Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations 58903

The United States Customs Service

amended its regulations at 19 CFR

122.153 and 122.154 to permit travel to

the same three designated airports in a

final rule published in the Federal

Register on October 4, 1999, at 64 FR

53627.

Good Cause Exception

Pursuant to the provisions of 5 U.S.C.

553(a)(1), public notice and comment

procedure is not applicable to this rule

because this rule falls within the foreign

affairs function of the United States. As

previously noted, the rule implements a

January 5, 1999, announcement by the

President that direct passenger flights

would be authorized to and from Cuba

and other U.S. cities as part of a

humanitarian effort designed to reach

out and ease the plight of the Cuban

people. Because this document is not

subject to the requirements of 5 U.S.C.

553, delayed effective date requirements

are not applicable.

Regulatory Flexibility Act

The Commissioner of the Immigration

and Naturalization Service, in

accordance with the Regulatory

Flexibility Act (5 U.S.C. 605(b)), has

reviewed this regulation and, by

approving it, certifies that this rule will

not have a significant economic impact

on a substantial number of small

entities. This rule affects individuals

and families and is intended to facilitate

licensed travel to and from Cuba.

Executive Order 12866

This rule is not considered by the

Department of Justice, Immigration and

Naturalization Service, to be a

‘‘significant regulatory action’’ under

Executive Order 12866, section 3(f),

Regulatory Planning and Review, and

the Office of Management and Budget

has waived its review process under

section 6(a)(3)(A).

Executive Order 13132

This regulation will not have

substantial direct effect on the States, on

the relationship between the National

Government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. Therefore, in

accordance with section 6 of Executive

Order 13132, it is determined that this

rule does not have sufficient federalism

implications to warrant the preparation

of a federalism summary impact

statement.

Unfunded Mandates Reform Act of

1995

This rule will not result in the

expenditure by State, local and tribal

governments in the aggregate, or by the

private sector, of $100 million or more

in any one year, and it will not

significantly or uniquely affect small

governments. Therefore, no actions were

deemed necessary under the provisions

of the Unfunded Mandates Reform Act

of 1995.

Small Business Regulatory Enforcement

Fairness Act of 1996

This rule is not a major rule as

defined by section 804 of the Small

Business Regulatory Enforcement

Fairness Act of 1996. This rule will not

result in an annual effect on the

economy of $100 million or more; a

major increase in costs or prices; or

significant adverse effects on

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

companies to compete with foreignbased companies in domestic and

export markets.

Executive Order 12988, Civil Justice

Reform

This rule meets the applicable

standards set forth in sections 3(a) and

3(b)(2) of Executive Order 12988.

List of Subjects in 8 CFR Part 234

Administrative practice and

procedure, Aliens Passports and visas.

Accordingly, part 234 of chapter I of

title 8 of the Code of Federal

Regulations is amended as follows:

PART 234—DESIGNATION OF PORTS

OF ENTRY FOR ALIENS ARRIVING BY

CIVIL AIRCRAFT

1. The authority citation for part 234

continues to read as follows;

Authority: 8 U.S.C. 1103, 1221, 1229; 8

CFR part 2.

2. In § 234.2, paragraph (a) is

amended by revising the last sentence to

read as follows:

§ 234.2 Landing requirements.

(a) * * * Notwithstanding the

foregoing, aircraft carrying passengers

and crew required to be inspected under

the act on flights originating in Cuba

shall land only at John F. Kennedy

International Airport, Jamaica, New

York; the Los Angeles International

Airport, Los Angeles, California; or the

Miami International Airport, Miami,

Florida, unless advance permission to

land elsewhere has been obtained from

the Office of Field Operations at

Headquarters.

* * * * *

Dated: March 28, 2000.

Doris Meissner,

Commissioner, Immigration and

Naturalization Service.

[FR Doc. 00–25319 Filed 10–2–00; 8:45 am]

BILLING CODE 4410–10–M

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R–1070]

Truth in Lending

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board is adopting a final

rule amending Regulation Z, which

implements the Truth in Lending Act, to

revise the disclosure requirements for

credit and charge card solicitations and

applications. The act requires disclosure

of the annual percentage rate (APR) and

other cost information in direct mail

and other applications and solicitations

to open card accounts. The amendments

to Regulation Z are intended to enhance

consumers’ ability to notice and

understand this cost information that

generally must be provided in the form

of a table. Under the final rule,

disclosures must be in a readily

understandable form and readily

noticeable to consumers. The APR

disclosed for purchase transactions

must be in 18-point type. Cash advance

and balance transfer APRs must be

included in the table and any balance

transfer fee must be disclosed either in

or outside of the table. Additional

guidance is provided on the

requirement that the card solicitation

and application disclosures be

prominently located, and on the level of

detail about cost information required or

permitted in the table.

DATES: The rule is effective September

27, 2000; compliance is mandatory as of

October 1, 2001.

FOR FURTHER INFORMATION CONTACT:

Deborah Stipick, Attorney, 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 Janice Simms at

(202) 872–4984.

SUPPLEMENTARY INFORMATION:

I. Background

The purpose of the Truth in Lending

Act (TILA), 15 U.S.C. 1601 et seq., is to

promote the informed use of consumer

credit by requiring disclosures about its

58904 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations

terms and cost. The Board’s Regulation

Z (12 CFR part 226) implements the act.

The act requires creditors to disclose the

cost of credit as a dollar amount (the

finance charge) and as an annual

percentage rate (the APR). Uniformity in

creditors’ disclosures is intended to

assist consumers in comparisonshopping.

The Fair Credit and Charge Card

Disclosure Act of 1988 (1988 Act)

amended TILA generally to require that

the APR and certain other terms

(primarily applicable to purchase

transactions) be disclosed in direct mail

and certain other solicitations and

applications to open credit and charge

card accounts. The purpose of the 1988

Act was to ensure that consumers

receive key cost information about

credit and charge cards early enough to

have the opportunity to comparison

shop for such cards. The 1988 Act

generally requires that card application

and solicitation disclosures be provided

in the form of a table (commonly

referred to as the ‘‘Schumer box’’ after

the law’s chief sponsor) with headings

for each item of information. The terms

required to be in the table include: the

name of the method used for calculating

finance charges on an outstanding

balance, any minimum finance charge

per billing cycle, transaction fee, annual

fee, grace period, and the APR for

purchase transactions. The card issuer

also must disclose any cash advance fee,

late payment fee, or fee for exceeding a

credit limit. These items may be either

in the required table or clearly and

conspicuously elsewhere. The

applicable disclosures must also be

provided for charge cards, which do not

have a periodic rate that is used to

compute a finance charge.

As with all TILA disclosures, the table

is subject to the ‘‘clear and

conspicuous’’ standard. Currently, the

table meets the ‘‘clear and conspicuous’’

standard if the disclosures are in a

‘‘readily understandable form.’’ There

are no type-size requirements associated

with this standard. The table is also

required to be in a ‘‘prominent location’’

on or with the application or

solicitation. Under the existing rules,

this requirement is met if the table is

‘‘readily noticeable to the consumer’’

but the table need not be in any

particular location to satisfy the

requirement.

Over the years, the pricing of credit

card programs has changed, and the cost

disclosures accompanying card issuers’

solicitations and applications have

become more complex. Multiple APRs

may apply to a single program. There

may be a temporary introductory rate, a

fixed or variable rate for all purchases

after the introductory period expires,

and one or more ‘‘penalty rates’’ that

apply if, for example, the consumer

makes late payments. There may also be

separate rates that apply to cash

advances and balance transfers.

As interest rates and other account

features have become more complex,

and disclosures longer, some card

issuers have compensated by using

reduced type sizes for the table instead

of allocating additional space for the

disclosures. In such cases, consumers

may have difficulty in using the table to

readily identify key costs and terms. In

contrast, the promotional materials that

accompany the credit card application

or solicitation may highlight a low

introductory APR in a large, easy to read

type size; oftentimes without the

expiration date in close proximity. The

APR in effect after the introductory rate

expires typically is disclosed much less

prominently—in a smaller type size—

and it may only appear in the disclosure

table and not at all in the promotional

materials. The table may be in a location

that is less likely to capture the

consumer’s attention, for example, on

the reverse side of an application or on

the last page of a multi-page solicitation.

Even with the format requirements,

the current regulatory framework allows

substantial flexibility in how and where

disclosures are presented. While some

card issuers’ disclosures are fairly

straightforward, other card issuers have

created disclosures that are difficult for

consumers to use. Accordingly, changes

to the current regulatory scheme appear

necessary to ensure that consumers

receive meaningful disclosures on a

more consistent basis, for comparisonshopping.

II. The Proposed Revisions

On May 24, 2000, the Board

published proposed revisions to

Regulation Z and the accompanying

commentary to revise the disclosure

requirements for credit and charge card

solicitations and applications (65 FR

33499). The proposal was issued

pursuant to the Board’s authority under

the 1988 Act to require disclosure of

additional information or to modify

disclosures required by the statute if the

Board determines that such action is

necessary to carry out the purposes of,

or prevent evasions of the 1988 Act. See

15 U.S.C. 1637(c)(5). The proposed

revisions were also issued under the

Board’s authority under section 105(a)

of TILA to prescribe regulations to

effectuate the purposes of TILA, to

prevent circumvention or evasion, or to

facilitate compliance. See 15 U.S.C.

1604(a).

Under the proposal, the APR

applicable to purchase transactions

would be subject to a type-size

requirement, to highlight this

information. It would be in 18-point

type and would appear with any

introductory rate under a separate

heading from other APRs, such as the

penalty rate. The proposal also more

strictly construes the requirement that

disclosures be clear and conspicuous by

requiring that information in the table

be ‘‘readily noticeable,’’ in addition to

being reasonably understandable. As to

type size, disclosures in at least 12-point

type were deemed readily noticeable.

The proposal gave additional

guidance on satisfying the current

requirements that disclosures be

prominently located. Under the

proposal, disclosures would be

prominently located if, for example,

they are on the same page as an

application or solicitation reply form, or

on a separate insert with a reference to

the insert on the application or reply

form.

To avoid clutter, guidance was

proposed to reduce the level of detail

required or permitted in the table, and

to promote the use of more concise

language. For example, card issuers

must disclose the penalty rate APR and

the conditions under which a rate may

be imposed such as when payments are

late. Under the proposal, only the rate

could be included in the table; all

explanatory information must be located

elsewhere. The Board also solicited

comment on whether additional rates

and fees should be disclosed in the

table.

The Board received more than 250

comment letters. More than half of the

comment letters were from consumers

that addressed issues outside of the

scope of the proposal. More than 80

comment letters were received regarding

the proposed revisions. Most of these

comments were from financial

institutions and their representatives;

about one-fourth were from individual

consumers.

In general, most commenters

supported the Board’s effort to improve

disclosures for credit and charge card

applications and solicitations. Most

industry commenters, however, objected

to specific aspects of the proposal or

requested clarification of the rules. In

particular, industry commenters

objected to the use of type-size

requirements and stated that the use of

italics, bolding, or similar means of

making disclosures clear and

conspicuous is preferable. They raised

concerns about the prominent location

standard and requested more flexibility

in locating the table within an

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations 58905

application or solicitation. Most

industry commenters were supportive of

efforts to decrease clutter and use more

concise language, and these commenters

supported the removal of the penalty

rate explanation from the table. They

also opposed the inclusion of additional

rates and fees in the table. A few

industry commenters objected to the

Board’s proposal to remove the penalty

rate explanation from the table and

suggested that the disclosure might be

overlooked if it were outside the table.

Consumers were generally supportive

of the proposal including the stricter

clear and conspicuous standard.

Consumers that commented generally

favored including in one location all

rates and fees along with any

explanation of how the rates and fees

are charged. In particular, they favored

including in the table the rate and fee

for balance transfers and the cash

advance APR.

III. Summary of Final Rule

As discussed below, the Board is

adopting the revisions substantially as

proposed in order to effectuate the

purposes of the 1988 Act and promote

more effective disclosure of the costs

and terms in credit and charge card

applications and solicitations. Some

revisions have been made for clarity or

in response to commenters’ requests for

guidance.

Under the final rules, the APR for

purchases must be in at least 18-point

type and must appear under a separate

heading from other APRs, such as the

penalty rates. The disclosures must be

‘‘readily noticeable,’’ as well as in a

‘‘reasonably understandable form.’’ As

to type size, disclosures in at least 12-

point type would be deemed readily

noticeable. Additional guidance is

provided for electronic communications

to clarify that card issuers comply with

the rules if disclosures are provided in

the required form even though the

consumer may view the disclosures in

a different form.

The final rule provides additional

guidance on the current requirement

that disclosures be prominently located

but has been modified from the proposal

to provide additional flexibility.

Disclosures are sufficiently prominent,

for example, if they are on the same

page as an application or solicitation

reply form. If located elsewhere, the

disclosures still would be considered

prominently located if the application

or solicitation reply form contains a

clear and conspicuous reference to the

location of the disclosures.

As proposed, guidance is provided on

the level of detail required or permitted

in the table. Under existing rules, the

table must include any increased

penalty APR that will apply upon the

occurrence of one or more specific

events, such as a late payment or an

extension of credit exceeding the credit

limit. Card issuers must also provide a

description of the specific events that

can trigger an increase. To simplify the

table, the existing commentary is

revised so that only the penalty rates

can appear inside the table; the

explanatory information must appear

outside the table.

Currently the regulation only requires

disclosure of the APR for purchase

transactions in the table. The final rule

also requires disclosure of the APRs for

cash advances and balance transfers in

the table and the disclosure of balance

transfer fees either in or outside the

table, as is currently the case for cash

advance, late payment, and over-thelimit fees.

Generally, updates to the Board’s staff

commentary are effective within 30 days

of publication. Consistent with the

requirements of section 105(d) of TILA,

however, the Board typically provides

an implementation period of six months

or longer. During that period,

compliance with the published update

is optional so that creditors may adjust

documents to accommodate TILA’s

disclosure requirements. Accordingly,

compliance with the revised credit card

provisions is mandatory as of October 1,

2001.

IV. Section-by-Section Analysis of the

Final Rule

Subpart B—Open-End Credit

Section 226.5—General Disclosure

Requirements

5(a) Form of Disclosures

Section 226.5(a)(1) states the general

rule that TILA disclosures for open-end

credit plans must be made clearly and

conspicuously. Existing comment

5(a)(1)–1 interprets this standard to

require disclosures to be in a

‘‘reasonably understandable form.’’

Under the final rule, as proposed, this

standard is more strictly construed for

purposes of the disclosures required

under § 226.5a for credit and charge

card applications and solicitations.

Accordingly, comment 5(a)(1)–1 is

revised to reflect this fact, by including

a cross-reference to the special rules for

§ 226.5a disclosures. See comments

5a(a)(2)–1 and –2.

Section 226.5(a)(2) n.9 provides that

the APRs under § 226.5a need not be

more conspicuous than other

disclosures. Footnote 9 is revised by

adding a cross-reference to reflect the

special type-size rule under § 226.5a for

purchases APRs. Comment 5(a)(2)–1 is

also revised to make a technical

correction.

Section 226.5a—Credit and Charge

Card Applications and Solicitations

5a(a) General Rules

5a(a)(2) Form of Disclosures

Disclosures that are required by

§ 226.5a must be clear and conspicuous

and prominently located on or with an

application or solicitation or other

applicable document. Certain of these

disclosures also are required to be in a

table format. As proposed, comment

5a(a)(2)–1 is added to establish a stricter

standard for satisfying the ‘‘clear and

conspicuous’’ standard with respect to

credit or charge card application or

solicitation disclosures. Comment

5a(a)(2)–2 provides additional

interpretative guidance on the

requirement that certain disclosures be

prominently located. Because the

interpretations differ somewhat from

those currently provided, they are

intended to apply prospectively.

Currently, disclosures meet the ‘‘clear

and conspicuous’’ requirement if they

are reasonably understandable. To

ensure that consumers receive

meaningful disclosures on a consistent

basis, comment 5a(a)(2)–1 provides that

disclosures are clear and conspicuous if

they are both reasonably understandable

and readily noticeable.

Industry commenters that opposed

the revision cited a variety of reasons

including the belief that a court might

apply the stricter construction of the

clear and conspicuous standard under

§ 226.5a to other sections of Regulation

Z. Consumers and their representatives

generally favored the stricter

construction and thought the revisions

would assist consumers in comparisonshopping for credit and charge cards by

making disclosures more noticeable.

Many commenters representing

financial institutions expressed a belief

that the stricter construction of the

‘‘clear and conspicuous’’ standard is

unnecessary and the same result could

be achieved through more rigorous

enforcement of the existing standard.

These commenters generally objected to

the proposal’s use of particular type-size

examples. Under the final rule,

comment 5a(a)(2)–1 provides, as

proposed, that as to type size,

disclosures are deemed to be readily

noticeable if they are in at least 12-point

type. A number of commenters stated

that using the example of 12-point type

to satisfy the standard would have the

effect of establishing a minimum typesize requirement. Accordingly, some

commenters suggested that the final rule

58906 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations

use 10-point type as the example of a

conspicuous type size, or that the final

rule includes additional language

clarifying that some disclosures smaller

than 12-point may also satisfy the rule.

To address commenters concerns, the

comment states that disclosures printed

in less than 12-point type do not

automatically violate the standard.

Disclosures in less than 8-point type,

however, would likely be too small to

satisfy the standard.

Some commenters requested further

guidance on whether the new ‘‘clear and

conspicuous standard’’ would apply

only to information required to be

disclosed in a tabular format, or to all

disclosures required under § 226.5a. In

response to the comment received,

comment 226.5a(a)(2)–1 provides that

the stricter clear and conspicuous

standard applies to all § 226.5a

disclosures.

Comment 5a(a)(2)–2 addresses the

requirement that certain disclosures be

prominently located. Currently, the

standard does not require disclosures to

be located in any particular location.

For example, card issuers may locate

disclosures that are required to be in a

tabular format on the reverse side of an

application or on the last page of a

multi-page solicitation. Consumers may

see the promotional materials and fill

out the application without being aware

that there is additional cost information

elsewhere following the application.

Under the proposal, the table would

have been deemed to be prominently

located, for example, if it appeared on

the same page as the application or

solicitation reply form, or on a separate

insert with a reference to the insert on

the application or reply form. Many

commenters, including both consumers

and some financial institution

representatives suggested that card

issuers might favor the use of inserts

instead of locating the table on the

application or reply form. These

commenters were concerned that inserts

might be overlooked by consumers and

they urged that the Board grant

flexibility to card issuers that cannot fit

their disclosures on the same page as

the application. Commenters also

requested additional guidance. For

example, some suggested that

disclosures on the reverse side of a onepage application might be considered to

be on the same page as the application.

(They would not; each side would be

considered a separate page.)

In response to commenters’ concerns,

comment 5(a)(2)–2 provides additional

flexibility. Disclosures that do not

appear on the same page as the

application or solicitation reply form

will also be considered prominently

located if a clear and conspicuous

reference to the location of the

disclosures is on the application or

solicitation reply form indicating that

they contain additional information

about rates, fees, and other costs, as

applicable.

The revised comment clarifies that the

tabular disclosures required under

§ 226.5a(b) must all appear on the same

page. Disclosures required under

§ 226.5a(b)(8)–(11) that appear outside

the table must start on the same page as

the table but may continue on

subsequent pages.

Electronic Disclosures—In September

1999, the Board published a proposal

that would amend Regulation Z to

authorize creditors to use electronic

communication to deliver required

disclosures. 64 FR 49722 (September 14,

1999). On June 30, 2000, the Electronic

Signatures in Global and National

Commerce Act was signed into law,

which authorizes the use of electronic

records to provide written disclosures to

consumers. Pub. L. 106–229, 114 Stat.

464. That law is effective October 1,

2000.

The Board’s proposal specifically

requested comment on any guidance

that may be needed when credit and

charge card applications and

solicitations are provided by electronic

communication. The majority of

commenters requested that the Board

provide guidance in the final rule on the

use of electronic disclosures for credit

and charge card applications and

solicitations. Some commenters

requested clarification that

electronically transmitting or posting

the APR disclosures in the required type

size is sufficient in light of the

consumer’s ability to alter the

appearance of information received

electronically. In response to

commenters’ concerns, comment

5a(a)(2)–1 indicates that if disclosures

required by § 226.5a(b) are provided by

electronic communication, they are

judged for purposes of the clear and

conspicuous standard based on the form

in which they are provided even though

they may be viewed by consumers in a

different format.

Commenters also requested guidance

on complying with the requirement that

certain disclosures be ‘‘prominently

located’’ when electronic media are

used. This guidance has been provided

in comment 5a(a)(2)–2. Electronic

disclosures are deemed to be

prominently located if they are posted

on a web site and the application or

solicitation reply form is linked to the

disclosures in a manner that prevents

the consumer from by-passing the

disclosures before submitting the

application or reply form, or they are

located on the same page as an

application or solicitation reply form

that contains a clear and conspicuous

reference to the location of the

disclosures and indicates that they

contain rate, fee, and other cost

information as applicable.

5a(b) Required Disclosures

Disclosure of Additional Rates and

Fees—The table required under § 226.5a

provides consumers with key cost

information, grouped together in one

place to facilitate consumers’ use of the

information for comparison-shopping.

These disclosures are not intended to be

as detailed as disclosures provided to

consumers at account opening. At the

time the 1988 Act was adopted, the

primary focus was on cost disclosures

for purchase transactions. Thus, under

the current rules the APR and

transaction fees for purchases must be

disclosed in the table, but not the APR

for cash advances.

Because the services and features

offered with credit and charge cards

have evolved in recent years, the

disclosures required by the 1988 Act do

not capture costs that are commonly

assessed on such cards, such as the APR

assessed on a balance transfer (which

the card issuer may characterize as a

cash advance). Accordingly, the Board

solicited comment on whether

consumers would be aided in

comparison-shopping by having

additional rates and fees disclosed in

the table. In particular, commenters

were asked to address whether the APR

and transaction fee for balance transfers

and the APR for cash advances should

be included in the table.

Many of the consumers and consumer

advocates supported the inclusion of

additional rate and fee information.

These commenters generally favored

including the APR and transaction fee

for balance transfers and the APR for

cash advances. They noted that these

card features are common and that

disclosure of these terms aids

consumers in more effective

comparison-shopping. Industry

commenters generally opposed the

inclusion of new fees and rates. They

believe that the application and

solicitation disclosures are more likely

to be effective if they are simpler. They

are also concerned that adding new

disclosures based on card issuer’s

current program features is likely to lead

to further expansion of the disclosures

in response to new trends in future

industry card programs.

On balance, the Board believes that

consumers seeking to comparison-shop

would benefit from having the APR and

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations 58907

transaction fee for balance transfers and

the APR for cash advances provided in

a consistent and uniform manner along

with other key cost information. Balance

transfer features have become common

and cash advance features are an

integral part of many card programs.

Frequently, these features are

prominently listed by card issuers in

their promotional materials, sometimes

as part of an introductory offer that

expires after several months.

Consumers’ ability to understand the

offered terms is likely to be enhanced by

more uniform disclosure of these terms,

particularly as consumers become

familiar with the new format.

Accordingly, § 226.5a(b)(1) has been

revised to include the APR for cash

advances and balance transfers in the

tabular disclosures. Under the final rule,

§ 226.5a(b)(11) has also been added to

provide that a balance transfer fee must

also be disclosed, either in the table, or

clearly or conspicuously elsewhere.

APR for Purchase Transactions—

Section 226.5a(b)(1) requires card

issuers to disclose in the table each

periodic rate that may be used to

compute the finance charge on an

outstanding balance for purchases,

expressed as an APR. The final rule is

being adopted, as proposed, to require

the APR for purchases to be disclosed in

the table in at least 18-point type. This

type-size requirement does not apply to

temporary initial rates, that are lower

than the APR that will apply after the

temporary rate expires (to the extent

such programs exist), or to penalty rates

that result upon the occurrence of one

or more specific events (such as a late

payment or an extension of credit that

exceeds the credit limit). See comment

5a(b)(1)–6. The APR for purchases must

also appear with any introductory rate

under a separate heading from other

APRs, such as penalty rates, or rates for

cash advances.

The Board proposed the use of this

larger type size to highlight the

significance of this information,

particularly in light of the larger type

sizes typically used by card issuers to

promote introductory rates. Under

existing rules, the APR information is

often obscured due to the amount of

other information provided in the table

and the small type size used by some

card issuers.

Consumers and consumer advocates

generally believed that the type-size

requirement is appropriate to ensure

that the APR for purchases is clear and

conspicuous. Industry commenters

generally opposed the type-size

requirement. Many of these commenters

stated that the larger type size would

place too much emphasis on the APR

for purchases even though consumers

may have differing opinions regarding

which disclosures are most important.

Many industry commenters suggested

that highlighting the APR for purchases

in this manner would diminish the

effectiveness of other disclosures in the

table.

Some financial institutions contend

that an increase in type size will

increase paper and production costs,

although few institutions attempted to

quantify the cost. One financial

institution estimated that under the new

rule its paper costs would increase 7%

annually. Some credit unions expressed

concern regarding increased costs;

however, many indicated that the

increased costs could be avoided if the

final rule does not become effective for

at least six months thereby, permitting

them to use their existing stock of

disclosures.

Overall, the benefits of requiring 18-

point type in disclosing the APR for

purchases seem to outweigh any

potential adverse effects. Even though

some consumers comparison-shop for

credit and charge cards based on a

variety of features, the APR for

purchases remains one of the key

features that consumers consider.

Moreover, many card issuers use larger

than 18-point type to promote

introductory APRs and other features in

their credit and charge card promotional

materials. Also, to aid consumers in

better understanding the rates being

imposed on a card account, card issuers

are encouraged to disclose, in close

proximity with any introductory rate

being promoted, the period of time that

the rate is in effect, and the postintroductory APR for purchases.

Rules to Simplify the Table—Card

issuers are required to disclose ‘‘penalty

rates’’ in the table, along with a

description of the specific events that

can trigger a rate increase and any index

or margin used to determine the penalty

rate. Under existing comment 5a(b)(1)–

7, card issuers have the option of

including this information inside the

table or elsewhere. To simplify the

table, the comment has been revised to

provide that only the penalty rate

should appear inside the table; the

explanatory information must appear

outside the table. Card issuers must use

an asterisk or other means to direct the

consumer to the additional information.

Most commenters believed that

removing the explanatory information

from the table would decrease clutter

and promote the use of concise language

in the table. A few consumers, however,

stated that the significant impact of

penalty rates justifies leaving the

explanation in the table to prevent it

from being overlooked. The Board has

determined that consumers are more

likely to notice the penalty APRs if the

table is uncluttered by removing the

explanatory information. Moreover, the

stricter interpretation of the ‘‘clear and

conspicuous’’ standard should ensure

that the explanatory information

appears outside in a readily noticeable

form.

Appendices G and H to Part 226—

Open-end and Closed-End Model Forms

and Clauses

Revisions to comment App. G and H–

1 are adopted, as proposed, to clarify

that there are special rules for

disclosures required under § 226.5a for

applications and solicitations for credit

and charge cards.

Appendix G to Part 226—Open-end

Model Forms and Clauses

The Board provides model forms to

aid compliance with the disclosure

requirements of § 226.5a(b). See

Appendix G–10(A)–(C). Model form G–

10(A) is revised and model form G–

10(B) has been removed as unnecessary.

A new sample form G–10(B) is added to

illustrate an account with an

introductory rate and a penalty rate. The

forms also reflect the inclusion of the

cash advance APR, balance transfer

APR, and the balance transfer fee. Also

comment G–5 is revised to clarify that

there are format and sequence

requirements for certain § 226.5a

disclosures.

V. Regulatory Flexibility Analysis

In accordance with section 3(a) of the

Regulatory Flexibility Act, the Board

has reviewed the amendments to

Regulation Z. The amendments require

creditors to use a specific type size for

the APR for purchases, to add the APR

and fee for balance transfers and the

APR for cash advances; to provide

supplemental information about penalty

rates outside the table; and to locate the

table on the same page as the

application or solicitation reply form, or

elsewhere with a reference in the

application or reply form to the location

and content of the disclosures.

Some smaller financial institutions,

particularly credit unions, expressed

concerns that the need to revise

disclosures to comply would increase

costs; however, costs could be

minimized by delaying the mandatory

compliance date for at least six months

thereby permitting them to utilize

existing stocks of disclosures. Since the

mandatory compliance date is October

1, 2001, the amendments do not have

any significant impact on small entities

beyond these initial revisions.

58908 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations

VI. Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3506;

5 CFR 1320 Appendix A.1), the Board

reviewed the rule under the authority

delegated to the Board by the Office of

Management and Budget. The Federal

Reserve may not conduct or sponsor,

and an organization is not required to

respond to, this information collection

unless it displays a currently valid OMB

control number. The OMB control

number is 7100–0199.

The collection of information that is

revised by this rulemaking is found in

12 CFR part 226 and in Appendices F,

G, H, J, K, and L. This information is

mandatory (15 U.S.C. 1601 et seq.) to

evidence compliance with the

requirements of Regulation Z and the

Truth in Lending Act (TILA). The

respondents/recordkeepers are for-profit

financial institutions, including small

businesses. Institutions are required to

retain records for twenty-four months.

This regulation applies to all types of

creditors, not just state member banks;

however, under Paperwork Reduction

Act regulations, the Federal Reserve

accounts for the burden of the

paperwork associated with the

regulation only for state member banks.

Other agencies account for the

paperwork burden on their respective

constituencies under this regulation.

The revisions require creditors to

revise disclosures for credit card

solicitations and applications by: (1)

Requiring an 18-point type-size for the

APR for purchase transactions, (2)

requiring creditors to provide

supplemental information about penalty

rates outside the table, (3) requiring

disclosure of the APR and fee for

balance transfers and cash advance

APR, and (4) requiring that such table be

located on the same page as the

application or solicitation reply form or

elsewhere with a reference to the

location on the application or reply

form. Although the final rule adds these

requirements, it is expected that these

revisions would not significantly

increase the paperwork burden of

creditors. With respect to state member

banks, it is estimated that there are 988

respondent/recordkeepers and an

average frequency of 136,294 responses

per respondent each year. Therefore, the

current amount of annual burden is

estimated to be 1,863,754 hours.

Because these revisions modify

preexisting tables, there is estimated to

be no additional annual cost burden and

no capital or start-up cost.

Because the records would be

maintained at state member banks and

the notices are not provided to the

Federal Reserve, no issue of

confidentiality under the Freedom of

Information Act arises; however, any

information obtained by the Federal

Reserve may be protected from

disclosure under exemptions (b)(4), (6),

and (8) of the Freedom of Information

Act (5 U.S.C. 522 (b)(4), (6) and (8)). The

disclosures and information about error

allegations are confidential between

creditors and the customer.

The Federal Reserve has a continuing

interest in the public’s opinion of our

collections of information. At any time,

comments regarding the burden

estimates, or any other aspect of this

collection of information, including

suggestions for reducing the burden

estimate, may be sent to: Secretary,

Board of Governors of the Federal

Reserve System, 20th and C Streets,

N.W., Washington, DC 20551; and to the

Office of Management and Budget,

Paperwork Reduction Project (7100–

0199), Washington, DC 20503.

List of Subjects in 12 CFR Part 226

Advertising, Federal Reserve System,

Mortgages, Reporting and recordkeeping

requirements, Truth in lending.

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

and 1637(c)(5).

Subpart B—Open-End Credit

2. Section 226.5 is amended by

revising footnote 9 to read as follows:

Section 226.5 General disclosure

requirements.

* * * * * 9The terms need not be more conspicuous

when used under § 226.5a generally for credit

and charge card applications and

solicitations under § 226.7(d) on periodic

statements, under § 226.9(e) in credit and

charge card renewal disclosures, and under

§ 226.16 in advertisements. (But see special

rule for annual percentage rate for purchases,

§ 226.5a(b)(1).)

3. Section 226.5a is amended by:

a. Revising paragraphs (a)(2)(ii), (a)(5),

(b) introductory text and (b)(1)

introductory text; and

b. Adding a new paragraph (b)(11).

§ 226.5a Credit and charge card

applications and solicitations.

* * * * *

(a) * * *

(a)(2) Form of disclosures. ***

(ii) The disclosures in paragraphs

(b)(8) through (11) of this section shall

be provided either in the table

containing the disclosures in paragraphs

(b)(1) through (7), or clearly and

conspicuously elsewhere on or with the

application or solicitation.

* * * * *

(a)(5) Certain fees that vary by state.

If the amount of any fee referred to in

paragraphs (b)(8) through (11) of this

section varies from state to state, the

card issuer may disclose the range of the

fees instead of the amount for each state,

if the disclosure includes a statement

that the amount of the fee varies from

state to state.

(b) Required disclosures. The card

issuer shall disclose the items in this

paragraph on or with an application or

a solicitation in accordance with the

requirements of paragraphs (c), (d), or

(e) of this section. A credit card issuer

shall disclose all applicable items in

this paragraph except for paragraph

(b)(7) of this section. A charge card

issuer shall disclose the applicable

items in paragraphs (b)(2), (4), and (7)

through (11) of this section.

(1) Annual percentage rate. 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

(as determined by § 226.14(b)). When

more than one rate applies for a category

of transactions, the range of balances to

which each rate is applicable shall also

be disclosed. The annual percentage rate

for purchases disclosed pursuant to this

paragraph shall be in at least 18-point

type, except for the following: a

temporary initial rate that is lower than

the rate that will apply after the

temporary rate expires, and a penalty

rate that will apply upon the occurrence

of one or more specific events.

* * * * *

(11) Balance transfer fee. Any fee

imposed to transfer an outstanding

balance.

* * * * *

4. Appendix G to Part 226 is amended

by:

a. Revising the table of contents at the

beginning of the appendix;

b. Revising Model G–10(A); and

c. Removing Model G–10(B) and

adding a new Sample G–10(B) in its

place.

Appendix G To Part 226—Open-End Model

Forms and Clauses

G–1 Balance-Computation Methods Model

Clauses (§§ 226.6 and 226.7)

G–2 Liability for Unauthorized Use Model

Clause (§ 226.12)

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations 58909

G–3 Long-Form Billing-Error Rights Model

Form (§§ 226.6 and 226.9)

G–4 Alternative Billing-Error Rights Model

Form (§ 226.9)

G–5 Rescission Model Form (When

Opening an Account) (§ 226.15)

G–6 Rescission Model Form (For Each

Transaction) (§ 226.15)

G–7 Rescission Model Form (When

Increasing the Credit Limit) (§ 226.15)

G–8 Rescission Model Form (When Adding

a Security Interest) (§ 226.15)

G–9 Rescission Model Form (When

Increasing the Security) (§ 226.15)

G–10(A) Applications and Solicitations

Model Forms (Credit Cards) (§ 226.5a(b))

G–10(B) Applications and Solicitations

Sample (Credit Card) (§ 226.5a(b))

G–10(C) Applications and Solicitations

Model Form (Charge Cards) (§ 226.5a(b))

G–11 Applications and Solicitations Made

Available to General Public Model

Clauses (§ 226.5a(e))

G–12 Charge Card Model Clause (When

Access to Plan Offered by Another)

(§ 226.5a(f))

G–13(A) Change in Insurance Provider

Model Form (Combined Notice)

(§ 226.9(f))

G–13(B) Change in Insurance Provider

Model Form (§ 226.9(f)(2))

G–14A Home Equity Sample

G–14B Home Equity Sample

G–15 Home Equity Model Clauses

* * * * *

BILLING CODE 6210–01–P

58910 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations

BILLING CODE 6210–01–C

* * * * *

5. In Supplement I to Part 226, MAKE

the following amendments:

a. Under Section 226.5—General

Disclosure Requirements, under

Paragraph 5(a)(1), paragraph 1.

introductory text is revised;

b. Under Section 226.5—General

Disclosure Requirements, under

Paragraph 5(a)(2), the first sentence in

paragraph 1 is revised;

c. Under Section 226.5a—Credit and

Charge Card Applications and

Solicitations, under 5a(a)(2) Form of

Disclosures, paragraph 1 through

paragraph 6 are redesignated as

paragraph 2 through paragraph 7

respectively, a new paragraph 1 is

added, and newly designated paragraph

2 is revised.

d. Under Section 226.5a—Credit and

Charge Card Applications and

Solicitations, under 5a(b)(1) Annual

Percentage Rate, paragraphs 6 and 7 are

revised.

e. Under Appendices G and H—OpenEnd and Closed-End Model Forms and

Clauses, a new sentence is added after

the second sentence in paragraph 1.

f. Under Appendix G—Open-end

Model Forms and Clauses, paragraph 5

is revised.

SUPPLEMENT I TO PART 226—OFFICIAL

STAFF INTERPRETATIONS

* * * * *

Subpart B—End Credit

§ 226.5—General Disclosure

Requirements

5(a) Form of disclosures.

Paragraph 5(a)(1).

1. Clear and conspicuous. The clear and

conspicuous standard requires that

disclosures be in a reasonably

understandable form. Except where

otherwise provided, the standard does not

require that disclosures be segregated from

other material or located in any particular

place on the disclosure statement, or that

numerical amounts or percentages be in any

particular type size. (But see comments

5a(a)(2)–1 and –2 for special rules concerning

§ 226.5a disclosures for credit card

applications and solicitations.) The standard

does not prohibit:

* * * * *

Paragraph 5(a)(2).

1. When disclosures must be more

conspicuous. The term finance charge and

annual percentage rate, when required to be

used with a number, must be disclosed more

conspicuously than other required

disclosures, except in the cases provided in

footnote 9. * * *

* * * * *

Section 226.5a—Credit and Charge Card

Applications and Solicitations

* * * * *

5a(a) General Rules

5a(a)(2) Form of Disclosures

1. Clear and conspicuous standard. For

purposes of § 226.5a disclosures, clear and

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Rules and Regulations 58911

conspicuous means in a reasonably

understandable form and readily noticeable

to the consumer. As to type size, disclosures

in 12-point type are deemed to be readily

noticeable for purposes of § 226.5a.

Disclosures printed in less than 12-point type

do not automatically violate the standard;

however, disclosures in less than 8-point

type would likely be too small to satisfy the

standard. Disclosures that are transmitted by

electronic communication are judged for

purposes of the clear and conspicuous

standard based on the form in which they are

provided even though they may be viewed by

the consumer in a different form.

2. Prominent location. i. Generally. Certain

of the required disclosures provided on or

with an application or solicitation must be

prominently located. Disclosures are deemed

to be prominently located, for example, if the

disclosures are on the same page as an

application or solicitation reply form. If the

disclosures appear elsewhere, they are

deemed to be prominently located if the

application or solicitation reply form

contains a clear and conspicuous reference to

the location of the disclosures and indicates

that they contain rate, fee, and other cost

information, as applicable. Disclosures

required by § 226.5a(b) that are placed

outside the table must begin on the same

page as the table but need not end on the

same page.

ii. Electronic disclosures. Electronic

disclosures are deemed to be prominently

located if:

A. They are posted on a web site and the

application or solicitation reply form is

linked to the disclosures in a manner that

prevents the consumer from by-passing the

disclosures before submitting the application

or reply form; or

B. They are located on the same page as an

application or solicitation reply form, that

contains a clear and conspicuous reference to

the location of the disclosures and indicates

that they contain rate, fee, and other cost

information, as applicable.

* * * * *

5a(b) Required Disclosures

5a(b)(1) Annual Percentage Rate

* * * * *

6. Introductory rates—premium rates. If the

initial rate is temporary and is higher than

the permanently applicable rate, the card

issuer must disclose the initial rate in the

table. The initial rate must be in at least 18-

point type unless the issuer also discloses in

the table the permanently applicable rate.

The issuer may disclose in the table the

permanently applicable rate that would

otherwise apply if the issuer also discloses

the time period during which the initial rate

will remain in effect. In that case, the

permanently applicable rate must be in at

least 18-point type.

7. Increased penalty rates. If the initial rate

may increase upon the occurrence of one or

more specific events, such as a late payment

or an extension of credit that exceeds the

credit limit, the card issuer must disclose in

the table the initial rate and the increased

penalty rate that may apply. If the penalty

rate is based on an index and an increased

margin, the issuer must also disclose in the

table the index and the margin as well as the

specific event or events that may result in the

increased rate, such as ‘‘applies to accounts

60 days late.’’ If the penalty rate cannot be

determined at the time disclosures are given,

the issuer must provide an explanation of the

specific event or events that may result in

imposing an increased rate. In describing the

specific event or events that may result in an

increased rate, issuers need not be as detailed

as for the disclosures required under

§ 226.6(a)(2). For issuers using a tabular

format, the specific event or events must be

placed outside the table and an asterisk or

other means shall be used to direct the

consumer to the additional information. At

its option, the issuer may include in the

explanation of the penalty rate the period for

which the increased rate will remain in

effect, such as ‘‘until you make three timely

payments.’’ The issuer need not disclose an

increased rate that is imposed when credit

privileges are permanently terminated.

* * * * *

Appendices G and H—Open-End and

Closed-End Model Forms and Clauses

1. Permissible changes. * * * (But see

Appendix G comment 5 for special rules

concerning certain disclosures required

under § 226.5a for credit and charge card

applications and solicitations). * * *

* * * * *

APPENDIX G—OPEN-END MODEL FORMS

AND CLAUSES

* * * * *

5. Model G–10(A), Sample G–10(B) and

Model G–10(C). i. Model G–10(A) and

Sample G–10(B) illustrate, in the tabular

format, all of the disclosures required under

§ 226.5a for applications and solicitations for

credit cards other than charge cards. Model

G–10(B) is a sample disclosure illustrating an

account with a lower introductory rate and

penalty rate. Model G–10(C) illustrates the

tabular format disclosure for charge card

applications and solicitations and reflects all

of the disclosures in the table.

ii. Except as otherwise permitted,

disclosures must be substantially similar in

sequence and format to model forms G–10(A)

and (C). The disclosures may, however, be

arranged vertically or horizontally and need

not be highlighted aside from being included

in the table. While proper use of the model

forms will be deemed in compliance with the

regulation, card issuers are permitted to use

headings and disclosures other than those in

the forms (with an exception relating to the

use of ‘‘grace period’’) if they are clear and

concise and are substantially similar to the

headings and disclosures contained in model

forms. For further discussion of requirements

relating to form, see the commentary to

§ 226.5a(a)(2).

* * * * *

By order of the Board of Governors of the

Federal Reserve System, September 27, 2000.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 00–25316 Filed 10–2–00; 8:45 am]

BILLING CODE 6210–01–P

DEPARTMENT OF COMMERCE

Bureau of Export Administration

15 CFR Parts 742 and 774

[Docket No. 000920265–0265–01]

RIN 0694–AC13

Revisions and Clarifications to the

Commerce Control List; Chemical and

Biological Weapons Controls;

Australia Group

AGENCY: Bureau of Export

Administration, Commerce.

ACTION: Final rule.

SUMMARY: This final rule amends the

Commerce Control List (CCL) of the

Export Administration Regulations to

implement an October 1999 Australia

Group agreement to clarify the scope of

controls on saxitoxin, toxic gas

monitoring systems, and cross-flow

filtration equipment, as well as

clarifying the application of the rule for

mixtures containing Australia Group

(AG) chemicals that are also identified

as Schedule 1 chemicals under the

Chemical Weapons Convention. The

final rule also amends the CCL to

authorize, without a license, exports of

certain medical products containing

botulinum toxin, and certain diagnostic

and food testing kits that contain AGcontrolled toxins. Finally, this final rule

amends the CCL to add titanium carbide

and silicon carbide to the list of

construction materials for heat

exchangers. Restrictions on chemicals

and toxins that are also controlled for

CW (Chemical Weapons Convention)

purposes continue to apply. This rule

will result in an overall decreased

licensing burden on U.S. industry.

EFFECTIVE DATE: This rule is effective:

October 3, 2000.

FOR FURTHER INFORMATION CONTACT:

James Seevaratnam, Director, Chemical

and Biological Controls Division,

Bureau of Export Administration, (202)

501–7900.

SUPPLEMENTARY INFORMATION:

Background

On October 7, 1999, the Bureau of

Export Administration (BXA) published

a final rule amending the Export

Administration Regulations (EAR) to

implement the October 1998 Australia

Group agreement to amend controls on

toxic gas monitoring systems and to

amend the CCL to authorize, without a

license, exports of medical products

containing controlled biological toxins

that are developed, packaged and sold

for medical treatment.