promotional period. If the annual percentage 

rate that will be in effect at the end of the 

promotional period (i.e., the postpromotional rate) is a variable rate, the postpromotional rate for purposes of 

§ 226.16(g)(2)(i) is the rate that would have 

applied at the time the promotional rate was 

advertised if the promotional rate was not 

offered, consistent with the accuracy 

requirements in § 226.5a(c)(2) and (e)(4), as 

applicable. 

2. Immediate proximity. For written or 

electronic advertisements, including the term 

‘‘introductory’’ or ‘‘intro’’ in the same phrase 

as the listing of the introductory rate or 

introductory fee is deemed to be in 

immediate proximity of the listing. 

3. Prominent location closely proximate. 

For written or electronic advertisements, 

information required to be disclosed in 

§ 226.16(g)(4)(i) and, as applicable, (g)(4)(ii) 

and (g)(4)(iii) that is in the same paragraph 

as the first listing of the promotional rate or 

promotional fee is deemed to be in a 

prominent location closely proximate to the 

listing. Information disclosed in a footnote 

will not be considered in a prominent 

location closely proximate to the listing. 

4. First listing. For purposes of 

§ 226.16(g)(4) as it applies to written or 

electronic advertisements, the first listing of 

the promotional rate or promotional fee is the 

most prominent listing of the rate or fee on 

the front side of the first page of the principal 

promotional document. The principal 

promotional document is the document 

designed to be seen first by the consumer in 

a mailing, such as a cover letter or 

solicitation letter. If the promotional rate or 

promotional fee does not appear on the front 

side of the first page of the principal 

promotional document, then the first listing 

of the promotional rate or promotional fee is 

the most prominent listing of the rate or fee 

on the subsequent pages of the principal 

promotional document. If the promotional 

rate or promotional fee is not listed on the 

principal promotional document or there is 

no principal promotional document, the first 

listing is the most prominent listing of the 

rate or fee on the front side of the first page 

of each document listing the promotional rate 

or promotional fee. If the promotional rate or 

promotional fee does not appear on the front 

side of the first page of a document, then the 

first listing of the promotional rate or 

promotional fee is the most prominent listing 

of the rate or fee on the subsequent pages of 

the document. If the listing of the 

promotional rate or promotional fee with the 

largest type size on the front side of the first 

page (or subsequent pages if the promotional 

rate or promotional fee is not listed on the 

front side of the first page) of the principal 

promotional document (or each document 

listing the promotional rate or promotional 

fee if the promotional rate or promotional fee 

is not listed on the principal promotional 

document or there is no principal 

promotional document) is used as the most 

prominent listing, it will be deemed to be the 

first listing. Consistent with comment 16(c)– 

1, a catalog or multiple-page advertisement is 

considered one document for purposes of 

§ 226.16(g)(4). 

5. Post-promotional rate depends on 

consumer’s creditworthiness. For purposes of 

disclosing the rate that may apply after the 

end of the promotional rate period, at the 

advertiser’s option, the advertisement may 

disclose the rates that may apply as either 

specific rates, or a range of rates. For 

example, if there are three rates that may 

apply (9.99%, 12.99% or 17.99%), an issuer 

may disclose these three rates as specific 

rates (9.99%, 12.99% or 17.99%) or as a 

range of rates (9.99%–17.99%). 

* * * * * 

§ 226.30—Limitation on Rates 

* * * * * 

8. Manner of stating the maximum interest 

rate. The maximum interest rate must be 

stated in the credit contract either as a 

specific amount or in any other manner that 

would allow the consumer to easily 

ascertain, at the time of entering into the 

obligation, what the rate ceiling will be over 

the term of the obligation. 

i. For example, the following statements 

would be sufficiently specific: 

A. The maximum interest rate will not 

exceed X%. 

B. The interest rate will never be higher 

than X percentage points above the initial 

rate of Y%. 

C. The interest rate will not exceed X%, or 

X percentage points above [a rate to be 

determined at some future point in time], 

whichever is less. 

D. The maximum interest rate will not 

exceed X%, or the state usury ceiling, 

whichever is less. 

ii. The following statements would not 

comply with this section: 

A. The interest rate will never be higher 

than X percentage points over the prevailing 

market rate. 

B. The interest rate will never be higher 

than X percentage points above [a rate to be 

determined at some future point in time]. 

C. The interest rate will not exceed the 

state usury ceiling which is currently X%. 

iii. A creditor may state the maximum rate 

in terms of a maximum annual percentage 

rate that may be imposed. Under an open-end 

credit plan, this normally would be the 

corresponding annual percentage rate. (See 

generally § 226.6(a)(1)(ii) and (b)(4)(i)(A).) 

* * * * * 

§ 226.51—Ability To Pay 

51(a) General rule. 

51(a)(1) Consideration of ability to pay. 

1. Consideration of additional factors. 

Section 226.51(a) requires a card issuer to 

consider a consumer’s independent ability to 

make the required minimum periodic 

payments under the terms of an account 

based on the consumer’s independent 

income or assets and current obligations. The 

card issuer may also consider consumer 

reports, credit scores, and other factors, 

consistent with Regulation B (12 CFR part 

202). 

2. Ability to pay as of application or 

consideration of increase. A card issuer 

complies with § 226.51(a) if it bases its 

determination regarding a consumer’s 

independent ability to make the required 

minimum periodic payments on the facts and 

circumstances known to the card issuer at the 

time the consumer applies to open the credit 

card account or when the card issuer 

considers increasing the credit line on an 

existing account. 

3. Credit line increase. When a card issuer 

considers increasing the credit line on an 

existing account, § 226.51(a) applies whether 

the consideration is based upon a request of 

the consumer or is initiated by the card 

issuer. 

4. Income and assets. i. Sources of 

information. For purposes of § 226.51(a), a 

card issuer may consider the consumer’s 

income and assets based on: 

A. Information provided by the consumer 

in connection with the credit card account 

under an open-end (not home-secured) 

consumer credit plan; 

B. Information provided by the consumer 

in connection with any other financial 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23021 

relationship the card issuer or its affiliates 

have with the consumer (subject to any 

applicable information-sharing rules); 

C. Information obtained through third 

parties (subject to any applicable 

information-sharing rules); and 

D. Information obtained through any 

empirically derived, demonstrably and 

statistically sound model that reasonably 

estimates a consumer’s income and assets. 

ii. Income and assets of persons liable for 

debts incurred on account. For purposes of 

§ 226.51(a), a card issuer may consider any 

current or reasonably expected income and 

assets of the consumer or consumers who are 

applying for a new account and will be liable 

for debts incurred on that account. Similarly, 

when a card issuer is considering whether to 

increase the credit limit on an existing 

account, the card issuer may consider any 

current or reasonably expected income and 

assets of the consumer or consumers who are 

accountholders and are liable for debts 

incurred on that account. A card issuer may 

also consider any current or reasonably 

expected income and assets of a cosigner or 

guarantor who is or will be liable for debts 

incurred on the account. However, a card 

issuer may not use the income and assets of 

an authorized user or other person who is not 

liable for debts incurred on the account to 

satisfy the requirements of § 226.51, unless a 

Federal or State statute or regulation grants 

a consumer who is liable for debts incurred 

on the account an ownership interest in such 

income and assets. Information about current 

or reasonably expected income and assets 

includes, for example, information about 

current or expected salary, wages, bonus pay, 

tips, and commissions. Employment may be 

full-time, part-time, seasonal, irregular, 

military, or self-employment. Other sources 

of income could include interest or 

dividends, retirement benefits, public 

assistance, alimony, child support, or 

separate maintenance payments. A card 

issuer may also take into account assets such 

as savings accounts or investments. 

iii. Household income and assets. 

Consideration of information regarding a 

consumer’s household income does not by 

itself satisfy the requirement in § 226.51(a) to 

consider the consumer’s independent ability 

to pay. For example, if a card issuer requests 

on its application forms that applicants 

provide their ‘‘household income,’’ the card 

issuer may not rely solely on the information 

provided by applicants to satisfy the 

requirements of § 226.51(a). Instead, the card 

issuer would need to obtain additional 

information about an applicant’s 

independent income (such as by contacting 

the applicant). However, if a card issuer 

requests on its application forms that 

applicants provide their income without 

reference to household income (such as by 

requesting ‘‘income’’ or ‘‘salary’’), the card 

issuer may rely on the information provided 

by applicants to satisfy the requirements of 

§ 226.51(a). 

5. Current obligations. A card issuer may 

consider the consumer’s current obligations 

based on information provided by the 

consumer or in a consumer report. In 

evaluating a consumer’s current obligations, 

a card issuer need not assume that credit 

lines for other obligations are fully utilized. 

6. Joint applicants and joint 

accountholders. With respect to the opening 

of a joint account for two or more consumers 

or a credit line increase on such an account, 

the card issuer may consider the collective 

ability of all persons who are or will be liable 

for debts incurred on the account to make the 

required payments. 

51(a)(2) Minimum periodic payments. 

1. Applicable minimum payment formula. 

For purposes of estimating required 

minimum periodic payments under the safe 

harbor set forth in § 226.51(a)(2)(ii), if the 

account has or may have a promotional 

program, such as a deferred payment or 

similar program, where there is no applicable 

minimum payment formula during the 

promotional period, the issuer must estimate 

the required minimum periodic payment 

based on the minimum payment formula that 

will apply when the promotion ends. 

2. Interest rate for purchases. For purposes 

of estimating required minimum periodic 

payments under the safe harbor set forth in 

§ 226.51(a)(2)(ii), if the interest rate for 

purchases is or may be a promotional rate, 

the issuer must use the post-promotional rate 

to estimate interest charges. 

3. Mandatory fees. For purposes of 

estimating required minimum periodic 

payments under the safe harbor set forth in 

§ 226.51(a)(2)(ii), mandatory fees that must be 

assumed to be charged include those fees the 

card issuer knows the consumer will be 

required to pay under the terms of the 

account if the account is opened, such as an 

annual fee. If a mandatory fee is a 

promotional fee (as defined in § 226.16(g)), 

the issuer must use the post-promotional fee 

amount for purposes of § 226.51(a)(2)(ii). 

51(b) Rules affecting young consumers. 

1. Age as of date of application or 

consideration of credit line increase. Sections 

226.51(b)(1) and (b)(2) apply only to a 

consumer who has not attained the age of 21 

as of the date of submission of the 

application under § 226.51(b)(1) or the date 

the credit line increase is requested by the 

consumer (or if no request has been made, 

the date the credit line increase is considered 

by the card issuer) under § 226.51(b)(2). 

2. Liability of cosigner, guarantor, or joint 

accountholder. Sections 226.51(b)(1)(ii) and 

(b)(2) require the signature or written consent 

of a cosigner, guarantor, or joint 

accountholder agreeing either to be 

secondarily liable for any debt on the account 

incurred by the consumer before the 

consumer has attained the age of 21 or to be 

jointly liable with the consumer for any debt 

on the account. Sections 226.51(b)(1)(ii) and 

(b)(2) do not prohibit a card issuer from also 

requiring the cosigner, guarantor, or joint 

accountholder to assume liability for debts 

incurred after the consumer has attained the 

age of 21, consistent with any agreement 

made between the parties. 

3. Authorized users exempt. If a consumer 

who has not attained the age of 21 is being 

added to another person’s account as an 

authorized user and has no liability for debts 

incurred on the account, § 226.51(b)(1) and 

(b)(2) do not apply. 

4. Electronic application. Consistent with 

§ 226.5(a)(1)(iii), an application may be 

provided to the consumer in electronic form 

without regard to the consumer consent or 

other provisions of the Electronic Signatures 

in Global and National Commerce Act (ESign Act) (15 U.S.C. 7001 et seq.) in the 

circumstances set forth in § 226.5a. The 

electronic submission of an application from 

a consumer or a consent to a credit line 

increase from a cosigner, guarantor, or joint 

accountholder to a card issuer would 

constitute a written application or consent 

for purposes of § 226.51(b) and would not be 

considered a consumer disclosure for 

purposes of the E-Sign Act. 

51(b)(1) Applications from young 

consumers. 

1. Relation to Regulation B. In considering 

an application or credit line increase on the 

credit card account of a consumer who is less 

than 21 years old, creditors must comply 

with the applicable rules in Regulation B (12 

CFR part 202). 

2. Financial information. Information 

regarding income and assets that satisfies the 

requirements of § 226.51(a) also satisfies the 

requirements of § 226.51(b)(1). See comment 

51(a)(1)–4. 

51(b)(2) Credit line increases for young 

consumers. 

1. Relation to Regulation B. In considering 

an application or credit line increase on the 

credit card account of a consumer who is less 

than 21 years old, creditors must comply 

with the applicable rules in Regulation B (12 

CFR part 202). 

§ 226.52—Limitations on Fees 

52(a) Limitations prior to account opening 

and during first year after account opening. 

52(a)(1) General rule. 

1. Application. The 25 percent limit in 

§ 226.52(a)(1) applies to fees that the card 

issuer charges to the account as well as to 

fees that the card issuer requires the 

consumer to pay with respect to the account 

through other means (such as through a 

payment from the consumer’s asset account 

to the card issuer or from another credit 

account provided by the card issuer). For 

example: 

i. Assume that, under the terms of a credit 

card account, a consumer is required to pay 

$120 in fees for the issuance or availability 

of credit at account opening. The consumer 

is also required to pay a cash advance fee that 

is equal to five percent of the cash advance 

and a late payment fee of $15 if the required 

minimum periodic payment is not received 

by the payment due date (which is the 

twenty-fifth of the month). At account 

opening on January 1 of year one, the credit 

limit for the account is $500. Section 

226.52(a)(1) permits the card issuer to charge 

to the account the $120 in fees for the 

issuance or availability of credit at account 

opening. On February 1 of year one, the 

consumer uses the account for a $100 cash 

advance. Section 226.52(a)(1) permits the 

card issuer to charge a $5 cash-advance fee 

to the account. On March 26 of year one, the 

card issuer has not received the consumer’s 

required minimum periodic payment. 

Section 226.52(a)(2) permits the card issuer 

to charge a $15 late payment fee to the 

account. On July 15 of year one, the 

consumer uses the account for a $50 cash 

advance. Section 226.52(a)(1) does not permit 


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the card issuer to charge a $2.50 cash 

advance fee to the account. Furthermore, 

§ 225.52(a)(1) prohibits the card issuer from 

collecting the $2.50 cash advance fee from 

the consumer by other means. 

ii. Assume that, under the terms of a credit 

card account, a consumer is required to pay 

$125 in fees for the issuance or availability 

of credit during the first year after account 

opening. At account opening on January 1 of 

year one, the credit limit for the account is 

$500. Section 226.52(a)(1) permits the card 

issuer to charge the $125 in fees to the 

account. However, § 226.52(a)(1) prohibits 

the card issuer from requiring the consumer 

to make payments to the card issuer for 

additional non-exempt fees with respect to 

the account prior to account opening or 

during the first year after account opening. 

Section 226.52(a)(1) also prohibits the card 

issuer from requiring the consumer to open 

a separate credit account with the card issuer 

to fund the payment of additional nonexempt fees prior to the opening of the credit 

card account or during the first year after the 

credit card account is opened. 

iii. Assume that, on January 1 of year one, 

a consumer is required to pay a $100 fee in 

order to apply for a credit card account. On 

January 5, the card issuer approves the 

consumer’s application, assigns the account 

a credit limit of $1,000, and provides the 

consumer with account-opening disclosures 

consistent with § 226.6. The date on which 

the account may first be used by the 

consumer to engage in transactions is January 

5. The consumer is required to pay $150 in 

fees for the issuance or availability of credit, 

which § 226.52(a)(1) permits the card issuer 

to charge to the account on January 5. 

However, because the $100 application fee is 

subject to the 25 percent limit in 

§ 226.52(a)(1), the card issuer is prohibited 

from requiring the consumer to pay any 

additional non-exempt fees with respect to 

the account until January 5 of year two. 

2. Fees that exceed 25 percent limit. A card 

issuer that charges a fee to a credit card 

account that exceeds the 25 percent limit 

complies with § 226.52(a)(1) if the card issuer 

waives or removes the fee and any associated 

interest charges or credits the account for an 

amount equal to the fee and any associated 

interest charges within a reasonable amount 

of time but no later than the end of the billing 

cycle following the billing cycle during 

which the fee was charged. For example, 

assuming the facts in the example in 

comment 52(a)(1)–1.i. above, the card issuer 

complies with § 226.52(a)(1) if the card issuer 

charged the $2.50 cash advance fee to the 

account on July 15 of year one but waived 

or removed the fee or credited the account for 

$2.50 (plus any interest charges on that 

$2.50) at the end of the billing cycle. 

3. Changes in credit limit during first year. 

i. Increases in credit limit. If a card issuer 

increases the credit limit during the first year 

after the account is opened, § 226.52(a)(1) 

does not permit the card issuer to require the 

consumer to pay additional fees that would 

otherwise be prohibited (such as a fee for 

increasing the credit limit). For example, 

assume that, at account opening on January 

1, the credit limit for a credit card account 

is $400 and the consumer is required to pay 

$100 in fees for the issuance or availability 

of credit. On July 1, the card issuer increases 

the credit limit for the account to $600. 

Section 226.52(a)(1) does not permit the card 

issuer to require the consumer to pay 

additional fees based on the increased credit 

limit. 

ii. Decreases in credit limit. If a card issuer 

decreases the credit limit during the first year 

after the account is opened, § 226.52(a)(1) 

requires the card issuer to waive or remove 

any fees charged to the account that exceed 

25 percent of the reduced credit limit or to 

credit the account for an amount equal to any 

fees the consumer was required to pay with 

respect to the account that exceed 25 percent 

of the reduced credit limit within a 

reasonable amount of time but no later than 

the end of the billing cycle following the 

billing cycle during which the credit limit 

was reduced. For example: 

A. Assume that, at account opening on 

January 1, the credit limit for a credit card 

account is $1,000 and the consumer is 

required to pay $250 in fees for the issuance 

or availability of credit. The billing cycles for 

the account begin on the first day of the 

month and end on the last day of the month. 

On July 30, the card issuer decreases the 

credit limit for the account to $500. Section 

226.52(a)(1) requires the card issuer to waive 

or remove $175 in fees from the account or 

to credit the account for an amount equal to 

$175 within a reasonable amount of time but 

no later than August 31. 

B. Assume that, on June 25 of year one, a 

consumer is required to pay a $75 fee in 

order to apply for a credit card account. At 

account opening on July 1 of year one, the 

credit limit for the account is $500 and the 

consumer is required to pay $50 in fees for 

the issuance or availability of credit. The 

billing cycles for the account begin on the 

first day of the month and end on the last day 

of the month. On February 15 of year two, 

the card issuer decreases the credit limit for 

the account to $250. Section 226.52(a)(1) 

requires the card issuer to waive or remove 

fees from the account or to credit the account 

for an amount equal to $62.50 within a 

reasonable amount of time but no later than 

March 31 of year two. 

4. Date on which account may first be used 

by consumer to engage in transactions. 

i. Methods of compliance. For purposes of 

§ 226.52(a)(1), an account is considered open 

no earlier than the date on which the account 

may first be used by the consumer to engage 

in transactions. A card issuer may consider 

an account open for purposes of 

§ 226.52(a)(1) on any of the following dates: 

A. The date the account is first used by the 

consumer for a transaction (such as when an 

account is established in connection with 

financing the purchase of goods or services). 

B. The date the consumer complies with 

any reasonable activation procedures 

imposed by the card issuer for preventing 

fraud or unauthorized use of a new account 

(such as requiring the consumer to provide 

information that verifies his or her identity), 

provided that the account may be used for 

transactions on that date. 

C. The date that is seven days after the card 

issuer mails or delivers to the consumer 

account-opening disclosures that comply 

with § 226.6, provided that the consumer 

may use the account for transactions after 

complying with any reasonable activation 

procedures imposed by the card issuer for 

preventing fraud or unauthorized use of the 

new account (such as requiring the consumer 

to provide information that verifies his or her 

identity). If a card issuer has reasonable 

procedures designed to ensure that accountopening disclosures that comply with § 226.6 

are mailed or delivered to consumers no later 

than a certain number of days after the card 

issuer establishes the account, the card issuer 

may add that number of days to the sevenday period for purposes of determining the 

date on which the account was opened. 

ii. Examples. 

A. Assume that, on July 1 of year one, a 

credit card account under an open-end (not 

home-secured) consumer credit plan is 

established in connection with financing the 

purchase of goods or services and a $500 

transaction is charged to the account by the 

consumer. The card issuer may consider the 

account open on July 1 of year one for 

purposes of § 226.52(a)(1). Accordingly, 

§ 226.52(a)(1) ceases to apply to the account 

on July 1 of year two. 

B. Assume that, on July 1 of year one, a 

card issuer approves a consumer’s 

application for a credit card account under 

an open-end (not home-secured) consumer 

credit plan and establishes the account on its 

internal systems. On July 5, the card issuer 

mails or delivers to the consumer accountopening disclosures that comply with 

§ 226.6. If the consumer may use the account 

for transactions on the date the consumer 

complies with any reasonable procedures 

imposed by the card issuer for preventing 

fraud or unauthorized use, the card issuer 

may consider the account open on July 12 of 

year one for purposes of § 226.52(a)(1). 

Accordingly, § 226.52(a)(1) ceases to apply to 

the account on July 12 of year two. 

C. Same facts as in paragraph B above 

except that the card issuer has adopted 

reasonable procedures designed to ensure 

that account-opening disclosures that comply 

with § 226.6 are mailed or delivered to 

consumers no later than three days after an 

account is established on its systems. If the 

consumer may use the account for 

transactions on the date the consumer 

complies with any reasonable procedures 

imposed by the card issuer for preventing 

fraud or unauthorized use, the card issuer 

may consider the account open on July 11 of 

year one for purposes of § 226.52(a)(1). 

Accordingly, § 226.52(a)(1) ceases to apply to 

the account on July 11 of year two. However, 

if the consumer uses the account for a 

transaction or complies with the card issuer’s 

reasonable procedures for preventing fraud or 

unauthorized use on July 8 of year one, the 

card issuer may, at its option, consider the 

account open on that date for purposes of 

§ 226.52(a)(1) and § 226.52(a)(1) therefore 

ceases to apply to the account on July 8 of 

year two. 

52(a)(2) Fees not subject to limitations. 

1. Covered fees. Except as provided in 

§ 226.52(a)(2), § 226.52(a) applies to any fees 

or other charges that a card issuer will or may 

require the consumer to pay with respect to 

a credit card account prior to account 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23023 

opening and during the first year after 

account opening, other than charges 

attributable to periodic interest rates. For 

example, § 226.52(a) applies to: 

i. Fees that the consumer is required to pay 

for the issuance or availability of credit 

described in § 226.5a(b)(2), including any fee 

based on account activity or inactivity and 

any fee that a consumer is required to pay in 

order to receive a particular credit limit; 

ii. Fees for insurance described in 

§ 226.4(b)(7) or debt cancellation or debt 

suspension coverage described in 

§ 226.4(b)(10) written in connection with a 

credit transaction, if the insurance or debt 

cancellation or debt suspension coverage is 

required by the terms of the account; 

iii. Fees that the consumer is required to 

pay in order to engage in transactions using 

the account (such as cash advance fees, 

balance transfer fees, foreign transaction fees, 

and fees for using the account for purchases); 

iv. Fees that the consumer is required to 

pay for violating the terms of the account 

(except to the extent specifically excluded by 

§ 226.52(a)(2)(i)); 

v. Fixed finance charges; and 

vi. Minimum charges imposed if a charge 

would otherwise have been determined by 

applying a periodic interest rate to a balance 

except for the fact that such charge is smaller 

than the minimum. 

2. Fees the consumer is not required to pay. 

Section 226.52(a)(2)(ii) provides that 

§ 226.52(a) does not apply to fees that the 

consumer is not required to pay with respect 

to the account. For example, § 226.52(a) 

generally does not apply to fees for making 

an expedited payment (to the extent 

permitted by § 226.10(e)), fees for optional 

services (such as travel insurance), fees for 

reissuing a lost or stolen card, or statement 

reproduction fees. 

3. Security deposits. A security deposit that 

is charged to a credit card account is a fee 

for purposes of § 226.52(a). In contrast, 

however, a security deposit is not subject to 

the 25 percent limit in § 226.52(a)(1) if it is 

not charged to the account. For example, 

§ 226.52(a)(1) does not prohibit a card issuer 

from requiring a consumer to provide funds 

at account opening pledged as security for 

the account that exceed 25 percent of the 

credit limit at account opening so long as 

those funds are not obtained from the 

account. 

52(a)(3) Rule of construction. 

1. Fees or charges otherwise prohibited by 

law. Section 226.52(a) does not authorize the 

imposition or payment of fees or charges 

otherwise prohibited by law. For example, 

see 16 CFR 310.4(a)(4). 

52(b) Limitations on penalty fees. 

1. Fees for violating the account terms or 

other requirements. For purposes of 

§ 226.52(b), a fee includes any charge 

imposed by a card issuer based on an act or 

omission that violates the terms of the 

account or any other requirements imposed 

by the card issuer with respect to the 

account, other than charges attributable to 

periodic interest rates. Accordingly, for 

purposes of § 226.52(b), a fee does not 

include charges attributable to an increase in 

an annual percentage rate based on an act or 

omission that violates the terms or other 

requirements of an account. 

i. The following are examples of fees that 

are subject to the limitations in § 226.52(b) or 

are prohibited by § 226.52(b): 

A. Late payment fees and any other fees 

imposed by a card issuer if an account 

becomes delinquent or if a payment is not 

received by a particular date. 

B. Returned payment fees and any other 

fees imposed by a card issuer if a payment 

received via check, automated clearing 

house, or other payment method is returned. 

C. Any fee or charge for an over-the-limit 

transaction as defined in § 226.56(a), to the 

extent the imposition of such a fee or charge 

is permitted by § 226.56. 

D. Any fee imposed by a card issuer if 

payment on a check that accesses a credit 

card account is declined. 

E. Any fee or charge for a transaction that 

the card issuer declines to authorize. See 

§ 226.52(b)(2)(i)(B). 

F. Any fee imposed by a card issuer based 

on account inactivity (including the 

consumer’s failure to use the account for a 

particular number or dollar amount of 

transactions or a particular type of 

transaction). See § 226.52(b)(2)(i)(B). 

G. Any fee imposed by a card issuer based 

on the closure or termination of an account. 

See § 226.52(b)(2)(i)(B). 

ii. The following are examples of fees to 

which § 226.52(b) does not apply: 

A. Balance transfer fees. 

B. Cash advance fees. 

C. Foreign transaction fees. 

D. Annual fees and other fees for the 

issuance or availability of credit described in 

§ 226.5a(b)(2), except to the extent that such 

fees are based on account inactivity. See 

§ 226.52(b)(2)(i)(B). 

E. Fees for insurance described in 

§ 226.4(b)(7) or debt cancellation or debt 

suspension coverage described in 

§ 226.4(b)(10) written in connection with a 

credit transaction, provided that such fees are 

not imposed as a result of a violation of the 

account terms or other requirements of an 

account. 

F. Fees for making an expedited payment 

(to the extent permitted by § 226.10(e)). 

G. Fees for optional services (such as travel 

insurance). 

H. Fees for reissuing a lost or stolen card. 

2. Rounding to nearest whole dollar. A card 

issuer may round any fee that complies with 

§ 226.52(b) to the nearest whole dollar. For 

example, if § 226.52(b) permits a card issuer 

to impose a late payment fee of $21.50, the 

card issuer may round that amount up to the 

nearest whole dollar and impose a late 

payment fee of $22. However, if the late 

payment fee permitted by § 226.52(b) were 

$21.49, the card issuer would not be 

permitted to round that amount up to $22, 

although the card issuer could round that 

amount down and impose a late payment fee 

of $21. 

52(b)(1) General rule. 

1. Relationship between § 226.52(b)(1)(i), 

(b)(1)(ii), and (b)(2). 

i. Relationship between § 226.52(b)(1)(i) 

and (b)(1)(ii). A card issuer may impose a fee 

for violating the terms or other requirements 

of an account pursuant to either 

§ 226.52(b)(1)(i) or (b)(1)(ii). 

A. A card issuer that complies with the 

safe harbors in § 226.52(b)(1)(ii) is not 

required to determine that its fees represent 

a reasonable proportion of the total costs 

incurred by the card issuer as a result of a 

type of violation under § 226.52(b)(1)(i). 

B. A card issuer may impose a fee for one 

type of violation pursuant to § 226.52(b)(1)(i) 

and may impose a fee for a different type of 

violation pursuant to § 226.52(b)(1)(ii). For 

example, a card issuer may impose a late 

payment fee of $30 based on a cost 

determination pursuant to § 226.52(b)(1)(i) 

but impose returned payment and over-thelimit fees of $25 or $35 pursuant to the safe 

harbors in § 226.52(b)(1)(ii). 

C. A card issuer that previously based the 

amount of a penalty fee for a particular type 

of violation on a cost determination pursuant 

to § 226.52(b)(1)(i) may begin to impose a 

penalty fee for that type of violation that is 

consistent with § 226.52(b)(1)(ii) at any time 

(subject to the notice requirements in 

§ 226.9), provided that the first fee imposed 

pursuant to § 226.52(b)(1)(ii) is consistent 

with § 226.52(b)(1)(ii)(A). For example, 

assume that a late payment occurs on January 

15 and that, based on a cost determination 

pursuant to § 226.52(b)(1)(i), the card issuer 

imposes a $30 late payment fee. Another late 

payment occurs on July 15. The card issuer 

may impose another $30 late payment fee 

pursuant to § 226.52(b)(1)(i) or may impose a 

$25 late payment fee pursuant to 

§ 226.52(b)(1)(ii)(A). However, the card issuer 

may not impose a $35 late payment fee 

pursuant to § 226.52(b)(1)(ii)(B). If the card 

issuer imposes a $25 fee pursuant to 

§ 226.52(b)(1)(ii)(A) for the July 15 late 

payment and another late payment occurs on 

September 15, the card issuer may impose a 

$35 fee for the September 15 late payment 

pursuant to § 226.52(b)(1)(ii)(B). 

ii. Relationship between § 226.52(b)(1) and 

(b)(2). Section 226.52(b)(1) does not permit a 

card issuer to impose a fee that is 

inconsistent with the prohibitions in 

§ 226.52(b)(2). For example, if 

§ 226.52(b)(2)(i) prohibits the card issuer 

from imposing a late payment fee that 

exceeds $15, § 226.52(b)(1)(ii) does not 

permit the card issuer to impose a higher late 

payment fee. 

52(b)(1)(i) Fees based on costs. 

1. Costs incurred as a result of violations. 

Section 226.52(b)(1)(i) does not require a card 

issuer to base a fee on the costs incurred as 

a result of a specific violation of the terms 

or other requirements of an account. Instead, 

for purposes of § 226.52(b)(1)(i), a card issuer 

must have determined that a fee for violating 

the terms or other requirements of an account 

represents a reasonable proportion of the 

costs incurred by the card issuer as a result 

of that type of violation. A card issuer may 

make a single determination for all of its 

credit card portfolios or may make separate 

determinations for each portfolio. The factors 

relevant to this determination include: 

i. The number of violations of a particular 

type experienced by the card issuer during a 

prior period of reasonable length (for 

example, a period of twelve months). 

ii. The costs incurred by the card issuer 

during that period as a result of those 

violations. 

iii. At the card issuer’s option, the number 

of fees imposed by the card issuer as a result 


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23024 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

of those violations during that period that the 

card issuer reasonably estimates it will be 

unable to collect. See comment 52(b)(1)(i)–5. 

iv. At the card issuer’s option, reasonable 

estimates for an upcoming period of changes 

in the number of violations of that type, the 

resulting costs, and the number of fees that 

the card issuer will be unable to collect. See 

illustrative examples in comments 

52(b)(1)(i)–6 through –9. 

2. Amounts excluded from cost analysis. 

The following amounts are not costs incurred 

by a card issuer as a result of violations of 

the terms or other requirements of an account 

for purposes of § 226.52(b)(1)(i): 

i. Losses and associated costs (including 

the cost of holding reserves against potential 

losses and the cost of funding delinquent 

accounts). 

ii. Costs associated with evaluating 

whether consumers who have not violated 

the terms or other requirements of an account 

are likely to do so in the future (such as the 

costs associated with underwriting new 

accounts). However, once a violation of the 

terms or other requirements of an account 

has occurred, the costs associated with 

preventing additional violations for a 

reasonable period of time are costs incurred 

by a card issuer as a result of violations of 

the terms or other requirements of an account 

for purposes of § 226.52(b)(1)(i). 

3. Third party charges. As a general matter, 

amounts charged to the card issuer by a third 

party as a result of a violation of the terms 

or other requirements of an account are costs 

incurred by the card issuer for purposes of 

§ 226.52(b)(1)(i). For example, if a card issuer 

is charged a specific amount by a third party 

for each returned payment, that amount is a 

cost incurred by the card issuer as a result 

of returned payments. However, if the 

amount is charged to the card issuer by an 

affiliate or subsidiary of the card issuer, the 

card issuer must have determined that the 

charge represents a reasonable proportion of 

the costs incurred by the affiliate or 

subsidiary as a result of the type of violation. 

For example, if an affiliate of a card issuer 

provides collection services to the card issuer 

on delinquent accounts, the card issuer must 

have determined that the amounts charged to 

the card issuer by the affiliate for such 

services represent a reasonable proportion of 

the costs incurred by the affiliate as a result 

of late payments. 

4. Amounts charged by other card issuers. 

The fact that a card issuer’s fees for violating 

the terms or other requirements of an account 

are comparable to fees assessed by other card 

issuers does not satisfy the requirements of 

§ 226.52(b)(1)(i). 

5. Uncollected fees. For purposes of 

§ 226.52(b)(1)(i), a card issuer may consider 

fees that it is unable to collect when 

determining the appropriate fee amount. Fees 

that the card issuer is unable to collect 

include fees imposed on accounts that have 

been charged off by the card issuer, fees that 

have been discharged in bankruptcy, and fees 

that the card issuer is required to waive in 

order to comply with a legal requirement 

(such as a requirement imposed by 12 CFR 

part 226 or 50 U.S.C. app. 527). However, 

fees that the card issuer chooses not to 

impose or chooses not to collect (such as fees 

the card issuer chooses to waive at the 

request of the consumer or under a workout 

or temporary hardship arrangement) are not 

relevant for purposes of this determination. 

See illustrative examples in comments 

52(b)(2)(i)–6 through –9. 

6. Late payment fees. i. Costs incurred as 

a result of late payments. For purposes of 

§ 226.52(b)(1)(i), the costs incurred by a card 

issuer as a result of late payments include the 

costs associated with the collection of late 

payments, such as the costs associated with 

notifying consumers of delinquencies and 

resolving delinquencies (including the 

establishment of workout and temporary 

hardship arrangements). 

ii. Examples. 

A. Late payment fee based on past 

delinquencies and costs. Assume that, during 

year one, a card issuer experienced 1 million 

delinquencies and incurred $26 million in 

costs as a result of those delinquencies. For 

purposes of § 226.52(b)(1)(i), a $26 late 

payment fee would represent a reasonable 

proportion of the total costs incurred by the 

card issuer as a result of late payments 

during year two. 

B. Adjustment based on fees card issuer is 

unable to collect. Same facts as above except 

that the card issuer imposed a late payment 

fee for each of the 1 million delinquencies 

experienced during year one but was unable 

to collect 25% of those fees (in other words, 

the card issuer was unable to collect 250,000 

fees, leaving a total of 750,000 late payments 

for which the card issuer did collect or could 

have collected a fee). For purposes of 

§ 226.52(b)(2)(i), a late payment fee of $35 

would represent a reasonable proportion of 

the total costs incurred by the card issuer as 

a result of late payments during year two. 

C. Adjustment based on reasonable 

estimate of future changes. Same facts as 

paragraphs A. and B. above except the card 

issuer reasonably estimates that—based on 

past delinquency rates and other factors 

relevant to potential delinquency rates for 

year two—it will experience a 2% decrease 

in delinquencies during year two (in other 

words, 20,000 fewer delinquencies for a total 

of 980,000). The card issuer also reasonably 

estimates that it will be unable to collect the 

same percentage of fees (25%) during year 

two as during year one (in other words, the 

card issuer will be unable to collect 245,000 

fees, leaving a total of 735,000 late payments 

for which the card issuer will be able to 

collect a fee). The card issuer also reasonably 

estimates that—based on past changes in 

costs incurred as a result of delinquencies 

and other factors relevant to potential costs 

for year two—it will experience a 5% 

increase in costs during year two (in other 

words, $1.3 million in additional costs for a 

total of $27.3 million). For purposes of 

§ 226.52(b)(1)(i), a $37 late payment fee 

would represent a reasonable proportion of 

the total costs incurred by the card issuer as 

a result of late payments during year two. 

7. Returned payment fees. i. Costs incurred 

as a result of returned payments. For 

purposes of § 226.52(b)(1)(i), the costs 

incurred by a card issuer as a result of 

returned payments include: 

A. Costs associated with processing 

returned payments and reconciling the card 

issuer’s systems and accounts to reflect 

returned payments; 

B. Costs associated with investigating 

potential fraud with respect to returned 

payments; and 

C. Costs associated with notifying the 

consumer of the returned payment and 

arranging for a new payment. 

ii. Examples. 

A. Returned payment fee based on past 

returns and costs. Assume that, during year 

one, a card issuer experienced 150,000 

returned payments and incurred $3.1 million 

in costs as a result of those returned 

payments. For purposes of § 226.52(b)(1)(i), a 

$21 returned payment fee would represent a 

reasonable proportion of the total costs 

incurred by the card issuer as a result of 

returned payments during year two. 

B. Adjustment based on fees card issuer is 

unable to collect. Same facts as above except 

that the card issuer imposed a returned 

payment fee for each of the 150,000 returned 

payments experienced during year one but 

was unable to collect 15% of those fees (in 

other words, the card issuer was unable to 

collect 22,500 fees, leaving a total of 127,500 

returned payments for which the card issuer 

did collect or could have collected a fee). For 

purposes of § 226.52(b)(2)(i), a returned 

payment fee of $24 would represent a 

reasonable proportion of the total costs 

incurred by the card issuer as a result of 

returned payments during year two. 

C. Adjustment based on reasonable 

estimate of future changes. Same facts as 

paragraphs A. and B. above except the card 

issuer reasonably estimates that—based on 

past returned payment rates and other factors 

relevant to potential returned payment rates 

for year two—it will experience a 2% 

increase in returned payments during year 

two (in other words, 3,000 additional 

returned payments for a total of 153,000). 

The card issuer also reasonably estimates that 

it will be unable to collect 25% of returned 

payment fees during year two (in other 

words, the card issuer will be unable to 

collect 38,250 fees, leaving a total of 114,750 

returned payments for which the card issuer 

will be able to collect a fee). The card issuer 

also reasonably estimates that—based on past 

changes in costs incurred as a result of 

returned payments and other factors relevant 

to potential costs for year two—it will 

experience a 1% decrease in costs during 

year two (in other words, a $31,000 reduction 

in costs for a total of $3.069 million). For 

purposes of § 226.52(b)(1)(i), a $27 returned 

payment fee would represent a reasonable 

proportion of the total costs incurred by the 

card issuer as a result of returned payments 

during year two. 

8. Over-the-limit fees. i. Costs incurred as 

a result of over-the-limit transactions. For 

purposes of § 226.52(b)(1)(i), the costs 

incurred by a card issuer as a result of overthe-limit transactions include: 

A. Costs associated with determining 

whether to authorize over-the-limit 

transactions; and 

B. Costs associated with notifying the 

consumer that the credit limit has been 

exceeded and arranging for payments to 

reduce the balance below the credit limit. 

ii. Costs not incurred as a result of overthe-limit transactions. For purposes of 


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§ 226.52(b)(1)(i), costs associated with 

obtaining the affirmative consent of 

consumers to the card issuer’s payment of 

transactions that exceed the credit limit 

consistent with § 226.56 are not costs 

incurred by a card issuer as a result of overthe-limit transactions. 

iii. Examples. 

A. Over-the-limit fee based on past fees 

and costs. Assume that, during year one, a 

card issuer authorized 600,000 over-the-limit 

transactions and incurred $4.5 million in 

costs as a result of those over-the-limit 

transactions. However, because of the 

affirmative consent requirements in § 226.56, 

the card issuer was only permitted to impose 

200,000 over-the-limit fees during year one. 

For purposes of § 226.52(b)(1)(i), a $23 overthe-limit fee would represent a reasonable 

proportion of the total costs incurred by the 

card issuer as a result of over-the-limit 

transactions during year two. 

B. Adjustment based on fees card issuer is 

unable to collect. Same facts as above except 

that the card issuer was unable to collect 

30% of the 200,000 over-the-limit fees 

imposed during year one (in other words, the 

card issuer was unable to collect 60,000 fees, 

leaving a total of 140,000 over-the-limit 

transactions for which the card issuer did 

collect or could have collected a fee). For 

purposes of § 226.52(b)(2)(i), an over-thelimit fee of $32 would represent a reasonable 

proportion of the total costs incurred by the 

card issuer as a result of over-the-limit 

transactions during year two. 

C. Adjustment based on reasonable 

estimate of future changes. Same facts as 

paragraphs A. and B. above except the card 

issuer reasonably estimates that—based on 

past over-the-limit transaction rates, the 

percentages of over-the-limit transactions 

that resulted in an over-the-limit fee in the 

past (consistent with § 226.56), and factors 

relevant to potential changes in those rates 

and percentages for year two—it will 

authorize approximately the same number of 

over-the-limit transactions during year two 

(600,000) and impose approximately the 

same number of over-the-limit fees (200,000). 

The card issuer also reasonably estimates that 

it will be unable to collect the same 

percentage of fees (30%) during year two as 

during year one (in other words, the card 

issuer was unable to collect 60,000 fees, 

leaving a total of 140,000 over-the-limit 

transactions for which the card issuer will be 

able to collect a fee). The card issuer also 

reasonably estimates that—based on past 

changes in costs incurred as a result of overthe-limit transactions and other factors 

relevant to potential costs for year two—it 

will experience a 6% decrease in costs 

during year two (in other words, a $270,000 

reduction in costs for a total of $4.23 

million). For purposes of § 226.52(b)(1)(i), a 

$30 over-the-limit fee would represent a 

reasonable proportion of the total costs 

incurred by the card issuer as a result of overthe-limit transactions during year two. 

9. Declined access check fees. i. Costs 

incurred as a result of declined access 

checks. For purposes of § 226.52(b)(1)(i), the 

costs incurred by a card issuer as a result of 

declining payment on a check that accesses 

a credit card account include: 

A. Costs associated with determining 

whether to decline payment on access 

checks; 

B. Costs associated with processing 

declined access checks and reconciling the 

card issuer’s systems and accounts to reflect 

declined access checks; 

C. Costs associated with investigating 

potential fraud with respect to declined 

access checks; and 

D. Costs associated with notifying the 

consumer and the merchant or other party 

that accepted the access check that payment 

on the check has been declined. 

ii. Example. Assume that, during year one, 

a card issuer declined 100,000 access checks 

and incurred $2 million in costs as a result 

of those declined checks. The card issuer 

imposed a fee for each declined access check 

but was unable to collect 10% of those fees 

(in other words, the card issuer was unable 

to collect 10,000 fees, leaving a total of 

90,000 declined access checks for which the 

card issuer did collect or could have 

collected a fee). For purposes of 

§ 226.52(b)(1)(i), a $22 declined access check 

fee would represent a reasonable proportion 

of the total costs incurred by the card issuer 

as a result of declined access checks during 

year two. 

52(b)(1)(ii) Safe harbors. 

1. Multiple violations of same type. 

i. Same billing cycle or next six billing 

cycles. A card issuer cannot impose a fee for 

a violation pursuant to § 226.52(b)(1)(ii)(B) 

unless a fee has previously been imposed for 

the same type of violation pursuant to 

§ 226.52(b)(1)(ii)(A). Once a fee has been 

imposed for a violation pursuant to 

§ 226.52(b)(1)(ii)(A), the card issuer may 

impose a fee pursuant to § 226.52(b)(1)(ii)(B) 

for any subsequent violation of the same type 

until that type of violation has not occurred 

for a period of six consecutive complete 

billing cycles. A fee has been imposed for 

purposes of § 226.52(b)(1)(ii) even if the card 

issuer waives or rebates all or part of the fee. 

A. Late payments. For purposes of 

§ 226.52(b)(1)(ii), a late payment occurs 

during the billing cycle in which the 

payment may first be treated as late 

consistent with the requirements of 12 CFR 

Part 226 and the terms or other requirements 

of the account. 

B. Returned payments. For purposes of 

§ 226.52(b)(1)(ii), a returned payment occurs 

during the billing cycle in which the 

payment is returned to the card issuer. 

C. Transactions that exceed the credit 

limit. For purposes of § 226.52(b)(1)(ii), a 

transaction that exceeds the credit limit for 

an account occurs during the billing cycle in 

which the transaction occurs or is authorized 

by the card issuer. 

D. Declined access checks. For purposes of 

§ 226.52(b)(1)(ii), a check that accesses a 

credit card account is declined during the 

billing cycle in which the card issuer 

declines payment on the check. 

ii. Relationship to §§ 226.52(b)(2)(ii) and 

226.56(j)(1). If multiple violations are based 

on the same event or transaction such that 

§ 226.52(b)(2)(ii) prohibits the card issuer 

from imposing more than one fee, the event 

or transaction constitutes a single violation 

for purposes of § 226.52(b)(1)(ii). 

Furthermore, consistent with § 226.56(j)(1)(i), 

no more than one violation for exceeding an 

account’s credit limit can occur during a 

single billing cycle for purposes of 

§ 226.52(b)(1)(ii). However, § 226.52(b)(2)(ii) 

does not prohibit a card issuer from imposing 

fees for exceeding the credit limit in 

consecutive billing cycles based on the same 

over-the-limit transaction to the extent 

permitted by § 226.56(j)(1). In these 

circumstances, the second and third over-thelimit fees permitted by § 226.56(j)(1) may be 

imposed pursuant to § 226.52(b)(1)(ii)(B). See 

comment 52(b)(2)(ii)–1. 

iii. Examples. The following examples 

illustrate the application of 

§ 226.52(b)(1)(ii)(A) and (b)(1)(ii)(B) with 

respect to credit card accounts under an 

open-end (not home-secured) consumer 

credit plan that are not charge card accounts. 

For purposes of these examples, assume that 

the billing cycles for the account begin on the 

first day of the month and end on the last day 

of the month and that the payment due date 

for the account is the twenty-fifth day of the 

month. 

A. Violations of same type (late payments). 

A required minimum periodic payment of 

$50 is due on March 25. On March 26, a late 

payment has occurred because no payment 

has been received. Accordingly, consistent 

with § 226.52(b)(1)(ii)(A), the card issuer 

imposes a $25 late payment fee on March 26. 

In order for the card issuer to impose a $35 

late payment fee pursuant to 

§ 226.52(b)(1)(ii)(B), a second late payment 

must occur during the April, May, June, July, 

August, or September billing cycles. 

(1) The card issuer does not receive any 

payment during the March billing cycle. A 

required minimum periodic payment of $100 

is due on April 25. On April 20, the card 

issuer receives a $50 payment. No further 

payment is received during the April billing 

cycle. Accordingly, consistent with 

§ 226.52(b)(1)(ii)(B), the card issuer may 

impose a $35 late payment fee on April 26. 

Furthermore, the card issuer may impose a 

$35 late payment fee for any late payment 

that occurs during the May, June, July, 

August, September, or October billing cycles. 

(2) Same facts as in paragraph A. above. On 

March 30, the card issuer receives a $50 

payment and the required minimum periodic 

payments for the April, May, June, July, 

August, and September billing cycles are 

received on or before the payment due date. 

A required minimum periodic payment of 

$60 is due on October 25. On October 26, a 

late payment has occurred because the 

required minimum periodic payment due on 

October 25 has not been received. However, 

because this late payment did not occur 

during the six billing cycles following the 

March billing cycle, § 226.52(b)(1)(ii) only 

permits the card issuer to impose a late 

payment fee of $25. 

B. Violations of different types (late 

payment and over the credit limit). The credit 

limit for an account is $1,000. Consistent 

with § 226.56, the consumer has affirmatively 

consented to the payment of transactions that 

exceed the credit limit. A required minimum 

periodic payment of $30 is due on August 25. 

On August 26, a late payment has occurred 

because no payment has been received. 


srobinson on DSKHWCL6B1PROD with RULES2
23026 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

Accordingly, consistent with 

§ 226.52(b)(1)(ii)(A), the card issuer imposes 

a $25 late payment fee on August 26. On 

August 30, the card issuer receives a $30 

payment. On September 10, a transaction 

causes the account balance to increase to 

$1,150, which exceeds the account’s $1,000 

credit limit. On September 11, a second 

transaction increases the account balance to 

$1,350. On September 23, the card issuer 

receives the $50 required minimum periodic 

payment due on September 25, which 

reduces the account balance to $1,300. On 

September 30, the card issuer imposes a $25 

over-the-limit fee, consistent with 

§ 226.52(b)(1)(ii)(A). On October 26, a late 

payment has occurred because the $60 

required minimum periodic payment due on 

October 25 has not been received. 

Accordingly, consistent with 

§ 226.52(b)(1)(ii)(B), the card issuer imposes 

a $35 late payment fee on October 26. 

C. Violations of different types (late 

payment and returned payment). A required 

minimum periodic payment of $50 is due on 

July 25. On July 26, a late payment has 

occurred because no payment has been 

received. Accordingly, consistent with 

§ 226.52(b)(1)(ii)(A), the card issuer imposes 

a $25 late payment fee on July 26. On July 

30, the card issuer receives a $50 payment. 

A required minimum periodic payment of 

$50 is due on August 25. On August 24, a 

$50 payment is received. On August 27, the 

$50 payment is returned to the card issuer for 

insufficient funds. In these circumstances, 

§ 226.52(b)(2)(ii) permits the card issuer to 

impose either a late payment fee or a 

returned payment fee but not both because 

the late payment and the returned payment 

result from the same event or transaction. 

Accordingly, for purposes of 

§ 226.52(b)(1)(ii), the event or transaction 

constitutes a single violation. However, if the 

card issuer imposes a late payment fee, 

§ 226.52(b)(1)(ii)(B) permits the issuer to 

impose a fee of $35 because the late payment 

occurred during the six billing cycles 

following the July billing cycle. In contrast, 

if the card issuer imposes a returned payment 

fee, the amount of the fee may be no more 

than $25 pursuant to § 226.52(b)(1)(ii)(A). 

2. Adjustments based on Consumer Price 

Index. For purposes of § 226.52(b)(1)(ii)(A) 

and (b)(1)(ii)(B), the Board shall calculate 

each year price level adjusted amounts using 

the Consumer Price Index in effect on June 

1 of that year. When the cumulative change 

in the adjusted minimum value derived from 

applying the annual Consumer Price level to 

the current amounts in § 226.52(b)(1)(ii)(A) 

and (b)(1)(ii)(B) has risen by a whole dollar, 

those amounts will be increased by $1.00. 

Similarly, when the cumulative change in the 

adjusted minimum value derived from 

applying the annual Consumer Price level to 

the current amounts in § 226.52(b)(1)(ii)(A) 

and (b)(1)(ii)(B) has decreased by a whole 

dollar, those amounts will be decreased by 

$1.00. The Board will publish adjustments to 

the amounts in § 226.52(b)(1)(ii)(A) and 

(b)(1)(ii)(B). 

3. Delinquent balance for charge card 

accounts. Section 226.52(b)(1)(ii)(C) provides 

that, when a charge card issuer that requires 

payment of outstanding balances in full at 

the end of each billing cycle has not received 

the required payment for two or more 

consecutive billing cycles, the card issuer 

may impose a late payment fee that does not 

exceed three percent of the delinquent 

balance. For purposes of § 226.52(b)(1)(ii)(C), 

the delinquent balance is any previously 

billed amount that remains unpaid at the 

time the late payment fee is imposed 

pursuant to § 226.52(b)(1)(ii)(C). Consistent 

with § 226.52(b)(2)(ii), a charge card issuer 

that imposes a fee pursuant to 

§ 226.52(b)(1)(ii)(C) with respect to a late 

payment may not impose a fee pursuant to 

§ 226.52(b)(1)(ii)(B) with respect to the same 

late payment. The following examples 

illustrate the application of 

§ 226.52(b)(1)(ii)(C): 

i. Assume that a charge card issuer requires 

payment of outstanding balances in full at 

the end of each billing cycle and that the 

billing cycles for the account begin on the 

first day of the month and end on the last day 

of the month. At the end of the June billing 

cycle, the account has a balance of $1,000. 

On July 5, the card issuer provides a periodic 

statement disclosing the $1,000 balance 

consistent with § 226.7. During the July 

billing cycle, the account is used for $300 in 

transactions, increasing the balance to 

$1,300. At the end of the July billing cycle, 

no payment has been received and the card 

issuer imposes a $25 late payment fee 

consistent with § 226.52(b)(1)(ii)(A). On 

August 5, the card issuer provides a periodic 

statement disclosing the $1,325 balance 

consistent with § 226.7. During the August 

billing cycle, the account is used for $200 in 

transactions, increasing the balance to 

$1,525. At the end of the August billing 

cycle, no payment has been received. 

Consistent with § 226.52(b)(1)(ii)(C), the card 

issuer may impose a late payment fee of $40, 

which is 3% of the $1,325 balance that was 

due at the end of the August billing cycle. 

Section 226.52(b)(1)(ii)(C) does not permit 

the card issuer to include the $200 in 

transactions that occurred during the August 

billing cycle. 

ii. Same facts as above except that, on 

August 25, a $100 payment is received. 

Consistent with § 226.52(b)(1)(ii)(C), the card 

issuer may impose a late payment fee of $37, 

which is 3% of the unpaid portion of the 

$1,325 balance that was due at the end of the 

August billing cycle ($1,225). 

iii. Same facts as in paragraph A. above 

except that, on August 25, a $200 payment 

is received. Consistent with 

§ 226.52(b)(1)(ii)(C), the card issuer may 

impose a late payment fee of $34, which is 

3% of the unpaid portion of the $1,325 

balance that was due at the end of the August 

billing cycle ($1,125). In the alternative, the 

card issuer may impose a late payment fee of 

$35 consistent with § 226.52(b)(1)(ii)(B). 

However, § 226.52(b)(2)(ii) prohibits the card 

issuer from imposing both fees. 

52(b)(2) Prohibited fees. 

1. Relationship to § 226.52(b)(1). A card 

issuer does not comply with § 226.52(b) if it 

imposes a fee that is inconsistent with the 

prohibitions in § 226.52(b)(2). Thus, the 

prohibitions in § 226.52(b)(2) apply even if a 

fee is consistent with § 226.52(b)(1)(i) or 

(b)(1)(ii). For example, even if a card issuer 

has determined for purposes of 

§ 226.52(b)(1)(i) that a $27 fee represents a 

reasonable proportion of the total costs 

incurred by the card issuer as a result of a 

particular type of violation, § 226.52(b)(2)(i) 

prohibits the card issuer from imposing that 

fee if the dollar amount associated with the 

violation is less than $27. Similarly, even if 

§ 226.52(b)(1)(ii) permits a card issuer to 

impose a $25 fee, § 226.52(b)(2)(i) prohibits 

the card issuer from imposing that fee if the 

dollar amount associated with the violation 

is less than $25. 

52(b)(2)(i) Fees that exceed dollar amount 

associated with violation. 

1. Late payment fees. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with a late payment is the amount of the 

required minimum periodic payment due 

immediately prior to assessment of the late 

payment fee. Thus, § 226.52(b)(2)(i)(A) 

prohibits a card issuer from imposing a late 

payment fee that exceeds the amount of that 

required minimum periodic payment. For 

example: 

i. Assume that a $15 required minimum 

periodic payment is due on September 25. 

The card issuer does not receive any payment 

on or before September 25. On September 26, 

the card issuer imposes a late payment fee. 

For purposes of § 226.52(b)(2)(i), the dollar 

amount associated with the late payment is 

the amount of the required minimum 

periodic payment due on September 25 ($15). 

Thus, under § 226.52(b)(2)(i)(A), the amount 

of that fee cannot exceed $15 (even if a 

higher fee would be permitted under 

§ 226.52(b)(1)). 

ii. Same facts as above except that, on 

September 25, the card issuer receives a $10 

payment. No further payments are received. 

On September 26, the card issuer imposes a 

late payment fee. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with the late payment is the full amount of 

the required minimum periodic payment due 

on September 25 ($15), rather than the 

unpaid portion of that payment ($5). Thus, 

under § 226.52(b)(2)(i)(A), the amount of the 

late payment fee cannot exceed $15 (even if 

a higher fee would be permitted under 

§ 226.52(b)(1)). 

iii. Assume that a $15 required minimum 

periodic payment is due on October 28 and 

the billing cycle for the account closes on 

October 31. The card issuer does not receive 

any payment on or before November 3. On 

November 3, the card issuer determines that 

the required minimum periodic payment due 

on November 28 is $50. On November 5, the 

card issuer imposes a late payment fee. For 

purposes of § 226.52(b)(2)(i), the dollar 

amount associated with the late payment is 

the amount of the required minimum 

periodic payment due on October 28 ($15), 

rather than the amount of the required 

minimum periodic payment due on 

November 28 ($50). Thus, under 

§ 226.52(b)(2)(i)(A), the amount of that fee 

cannot exceed $15 (even if a higher fee 

would be permitted under § 226.52(b)(1)). 

2. Returned payment fees. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with a returned payment is the amount of the 

required minimum periodic payment due 

immediately prior to the date on which the 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23027 

payment is returned to the card issuer. Thus, 

§ 226.52(b)(2)(i)(A) prohibits a card issuer 

from imposing a returned payment fee that 

exceeds the amount of that required 

minimum periodic payment. However, if a 

payment has been returned and is submitted 

again for payment by the card issuer, there 

is no additional dollar amount associated 

with a subsequent return of that payment and 

§ 226.52(b)(2)(i)(B) prohibits the card issuer 

from imposing an additional returned 

payment fee. For example: 

i. Assume that the billing cycles for an 

account begin on the first day of the month 

and end on the last day of the month and that 

the payment due date is the twenty-fifth day 

of the month. A minimum payment of $15 is 

due on March 25. The card issuer receives a 

check for $100 on March 23, which is 

returned to the card issuer for insufficient 

funds on March 26. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with the returned payment is the amount of 

the required minimum periodic payment due 

on March 25 ($15). Thus, § 226.52(b)(2)(i)(A) 

prohibits the card issuer from imposing a 

returned payment fee that exceeds $15 (even 

if a higher fee would be permitted under 

§ 226.52(b)(1)). Furthermore, § 226.52(b)(2)(ii) 

prohibits the card issuer from assessing both 

a late payment fee and a returned payment 

fee in these circumstances. See comment 

52(b)(2)(ii)–1. 

ii. Same facts as above except that the card 

issuer receives the $100 check on March 31 

and the check is returned for insufficient 

funds on April 2. The minimum payment 

due on April 25 is $30. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with the returned payment is the amount of 

the required minimum periodic payment due 

on March 25 ($15), rather than the amount 

of the required minimum periodic payment 

due on April 25 ($30). Thus, 

§ 226.52(b)(2)(i)(A) prohibits the card issuer 

from imposing a returned payment fee that 

exceeds $15 (even if a higher fee would be 

permitted under § 226.52(b)(1)). Furthermore, 

§ 226.52(b)(2)(ii) prohibits the card issuer 

from assessing both a late payment fee and 

a returned payment fee in these 

circumstances. See comment 52(b)(2)(ii)–1. 

iii. Same facts as paragraph i. above except 

that, on March 28, the card issuer presents 

the $100 check for payment a second time. 

On April 1, the check is again returned for 

insufficient funds. Section 226.52(b)(2)(i)(B) 

prohibits the card issuer from imposing a 

returned payment fee based on the return of 

the payment on April 1. 

iv. Assume that the billing cycles for an 

account begin on the first day of the month 

and end on the last day of the month and that 

the payment due date is the twenty-fifth day 

of the month. A minimum payment of $15 is 

due on August 25. The card issuer receives 

a check for $15 on August 23, which is not 

returned. The card issuer receives a check for 

$50 on September 5, which is returned to the 

card issuer for insufficient funds on 

September 7. Section 226.52(b)(2)(i)(B) does 

not prohibit the card issuer from imposing a 

returned payment fee in these circumstances. 

Instead, for purposes of § 226.52(b)(2)(i), the 

dollar amount associated with the returned 

payment is the amount of the required 

minimum periodic payment due on August 

25 ($15). Thus, § 226.52(b)(2)(i)(A) prohibits 

the card issuer from imposing a returned 

payment fee that exceeds $15 (even if a 

higher fee would be permitted under 

§ 226.52(b)(1)). 

3. Over-the-limit fees. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with extensions of credit in excess of the 

credit limit for an account is the total amount 

of credit extended by the card issuer in 

excess of the credit limit during the billing 

cycle in which the over-the-limit fee is 

imposed. Thus, § 226.52(b)(2)(i)(A) prohibits 

a card issuer from imposing an over-the-limit 

fee that exceeds that amount. Nothing in 

§ 226.52(b) permits a card issuer to impose an 

over-the-limit fee if imposition of the fee is 

inconsistent with § 226.56. The following 

examples illustrate the application of 

§ 226.52(b)(2)(i)(A) to over-the-limit fees: 

i. Assume that the billing cycles for a credit 

card account with a credit limit of $5,000 

begin on the first day of the month and end 

on the last day of the month. Assume also 

that, consistent with § 226.56, the consumer 

has affirmatively consented to the payment of 

transactions that exceed the credit limit. On 

March 1, the account has a $4,950 balance. 

On March 6, a $60 transaction is charged to 

the account, increasing the balance to $5,010. 

On March 25, a $5 transaction is charged to 

the account, increasing the balance to $5,015. 

On the last day of the billing cycle (March 

31), the card issuer imposes an over-the-limit 

fee. For purposes of § 226.52(b)(2)(i), the 

dollar amount associated with the extensions 

of credit in excess of the credit limit is the 

total amount of credit extended by the card 

issuer in excess of the credit limit during the 

March billing cycle ($15). Thus, 

§ 226.52(b)(2)(i)(A) prohibits the card issuer 

from imposing an over-the-limit fee that 

exceeds $15 (even if a higher fee would be 

permitted under § 226.52(b)(1)). 

ii. Same facts as above except that, on 

March 26, the card issuer receives a payment 

of $20, reducing the balance below the credit 

limit to $4,995. Nevertheless, for purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with the extensions of credit in excess of the 

credit limit is the total amount of credit 

extended by the card issuer in excess of the 

credit limit during the March billing cycle 

($15). Thus, consistent with 

§ 226.52(b)(2)(i)(A), the card issuer may 

impose an over-the-limit fee of $15. 

4. Declined access check fees. For purposes 

of § 226.52(b)(2)(i), the dollar amount 

associated with declining payment on a 

check that accesses a credit card account is 

the amount of the check. Thus, when a check 

that accesses a credit card account is 

declined, § 226.52(b)(2)(i)(A) prohibits a card 

issuer from imposing a fee that exceeds the 

amount of that check. For example, assume 

that a check that accesses a credit card 

account is used as payment for a $50 

transaction, but payment on the check is 

declined by the card issuer because the 

transaction would have exceeded the credit 

limit for the account. For purposes of 

§ 226.52(b)(2)(i), the dollar amount associated 

with the declined check is the amount of the 

check ($50). Thus, § 226.52(b)(2)(i)(A) 

prohibits the card issuer from imposing a fee 

that exceeds $50. However, the amount of 

this fee must also comply with 

§ 226.52(b)(1)(i) or (b)(1)(ii). 

5. Inactivity fees. Section 

226.52(b)(2)(i)(B)(2) prohibits a card issuer 

from imposing a fee with respect to a credit 

card account under an open-end (not homesecured) consumer credit plan based on 

inactivity on that account (including the 

consumer’s failure to use the account for a 

particular number or dollar amount of 

transactions or a particular type of 

transaction). For example, 

§ 226.52(b)(2)(i)(B)(2) prohibits a card issuer 

from imposing a $50 fee when a credit card 

account under an open-end (not homesecured) consumer credit plan is not used for 

at least $2,000 in purchases over the course 

of a year. Similarly, § 226.52(b)(2)(i)(B)(2) 

prohibits a card issuer from imposing a $50 

annual fee on all accounts of a particular type 

but waiving the fee on any account that is 

used for at least $2,000 in purchases over the 

course of a year if the card issuer promotes 

the waiver or rebate of the annual fee for 

purposes of § 226.55(e). However, if the card 

issuer does not promote the waiver or rebate 

of the annual fee for purposes of § 226.55(e), 

§ 226.52(b)(2)(i)(B)(2) does not prohibit a card 

issuer from considering account activity 

along with other factors when deciding 

whether to waive or rebate annual fees on 

individual accounts (such as in response to 

a consumer’s request). 

6. Closed account fees. Section 

226.52(b)(2)(i)(B)(3) prohibits a card issuer 

from imposing a fee based on the closure or 

termination of an account. For example, 

226.52(b)(2)(i)(B)(3) prohibits a card issuer 

from: 

i. Imposing a one-time fee to consumers 

who close their accounts. 

ii. Imposing a periodic fee (such as an 

annual fee, a monthly maintenance fee, or a 

closed account fee) after an account is closed 

or terminated if that fee was not imposed 

prior to closure or termination. This 

prohibition applies even if the fee was 

disclosed prior to closure or termination. See 

also comment 55(d)–1. 

iii. Increasing a periodic fee (such as an 

annual fee or a monthly maintenance fee) 

after an account is closed or terminated. 

However, a card issuer is not prohibited from 

continuing to impose a periodic fee that was 

imposed before the account was closed or 

terminated. 

52(b)(2)(ii) Multiple fees based on single 

event or transaction. 

1. Single event or transaction. Section 

226.52(b)(2)(ii) prohibits a card issuer from 

imposing more than one fee for violating the 

terms or other requirements of an account 

based on a single event or transaction. If 

§ 226.56(j)(1) permits a card issuer to impose 

fees for exceeding the credit limit in 

consecutive billing cycles based on the same 

over-the-limit transaction, those fees are not 

based on a single event or transaction for 

purposes of § 226.52(b)(2)(ii). The following 

examples illustrate the application of 

§ 226.52(b)(2)(ii). Assume for purposes of 

these examples that the billing cycles for a 

credit card account begin on the first day of 

the month and end on the last day of the 

month and that the payment due date for the 

account is the twenty-fifth day of the month. 


srobinson on DSKHWCL6B1PROD with RULES2
23028 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

i. Assume that the required minimum 

periodic payment due on March 25 is $20. 

On March 26, the card issuer has not 

received any payment and imposes a late 

payment fee. Consistent with 

§§ 226.52(b)(1)(ii)(A) and (b)(2)(i), the card 

issuer may impose a $20 late payment fee on 

March 26. However, § 226.52(b)(2)(ii) 

prohibits the card issuer from imposing an 

additional late payment fee if the $20 

minimum payment has not been received by 

a subsequent date (such as March 31). 

A. On April 3, the card issuer provides a 

periodic statement disclosing that a $70 

required minimum periodic payment is due 

on April 25. This minimum payment 

includes the $20 minimum payment due on 

March 25 and the $20 late payment fee 

imposed on March 26. On April 20, the card 

issuer receives a $20 payment. No additional 

payments are received during the April 

billing cycle. Section 226.52(b)(2)(ii) does not 

prohibit the card issuer from imposing a late 

payment fee based on the consumer’s failure 

to make the $70 required minimum periodic 

payment on or before April 25. Accordingly, 

consistent with § 226.52(b)(1)(ii)(B) and 

(b)(2)(i), the card issuer may impose a $35 

late payment fee on April 26. 

B. On April 3, the card issuer provides a 

periodic statement disclosing that a $20 

required minimum periodic payment is due 

on April 25. This minimum payment does 

not include the $20 minimum payment due 

on March 25 or the $20 late payment fee 

imposed on March 26. On April 20, the card 

issuer receives a $20 payment. No additional 

payments are received during the April 

billing cycle. Because the card issuer has 

received the required minimum periodic 

payment due on April 25 and because 

§ 226.52(b)(2)(ii) prohibits the card issuer 

from imposing a second late payment fee 

based on the consumer’s failure to make the 

$20 minimum payment due on March 25, the 

card issuer cannot impose a late payment fee 

in these circumstances. 

ii. Assume that the required minimum 

periodic payment due on March 25 is $30. 

A. On March 25, the card issuer receives 

a check for $50, but the check is returned for 

insufficient funds on March 27. Consistent 

with §§ 226.52(b)(1)(ii)(A) and (b)(2)(i)(A), 

the card issuer may impose a late payment 

fee of $25 or a returned payment fee of $25. 

However, § 226.52(b)(2)(ii) prohibits the card 

issuer from imposing both fees because those 

fees would be based on a single event or 

transaction. 

B. Same facts as paragraph ii.A. above 

except that that card issuer receives the $50 

check on March 27 and the check is returned 

for insufficient funds on March 29. 

Consistent with §§ 226.52(b)(1)(ii)(A) and 

(b)(2)(i)(A), the card issuer may impose a late 

payment fee of $25 or a returned payment fee 

of $25. However, § 226.52(b)(2)(ii) prohibits 

the card issuer from imposing both fees 

because those fees would be based on a 

single event or transaction. If no payment is 

received on or before the next payment due 

date (April 25), § 226.52(b)(2)(ii) does not 

prohibit the card issuer from imposing a late 

payment fee. 

iii. Assume that the required minimum 

periodic payment due on July 25 is $30. On 

July 10, the card issuer receives a $50 

payment, which is not returned. On July 20, 

the card issuer receives a $100 payment, 

which is returned for insufficient funds on 

July 24. Consistent with § 226.52(b)(1)(ii)(A) 

and (b)(2)(i)(A), the card issuer may impose 

a returned payment fee of $25. Nothing in 

§ 226.52(b)(2)(ii) prohibits the imposition of 

this fee. 

iv. Assume that the credit limit for an 

account is $1,000 and that, consistent with 

§ 226.56, the consumer has affirmatively 

consented to the payment of transactions that 

exceed the credit limit. On March 31, the 

balance on the account is $970 and the card 

issuer has not received the $35 required 

minimum periodic payment due on March 

25. On that same date (March 31), a $70 

transaction is charged to the account, which 

increases the balance to $1,040. Consistent 

with § 226.52(b)(1)(ii)(A) and (b)(2)(i)(A), the 

card issuer may impose a late payment fee of 

$25 and an over-the-limit fee of $25. Section 

226.52(b)(2)(ii) does not prohibit the 

imposition of both fees because those fees are 

based on different events or transactions. No 

additional transactions are charged to the 

account during the March, April, or May 

billing cycles. If the account balance remains 

more than $35 above the credit limit on April 

26, the card issuer may impose an over-thelimit fee of $35 pursuant to 

§ 226.52(b)(1)(ii)(B), to the extent consistent 

with § 226.56(j)(1). Furthermore, if the 

account balance remains more than $35 

above the credit limit on May 26, the card 

issuer may again impose an over-the-limit fee 

of $35 pursuant to § 226.52(b)(1)(ii)(B), to the 

extent consistent with § 226.56(j)(1). 

Thereafter, § 226.56(j)(1) does not permit the 

card issuer to impose additional over-thelimit fees unless another over-the-limit 

transaction occurs. However, if an over-thelimit transaction occurs during the six billing 

cycles following the May billing cycle, the 

card issuer may impose an over-the-limit fee 

of $35 pursuant to § 226.52(b)(1)(ii)(B). 

v. Assume that the credit limit for an 

account is $5,000 and that, consistent with 

§ 226.56, the consumer has affirmatively 

consented to the payment of transactions that 

exceed the credit limit. On July 23, the 

balance on the account is $4,950. On July 24, 

the card issuer receives the $100 required 

minimum periodic payment due on July 25, 

reducing the balance to $4,850. On July 26, 

a $75 transaction is charged to the account, 

which increases the balance to $4,925. On 

July 27, the $100 payment is returned for 

insufficient funds, increasing the balance to 

$5,025. Consistent with §§ 226.52(b)(1)(ii)(A) 

and (b)(2)(i)(A), the card issuer may impose 

a returned payment fee of $25 or an over-thelimit fee of $25. However, § 226.52(b)(2)(ii) 

prohibits the card issuer from imposing both 

fees because those fees would be based on a 

single event or transaction. 

vi. Assume that the required minimum 

periodic payment due on March 25 is $50. 

On March 20, the card issuer receives a check 

for $50, but the check is returned for 

insufficient funds on March 22. Consistent 

with §§ 226.52(b)(1)(ii)(A) and (b)(2)(i)(A), 

the card issuer may impose a returned 

payment fee of $25. On March 25, the card 

issuer receives a second check for $50, but 

the check is returned for insufficient funds 

on March 27. Consistent with 

§§ 226.52(b)(1)(ii)(A), (b)(1)(ii)(B), and 

(b)(2)(i)(A), the card issuer may impose a late 

payment fee of $25 or a returned payment fee 

of $35. However, § 226.52(b)(2)(ii) prohibits 

the card issuer from imposing both fees 

because those fees would be based on a 

single event or transaction. 

vii. Assume that the required minimum 

periodic payment due on February 25 is 

$100. On February 25, the card issuer 

receives a check for $100. On March 3, the 

card issuer provides a periodic statement 

disclosing that a $120 required minimum 

periodic payment is due on March 25. On 

March 4, the $100 check is returned to the 

card issuer for insufficient funds. Consistent 

with §§ 226.52(b)(1)(ii)(A) and (b)(2)(i)(A), 

the card issuer may impose a late payment 

fee of $25 or a returned payment fee of $25 

with respect to the $100 payment. However, 

§ 226.52(b)(2)(ii) prohibits the card issuer 

from imposing both fees because those fees 

would be based on a single event or 

transaction. On March 20, the card issuer 

receives a $120 check, which is not returned. 

No additional payments are received during 

the March billing cycle. Because the card 

issuer has received the required minimum 

periodic payment due on March 25 and 

because § 226.52(b)(2)(ii) prohibits the card 

issuer from imposing a second fee based on 

the $100 payment that was returned for 

insufficient funds, the card issuer cannot 

impose a late payment fee in these 

circumstances. 

§ 226.53—Allocation of Payments 

* * * * * 

4. Balances with the same rate. When the 

same annual percentage rate applies to more 

than one balance on an account and a 

different annual percentage rate applies to at 

least one other balance on that account, 

§ 226.53 generally does not require that any 

particular method be used when allocating 

among the balances with the same annual 

percentage rate. Under these circumstances, 

a card issuer may treat the balances with the 

same rate as a single balance or separate 

balances. See example in comment 53–5.iv. 

However, when a balance on a credit card 

account is subject to a deferred interest or 

similar program that provides that a 

consumer will not be obligated to pay 

interest that accrues on the balance if the 

balance is paid in full prior to the expiration 

of a specified period of time, that balance 

must be treated as a balance with an annual 

percentage rate of zero for purposes of 

§ 226.53 during that period of time. For 

example, if an account has a $1,000 purchase 

balance and a $2,000 balance that is subject 

to a deferred interest program that expires on 

July 1 and a 15% annual percentage rate 

applies to both, the balances must be treated 

as balances with different rates for purposes 

of § 226.53 until July 1. In addition, unless 

the card issuer allocates amounts paid by the 

consumer in excess of the required minimum 

periodic payment in the manner requested by 

the consumer pursuant to § 226.53(b)(1)(ii), 

§ 226.53(b)(1)(i) requires the card issuer to 

apply any excess payments first to the $1,000 

purchase balance except during the last two 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23029 

billing cycles of the deferred interest period 

(when it must be applied first to any 

remaining portion of the $2,000 balance). See 

example in comment 53–5.v. 

5. * * * 

v. * * * 

A. Each month from February through 

June, the consumer pays $400 in excess of 

the required minimum periodic payment on 

the payment due date, which is the twentyfifth of the month. Any interest that accrues 

on the purchases not subject to the deferred 

interest program is paid by the required 

minimum periodic payment. The card issuer 

does not accept requests from consumers 

regarding the allocation of excess payments 

pursuant to § 226.53(b)(1)(ii). Thus, 

§ 226.53(b)(1)(i) requires the card issuer to 

allocate the $400 excess payments received 

on February 25, March 25, and April 25 

consistent with § 226.53(a). In other words, 

the card issuer must allocate those payments 

as follows: $200 to pay off the balance not 

subject to the deferred interest program 

(which is subject to the 15% rate) and the 

remaining $200 to the deferred interest 

balance (which is treated as a balance with 

a rate of zero). However, § 226.53(b)(1)(i) 

requires the card issuer to allocate the entire 

$400 excess payment received on May 25 to 

the deferred interest balance. Similarly, 

§ 226.53(b)(1)(i) requires the card issuer to 

allocate the $400 excess payment received on 

June 25 as follows: $200 to the deferred 

interest balance (which pays that balance in 

full) and the remaining $200 to the balance 

not subject to the deferred interest program. 

B. Same facts as above, except that the card 

issuer does accept requests from consumers 

regarding the allocation of excess payments 

pursuant to § 226.53(b)(1)(ii). In addition, on 

April 25, the card issuer receives an excess 

payment of $800, which the consumer 

requests be allocated to pay off the $800 

balance subject to the deferred interest 

program. Section 226.53(b)(1)(ii) permits the 

card issuer to allocate the $800 excess 

payment in the manner requested by the 

consumer. 

53(b) Special rules. 

1. Deferred interest and similar programs. 

Section 226.53(b)(1) applies to deferred 

interest or similar programs under which the 

consumer is not obligated to pay interest that 

accrues on a balance if that balance is paid 

in full prior to the expiration of a specified 

period of time. For purposes of § 226.53(b)(1), 

‘‘deferred interest’’ has the same meaning as 

in § 226.16(h)(2) and associated commentary. 

Section 226.53(b)(1) applies regardless of 

whether the consumer is required to make 

payments with respect to that balance during 

the specified period. However, a grace period 

during which any credit extended may be 

repaid without incurring a finance charge 

due to a periodic interest rate is not a 

deferred interest or similar program for 

purposes of § 226.53(b)(1). Similarly, a 

temporary annual percentage rate of zero 

percent that applies for a specified period of 

time consistent with § 226.55(b)(1) is not a 

deferred interest or similar program for 

purposes of § 226.53(b)(1) unless the 

consumer may be obligated to pay interest 

that accrues during the period if a balance is 

not paid in full prior to expiration of the 

period. 

2. Expiration of deferred interest or similar 

program during billing cycle. For purposes of 

§ 226.53(b)(1)(i), a billing cycle does not 

constitute one of the two billing cycles 

immediately preceding expiration of a 

deferred interest or similar program if the 

expiration date for the program precedes the 

payment due date in that billing cycle. For 

example, assume that a credit card account 

has a balance subject to a deferred interest 

program that expires on June 15. Assume also 

that the billing cycles for the account begin 

on the first day of the month and end on the 

last day of the month and that the required 

minimum periodic payment is due on the 

twenty-fifth day of the month. The card 

issuer does not accept requests from 

consumers regarding the allocation of excess 

payments pursuant to § 226.53(b)(1)(ii). 

Because the expiration date for the deferred 

interest program (June 15) precedes the due 

date in the June billing cycle (June 25), 

§ 226.53(b)(1)(i) requires the card issuer to 

allocate first to the deferred interest balance 

any amount paid by the consumer in excess 

of the required minimum periodic payment 

during the April and May billing cycles (as 

well as any amount paid by the consumer 

before June 15). However, if the deferred 

interest program expired on June 25 or on 

June 30 (or on any day in between), 

§ 226.53(b)(1)(i) would apply only to the May 

and June billing cycles. 

3. Consumer requests. i. Generally. Section 

226.53(b) does not require a card issuer to 

allocate amounts paid by the consumer in 

excess of the required minimum periodic 

payment in the manner requested by the 

consumer, provided that the card issuer 

instead allocates such amounts consistent 

with § 226.53(a) or (b)(1)(i), as applicable. For 

example, a card issuer may decline consumer 

requests regarding payment allocation as a 

general matter or may decline such requests 

when a consumer does not comply with 

requirements set by the card issuer (such as 

submitting the request in writing or 

submitting the request prior to or 

contemporaneously with submission of the 

payment), provided that amounts paid by the 

consumer in excess of the required minimum 

periodic payment are allocated consistent 

with § 226.53(a) or (b)(1)(i), as applicable. 

Similarly, a card issuer that accepts requests 

pursuant to § 226.53(b)(1)(ii) or (b)(2) must 

allocate amounts paid by a consumer in 

excess of the required minimum periodic 

payment consistent with § 226.53(a) or 

(b)(1)(i), as applicable, if the consumer does 

not submit a request. Furthermore, a card 

issuer that accepts requests pursuant to 

§ 226.53(b)(1)(ii) or (b)(2) must allocate 

consistent with § 226.53(a) or (b)(1)(i), as 

applicable, if the consumer submits a request 

with which the card issuer cannot comply 

(such as a request that contains a 

mathematical error), unless the consumer 

submits an additional request with which the 

card issuer can comply. 

ii. Examples of consumer requests that 

satisfy § 226.53(b)(1)(ii) or (b)(2). A consumer 

has made a request for purposes of 

§ 226.53(b)(1)(ii) or (b)(2) if: 

A. The consumer contacts the card issuer 

orally, electronically, or in writing and 

specifically requests that a payment or 

payments be allocated in a particular manner 

during the period of time that the deferred 

interest or similar program applies to a 

balance on the account or the period of time 

that a balance on the account is secured. 

B. The consumer completes and submits to 

the card issuer a form or payment coupon 

provided by the card issuer for the purpose 

of requesting that a payment or payments be 

allocated in a particular manner during the 

period of time that the deferred interest or 

similar program applies to a balance on the 

account or the period of time that a balance 

on the account is secured. 

C. The consumer contacts the card issuer 

orally, electronically, or in writing and 

specifically requests that a payment that the 

card issuer has previously allocated 

consistent with § 226.53(a) or (b)(1)(i), as 

applicable, instead be allocated in a different 

manner. 

iii. Examples of consumer requests that do 

not satisfy § 226.53(b)(1)(ii) or (b)(2). A 

consumer has not made a request for 

purposes of § 226.53(b)(1)(ii) or (b)(2) if: 

A. The terms and conditions of the account 

agreement contain preprinted language 

stating that by applying to open an account, 

by using that account for transactions subject 

to a deferred interest or similar program, or 

by using the account to purchase property in 

which the card issuer holds a security 

interest the consumer requests that payments 

be allocated in a particular manner. 

B. The card issuer’s on-line application 

contains a preselected check box indicating 

that the consumer requests that payments be 

allocated in a particular manner and the 

consumer does not deselect the box. 

C. The payment coupon provided by the 

card issuer contains preprinted language or a 

preselected check box stating that by 

submitting a payment the consumer requests 

that the payment be allocated in a particular 

manner. 

D. The card issuer requires a consumer to 

accept a particular payment allocation 

method as a condition of using a deferred 

interest or similar program, purchasing 

property in which the card issuer holds a 

security interest, making a payment, or 

receiving account services or features. 

* * * * * 

§ 226.55—Limitations on Increasing Annual 

Percentage Rates, Fees, and Charges 

55(a) General rule. 

1. Increase in rate, fee, or charge. Section 

226.55(a) prohibits card issuers from 

increasing an annual percentage rate or any 

fee or charge required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) on a 

credit card account unless specifically 

permitted by one of the exceptions in 

§ 226.55(b). Except as specifically provided 

in § 226.55(b), this prohibition applies even 

if the circumstances under which an increase 

will occur are disclosed in advance. The 

following examples illustrate the general 

application of § 226.55(a) and (b). Additional 

examples illustrating specific aspects of the 

exceptions in § 226.55(b) are provided in the 

commentary to those exceptions. 

i. Account-opening disclosure of nonvariable rate for six months, then variable 

rate. Assume that, at account opening on 


srobinson on DSKHWCL6B1PROD with RULES2
23030 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

January 1 of year one, a card issuer discloses 

that the annual percentage rate for purchases 

is a non-variable rate of 15% and will apply 

for six months. The card issuer also discloses 

that, after six months, the annual percentage 

rate for purchases will be a variable rate that 

is currently 18% and will be adjusted 

quarterly by adding a margin of 8 percentage 

points to a publicly-available index not 

under the card issuer’s control. Furthermore, 

the card issuer discloses that the annual 

percentage rate for cash advances is the same 

variable rate that will apply to purchases 

after six months. Finally, the card issuer 

discloses that, to the extent consistent with 

§ 226.55 and other applicable law, a nonvariable penalty rate of 30% may apply if the 

consumer makes a late payment. The 

payment due date for the account is the 

twenty-fifth day of the month and the 

required minimum periodic payments are 

applied to accrued interest and fees but do 

not reduce the purchase and cash advance 

balances. 

A. Change-in-terms rate increase for new 

transactions after first year. On January 15 of 

year one, the consumer uses the account to 

make a $2,000 purchase and a $500 cash 

advance. No other transactions are made on 

the account. At the start of each quarter, the 

card issuer may adjust the variable rate that 

applies to the $500 cash advance consistent 

with changes in the index (pursuant to 

§ 226.55(b)(2)). All required minimum 

periodic payments are received on or before 

the payment due date until May of year one, 

when the payment due on May 25 is received 

by the creditor on May 28. At this time, the 

card issuer is prohibited by § 226.55 from 

increasing the rates that apply to the $2,000 

purchase, the $500 cash advance, or future 

purchases and cash advances. Six months 

after account opening (July 1), the card issuer 

may begin to accrue interest on the $2,000 

purchase at the previously-disclosed variable 

rate determined using an 8-point margin 

(pursuant to § 226.55(b)(1)). Because no other 

increases in rate were disclosed at account 

opening, the card issuer may not 

subsequently increase the variable rate that 

applies to the $2,000 purchase and the $500 

cash advance (except due to increases in the 

index pursuant to § 226.55(b)(2)). On 

November 16, the card issuer provides a 

notice pursuant to § 226.9(c) informing the 

consumer of a new variable rate that will 

apply on January 1 of year two (calculated 

using the same index and an increased 

margin of 12 percentage points). On 

December 15, the consumer makes a $100 

purchase. On January 1 of year two, the card 

issuer may increase the margin used to 

determine the variable rate that applies to 

new purchases to 12 percentage points 

(pursuant to § 226.55(b)(3)). However, 

§ 226.55(b)(3)(ii) does not permit the card 

issuer to apply the variable rate determined 

using the 12-point margin to the $2,000 

purchase balance. Furthermore, although the 

$100 purchase occurred more than 14 days 

after provision of the § 226.9(c) notice, 

§ 226.55(b)(3)(iii) does not permit the card 

issuer to apply the variable rate determined 

using the 12-point margin to that purchase 

because it occurred during the first year after 

account opening. On January 15 of year two, 

the consumer makes a $300 purchase. The 

card issuer may apply the variable rate 

determined using the 12-point margin to the 

$300 purchase. 

B. Account becomes more than 60 days 

delinquent during first year. Same facts as 

above except that the required minimum 

periodic payment due on May 25 of year one 

is not received by the card issuer until July 

30 of year one. Because the card issuer 

received the required minimum periodic 

payment more than 60 days after the 

payment due date, § 226.55(b)(4) permits the 

card issuer to increase the annual percentage 

rate applicable to the $2,000 purchase, the 

$500 cash advance, and future purchases and 

cash advances. However, § 226.55(b)(4)(i) 

requires the card issuer to first comply with 

the notice requirements in § 226.9(g). Thus, 

if the card issuer provided a § 226.9(g) notice 

on July 25 stating that all rates on the account 

would be increased to the 30% penalty rate, 

the card issuer could apply that rate 

beginning on September 8 to all balances and 

to future transactions. 

ii. Account-opening disclosure of nonvariable rate for six months, then increased 

non-variable rate for six months, then 

variable rate; change-in-terms rate increase 

for new transactions after first year. Assume 

that, at account opening on January 1 of year 

one, a card issuer discloses that the annual 

percentage rate for purchases will increase as 

follows: A non-variable rate of 5% for six 

months; a non-variable rate of 10% for an 

additional six months; and thereafter a 

variable rate that is currently 15% and will 

be adjusted monthly by adding a margin of 

5 percentage points to a publicly-available 

index not under the card issuer’s control. The 

payment due date for the account is the 

fifteenth day of the month and the required 

minimum periodic payments are applied to 

accrued interest and fees but do not reduce 

the purchase balance. On January 15 of year 

one, the consumer uses the account to make 

a $1,500 purchase. Six months after account 

opening (July 1), the card issuer may begin 

to accrue interest on the $1,500 purchase at 

the previously-disclosed 10% non-variable 

rate (pursuant to § 226.55(b)(1)). On 

September 15, the consumer uses the account 

for a $700 purchase. On November 16, the 

card issuer provides a notice pursuant to 

§ 226.9(c) informing the consumer of a new 

variable rate that will apply on January 1 of 

year two (calculated using the same index 

and an increased margin of 8 percentage 

points). One year after account opening 

(January 1 of year two), the card issuer may 

begin accruing interest on the $2,200 

purchase balance at the previously-disclosed 

variable rate determined using a 5-point 

margin (pursuant to § 226.55(b)(1)). Section 

226.55 does not permit the card issuer to 

apply the variable rate determined using the 

8-point margin to the $2,200 purchase 

balance. Furthermore, § 226.55 does not 

permit the card issuer to subsequently 

increase the variable rate determined using 

the 5-point margin that applies to the $2,200 

purchase balance (except due to increases in 

the index pursuant to § 226.55(b)(2)). The 

card issuer may, however, apply the variable 

rate determined using the 8-point margin to 

purchases made on or after January 1 of year 

two (pursuant to § 226.55(b)(3)). 

iii. Change-in-terms rate increase for new 

transactions after first year; penalty rate 

increase after first year. Assume that, at 

account opening on January 1 of year one, a 

card issuer discloses that the annual 

percentage rate for purchases is a variable 

rate determined by adding a margin of 6 

percentage points to a publicly-available 

index outside of the card issuer’s control. 

The card issuer also discloses that, to the 

extent consistent with § 226.55 and other 

applicable law, a non-variable penalty rate of 

28% may apply if the consumer makes a late 

payment. The due date for the account is the 

fifteenth of the month. On May 30 of year 

two, the account has a purchase balance of 

$1,000. On May 31, the card issuer provides 

a notice pursuant to § 226.9(c) informing the 

consumer of a new variable rate that will 

apply on July 16 for all purchases made on 

or after June 15 (calculated by using the same 

index and an increased margin of 8 

percentage points). On June 14, the consumer 

makes a $500 purchase. On June 15, the 

consumer makes a $200 purchase. On July 1, 

the card issuer has not received the payment 

due on June 15 and provides the consumer 

with a notice pursuant to § 226.9(g) stating 

that the 28% penalty rate will apply as of 

August 15 to all transactions made on or after 

July 16 and that, if the consumer becomes 

more than 60 days late, the penalty rate will 

apply to all balances on the account. On July 

17, the consumer makes a $300 purchase. 

A. Account does not become more than 60 

days delinquent. The payment due on June 

15 of year two is received on July 2. On July 

16, § 226.55(b)(3)(ii) permits the card issuer 

to apply the variable rate determined using 

the 8-point margin disclosed in the § 226.9(c) 

notice to the $200 purchase made on June 15 

but does not permit the card issuer to apply 

this rate to the $1,500 purchase balance. On 

August 15, § 226.55(b)(3)(ii) permits the card 

issuer to apply the 28% penalty rate 

disclosed at account opening and in the 

§ 226.9(g) notice to the $300 purchase made 

on July 17 but does not permit the card issuer 

to apply this rate to the $1,500 purchase 

balance (which remains at the variable rate 

determined using the 6-point margin) or the 

$200 purchase (which remains at the variable 

rate determined using the 8-point margin). 

B. Account becomes more than 60 days 

delinquent after provision of § 226.9(g) 

notice. Same facts as above except the 

payment due on June 15 of year two has not 

been received by August 15. Section 

226.55(b)(4) permits the card issuer to apply 

the 28% penalty rate to the $1,500 purchase 

balance and the $200 purchase because it has 

not received the June 15 payment within 60 

days after the due date. However, in order to 

do so, § 226.55(b)(4)(i) requires the card 

issuer to first provide an additional notice 

pursuant to § 226.9(g). This notice must be 

sent no earlier than August 15, which is the 

first day the account became more than 60 

days’ delinquent. If the notice is sent on 

August 15, the card issuer may begin 

accruing interest on the $1,500 purchase 

balance and the $200 purchase at the 28% 

penalty rate beginning on September 29. 

2. Relationship to grace period. Nothing in 

§ 226.55 prohibits a card issuer from 

assessing interest due to the loss of a grace 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23031 

period to the extent consistent with 

§ 226.5(b)(2)(ii)(B) and § 226.54. In addition, 

a card issuer has not reduced an annual 

percentage rate on a credit card account for 

purposes of § 226.55 if the card issuer does 

not charge interest on a balance or a portion 

thereof based on a payment received prior to 

the expiration of a grace period. For example, 

if the annual percentage rate for purchases on 

an account is 15% but the card issuer does 

not charge any interest on a $500 purchase 

balance because that balance was paid in full 

prior to the expiration of the grace period, the 

card issuer has not reduced the 15% 

purchase rate to 0% for purposes of § 226.55. 

55(b) Exceptions. 

1. Exceptions not mutually exclusive. A 

card issuer generally may increase an annual 

percentage rate or a fee or charge required to 

be disclosed under § 226.6(b)(2)(ii), (b)(2)(iii), 

or (b)(2)(xii) pursuant to an exception set 

forth in § 226.55(b) even if that increase 

would not be permitted under a different 

exception. For example, although a card 

issuer cannot increase an annual percentage 

rate pursuant to § 226.55(b)(1) unless that 

rate is provided for a specified period of at 

least six months, the card issuer may increase 

an annual percentage rate during a specified 

period due to an increase in an index 

consistent with § 226.55(b)(2). Similarly, 

although § 226.55(b)(3) does not permit a 

card issuer to increase an annual percentage 

rate during the first year after account 

opening, the card issuer may increase the rate 

during the first year after account opening 

pursuant to § 226.55(b)(4) if the required 

minimum periodic payment is not received 

within 60 days after the due date. However, 

if § 226.55(b)(4)(ii) requires a card issuer to 

decrease the rate, fee, or charge that applies 

to a balance while the account is subject to 

a workout or temporary hardship 

arrangement or subject to 50 U.S.C. app. 527 

or a similar Federal or State statute or 

regulation, the card issuer may not impose a 

higher rate, fee, or charge on that balance 

pursuant to § 226.55(b)(5) or (b)(6) upon 

completion or failure of the arrangement or 

once 50 U.S.C. app. 527 or the similar 

Federal or State statute or regulation no 

longer applies. For example, assume that, on 

January 1, the annual percentage rate that 

applies to a $1,000 balance is increased from 

12% to 30% pursuant to § 226.55(b)(4). On 

February 1, the rate on that balance is 

decreased from 30% to 15% consistent with 

§ 226.55(b)(5) as a part of a workout or 

temporary hardship arrangement. On July 1, 

§ 226.55(b)(4)(ii) requires the card issuer to 

reduce the rate that applies to any remaining 

portion of the $1,000 balance from 15% to 

12%. If the consumer subsequently 

completes or fails to comply with the terms 

of the workout or temporary hardship 

arrangement, the card issuer may not 

increase the 12% rate that applies to any 

remaining portion of the $1,000 balance 

pursuant to § 226.55(b)(5). 

* * * * * 

3. Application of a lower rate, fee, or 

charge. Nothing in § 226.55 prohibits a card 

issuer from lowering an annual percentage 

rate or a fee or charge required to be 

disclosed under § 226.6(b)(2)(ii), (b)(2)(iii), or 

(b)(2)(xii). However, a card issuer that does 

so cannot subsequently increase the rate, fee, 

or charge unless permitted by one of the 

exceptions in § 226.55(b). The following 

examples illustrate the application of the 

rule: 

i. Application of lower rate during first 

year. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that a non-variable annual percentage rate of 

15% will apply to purchases. The card issuer 

also discloses that, to the extent consistent 

with § 226.55 and other applicable law, a 

non-variable penalty rate of 30% may apply 

if the consumer’s required minimum periodic 

payment is received after the payment due 

date, which is the tenth of the month. The 

required minimum periodic payments are 

applied to accrued interest and fees but do 

not reduce the purchase balance. 

A. Temporary rate returns to standard rate 

at expiration. On September 30 of year one, 

the account has a purchase balance of $1,400 

at the 15% rate. On October 1, the card issuer 

provides a notice pursuant to § 226.9(c) 

informing the consumer that the rate for new 

purchases will decrease to a non-variable rate 

of 5% for six months (from October 1 through 

March 31 of year two) and that, beginning on 

April 1 of year two, the rate for purchases 

will increase to the 15% non-variable rate 

disclosed at account opening. The card issuer 

does not apply the 5% rate to the $1,400 

purchase balance. On October 14 of year one, 

the consumer makes a $300 purchase at the 

5% rate. On January 15 of year two, the 

consumer makes a $150 purchase at the 5% 

rate. On April 1 of year two, the card issuer 

may begin accruing interest on the $300 

purchase and the $150 purchase at 15% as 

disclosed in the § 226.9(c) notice (pursuant to 

§ 226.55(b)(1)). 

B. Penalty rate increase. Same facts as 

above except that the required minimum 

periodic payment due on November 10 of 

year one is not received until November 15. 

Section 226.55 does not permit the card 

issuer to increase any annual percentage rate 

on the account at this time. The card issuer 

may apply the 30% penalty rate to new 

transactions beginning on April 1 of year two 

pursuant to § 226.55(b)(3) by providing a 

§ 226.9(g) notice informing the consumer of 

this increase no later than February 14 of 

year two. The card issuer may not, however, 

apply the 30% penalty rate to the $1,400 

purchase balance as of September 30 of year 

one, the $300 purchase on October 15 of year 

one, or the $150 purchase on January 15 of 

year two. 

ii. Application of lower rate at end of first 

year. Assume that, at account opening on 

January 1 of year one, a card issuer discloses 

that a non-variable annual percentage rate of 

15% will apply to purchases for one year and 

discloses that, after the first year, the card 

issuer will apply a variable rate that is 

currently 20% and is determined by adding 

a margin of 10 percentage points to a 

publicly-available index not under the card 

issuer’s control. On December 31 of year one, 

the account has a purchase balance of $3,000. 

A. Notice of extension of existing 

temporary rate provided consistent with 

§ 226.55(b)(1)(i). On December 15 of year one, 

the card issuer provides a notice pursuant to 

§ 226.9(c) informing the consumer that the 

existing 15% rate will continue to apply until 

July 1 of year two. The notice further states 

that, on July 1 of year two, the variable rate 

disclosed at account opening will apply. On 

July 1 of year two, § 226.55(b)(1) permits the 

card issuer to apply that variable rate to any 

remaining portion of the $3,000 balance and 

to new transactions. 

B. Notice of new temporary rate provided 

consistent with § 226.55(b)(1)(i). On 

December 15 of year one, the card issuer 

provides a notice pursuant to § 226.9(c) 

informing the consumer of a new variable 

rate that will apply on January 1 of year two 

that is lower than the variable rate disclosed 

at account opening. The new variable rate is 

calculated using the same index and a 

reduced margin of 8 percentage points. The 

notice further states that, on July 1 of year 

two, the margin will increase to the margin 

disclosed at account opening (10 percentage 

points). On July 1 of year two, § 226.55(b)(1) 

permits the card issuer to increase the margin 

used to determine the variable rate that 

applies to new purchases to 10 percentage 

points and to apply that rate to any 

remaining portion of the $3,000 purchase 

balance. 

C. No notice provided. Same facts as in 

paragraph ii.B. above except that the card 

issuer does not send a notice on December 

15 of year one. Instead, on January 1 of year 

two, the card issuer lowers the margin used 

to determine the variable rate to 8 percentage 

points and applies that rate to the $3,000 

purchase balance and to new purchases. 

Section 226.9 does not require advance 

notice in these circumstances. However, 

unless the account becomes more than 60 

days’ delinquent, § 226.55 does not permit 

the card issuer to subsequently increase the 

rate that applies to the $3,000 purchase 

balance except due to increases in the index 

(pursuant to § 226.55(b)(2)). 

iii. Application of lower rate after first 

year. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that a non-variable annual percentage rate of 

10% will apply to purchases for one year, 

after which that rate will increase to a nonvariable rate of 15%. The card issuer also 

discloses that, to the extent consistent with 

§ 226.55 and other applicable law, a nonvariable penalty rate of 30% may apply if the 

consumer’s required minimum periodic 

payment is received after the payment due 

date, which is the tenth of the month. The 

required minimum periodic payments are 

applied to accrued interest and fees but do 

not reduce the purchase balance. 

A. Effect of 14-day period. On June 30 of 

year two, the account has a purchase balance 

of $1,000 at the 15% rate. On July 1, the card 

issuer provides a notice pursuant to 

§ 226.9(c) informing the consumer that the 

rate for new purchases will decrease to a 

non-variable rate of 5% for six months (from 

July 1 through December 31 of year two) and 

that, beginning on January 1 of year three, the 

rate for purchases will increase to a nonvariable rate of 17%. On July 15 of year two, 

the consumer makes a $200 purchase. On 

July 16, the consumer makes a $100 

purchase. On January 1 of year three, the card 

issuer may begin accruing interest on the 

$100 purchase at 17% (pursuant to 


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23032 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

§ 226.55(b)(1)). However, § 226.55(b)(1)(ii)(B) 

does not permit the card issuer to apply the 

17% rate to the $200 purchase because that 

transaction occurred within 14 days after 

provision of the § 226.9(c) notice. Instead, the 

card issuer may apply the 15% rate that 

applied to purchases prior to provision of the 

§ 226.9(c) notice. In addition, if the card 

issuer applied the 5% rate to the $1,000 

purchase balance, § 226.55(b)(ii)(A) would 

not permit the card issuer to increase the rate 

that applies to that balance on January 1 of 

year three to a rate that is higher than 15% 

that previously applied to the balance. 

B. Penalty rate increase. Same facts as 

above except that the required minimum 

periodic payment due on August 25 is 

received on August 30. At this time, § 226.55 

does not permit the card issuer to increase 

the annual percentage rates that apply to the 

$1,000 purchase balance, the $200 purchase, 

or the $100 purchase. Instead, those rates can 

only be increased as discussed in paragraph 

iii.A. above. However, if the card issuer 

provides a notice pursuant to § 226.9(c) or (g) 

on September 1, § 226.55(b)(3) permits the 

card issuer to apply an increased rate (such 

as the 17% purchase rate or the 30% penalty 

rate) to transactions that occur on or after 

September 16 beginning on October 16. 

C. Application of lower temporary rate 

during specified period. Same facts as in 

paragraph iii. above. On June 30 of year two, 

the account has a purchase balance of $1,000 

at the 15% non-variable rate. On July 1, the 

card issuer provides a notice pursuant to 

§ 226.9(c) informing the consumer that the 

rate for the $1,000 balance and new 

purchases will decrease to a non-variable rate 

of 12% for six months (from July 1 through 

December 31 of year two) and that, beginning 

on January 1 of year three, the rate for 

purchases will increase to a variable rate that 

is currently 20% and is determined by 

adding a margin of 10 percentage points to 

a publicly-available index not under the card 

issuer’s control. On August 15 of year two, 

the consumer makes a $500 purchase. On 

October 1, the card issuer provides another 

notice pursuant to § 226.9(c) informing the 

consumer that the rate for the $1,000 balance, 

the $500 purchase, and new purchases will 

decrease to a non-variable rate of 5% for six 

months (from October 1 of year two through 

March 31 of year three) and that, beginning 

on April 1 of year three, the rate for 

purchases will increase to a variable rate that 

is currently 23% and is determined by 

adding a margin of 13 percentage points to 

the previously-disclosed index. On 

November 15 of year two, the consumer 

makes a $300 purchase. On April 1 of year 

three, § 226.55 permits the card issuer to 

begin accruing interest using the following 

rates for any remaining portion of the 

following balances: The 15% non-variable 

rate for the $1,000 balance; the variable rate 

determined using the 10-point margin for the 

$500 purchase; and the variable rate 

determined using the 13-point margin for the 

$300 purchase. 

* * * * * 

55(b)(1) Temporary rate, fee, or charge 

exception. 

1. Relationship to § 226.9(c)(2)(v)(B). A 

card issuer that has complied with the 

disclosure requirements in § 226.9(c)(2)(v)(B) 

has also complied with the disclosure 

requirements in § 226.55(b)(1)(i). 

2. Period of six months or longer. A 

temporary annual percentage rate, fee, or 

charge must apply for a specified period of 

six months or longer before a card issuer can 

increase that rate, fee, or charge pursuant to 

§ 226.55(b)(1). The specified period must 

expire no less than six months after the date 

on which the card issuer provides the 

consumer with the disclosures required by 

§ 226.55(b)(1)(i) or, if later, the date on which 

the account can be used for transactions to 

which the temporary rate, fee, or charge 

applies. Section 226.55(b)(1) does not 

prohibit a card issuer from limiting the 

application of a temporary annual percentage 

rate, fee, or charge to a particular category of 

transactions (such as to balance transfers or 

to purchases over $100). However, in 

circumstances where the card issuer limits 

application of the temporary rate, fee, or 

charge to a single transaction, the specified 

period must expire no less than six months 

after the date on which that transaction 

occurred. The following examples illustrate 

the application of § 226.55(b)(1): 

i. Assume that on January 1 a card issuer 

offers a consumer a 5% annual percentage 

rate on purchases made during the months of 

January through June. A 15% rate will apply 

thereafter. On February 15, a $500 purchase 

is charged to the account. On June 15, a $200 

purchase is charged to the account. On July 

1, the card issuer may begin accruing interest 

at the 15% rate on the $500 purchase and the 

$200 purchase (pursuant to § 226.55(b)(1)). 

ii. Same facts as above except that on 

January 1 the card issuer offered the 5% rate 

on purchases beginning in the month of 

February. Section 226.55(b)(1) would not 

permit the card issuer to begin accruing 

interest at the 15% rate on the $500 purchase 

and the $200 purchase until August 1. 

iii. Assume that on October 31 of year one 

the annual percentage rate for purchases is 

17%. On November 1, the card issuer offers 

the consumer a 0% rate for six months on 

purchases made during the months of 

November and December. The 17% rate will 

apply thereafter. On November 15, a $500 

purchase is charged to the account. On 

December 15, a $300 purchase is charged to 

the account. On January 15 of year two, a 

$150 purchase is charged to the account. 

Section 226.55(b)(1) would not permit the 

card issuer to begin accruing interest at the 

17% rate on the $500 purchase and the $300 

purchase until May 1 of year two. However, 

the card issuer may accrue interest at the 

17% rate on the $150 purchase beginning on 

January 15 of year two. 

iv. Assume that on June 1 of year one a 

card issuer offers a consumer a 0% annual 

percentage rate for six months on the 

purchase of an appliance. An 18% rate will 

apply thereafter. On September 1, a $5,000 

transaction is charged to the account for the 

purchase of an appliance. Section 

226.55(b)(1) would not permit the card issuer 

to begin accruing interest at the 18% rate on 

the $5,000 transaction until March 1 of year 

two. 

v. Assume that on May 31 of year one the 

annual percentage rate for purchases is 15%. 

On June 1, the card issuer offers the 

consumer a 5% rate for six months on a 

balance transfer of at least $1,000. The 15% 

rate will apply thereafter. On June 15, a 

$3,000 balance is transferred to the account. 

On July 15, a $200 purchase is charged to the 

account. Section 226.55(b)(1) would not 

permit the card issuer to begin accruing 

interest at the 15% rate on the $3,000 

transferred balance until December 15. 

However, the card issuer may accrue interest 

at the 15% rate on the $200 purchase 

beginning on July 15. 

vi. Same facts as in paragraph v. above 

except that the card issuer offers the 5% rate 

for six months on all balance transfers of at 

least $1,000 during the month of June and a 

$2,000 balance is transferred to the account 

on June 30 (in addition to the $3,000 balance 

transfer on June 15). Because the 5% rate is 

not limited to a particular transaction, 

§ 226.55(b)(1) permits the card issuer to begin 

accruing interest on the $3,000 and $2,000 

transferred balances on December 1. 

vii. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that the annual fee for the account is $0 until 

January 1 of year two, when the fee will 

increase to $50. On January 1 of year two, the 

card issuer may impose the $50 annual fee. 

However, the issuer must also comply with 

the notice requirements in § 226.9(e). 

viii. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that the monthly maintenance fee for the 

account is $0 until July 1 of year one, when 

the fee will increase to $10. Beginning on 

July 1 of year one, the card issuer may 

impose the $10 monthly maintenance fee (to 

the extent consistent with § 226.52(a)). 

3. Deferred interest and similar 

promotional programs. i. Application of 

§ 226.55. The general prohibition in 

§ 226.55(a) applies to the imposition of 

accrued interest upon the expiration of a 

deferred interest or similar promotional 

program under which the consumer is not 

obligated to pay interest that accrues on a 

balance if that balance is paid in full prior 

to the expiration of a specified period of 

time. However, the exception in 

§ 226.55(b)(1) also applies to these programs, 

provided that the specified period is six 

months or longer and that, prior to the 

commencement of the period, the card issuer 

discloses the length of the period and the rate 

at which interest will accrue on the balance 

subject to the deferred interest or similar 

program if that balance is not paid in full 

prior to expiration of the period. See 

comment 9(c)(2)(v)–9. For purposes of 

§ 226.55, ‘‘deferred interest’’ has the same 

meaning as in § 226.16(h)(2) and associated 

commentary. 

ii. Examples. 

A. Deferred interest offer at account 

opening. Assume that, at account opening on 

January 1 of year one, the card issuer 

discloses the following with respect to a 

deferred interest program: ‘‘No interest on 

purchases made in January of year one if paid 

in full by December 31 of year one. If the 

balance is not paid in full by that date, 

interest will be imposed from the transaction 

date at a rate of 20%.’’ On January 15 of year 

one, the consumer makes a purchase of 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23033 

$2,000. No other transactions are made on 

the account. The terms of the deferred 

interest program require the consumer to 

make minimum periodic payments with 

respect to the deferred interest balance, and 

the payment due on April 1 is not received 

until April 10. Section 226.55 does not 

permit the card issuer to charge to the 

account interest that has accrued on the 

$2,000 purchase at this time. Furthermore, if 

the consumer pays the $2,000 purchase in 

full on or before December 31 of year one, 

§ 226.55 does not permit the card issuer to 

charge to the account any interest that has 

accrued on that purchase. If, however, the 

$2,000 purchase has not been paid in full by 

January 1 of year two, § 226.55(b)(1) permits 

the card issuer to charge to the account the 

interest accrued on that purchase at the 20% 

rate during year one (to the extent consistent 

with other applicable law). 

B. Deferred interest offer after account 

opening. Assume that a card issuer discloses 

at account opening on January 1 of year one 

that the rate that applies to purchases is a 

variable annual percentage rate that is 

currently 18% and will be adjusted quarterly 

by adding a margin of 8 percentage points to 

a publicly-available index not under the card 

issuer’s control. The card issuer also 

discloses that, to the extent consistent with 

§ 226.55 and other applicable law, a nonvariable penalty rate of 30% may apply if the 

consumer’s required minimum periodic 

payment is received after the payment due 

date, which is the first of the month. On June 

30 of year two, the consumer uses the 

account for a $1,000 purchase in response to 

an offer of a deferred interest program. Under 

the terms of this program, interest on the 

purchase will accrue at the variable rate for 

purchases but the consumer will not be 

obligated to pay that interest if the purchase 

is paid in full by December 31 of year three. 

The terms of the deferred interest program 

require the consumer to make minimum 

periodic payments with respect to the 

deferred interest balance, and the payment 

due on September 1 of year two is not 

received until September 6. Section 226.55 

does not permit the card issuer to charge to 

the account interest that has accrued on the 

$1,000 purchase at this time. Furthermore, if 

the consumer pays the $1,000 purchase in 

full on or before December 31 of year three, 

§ 226.55 does not permit the card issuer to 

charge to the account any interest that has 

accrued on that purchase. On December 31 

of year three, the $1,000 purchase has been 

paid in full. Under these circumstances, the 

card issuer may not charge any interest 

accrued on the $1,000 purchase. 

C. Application of § 226.55(b)(4) to deferred 

interest programs. Same facts as in paragraph 

ii.B. above except that, on November 2 of 

year two, the card issuer has not received the 

required minimum periodic payments due on 

September 1, October 1, or November 1 of 

year two and sends a § 226.9(c) or (g) notice 

stating that interest accrued on the $1,000 

purchase since June 30 of year two will be 

charged to the account on December 17 of 

year two and thereafter interest will be 

charged on the $1,000 purchase consistent 

with the variable rate for purchases. On 

December 17 of year two, § 226.55(b)(4) 

permits the card issuer to charge to the 

account interest accrued on the $1,000 

purchase since June 30 of year two and 

§ 226.55(b)(3) permits the card issuer to begin 

charging interest on the $1,000 purchase 

consistent with the variable rate for 

purchases. However, if the card issuer 

receives the required minimum periodic 

payments due on January 1, February 1, 

March 1, April 1, May 1, and June 1 of year 

three, § 226.55(b)(4)(ii) requires the card 

issuer to cease charging the account for 

interest on the $1,000 purchase no later than 

the first day of the next billing cycle. See 

comment 55(b)(4)–3.iii. However, 

§ 226.55(b)(4)(ii) does not require the card 

issuer to waive or credit the account for 

interest accrued on the $1,000 purchase since 

June 30 of year two. If the $1,000 purchase 

is paid in full on December 31 of year three, 

the card issuer is not permitted to charge to 

the account interest accrued on the $1,000 

purchase after June 1 of year three. 

4. Contingent or discretionary increases. 

Section 226.55(b)(1) permits a card issuer to 

increase a temporary annual percentage rate, 

fee, or charge upon the expiration of a 

specified period of time. However, 

§ 226.55(b)(1) does not permit a card issuer 

to apply an increased rate, fee, or charge that 

is contingent on a particular event or 

occurrence or that may be applied at the card 

issuer’s discretion. The following examples 

illustrate rate increases that are not permitted 

by § 226.55: 

i. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that a non-variable annual percentage rate of 

15% applies to purchases but that all rates 

on an account may be increased to a nonvariable penalty rate of 30% if a consumer’s 

required minimum periodic payment is 

received after the payment due date, which 

is the fifteenth of the month. On March 1, the 

account has a $2,000 purchase balance. The 

payment due on March 15 is not received 

until March 20. Section 226.55 does not 

permit the card issuer to apply the 30% 

penalty rate to the $2,000 purchase balance. 

However, pursuant to § 226.55(b)(3), the card 

issuer could provide a § 226.9(c) or (g) notice 

on or before November 16 informing the 

consumer that, on January 1 of year two, the 

30% rate (or a different rate) will apply to 

new transactions. 

ii. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that a non-variable annual percentage rate of 

5% applies to transferred balances but that 

this rate will increase to a non-variable rate 

of 18% if the consumer does not use the 

account for at least $200 in purchases each 

billing cycle. On July 1, the consumer 

transfers a balance of $4,000 to the account. 

During the October billing cycle, the 

consumer uses the account for $150 in 

purchases. Section 226.55 does not permit 

the card issuer to apply the 18% rate to the 

$4,000 transferred balance or the $150 in 

purchases. However, pursuant to 

§ 226.55(b)(3), the card issuer could provide 

a § 226.9(c) or (g) notice on or before 

November 16 informing the consumer that, 

on January 1 of year two, the 18% rate (or 

a different rate) will apply to new 

transactions. 

iii. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that the annual fee for the account is $10 but 

may be increased to $50 if a consumer’s 

required minimum periodic payment is 

received after the payment due date, which 

is the fifteenth of the month. The payment 

due on July 15 is not received until July 23. 

Section 226.55 does not permit the card 

issuer to impose the $50 annual fee at this 

time. Furthermore, § 226.55(b)(3) does not 

permit the card issuer to increase the $10 

annual fee during the first year after account 

opening. However, § 226.55(b)(3) does permit 

the card issuer to impose the $50 fee (or a 

different fee) on January 1 of year two if, on 

or before November 16 of year one, the issuer 

informs the consumer of the increased fee 

consistent with § 226.9(c) and the consumer 

does not reject that increase pursuant to 

§ 226.9(h). 

iv. Assume that a card issuer discloses at 

account opening on January 1 of year one 

that the annual fee for a credit card account 

under an open-end (not home-secured) 

consumer credit plan is $0 but may be 

increased to $100 if the consumer’s balance 

in a deposit account provided by the card 

issuer or its affiliate or subsidiary falls below 

$5,000. On June 1 of year one, the balance 

on the deposit account is $4,500. Section 

226.55 does not permit the card issuer to 

impose the $100 annual fee at this time. 

Furthermore, § 226.55(b)(3) does not permit 

the card issuer to increase the $0 annual fee 

during the first year after account opening. 

However, § 226.55(b)(3) does permit the card 

issuer to impose the $100 fee (or a different 

fee) on January 1 of year two if, on or before 

November 16 of year one, the issuer informs 

the consumer of the increased fee consistent 

with § 226.9(c) and the consumer does not 

reject that increase pursuant to § 226.9(h). 

5. Application of increased fees and 

charges. Section 226.55(b)(1)(ii) limits the 

ability of a card issuer to apply an increased 

fee or charge to certain transactions. 

However, to the extent consistent with 

§ 226.55(b)(3), (c), and (d), a card issuer 

generally is not prohibited from increasing a 

fee or charge that applies to the account as 

a whole. See comments 55(c)(1)–3 and 

55(d)–1. 

* * * * * 

55(b)(3) Advance notice exception. 

* * * * * 

6. Delayed implementation of increase. 

Section 226.55(b)(3)(iii) does not prohibit a 

card issuer from notifying a consumer of an 

increase in an annual percentage rate, fee, or 

charge consistent with § 226.9(b), (c), or (g). 

However, § 226.55(b)(3)(iii) does prohibit 

application of an increased rate, fee, or 

charge during the first year after the account 

is opened, while the account is closed, or 

while the card issuer does not permit the 

consumer to use the account for new 

transactions. If § 226.9(b), (c), or (g) permits 

a card issuer to apply an increased rate, fee, 

or charge on a particular date and the 

account is closed on that date or the card 

issuer does not permit the consumer to use 

the account for new transactions on that date, 

the card issuer may delay application of the 

increased rate, fee, or charge until the first 

day of the following billing cycle without 


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23034 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

relinquishing the ability to apply that rate, 

fee, or charge (assuming the increase is 

otherwise consistent with § 226.55). See 

examples in comment 55(b)–2.iii. However, if 

the account is closed or the card issuer does 

not permit the consumer to use the account 

for new transactions on the first day of the 

following billing cycle, then the card issuer 

must provide a new notice of the increased 

rate, fee, or charge consistent with § 226.9(b), 

(c), or (g). 

7. Date on which account may first be used 

by consumer to engage in transactions. For 

purposes of § 226.55(b)(3)(iii), an account is 

considered open no earlier than the date on 

which the account may first be used by the 

consumer to engage in transactions. An 

account is considered open for purposes of 

§ 226.55(b)(3)(iii) on any date that the card 

issuer may consider the account open for 

purposes of § 226.52(a)(1). See comment 

52(a)(1)–4. 

* * * * * 

55(c) Treatment of protected balances. 

55(c)(1) Definition of protected balance. 

1. Example of protected balance. Assume 

that, on March 15 of year two, an account has 

a purchase balance of $1,000 at a nonvariable annual percentage rate of 12% and 

that, on March 16, the card issuer sends a 

notice pursuant to § 226.9(c) informing the 

consumer that the annual percentage rate for 

new purchases will increase to a non-variable 

rate of 15% on May 1. The fourteenth day 

after provision of the notice is March 29. On 

March 29, the consumer makes a $100 

purchase. On March 30, the consumer makes 

a $150 purchase. On May 1, § 226.55(b)(3)(ii) 

permits the card issuer to begin accruing 

interest at 15% on the $150 purchase made 

on March 30 but does not permit the card 

issuer to apply that 15% rate to the $1,100 

purchase balance as of March 29. 

Accordingly, the protected balance for 

purposes of § 226.55(c) is the $1,100 

purchase balance as of March 29. The $150 

purchase made on March 30 is not part of the 

protected balance. 

2. First year after account opening. Section 

226.55(c) applies to amounts owed for a 

category of transactions to which an 

increased annual percentage rate or an 

increased fee or charge cannot be applied 

after the rate, fee, or charge for that category 

of transactions has been increased pursuant 

to § 226.55(b)(3). Because § 226.55(b)(3)(iii) 

does not permit a card issuer to increase an 

annual percentage rate or a fee or charge 

required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) 

during the first year after account opening, 

§ 226.55(c) does not apply to balances during 

the first year after account opening. 

3. Increased fees and charges. Except as 

provided in § 226.55(b)(3)(iii), § 226.55(b)(3) 

permits a card issuer to increase a fee or 

charge required to be disclosed under 

§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) after 

complying with the applicable notice 

requirements in § 226.9(b) or (c), provided 

that the increased fee or charge is not applied 

to a protected balance. To the extent 

consistent with § 226.55(b)(3)(iii), a card 

issuer is not prohibited from increasing a fee 

or charge that applies to the account as a 

whole or to balances other than the protected 

balance. For example, after the first year 

following account opening, a card issuer 

generally may add or increase an annual or 

a monthly maintenance fee for an account 

after complying with the notice requirements 

in § 226.9(c), including notifying the 

consumer of the right to reject the new or 

increased fee under § 226.9(h). However, 

except as otherwise provided in § 226.55(b), 

an increased fee or charge cannot be applied 

to an account while the account is closed or 

while the card issuer does not permit the 

consumer to use the account for new 

transactions. See § 226.55(b)(3)(iii); see also 

§§ 226.52(b)(2)(i)(B)(3) and 226.55(d)(1). 

Furthermore, if the consumer rejects an 

increase in a fee or charge pursuant to 

§ 226.9(h), the card issuer is prohibited from 

applying the increased fee or charge to the 

account and from imposing any other fee or 

charge solely as a result of the rejection. See 

§ 226.9(h)(2)(i) and (ii); comment 9(h)(2)(ii)– 

2. 

4. Changing balance computation method. 

Nothing in § 226.55 prohibits a card issuer 

from changing the balance computation 

method that applies to new transactions as 

well as protected balances. 

* * * * * 

55(e) Promotional waivers or rebates of 

interest, fees, and other charges. 

1. Generally. Nothing in § 226.55 prohibits 

a card issuer from waiving or rebating 

finance charges due to a periodic interest rate 

or a fee or charge required to be disclosed 

under § 226.6(b)(2)(ii), (b)(2)(iii), or 

(b)(2)(xii). However, if a card issuer promotes 

and applies the waiver or rebate to an 

account, the card issuer cannot temporarily 

or permanently cease or terminate any 

portion of the waiver or rebate on that 

account unless permitted by one of the 

exceptions in § 226.55(b). For example: 

i. A card issuer applies an annual 

percentage rate of 15% to balance transfers 

but promotes a program under which all of 

the interest accrued on transferred balances 

will be waived or rebated for one year. If, 

prior to the commencement of the one-year 

period, the card issuer discloses the length of 

the period and the annual percentage rate 

that will apply to transferred balances after 

expiration of that period consistent with 

§ 226.55(b)(1)(i), § 226.55(b)(1) permits the 

card issuer to begin imposing interest charges 

on transferred balances after one year. 

Furthermore, if, during the one-year period, 

a required minimum periodic payment is not 

received within 60 days of the payment due 

date, § 226.55(b)(4) permits the card issuer to 

begin imposing interest charges on 

transferred balances (after providing a notice 

consistent with § 226.9(g) and 

§ 226.55(b)(4)(i)). However, if a required 

minimum periodic payment is not more than 

60 days delinquent or if the consumer 

otherwise violates the terms or other 

requirements of the account, § 226.55 does 

not permit the card issuer to begin imposing 

interest charges on transferred balances until 

the expiration of the one-year period. 

ii. A card issuer imposes a monthly 

maintenance fee of $10 but promotes a 

program under which the fee will be waived 

or rebated for the six months following 

account opening. If, prior to account opening, 

the card issuer discloses the length of the 

period and the monthly maintenance fee that 

will be imposed after expiration of that 

period consistent with § 226.55(b)(1)(i), 

§ 226.55(b)(1) permits the card issuer to begin 

imposing the monthly maintenance fee six 

months after account opening. Furthermore, 

if, during the six-month period, a required 

minimum periodic payment is not received 

within 60 days of the payment due date, 

§ 226.55(b)(4) permits the card issuer to begin 

imposing the monthly maintenance fee (after 

providing a notice consistent with § 226.9(c) 

and § 226.55(b)(4)(i)). However, if a required 

minimum periodic payment is not more than 

60 days delinquent or if the consumer 

otherwise violates the terms or other 

requirements of the account, § 226.55 does 

not permit the card issuer to begin imposing 

the monthly maintenance fee until the 

expiration of the six-month period. 

2. Promotion of waiver or rebate. For 

purposes of § 226.55(e), a card issuer 

generally promotes a waiver or rebate if the 

card issuer discloses the waiver or rebate in 

an advertisement (as defined in § 226.2(a)(2)). 

See comment 2(a)(2)–1. In addition, a card 

issuer generally promotes a waiver or rebate 

for purposes of § 226.55(e) if the card issuer 

discloses the waiver or rebate in 

communications regarding existing accounts 

(such as communications regarding a 

promotion that encourages additional or 

different uses of an existing account). 

However, a card issuer does not promote a 

waiver or rebate for purposes of § 226.55(e) 

if the advertisement or communication 

relates to an inquiry or dispute about a 

specific charge or to interest, fees, or charges 

that have already been waived or rebated. 

i. Examples of promotional 

communications. The following are examples 

of circumstances in which a card issuer is 

promoting a waiver or rebate for purposes of 

§ 226.55(e): 

A. A card issuer discloses the waiver or 

rebate in a newspaper, magazine, leaflet, 

promotional flyer, catalog, sign, or point-ofsale display, unless the disclosure relates to 

interest, fees, or charges that have already 

been waived. 

B. A card issuer discloses the waiver or 

rebate on radio or television or through 

electronic advertisements (such as on the 

Internet), unless the disclosure relates to 

interest, fees, or charges that have already 

been waived or rebated. 

C. A card issuer discloses a waiver or 

rebate to individual consumers, such as by 

telephone, letter, or electronic 

communication, through direct mail 

literature, or on or with account statements, 

unless the disclosure relates to an inquiry or 

dispute about a specific charge or to interest, 

fees, or charges that have already been 

waived or rebated. 

ii. Examples of non-promotional 

communications. The following are examples 

of circumstances in which a card issuer is not 

promoting a waiver or rebate for purposes of 

§ 226.55(e): 

A. After a card issuer has waived or 

rebated interest, fees, or other charges subject 

to § 226.55 with respect to an account, the 

issuer discloses the waiver or rebate to the 

accountholder on the periodic statement or 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23035 

by telephone, letter, or electronic 

communication. However, if the card issuer 

also discloses prospective waivers or rebates 

in the same communication, the issuer is 

promoting a waiver or rebate for purposes of 

§ 226.55(e). 

B. A card issuer communicates with a 

consumer about a waiver or rebate of interest, 

fees, or other charges subject to § 226.55 in 

relation to an inquiry or dispute about a 

specific charge, including a dispute under 

§§ 226.12 or 226.13. 

C. A card issuer waives or rebates interest, 

fees, or other charges subject to § 226.55 in 

order to comply with a legal requirement 

(such as the limitations in § 226.52(a)). 

D. A card issuer discloses a grace period, 

as defined in § 226.5(b)(2)(ii)(3). 

E. A card issuer provides a period after the 

payment due date during which interest, 

fees, or other charges subject to § 226.55 are 

waived or rebated even if a payment has not 

been received. 

F. A card issuer provides benefits (such as 

rewards points or cash back on purchases or 

finance charges) that can be applied to the 

account as credits, provided that the benefits 

are not promoted as reducing interest, fees, 

or other charges subject to § 226.55. 

3. Relationship of § 226.55(e) to grace 

period. Section 226.55(e) does not apply to 

the waiver of finance charges due to a 

periodic rate consistent with a grace period, 

as defined in § 226.5(b)(2)(ii)(3). 

* * * * * 

§ 226.58—Internet Posting of Credit Card 

Agreements 

58(b) Definitions. 

58(b)(1) Agreement. 

1. Inclusion of pricing information. For 

purposes of this section, a credit card 

agreement is deemed to include certain 

information, such as annual percentage rates 

and fees, even if the issuer does not 

otherwise include this information in the 

basic credit contract. This information is 

listed under the defined term ‘‘pricing 

information’’ in § 226.58(b)(7). For example, 

the basic credit contract may not specify 

rates, fees and other information that 

constitutes pricing information as defined in 

§ 226.58(b)(7); instead, such information may 

be provided to the cardholder in a separate 

document sent along with the card. However, 

this information nevertheless constitutes part 

of the agreement for purposes of § 226.58. 

2. Provisions contained in separate 

documents included. A credit card agreement 

is defined as the written document or 

documents evidencing the terms of the legal 

obligation, or the prospective legal 

obligation, between a card issuer and a 

consumer for a credit card account under an 

open-end (not home-secured) consumer 

credit plan. An agreement therefore may 

consist of several documents that, taken 

together, define the legal obligation between 

the issuer and consumer. For example, 

provisions that mandate arbitration or allow 

an issuer to unilaterally alter the terms of the 

card issuer’s or consumer’s obligation are 

part of the agreement even if they are 

provided to the consumer in a document 

separate from the basic credit contract. 

58(b)(2) Amends. 

1. Substantive changes. A change to an 

agreement is substantive, and therefore is 

deemed an amendment of the agreement, if 

it alters the rights or obligations of the 

parties. Section 226.58(b)(2) provides that 

any change in the pricing information, as 

defined in § 226.58(b)(7), is deemed to be 

substantive. Examples of other changes that 

generally would be considered substantive 

include: (i) Addition or deletion of a 

provision giving the issuer or consumer a 

right under the agreement, such as a clause 

that allows an issuer to unilaterally change 

the terms of an agreement; (ii) addition or 

deletion of a provision giving the issuer or 

consumer an obligation under the agreement, 

such as a clause requiring the consumer to 

pay an additional fee; (iii) changes that may 

affect the cost of credit to the consumer, such 

as changes in a provision describing how the 

minimum payment will be calculated; (iv) 

changes that may affect how the terms of the 

agreement are construed or applied, such as 

changes in a choice-of-law provision; and (v) 

changes that may affect the parties to whom 

the agreement may apply, such as provisions 

regarding authorized users or assignment of 

the agreement. 

2. Non-substantive changes. Changes that 

generally would not be considered 

substantive include, for example: (i) 

Correction of typographical errors that do not 

affect the meaning of any terms of the 

agreement; (ii) changes to the card issuer’s 

corporate name, logo, or tagline; (iii) changes 

to the format of the agreement, such as 

conversion to a booklet from a full-sheet 

format, changes in font, or changes in 

margins; (iv) changes to the name of the 

credit card to which the program applies; (v) 

reordering sections of the agreement without 

affecting the meaning of any terms of the 

agreement; (vi) adding, removing, or 

modifying a table of contents or index; and 

(vii) changes to titles, headings, section 

numbers, or captions. 

58(b)(4) Card issuer. 

1. Card issuer clarified. Section 

226.58(b)(4) provides that, for purposes of 

§ 226.58, card issuer or issuer means the 

entity to which a consumer is legally 

obligated, or would be legally obligated, 

under the terms of a credit card agreement. 

For example, Bank X and Bank Y work 

together to issue credit cards. A consumer 

that obtains a credit card issued pursuant to 

this arrangement between Bank X and Bank 

Y is subject to an agreement that states ‘‘This 

is an agreement between you, the consumer, 

and Bank X that governs the terms of your 

Bank Y Credit Card.’’ The card issuer in this 

example is Bank X, because the agreement 

creates a legally enforceable obligation 

between the consumer and Bank X. Bank X 

is the issuer even if the consumer applied for 

the card through a link on Bank Y’s Web site 

and the cards prominently feature the Bank 

Y logo on the front of the card. 

2. Use of third-party service providers. An 

institution that is the card issuer as defined 

in § 226.58(b)(4) has a legal obligation to 

comply with the requirements of § 226.58. 

However, a card issuer generally may use a 

third-party service provider to satisfy its 

obligations under § 226.58, provided that the 

issuer acts in accordance with regulatory 

guidance regarding use of third-party service 

providers and other applicable regulatory 

guidance. In some cases, an issuer may wish 

to arrange for the institution with which it 

partners to issue credit cards to fulfill the 

requirements of § 226.58 on the issuer’s 

behalf. For example, Retailer and Bank work 

together to issue credit cards. Under the 

§ 226.58(b)(4) definition, Bank is the issuer of 

these credit cards for purposes of § 226.58. 

However, Retailer services the credit card 

accounts, including mailing account opening 

materials and periodic statements to 

cardholders. While Bank is responsible for 

ensuring compliance with § 226.58, Bank 

may arrange for Retailer (or another 

appropriate third-party service provider) to 

submit credit card agreements to the Board 

under § 226.58 on Bank’s behalf. Bank must 

comply with regulatory guidance regarding 

use of third-party service providers and other 

applicable regulatory guidance. 

3. Partner institution Web sites. As 

explained in comments 58(d)–2 and 58(e)–3, 

if an issuer provides cardholders with access 

to specific information about their individual 

accounts, such as balance information or 

copies of statements, through a third-party 

Web site, the issuer is deemed to maintain 

that Web site for purposes of § 226.58. Such 

a Web site is deemed to be maintained by the 

issuer for purposes of § 226.58 even where, 

for example, an unaffiliated entity designs 

the Web site and owns and maintains the 

information technology infrastructure that 

supports the Web site, cardholders with 

credit cards from multiple issuers can access 

individual account information through the 

same Web site, and the Web site is not 

labeled, branded, or otherwise held out to the 

public as belonging to the issuer. A partner 

institution’s Web site is an example of a 

third-party Web site that may be deemed to 

be maintained by the issuer for purposes of 

§ 226.58. For example, Retailer and Bank 

work together to issue credit cards. Under the 

§ 226.58(b)(4) definition, Bank is the issuer of 

these credit cards for purposes of § 226.58. 

Bank does not have a Web site. However, 

cardholders can access information about 

their individual accounts, such as balance 

information and copies of statements, 

through a Web site maintained by Retailer. 

Retailer designs the Web site and owns and 

maintains the information technology 

infrastructure that supports the Web site. The 

Web site is branded and held out to the 

public as belonging to Retailer. Because 

cardholders can access information about 

their individual accounts through this Web 

site, the Web site is deemed to be maintained 

by Bank for purposes of § 226.58. Bank 

therefore may comply with § 226.58(d) by 

ensuring that agreements offered to the 

public are posted on Retailer’s Web site in 

accordance with § 226.58(d). Bank may 

comply with § 226.58(e) by ensuring that 

cardholders can request copies of their 

individual agreements through Retailer’s 

Web site in accordance with § 226.58(e)(1). 

Bank need not create and maintain a Web site 

branded and held out to the public as 

belonging to Bank in order to comply with 

§§ 226.58(d) and (e) as long as Bank ensures 

that Retailer’s Web site complies with these 

sections. 


srobinson on DSKHWCL6B1PROD with RULES2
23036 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

In addition, § 226.58(d)(1) provides that, 

with respect to an agreement offered solely 

for accounts under one or more private label 

credit card plans, an issuer may comply with 

§ 226.58(d) by posting the agreement on the 

publicly available Web site of at least one of 

the merchants at which credit cards issued 

under each private label credit card plan 

with 10,000 or more open accounts may be 

used. This rule is not conditioned on 

cardholders’ ability to access accountspecific information through the merchant’s 

Web site. 

58(b)(5) Offers. 

1. Cards offered to limited groups. A card 

issuer is deemed to offer a credit card 

agreement to the public even if the issuer 

solicits, or accepts applications from, only a 

limited group of persons. For example, a card 

issuer may market affinity cards to students 

and alumni of a particular educational 

institution, or may solicit only high-networth individuals for a particular card; in 

these cases, the agreement would be 

considered to be offered to the public. 

Similarly, agreements for credit cards issued 

by a credit union are considered to be offered 

to the public even though such cards are 

available only to credit union members. 

2. Individualized agreements. A card issuer 

is deemed to offer a credit card agreement to 

the public even if the terms of the agreement 

are changed immediately upon opening of an 

account to terms not offered to the public. 

58(b)(6) Open account. 

1. Open account clarified. The definition of 

open account includes a credit card account 

under an open-end (not home-secured) 

consumer credit plan if either: (i) The 

cardholder can obtain extensions of credit on 

the account; or (ii) there is an outstanding 

balance on the account that has not been 

charged off. Under this definition, an account 

that meets either of these criteria is 

considered to be open even if the account is 

inactive. Similarly, if an account has been 

closed for new activity (for example, due to 

default by the cardholder), but the cardholder 

is still making payments to pay off the 

outstanding balance, the account is 

considered open. 

58(b)(8) Private label credit card account 

and private label credit card plan. 

1. Private label credit card account. The 

term private label credit card account means 

a credit card account under an open-end (not 

home-secured) consumer credit plan with a 

credit card that can be used to make 

purchases only at a single merchant or an 

affiliated group of merchants. This term 

applies to any such credit card account, 

regardless of whether it is issued by the 

merchant or its affiliate or by an unaffiliated 

third party. 

2. Co-branded credit cards. The term 

private label credit card account does not 

include accounts with so-called co-branded 

credit cards. Credit cards that display the 

name, mark, or logo of a merchant or 

affiliated group of merchants as well as the 

mark, logo, or brand of payment network are 

generally referred to as co-branded cards. 

While these credit cards may display the 

brand of the merchant or affiliated group of 

merchants as the dominant brand on the 

card, such credit cards are usable at any 

merchant that participates in the payment 

network. Because these credit cards can be 

used at multiple unaffiliated merchants, 

accounts with such credit cards are not 

considered private label credit card accounts 

under § 226.58(b)(8). 

3. Affiliated group of merchants. The term 

‘‘affiliated group of merchants’’ means two or 

more affiliated merchants or other persons 

that are related by common ownership or 

common corporate control. For example, the 

term would include franchisees that are 

subject to a common set of corporate policies 

or practices under the terms of their franchise 

licenses. The term also applies to two or 

more merchants or other persons that agree 

among each other, by contract or otherwise, 

to accept a credit card bearing the same 

name, mark, or logo (other than the mark, 

logo, or brand of a payment network), for the 

purchase of goods or services solely at such 

merchants or persons. For example, several 

local clothing retailers jointly agree to issue 

credit cards called the ‘‘Main Street Fashion 

Card’’ that can be used to make purchases 

only at those retailers. For purposes of this 

section, these retailers would be considered 

an affiliated group of merchants. 

4. Private label credit card plan. Which 

credit card accounts issued by a particular 

issuer constitute a private label credit card 

plan is determined by where the credit cards 

can be used. All of the private label credit 

card accounts issued by a particular card 

issuer with credit cards usable at the same 

merchant or affiliated group of merchants 

constitute a single private label credit card 

plan, regardless of whether the rates, fees, or 

other terms applicable to the individual 

credit card accounts differ. For example, a 

card issuer has 3,000 open private label 

credit card accounts with credit cards usable 

only at Merchant A and 5,000 open private 

label credit card accounts with credit cards 

usable only at Merchant B and its affiliates. 

The card issuer has two separate private label 

credit card plans, as defined by 

§ 226.58(b)(8)—one plan consisting of 3,000 

open accounts with credit cards usable only 

at Merchant A and another plan consisting of 

5,000 open accounts with credit cards usable 

only at Merchant B and its affiliates. 

The example above remains the same 

regardless of whether (or the extent to which) 

the terms applicable to the individual open 

accounts differ. For example, assume that, 

with respect to the card issuer’s 3,000 open 

accounts with credit cards usable only at 

Merchant A in the example above, 1,000 of 

the open accounts have a purchase APR of 

12 percent, 1,000 of the open accounts have 

a purchase APR of 15 percent, and 1,000 of 

the open accounts have a purchase APR of 

18 percent. All of the 5,000 open accounts 

with credit cards usable only at Merchant B 

and Merchant B’s affiliates have the same 15 

percent purchase APR. The card issuer still 

has only two separate private label credit 

card plans, as defined by § 226.58(b)(8). The 

open accounts with credit cards usable only 

at Merchant A do not constitute three 

separate private label credit card plans under 

§ 226.58(b)(8), even though the accounts are 

subject to different terms. 

58(c) Submission of agreements to Board. 

* * * * * 

58(c)(3) Amended agreements. 

1. No requirement to resubmit agreements 

not amended. Under § 226.58(c)(3), if a credit 

card agreement has been submitted to the 

Board, the agreement has not been amended, 

and the card issuer continues to offer the 

agreement to the public, no additional 

submission regarding that agreement is 

required. For example, a credit card issuer 

begins offering an agreement in October and 

submits the agreement to the Board the 

following January 31, as required by 

§ 226.58(c)(1). As of March 31, the card issuer 

has not amended the agreement and is still 

offering the agreement to the public. The card 

issuer is not required to submit anything to 

the Board regarding that agreement by April 

30. 

2. Submission of amended agreements. If a 

card issuer amends a credit card agreement 

previously submitted to the Board, 

§ 226.58(c)(3) requires the card issuer to 

submit the entire amended agreement to the 

Board. The issuer must submit the amended 

agreement to the Board by the first quarterly 

submission deadline after the last day of the 

calendar quarter in which the change became 

effective. However, the issuer is required to 

submit the amended agreement to the Board 

only if the issuer offered the amended 

agreement to the public as of the last 

business day of the calendar quarter in which 

the change became effective. For example, a 

card issuer submits an agreement to the 

Board on October 31. On November 15, the 

issuer changes the balance computation 

method used under the agreement. Because 

an element of the pricing information has 

changed, the agreement has been amended 

for purposes of § 226.58(c)(3). On December 

31, the last business day of the calendar 

quarter in which the change in the balance 

computation method became effective, the 

issuer still offers the agreement to the public 

as amended on November 15. The issuer 

must submit the entire amended agreement 

to the Board no later than January 31. 

3. Agreements amended but no longer 

offered to the public. A card issuer should 

submit an amended agreement to the Board 

under § 226.58(c)(3) only if the issuer offered 

the amended agreement to the public as of 

the last business day of the calendar quarter 

in which the amendment became effective. 

Agreements that are not offered to the public 

as of the last day of the calendar quarter 

should not be submitted to the Board. For 

example, on December 31 a card issuer offers 

two agreements, Agreement A and 

Agreement B. The issuer submits these 

agreements to the Board by January 31 as 

required by § 226.58. On February 15, the 

issuer amends both Agreement A and 

Agreement B. On February 28, the issuer 

stops offering Agreement A to the public. On 

March 15, the issuer amends Agreement B a 

second time. As a result, on March 31, the 

last business day of the calendar quarter, the 

issuer offers to the public one agreement— 

Agreement B as amended on March 15. By 

the April 30 quarterly submission deadline, 

the issuer must: (1) Notify the Board that it 

is withdrawing Agreement A because 

Agreement A is no longer offered to the 

public; and (2) submit to the Board 

Agreement B as amended on March 15. The 


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issuer should not submit to the Board either 

Agreement A as amended on February 15 or 

the earlier version of Agreement B (as 

amended on February 15), as neither was 

offered to the public on March 31, the last 

business day of the calendar quarter. 

4. Change-in-terms notices not permissible. 

Section 226.58(c)(3) requires that if an 

agreement previously submitted to the Board 

is amended, the card issuer must submit the 

entire revised agreement to the Board. A card 

issuer may not fulfill this requirement by 

submitting a change-in-terms or similar 

notice covering only the terms that have 

changed. In addition, amendments must be 

integrated into the text of the agreement (or 

the addenda described in § 226.58(c)(8)), not 

provided as separate riders. For example, a 

card issuer changes the purchase APR 

associated with an agreement the issuer has 

previously submitted to the Board. The 

purchase APR for that agreement was 

included in the addendum of pricing 

information, as required by § 226.58(c)(8). 

The card issuer may not submit a change-interms or similar notice reflecting the change 

in APR, either alone or accompanied by the 

original text of the agreement and original 

pricing information addendum. Instead, the 

card issuer must revise the pricing 

information addendum to reflect the change 

in APR and submit to the Board the entire 

text of the agreement and the entire revised 

addendum, even though no changes have 

been made to the provisions of the agreement 

and only one item on the pricing information 

addendum has changed. 

* * * * * 

58(d) Posting of agreements offered to the 

public. 

1. Requirement applies only to agreements 

submitted to the Board. Card issuers are only 

required to post and maintain on their 

publicly available Web site the credit card 

agreements that the card issuer must submit 

to the Board under § 226.58(c). If, for 

example, a card issuer is not required to 

submit any agreements to the Board because 

the card issuer qualifies for the de minimis 

exception under § 226.58(c)(5), the card 

issuer is not required to post and maintain 

any agreements on its Web site under 

§ 226.58(d). Similarly, if a card issuer is not 

required to submit a specific agreement to the 

Board, such as an agreement that qualifies for 

the private label exception under 

§ 226.58(c)(6), the card issuer is not required 

to post and maintain that agreement under 

§ 226.58(d) (either on the card issuer’s 

publicly available Web site or on the publicly 

available Web sites of merchants at which 

private label credit cards can be used). (The 

card issuer in both of these cases is still 

required to provide each individual 

cardholder with access to his or her specific 

credit card agreement under § 226.58(e) by 

posting and maintaining the agreement on 

the card issuer’s Web site or by providing a 

copy of the agreement upon the cardholder’s 

request.) 

2. Card issuers that do not otherwise 

maintain Web sites. Unlike § 226.58(e), 

§ 226.58(d) does not include a special rule for 

card issuers that do not otherwise maintain 

a Web site. If a card issuer is required to 

submit one or more agreements to the Board 

under § 226.58(c), that card issuer must post 

those agreements on a publicly available Web 

site it maintains (or, with respect to an 

agreement for a private label credit card, on 

the publicly available Web site of at least one 

of the merchants at which the card may be 

used, as provided in § 226.58(d)(1)). 

If an issuer provides cardholders with 

access to specific information about their 

individual accounts, such as balance 

information or copies of statements, through 

a third-party Web site, the issuer is 

considered to maintain that Web site for 

purposes of § 226.58. Such a third-party Web 

site is deemed to be maintained by the issuer 

for purposes of § 226.58(d) even where, for 

example, an unaffiliated entity designs the 

Web site and owns and maintains the 

information technology infrastructure that 

supports the Web site, cardholders with 

credit cards from multiple issuers can access 

individual account information through the 

same Web site, and the Web site is not 

labeled, branded, or otherwise held out to the 

public as belonging to the issuer. Therefore, 

issuers that provide cardholders with access 

to account-specific information through a 

third-party Web site can comply with 

§ 226.58(d) by ensuring that the agreements 

the issuer submits to the Board are posted on 

the third-party Web site in accordance with 

§ 226.58(d). (In contrast, the § 226.58(d)(1) 

rule regarding agreements for private label 

credit cards is not conditioned on 

cardholders’ ability to access accountspecific information through the merchant’s 

Web site.) 

3. Private label credit card plans. Section 

226.58(d) provides that, with respect to an 

agreement offered solely for accounts under 

one or more private label credit card plans, 

a card issuer may comply by posting and 

maintaining the agreement on the Web site of 

at least one of the merchants at which the 

cards issued under each private label credit 

card plan with 10,000 or more open accounts 

may be used. For example, a card issuer has 

100,000 open private label credit card 

accounts. Of these, 75,000 open accounts 

have credit cards usable only at Merchant A 

and 25,000 open accounts have credit cards 

usable only at Merchant B and Merchant B’s 

affiliates, Merchants C and D. The card issuer 

offers to the public a single credit card 

agreement that is offered for both of these 

types of accounts and is not offered for any 

other type of account. 

The card issuer is required to submit the 

agreement to the Board under § 226.58(c)(1). 

(The card issuer has more than 10,000 open 

accounts, so the § 226.58(c)(5) de minimis 

exception does not apply. The agreement is 

offered solely for two different private label 

credit card plans (i.e., one plan consisting of 

the accounts with credit cards usable at 

Merchant A and one plan consisting of the 

accounts with credit cards usable at 

Merchant B and its affiliates, Merchants C 

and D), but both of these plans have more 

than 10,000 open accounts, so the 

§ 226.58(c)(6) private label credit card 

exception does not apply. Finally, the 

agreement is not offered solely in connection 

with a product test by the card issuer, so the 

§ 226.58(c)(7) product test exception does not 

apply.) 

Because the card issuer is required to 

submit the agreement to the Board under 

§ 226.58(c)(1), the card issuer is required to 

post and maintain the agreement on the card 

issuer’s publicly available Web site under 

§ 226.58(d). However, because the agreement 

is offered solely for accounts under one or 

more private label credit card plans, the card 

issuer may comply with § 226.58(d) in either 

of two ways. First, the card issuer may 

comply by posting and maintaining the 

agreement on the card issuer’s own publicly 

available Web site. Alternatively, the card 

issuer may comply by posting and 

maintaining the agreement on the publicly 

available Web site of Merchant A and the 

publicly available Web site of at least one of 

Merchants B, C and D. It would not be 

sufficient for the card issuer to post the 

agreement on Merchant A’s Web site alone 

because § 226.58(d) requires the card issuer 

to post the agreement on the publicly 

available Web site of ‘‘at least one of the 

merchants at which cards issued under each 

private label credit card plan may be used’’ 

(emphasis added). 

In contrast, assume that a card issuer has 

100,000 open private label credit card 

accounts. Of these, 5,000 open accounts have 

credit cards usable only at Merchant A and 

95,000 open accounts have credit cards 

usable only at Merchant B and Merchant B’s 

affiliates, Merchants C and D. The card issuer 

offers to the public a single credit card 

agreement that is offered for both of these 

types of accounts and is not offered for any 

other type of account. 

The card issuer is required to submit the 

agreement to the Board under § 226.58(c)(1). 

(The card issuer has more than 10,000 open 

accounts, so the § 226.58(c)(5) de minimis 

exception does not apply. The agreement is 

offered solely for two different private label 

credit card plans (i.e., one plan consisting of 

the accounts with credit cards usable at 

Merchant A and one plan consisting of the 

accounts with credit cards usable at 

Merchant B and its affiliates, Merchants C 

and D), but one of these plans has more than 

10,000 open accounts, so the § 226.58(c)(6) 

private label credit card exception does not 

apply. Finally, the agreement is not offered 

solely in connection with a product test by 

the card issuer, so the § 226.58(c)(7) product 

test exception does not apply.) 

Because the card issuer is required to 

submit the agreement to the Board under 

§ 226.58(c)(1), the card issuer is required to 

post and maintain the agreement on the card 

issuer’s publicly available Web site under 

§ 226.58(d). However, because the agreement 

is offered solely for accounts under one or 

more private label credit card plans, the card 

issuer may comply with § 226.58(d) in either 

of two ways. First, the card issuer may 

comply by posting and maintaining the 

agreement on the card issuer’s own publicly 

available Web site. Alternatively, the card 

issuer may comply by posting and 

maintaining the agreement on the publicly 

available Web site of at least one of 

Merchants B, C and D. The card issuer is not 

required to post and maintain the agreement 

on the publicly available Web site of 

Merchant A because the card issuer’s private 

label credit card plan consisting of accounts 


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23038 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

with cards usable only at Merchant A has 

fewer than 10,000 open accounts. 

58(e) Agreements for all open accounts. 

1. Requirement applies to all open 

accounts. The requirement to provide access 

to credit card agreements under § 226.58(e) 

applies to all open credit card accounts, 

regardless of whether such agreements are 

required to be submitted to the Board 

pursuant to § 226.58(c) (or posted on the card 

issuer’s Web site pursuant to § 226.58(d)). For 

example, a card issuer that is not required to 

submit agreements to the Board because it 

qualifies for the de minimis exception under 

§ 226.58(c)(5)) would still be required to 

provide cardholders with access to their 

specific agreements under § 226.58(e). 

Similarly, an agreement that is no longer 

offered to the public would not be required 

to be submitted to the Board under 

§ 226.58(c), but would still need to be 

provided to the cardholder to whom it 

applies under § 226.58(e). 

2. Readily available telephone line. Section 

226.58(e) provides that card issuers that 

provide copies of cardholder agreements 

upon request must provide the cardholder 

with the ability to request a copy of their 

agreement by calling a readily available 

telephone line. To satisfy the readily 

available standard, the financial institution 

must provide enough telephone lines so that 

consumers get a reasonably prompt response. 

The institution need only provide telephone 

service during normal business hours. Within 

its primary service area, an institution must 

provide a local or toll-free telephone number. 

It need not provide a toll-free number or 

accept collect long-distance calls from 

outside the area where it normally conducts 

business. 

3. Issuers without interactive Web sites. 

Section 226.58(e)(2) provides that a card 

issuer that does not maintain a Web site from 

which cardholders can access specific 

information about their individual accounts 

is not required to provide a cardholder with 

the ability to request a copy of the agreement 

by using the card issuer’s Web site. A card 

issuer without a Web site of any kind could 

comply by disclosing the telephone number 

on each periodic statement; a card issuer 

with a non-interactive Web site could comply 

in the same way, or alternatively could 

comply by displaying the telephone number 

on the card issuer’s Web site. An issuer is 

considered to maintain an interactive Web 

site for purposes of the § 226.58(e)(2) special 

rule if the issuer provide cardholders with 

access to specific information about their 

individual accounts, such as balance 

information or copies of statements, through 

a third-party interactive Web site. Such a 

Web site is deemed to be maintained by the 

issuer for purposes of § 226.58(e)(2) even 

where, for example, an unaffiliated entity 

designs the Web site and owns and maintains 

the information technology infrastructure 

that supports the Web site, cardholders with 

credit cards from multiple issuers can access 

individual account information through the 

same Web site, and the Web site is not 

labeled, branded, or otherwise held out to the 

public as belonging to the issuer. An issuer 

that provides cardholders with access to 

specific information about their individual 

accounts through such a Web site is not 

permitted to comply with the special rule in 

§ 226.58(e)(2). Instead, such an issuer must 

comply with § 226.58(e)(1). 

4. Deadline for providing requested 

agreements clarified. Sections 226.58(e)(1)(ii) 

and (e)(2) require that credit card agreements 

provided upon request must be sent to the 

cardholder or otherwise made available to 

the cardholder in electronic or paper form no 

later than 30 days after the cardholder’s 

request is received. For example, if a card 

issuer chooses to respond to a cardholder’s 

request by mailing a paper copy of the 

cardholder’s agreement, the card issuer must 

mail the agreement no later than 30 days after 

receipt of the cardholder’s request. 

Alternatively, if a card issuer chooses to 

respond to a cardholder’s request by posting 

the cardholder’s agreement on the card 

issuer’s Web site, the card issuer must post 

the agreement on its Web site no later than 

30 days after receipt of the cardholder’s 

request. Section 226.58(e)(3)(v) provides that 

a card issuer may provide cardholder 

agreements in either electronic or paper form 

regardless of the form of the cardholder’s 

request. 

§ 226.59—Reevaluation of Rate Increases 

59(a) General rule. 

59(a)(1) Evaluation of increased rate. 

1. Types of rate increases covered. Section 

226.59(a) applies both to increases in annual 

percentage rates imposed on a consumer’s 

account based on that consumer’s credit risk 

or other circumstances specific to that 

consumer and to increases in annual 

percentage rates imposed based on factors 

that are not specific to the consumer, such as 

changes in market conditions or the issuer’s 

cost of funds. 

2. Rate increases actually imposed. Under 

§ 226.59(a), a card issuer must review 

changes in factors only if the increased rate 

is actually imposed on the consumer’s 

account. For example, if a card issuer 

increases the penalty rate for a credit card 

account under an open-end (not homesecured) consumer credit plan and the 

consumer’s account has no balances that are 

currently subject to the penalty rate, the card 

issuer is required to provide a notice 

pursuant to § 226.9(c) of the change in terms, 

but the requirements of § 226.59 do not 

apply. However, if the consumer’s account 

later becomes subject to the penalty rate, the 

card issuer is required to provide a notice 

pursuant to § 226.9(g) and the requirements 

of § 226.59 begin to apply upon imposition 

of the penalty rate. Similarly, if a card issuer 

raises the cash advance rate applicable to a 

consumer’s account but the consumer 

engages in no cash advance transactions to 

which that increased rate is applied, the card 

issuer is required to provide a notice 

pursuant to § 226.9(c) of the change in terms, 

but the requirements of § 226.59 do not 

apply. If the consumer subsequently engages 

in a cash advance transaction, the 

requirements of § 226.59 begin to apply at 

that time. 

3. Change in type of rate. i. Generally. A 

change from a variable rate to a non-variable 

rate or from a non-variable rate to a variable 

rate is not a rate increase for purposes of 

§ 226.59, if the rate in effect immediately 

prior to the change in type of rate is equal 

to or greater than the rate in effect 

immediately after the change. For example, a 

change from a variable rate of 15.99% to a 

non-variable rate of 15.99% is not a rate 

increase for purposes of § 226.59 at the time 

of the change. See § 226.55 for limitations on 

the permissibility of changing from a nonvariable rate to a variable rate. 

ii. Change from non-variable rate to 

variable rate. A change from a non-variable 

to a variable rate constitutes a rate increase 

for purposes of § 226.59 if the variable rate 

exceeds the non-variable rate that would 

have applied if the change in type of rate had 

not occurred. For example, assume a new 

credit card account under an open-end (not 

home-secured) consumer credit plan is 

opened on January 1 of year 1 and that a nonvariable annual percentage rate of 12% 

applies to all transactions on the account. On 

January 1 of year 2, upon 45 days’ advance 

notice pursuant to § 226.9(c)(2), the rate on 

all new transactions is changed to a variable 

rate that is currently 12% and is determined 

by adding a margin of 10 percentage points 

to a publicly-available index not under the 

card issuer’s control. The change from the 

12% non-variable rate to the 12% variable 

rate on January 1 of year 2 is not a rate 

increase for purposes of § 226.59(a). On April 

1 of year 2, the value of the variable rate 

increases to 12.5%. The increase in the rate 

from 12% to 12.5% is a rate increase for 

purposes of § 226.59, and the card issuer 

must begin periodically conducting reviews 

of the account pursuant to § 226.59. The 

increase that must be evaluated for purposes 

of § 226.59 is the increase from a nonvariable rate of 12% to a variable rate of 

12.5%. 

iii. Change from variable rate to nonvariable rate. A change from a variable to a 

non-variable rate constitutes a rate increase 

for purposes of § 226.59 if the non-variable 

rate exceeds the variable rate that would have 

applied if the change in type of rate had not 

occurred. For example, assume a new credit 

card account under an open-end (not homesecured) consumer credit plan is opened on 

January 1 of year 1 and that a variable annual 

percentage rate that is currently 15% and is 

determined by adding a margin of 10 

percentage points to a publicly-available 

index not under the card issuer’s control 

applies to all transactions on the account. On 

January 1 of year 2, upon 45 days’ advance 

notice pursuant to § 226.9(c)(2), the rate on 

all existing balances and new transactions is 

changed to a non-variable rate that is 

currently 15%. The change from the 15% 

variable rate to the 15% non-variable rate on 

January 1 of year 2 is not a rate increase for 

purposes of § 226.59(a). On April 1 of year 2, 

the value of the variable rate that would have 

applied to the account decreases to 12.5%. 

Accordingly, on April 1 of year 2, the nonvariable rate of 15% exceeds the 12.5% 

variable rate that would have applied but for 

the change in type of rate. At this time, the 

change to the non-variable rate of 15% 

constitutes a rate increase for purposes of 

§ 226.59, and the card issuer must begin 

periodically conducting reviews of the 

account pursuant to § 226.59. The increase 


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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 23039 

that must be evaluated for purposes of 

§ 226.59 is the increase from a variable rate 

of 12.5% to a non-variable rate of 15%. 

4. Rate increases prior to effective date of 

rule. For increases in annual percentage rates 

made on or after January 1, 2009, and prior 

to August 22, 2010, § 226.59(a) requires the 

card issuer to review the factors described in 

§ 226.59(d) and reduce the rate, as 

appropriate, if the rate increase is of a type 

for which 45 days’ advance notice would 

currently be required under § 226.9(c)(2) or 

(g). For example, 45 days’ notice is not 

required under § 226.9(c)(2) if the rate 

increase results from the increase in the 

index by which a properly-disclosed variable 

rate is determined in accordance with 

§ 226.9(c)(2)(v)(C) or if the increase occurs 

upon expiration of a specified period of time 

and disclosures complying with 

§ 226.9(c)(2)(v)(B) have been provided. The 

requirements of § 226.59 do not apply to such 

rate increases. 

5. Amount of rate decrease. i. General. 

Even in circumstances where a rate reduction 

is required, § 226.59 does not require that a 

card issuer decrease the rate that applies to 

a credit card account to the rate that was in 

effect prior to the rate increase subject to 

§ 226.59(a). The amount of the rate decrease 

that is required must be determined based 

upon the card issuer’s reasonable policies 

and procedures under § 226.59(b) for 

consideration of factors described in 

§ 226.59(a) and (d). For example, assume a 

consumer’s rate on new purchases is 

increased from a variable rate of 15.99% to 

a variable rate of 23.99% based on the 

consumer’s making a required minimum 

periodic payment five days late. The 

consumer makes all of the payments required 

on the account on time for the six months 

following the rate increase. Assume that the 

card issuer evaluates the account by 

reviewing the factors on which the increase 

in an annual percentage rate was originally 

based, in accordance with § 226.59(d)(1)(i). 

The card issuer is not required to decrease 

the consumer’s rate to the 15.99% that 

applied prior to the rate increase. However, 

the card issuer’s policies and procedures for 

performing the review required by § 226.59(a) 

must be reasonable, as required by 

§ 226.59(b), and must take into account any 

reduction in the consumer’s credit risk based 

upon the consumer’s timely payments. 

ii. Change in type of rate. If the rate 

increase subject to § 226.59 involves a change 

from a variable rate to a non-variable rate or 

from a non-variable rate to a variable rate, 

§ 226.59 does not require that the issuer 

reinstate the same type of rate that applied 

prior to the change. However, the amount of 

any rate decrease that is required must be 

determined based upon the card issuer’s 

reasonable policies and procedures under 

§ 226.59(b) for consideration of factors 

described in § 226.59(a) and (d). 

* * * * * 

59(d) Factors. 

* * * * * 

6. Multiple rate increases between January 

1, 2009 and February 21, 2010. i. General. 

Section 226.59(d)(2) applies if an issuer 

increased the rate applicable to a credit card 

account under an open-end (not homesecured) consumer credit plan between 

January 1, 2009 and February 21, 2010, and 

the increase was not based solely upon 

factors specific to the consumer. In some 

cases, a credit card account may have been 

subject to multiple rate increases during the 

period from January 1, 2009 to February 21, 

2010. Some such rate increases may have 

been based solely upon factors specific to the 

consumer, while others may have been based 

on factors not specific to the consumer, such 

as the issuer’s cost of funds or market 

conditions. In such circumstances, when 

conducting the first two reviews required 

under § 226.59, the card issuer may 

separately review: (i) Rate increases imposed 

based on factors not specific to the consumer, 

using the factors described in 

§ 226.59(d)(1)(ii) (as required by 

§ 226.59(d)(2)); and (ii) rate increases 

imposed based on consumer-specific factors, 

using the factors described in 

§ 226.59(d)(1)(i). If the review of factors 

described in § 226.59(d)(1)(i) indicates that it 

is appropriate to continue to apply a penalty 

or other increased rate to the account as a 

result of the consumer’s payment history or 

other factors specific to the consumer, 

§ 226.59 permits the card issuer to continue 

to impose the penalty or other increased rate, 

even if the review of the factors described in 

§ 226.59(d)(1)(ii) would otherwise require a 

rate decrease. 

ii. Example. Assume a credit card account 

was subject to a rate of 15% on all 

transactions as of January 1, 2009. On May 

1, 2009, the issuer increased the rate on 

existing balances and new transactions to 

18%, based upon market conditions or other 

factors not specific to the consumer or the 

consumer’s account. Subsequently, on 

September 1, 2009, based on a payment that 

was received five days after the due date, the 

issuer increased the applicable rate on 

existing balances and new transactions from 

18% to a penalty rate of 25%. When 

conducting the first review required under 

§ 226.59, the card issuer reviews the rate 

increase from 15% to 18% using the factors 

described in § 226.59(d)(1)(ii) (as required by 

§ 226.59(d)(2)), and separately but 

concurrently reviews the rate increase from 

18% to 25% using the factors described in 

paragraph § 226.59(d)(1)(i). The review of the 

rate increase from 15% to 18% based upon 

the factors described in § 226.59(d)(1)(ii) 

indicates that a similarly situated new 

consumer would receive a rate of 17%. The 

review of the rate increase from 18% to 25% 

based upon the factors described in 

§ 226.59(d)(1)(i) indicates that it is 

appropriate to continue to apply the 25% 

penalty rate based upon the consumer’s late 

payment. Section 226.59 permits the rate on 

the account to remain at 25%. 

59(f) Termination of obligation to review 

factors. 

1. Revocation of temporary rates. i. In 

general. If an annual percentage rate is 

increased due to revocation of a temporary 

rate, § 226.59(a) requires that the card issuer 

periodically review the increased rate. In 

contrast, if the rate increase results from the 

expiration of a temporary rate previously 

disclosed in accordance with 

§ 226.9(c)(2)(v)(B), the review requirements 

in § 226.59(a) do not apply. If a temporary 

rate is revoked such that the requirements of 

§ 226.59(a) apply, § 226.59(f) permits an 

issuer to terminate the review of the rate 

increase if and when the applicable rate is 

the same as the rate that would have applied 

if the increase had not occurred. 

ii. Examples. Assume that on January 1, 

2011, a consumer opens a new credit card 

account under an open-end (not homesecured) consumer credit plan. The annual 

percentage rate applicable to purchases is 

15%. The card issuer offers the consumer a 

10% rate on purchases made between 

February 1, 2012 and August 1, 2013 and 

discloses pursuant to § 226.9(c)(2)(v)(B) that 

on August 1, 2013 the rate on purchases will 

revert to the original 15% rate. The consumer 

makes a payment that is five days late in July 

2012. 

A. Upon providing 45 days’ advance notice 

and to the extent permitted under § 226.55, 

the card issuer increases the rate applicable 

to new purchases to 15%, effective on 

September 1, 2012. The card issuer must 

review that rate increase under § 226.59(a) at 

least once each six months during the period 

from September 1, 2012 to August 1, 2013, 

unless and until the card issuer reduces the 

rate to 10%. The card issuer performs 

reviews of the rate increase on January 1, 

2013 and July 1, 2013. Based on those 

reviews, the rate applicable to purchases 

remains at 15%. Beginning on August 1, 

2013, the card issuer is not required to 

continue periodically reviewing the rate 

increase, because if the temporary rate had 

expired in accordance with its previously 

disclosed terms, the 15% rate would have 

applied to purchase balances as of August 1, 

2013 even if the rate increase had not 

occurred on September 1, 2012. 

B. Same facts as above except that the 

review conducted on July 1, 2013 indicates 

that a reduction to the original temporary rate 

of 10% is appropriate. Section 226.59(a)(2)(i) 

requires that the rate be reduced no later than 

45 days after completion of the review, or no 

later than August 15, 2013. Because the 

temporary rate would have expired prior to 

the date on which the rate decrease is 

required to take effect, the card issuer may, 

at its option, reduce the rate to 10% for any 

portion of the period from July 1, 2013, to 

August 1, 2013, or may continue to impose 

the 15% rate for that entire period. The card 

issuer is not required to conduct further 

reviews of the 15% rate on purchases. 

C. Same facts as above except that on 

September 1, 2012 the card issuer increases 

the rate applicable to new purchases to the 

penalty rate on the consumer’s account, 

which is 25%. The card issuer conducts 

reviews of the increased rate in accordance 

with § 226.59 on January 1, 2013 and July 1, 

2013. Based on those reviews, the rate 

applicable to purchases remains at 25%. The 

card issuer’s obligation to review the rate 

increase continues to apply after August 1, 

2013, because the 25% penalty rate exceeds 

the 15% rate that would have applied if the 

temporary rate expired in accordance with its 

previously disclosed terms. The card issuer’s 

obligation to review the rate terminates if and 

when the annual percentage rate applicable 

to purchases is reduced to the 15% rate. 


srobinson on DSKHWCL6B1PROD with RULES2
23040 Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Rules and Regulations 

2. Example—relationship to § 226.59(a). 

Assume that on January 1, 2011, a consumer 

opens a new credit card account under an 

open-end (not home-secured) consumer 

credit plan. The annual percentage rate 

applicable to purchases is 15%. Upon 

providing 45 days’ advance notice and to the 

extent permitted under § 226.55, the card 

issuer increases the rate applicable to new 

purchases to 18%, effective on September 1, 

2012. The card issuer conducts reviews of the 

increased rate in accordance with § 226.59 on 

January 1, 2013 and July 1, 2013, based on 

the factors described in § 226.59(d)(1)(ii). 

Based on the January 1, 2013 review, the rate 

applicable to purchases remains at 18%. In 

the review conducted on July 1, 2013, the 

card issuer determines that, based on the 

relevant factors, the rate it would offer on a 

comparable new account would be 14%. 

Consistent with § 226.59(f), § 226.59(a) 

requires that the card issuer reduce the rate 

on the existing account to the 15% rate that 

was in effect prior to the September 1, 2012 

rate increase. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, April 8, 2011. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. 2011–8843 Filed 4–22–11; 8:45 am] 

BILLING CODE 6210–01–P 


srobinson on DSKHWCL6B1PROD with RULES2