67458 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

FEDERAL RESERVE SYSTEM 

12 CFR Part 226 

[Regulation Z; Docket No. R–1393] 

RIN No. 7100–AD55 

Truth in Lending 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Proposed rule; request for 

public comment. 

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 

proposes to amend specific portions of 

the regulations and official staff 

commentary. 

DATES: Comments must be received on 

or before January 3, 2011. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1393 and 

RIN No. 7100–AD55, by any of the 

following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include the docket number and RIN 

number in the subject line of the 

message. 

• Facsimile: (202) 452–3819 or (202) 

452–3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Streets, NW.) between 9 a.m. and 5 p.m. 

on weekdays. 

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 established 

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 (new TILA Section 

127(i)) and provisions regarding the 

amount of time that consumers have to 

make payments (revised 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 (revised TILA Section 171), 

over-the-limit transactions (new TILA 

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

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

(new 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. 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). On June 15, 

2010, the Board issued 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 

will comply with particular aspects of 

those rules. Accordingly, in order to 

provide guidance and facilitate 

compliance with the final rules, the 

Board proposes to amend portions of the 

regulations and the accompanying staff 

commentary. These proposed 

amendments are discussed in detail in 

Section III of this SUPPLEMENTARY

INFORMATION. 

Although comment is requested on 

the proposed amendments, the Board 

emphasizes 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 implemented in 

those rules. Thus, commenters are 

encouraged to limit their submissions 

accordingly. 

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 these proposed rules, 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 defined a new, somewhat 

narrower term in order to implement the 


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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 the term ‘‘credit card 

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

meaning any open-end credit account 

accessed by a credit card except a homeequity plan subject to the requirements 

of § 226.5b accessed by a credit card or 

an overdraft line of credit accessed by 

a debit card. 

The Board 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 to apply the Credit Card 

Act broadly to 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 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 proposes 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 would add an additional example 

clarifying that an account number that 

accesses a credit account is not 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), 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). 

In addition, the Board proposes to 

adopt a new comment 2(a)(15)–4, which 

would clarify 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). 

The Board would also amend the 

exception in § 226.2(a)(15)(ii)(B) to 

clarify that—like an overdraft line of 

credit accessed by a debit card—an 

overdraft line 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) is excluded from the definition 

of ‘‘credit card account under an openend (not home-secured) consumer credit 

plan.’’ Finally, for clarity and 

consistency, the Board would make 

non-substantive revisions to the 

exception for home-equity plans in 

§ 226.2(a)(15)(ii)(A). 

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 

proposes 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 would also update the list 

of provisions in comment 2(a)(15)–3 

that distinguish charge cards from credit 

cards. In addition, the Board would 

remove the statement in the comment 

that, when the term ‘‘credit card’’ is used 

in the listed provisions, it 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. 

Section 226.5 General Disclosure 

Requirements 

5(b) Time of Disclosures 

5(b)(2) Periodic Statements 

Prior to the Credit Card Act, TILA 

Section 163 generally required creditors 

to send periodic statements for openend 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. 


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67460 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

1The Board notes that 45 days’ advance notice is 

required pursuant to § 226.9(g) prior to imposition 

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. 

Public Law 111–93, 123 Stat. 2998 (Nov. 

6, 2009). The Technical Corrections Act 

narrowed the requirement 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, openend consumer credit plans that provide 

a grace period remain subject to the 21- 

day requirement in 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 proposes 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 would revise 

§ 226.5(b)(2)(ii) to require that, when an 

open-end account is not accessed by a 

credit card and does not provide a grace 

period, creditors must adopt reasonable 

procedures designed to ensure that 

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. In addition, 

creditors would be required to adopt 

reasonable procedures designed to 

ensure that required minimum periodic 

payments received within 14 days after 

mailing or delivery of the periodic 

statement are not treated as late for any 

purpose. The Board would also revise 

the commentary to § 226.5(b)(2)(ii) for 

consistency with these proposed 

revisions. 

Finally, the proposed rule would 

delete comment 5(b)(2)(iii)–1, which 

implemented the pre-Credit Card Act 

version of TILA Section 163 and was 

inadvertently retained in the February 

2010 Final Rule. 

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) 

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. 

The Board is proposing 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 is proposing 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 notes 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 home-secured) 

consumer credit plan while § 226.6(b) 

applies to all open-end (not homesecured) credit. Therefore, the Board is 

not proposing to delete the reference to 

limitations on rate decreases from 

§ 226.6(b)(2)(i)(A). But see the 

discussion in the supplementary 

information to § 226.9(c)(2)(v)(C) 

regarding the notice requirements that 

apply to an open-end (not homesecured) 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 is aware 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


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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67461 

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

limitations set forth in § 226.55 apply. 

The Board is proposing 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. New § 226.5a(b)(1)(iv)(C) 

would generally mirror 

§ 226.5a(b)(1)(iv)(B) and would provide 

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 

believes that this placement 

requirement is appropriate in order to 

prevent ‘‘information overload’’ and to 

focus consumers’ attention on the 

disclosures that they find the most 

important. 

The Board is proposing 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. Comment 5a(b)(1)–5.iv 

would generally mirror relevant 

portions of the guidance set forth in 

comment 5a(b)(1)–5.iii regarding the 

revocation of introductory rates. In 

addition, proposed comment 5a(b)(1)– 

5.iv would clarify 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 comment would clarify that 

an issuer may describe this 

circumstance as ‘‘if your employment 

with [issuer or third party] ends.’’ 

Proposed § 226.5a(b)(1)(iv)(C) would 

apply only to loss of employee 

preferential rates. The Board solicits 

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. 

For the reasons discussed above, the 

Board also is proposing 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 is also 

proposing conforming amendments to 

the formatting requirements set forth in 

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

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 may be 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 is 

proposing 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 would 

set forth two examples. First, the 

proposed comment states that 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 second 

example would provide that 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 §§ 226.54(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. 

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 226.9(g) 

disclosing the associated rate increase. 

Other Proposed Amendments to 

§ 226.5a(b)(1) 

The Board is proposing 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, contains an 

erroneous reference to a disclosure in, 

rather than beneath, the table. 

Accordingly, the Board is proposing a 

technical amendment to comment 

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

placement requirements in 

§ 226.5a(b)(1)(iv)(B). 

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 

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 would revise 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67462 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

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. 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. 

As discussed above, 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. Thus, the Board proposes 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 be 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 be deleted. 

In addition, the Board proposes 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 notes 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 clarifies 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 believes this disclosure 

language achieves its intended purpose 

of explaining succinctly how a 

consumer can avoid all interest charges 

on purchases. 

The Board recognizes 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 notes 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. For example, 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, § 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 may 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 purchases as a 

result of a loss of a grace period. 

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. There currently 

is no commentary to § 226.5a(g), so this 

cross-reference would be deleted as 

obsolete. 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67463 

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 proposes 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). 

In addition, for the reasons discussed 

in the supplementary information to 

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

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

require 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 offer 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] l 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. 

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 would be permitted to 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 

proposes 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 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)–4, which states that 

card issuers are not required to disclose 

the limitations set forth in § 226.54, 

would be deleted. 

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 proposes 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 notes 

that some creditors do not offer a grace 

period on cash advances and balance 

transfers, but offers 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 clarifies 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 believes 

this disclosure language achieves its 

intended purpose of explaining 

succinctly how a consumer can avoid 

all interest charges on purchases, while 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67464 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

explaining that no grace period is 

offered for cash advances and balance 

transfers. 

The Board recognizes 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 notes 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. For example, a 

creditor 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. Proposed comment 

6(b)(2)(v)–3 clarifies 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 may 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 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 clarifies 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 

proposes 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 notes 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, § 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] __ 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 notes 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 

clarifies 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. 

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 

§ 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, the Board proposes 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 makes 

explicitly 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 

provides 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67465 

referring to new purchases when the 

same method is used to calculate the 

balances for all features of the account. 

In addition, the Board proposes 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, 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. 

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 

shall 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 compliance issues 

and to provide additional flexibility to 

creditors, consistent with proposed 

guidance in comment 6(b)(2)(vi), the 

Board proposes 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, 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 

provides 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 

proposes 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 provides 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, 

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. 


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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 proposes to 

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

this guidance applies to fees as well as 

interest charged. 

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 not 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, the Board proposes 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 provide that 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 providing them on periodic 

statements, 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. Requiring an issuer 

to be consistent in how it rounds these 

disclosures helps to ensure that these 

disclosures remain consistent with each 

other. 

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 

proposes to amend § 226.7(b)(14) 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. The Board believes this 

clarification will ensure 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. 

Accordingly, the Board also proposes to 

amend the example in comment 7(b)– 

1.iv for consistency with the proposed 

revision. 

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 

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. The Board is proposing 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. The Board believes that it 

is appropriate 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. 

Proposed § 226.9(b)(3)(iii) would 

generally mirror the disclosure 

requirements for variable rates set forth 

in §§ 226.5a(b)(1)(i) and 

226.6(b)(2)(i)(A). Proposed 

§ 226.9(b)(3)(iii) provides that if any 

annual percentage rate required to be 

disclosed pursuant to § 226.9(b)(3)(i) is 

a variable rate, the card issuer must 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 


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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67467 

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. In addition, a card issuer may 

not disclose any applicable limitations 

on rate increases in the table. The Board 

believes that the approach in 

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

which was based in part on consumer 

testing conducted on behalf of the 

Board, strikes the appropriate balance 

between informing consumers of key 

information regarding the variable rate 

or rates while 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. The Board has been 

asked whether the ‘‘substantially 

similar’’ standard would permit a card 

issuer to provide a combined table that 

discloses the terms applicable both to 

access checks and other types of 

transactions. The Board is proposing 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 would further 

state, 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). 

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, the Board believes that 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 proposed comment 

9(b)(3)(i)–2 would ensure that 

consumers continue to 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. 

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 would 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). 

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 

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 

have 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 account-opening 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 has been 

asked whether 45 days’ advance notice 

is required prior to changing the 

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 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 

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 is proposing 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 is proposing 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 believes that 

for clarity the term ‘‘significant change 

in account terms’’ should be defined 

exclusively in § 226.9(c)(2)(ii) and that 

deletion of 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) will 

alleviate confusion regarding 

compliance with the change-in-terms 

notice requirements. 

Second, the Board is proposing 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. Section 

226.9(c)(2)(ii) would be amended 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. 

The Board notes that proposed 

§ 226.9(c)(2)(ii) would not specifically 

identify changes in terms required to be 

disclosed under § 226.6(b)(3) in the list 

of ‘‘significant change[s] in account 

terms.’’ The Board believes that 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 


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67468 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

2The 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 

would be required to be disclosed in accordance 

with § 226.9(c)(2)(iii). 

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. The Board 

is proposing one wording change to 

§ 226.9(c)(2)(iii) and comment 

9(c)(2)(iii)–1; the Board proposes to 

replace 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). 

Proposed § 226.9(c)(2)(ii) would 

specifically categorize 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 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 open-end (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 believes 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. 

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

the definition of ‘‘significant change[s] 

in account terms’’ in proposed 

§ 226.9(c)(2)(ii) would 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 forms 

of disclosures that must be given. 

Accordingly, given that these are not 

terms of the account, the Board believes 

that there are no corresponding changes 

in terms for which it is appropriate to 

require advance notice.2 In contrast, in 

the February 2010 Final Rule, the Board 

expressly included the acquisition of a 

security interest in the definition of 

‘‘significant change in account terms’’ for 

which 45 days’ advance notice must 

generally be provided. 

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

As discussed above, the Board is 

proposing to amend § 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 is proposing 

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 is 

proposing to amend § 226.9(c)(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 is 

proposing 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 accordingly would 

not be in a tabular format in the samples 

in G–17 to appendix G. Accordingly, the 

Board proposes 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 also is proposing 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 

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 proposes 

to remove the exemption in 

§ 226.9(c)(2)(iv)(B) for changes 

necessary to comply with § 226.54. In its 

place, the Board is proposing 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 


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fees for consumers who are engaged 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 

worse off 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 statute or regulation, 

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 would exempt such increases 

from the right to reject. However, 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. 

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 would 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 would also 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 would 

replace comments 9(c)(2)(v)–3 and –4 

with cross references to comments 

9(c)(2)(iv)–3 and –4. 

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. 

The Board is proposing to clarify the 

proximity and prominence requirements 

for the disclosure of introductory rates 

that are disclosed at account opening. 

The Board understands 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). The 

Board understands that there is 

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. 

The Board believes 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. 

Accordingly, the Board is proposing 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. Existing comments 


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3As discussed below, the Board is proposing to 

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

temporary fee reductions; accordingly, proposed 

comment 9(c)(2)(v)–5.ii would apply both to 

temporary rate and temporary fee offers. 

9(c)(2)(v)–10 through 9(c)(2)(v)–12 

would be renumbered accordingly. 

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, the Board believes that this rule 

for telephone offers of promotional rates 

ensures that consumers may take 

immediate advantage of promotions that 

they believe to be beneficial, while 

protecting consumers by allowing them 

to terminate the promotion with no 

adverse consequences, upon receipt of 

written disclosures. Consistent with the 

rationale discussed in the February 2010 

Final Rule, the Board is proposing to 

amend comment 9(c)(2)(v)–5.ii to 

provide that, in connection with 

telephone offers of temporary rates or 

fees,3 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 believes 

that, since such an offer never results in 

the increase in an interest rate or fee 

even on a prospective basis, it is 

unnecessary to provide consumers with 

the opportunity to reject such an offer. 

The Board is proposing a conforming 

change to comment 9(c)(2)(v)–5.iii. 

Exception for Temporary Reductions in 

Fees 

The Board also is proposing 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. 

Nevertheless, upon further review, for 

the reasons also discussed in the 

supplementary information to 

§ 226.55(b)(1), the Board believes that it 

may be appropriate 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 

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

apply to increases in fees upon the 

expiration of a specified period of time. 

Thus, § 226.9(c)(2)(v)(B) would permit 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 is proposing 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 is 

proposing to amend comment 

9(c)(2)(v)–2, which addresses skip 

features offered in connection with 

open-end (not home-secured) 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. The Board notes that 

comment 9(c)(2)(v)–2 was 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 is proposing to 

expand § 226.9(c)(2)(v)(B) to cover 

promotional fee offers in addition to 

promotional rate offers, the Board is 

proposing 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. 

Variable Rate Exception 

The Board is proposing to correct a 

typographical error in 

§ 226.9(c)(2)(v)(C). 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 

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 is 

proposing 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 is aware 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 


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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, if the variable rate is subject to a 

fixed minimum or ‘‘floor.’’ 

The Board proposes 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 believes 

that it is appropriate to adopt a 

consistent interpretation of ‘‘an index 

that is not under the control of the 

creditor’’ for all open-end (not homesecured) credit. The Board is proposing 

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 Board notes that the 

substantive provisions of § 226.55 

continue to apply only to credit card 

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

however, the proposed change would 

clarify 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. 

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. 

The Board is aware that there is 

confusion regarding the distinction 

between 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. 

The Board believes 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 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. 

Accordingly, the Board is proposing 

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 

proposes to add two additional 

examples to comment 10(b)–2. Proposed 

comment 10(b)(2)–ii states 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 states 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). 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. In contrast, 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 is 

proposing to amend § 226.10(b)(4), 

which addresses the treatment of 

nonconforming payments, 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. 

10(e) Limitations on Fees Related to 

Method of Payment 

Section 226.10(e) generally prohibits 

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, the 

third-party service provider may charge 

consumers a separate fee for making a 

payment—for example, when a payment 

is made electronically through a Web 

site. The Board believes that it would be 

inconsistent with the purposes of the 


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Credit Card Act for consumers to pay a 

separate fee for making a payment 

through a third party who is receiving 

payment on behalf of the issuer, unless 

the issuer itself would be permitted to 

charge the fee. Accordingly, the Board 

proposes to adopt a new comment 

10(e)–4 to prohibit third party service 

providers or other third parties who 

receive payments on behalf of a card 

issuer from charging a separate fee for 

payment, except as otherwise permitted 

by paragraph (e). 

10(f) Changes by Card Issuer 

The Board proposes to replace a 

reference to ‘‘consumer’’ in comment 

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

to correct a typographical error. 

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: (i) 

Late charges in the order of entry to the 

account; then to (ii) finance charges in 

the order of entry to the account; and 

then to (iii) 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 from a footnote in § 226.12 

to the commentary, 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. 

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 

would revise comment 12(c)–4 to clarify 

that, with respect to credit card 

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

issuers must comply with § 226.53 and 

the guidance in comment 53–3. 

However, with respect to other types of 

credit card accounts (such as credit 

cards that access home-equity plans), 

the Board would retain the longstanding guidance in comment 12(c)–4. 

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 

creditors 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 consumer’s 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 

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 proposes 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 clarifies 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. Thus, 

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 

proposed comment. 

Section 226.14 Determination of 

Annual Percentage Rate 

14(a) General Rule 

The Board understands that 

clarification may be appropriate 

regarding the effect of a leap year on 

determining the annual percentage rate 

for disclosures required for open-end 

(not home-secured) credit accounts. The 

Board proposes to add a new comment 

14(a)–6 to clarify that a creditor may 


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4Section 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. 

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. The Board 

believes that the proposed comment 

promotes accuracy in the disclosure of 

annual percentage rates and minimizes 

potential consumer confusion and 

operational burden for creditors. 

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 

proposing 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 is 

proposing conforming changes to 

§ 226.16(g) to require that certain 

advertisements of promotional fees also 

state the promotional period, postpromotional 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 is 

proposing these changes using its 

authority under TILA Section 105(a) to 

effectuate the purposes of TILA. The 

Board believes requiring that creditors 

clearly disclose the conditions of a 

promotional fee offer will promote the 

informed use of credit by consumers. 

The disclosure requirements under 

§ 226.16(g) generally would apply to 

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

§ 226.16(g)(2)(iv). In particular, 

§ 226.16(g)(2)(iv) would define 

‘‘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 new advertising requirements for 

promotional fee offers would apply 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). The Board 

believes, based in part on its consumer 

testing, that § 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 proposes 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). 

Section 226.30 Limitation on Rates 

The Board proposes to make a 

technical correction to comment 30– 

8.i.C to correct a typographical error. 

Section 226.51 Ability To Pay 

Section 226.51 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.4

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. 

Some card issuers request on 

application forms that applicants simply 

provide their ‘‘income,’’ while other 

issuers request that applicants provide 

their ‘‘household income.’’ The Board 

understands 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 understands that there has 

been some uncertainty as to whether 

§ 226.51 established different standards 

for underage consumers and other 

consumers with respect to the 

consideration of household income or 

assets. There appear to be three sources 

of this confusion. 

First, the Board understands that 

some of the uncertainty regarding 

household income results from the fact 

that, in the February 2010 Final Rule, 

the Board expressly concluded that the 

income of an underage consumer’s 

spouse could not be used to satisfy the 

requirements of § 226.51(b) but did not 

state a similar conclusion with respect 

to the general rule in § 226.51(a). See 75 

FR 7723. However, the issue of spousal 

or other household income was not 

addressed in the context of § 226.51(a) 

because it was not raised during the 

comment period. Accordingly, the 

Board is addressing the issue in this 

rulemaking. 


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Second, the Board understands that 

there has been some confusion as to 

whether Regulation B (12 CFR Part 202) 

requires a card issuer to consider 

spousal or other household income 

when considering a consumer’s ability 

to pay under § 226.51. In response to 

concerns raised by commenters, the 

Board stated in the February 2010 Final 

Rule that, when a card issuer is 

evaluating an underage consumer’s 

ability to pay under § 226.51(b), 

Regulation B does not compel the issuer 

to consider the income of the 

consumer’s spouse. See 75 FR 7723. The 

Board also stated that card issuers 

would not violate Regulation B by virtue 

of complying with the requirements in 

§ 226.51(b). Id. However, the Board 

understands that these statements may 

have left some uncertainty because they 

did not expressly address the general 

ability to pay requirement in § 226.51(a), 

which applies to all consumers 

regardless of age. Accordingly, the 

Board clarifies 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), 

unless, for example, the spouse or 

household member is a joint applicant 

or accountholder or state law grants the 

applicant an ownership interest in the 

income of his or her spouse. 

Furthermore, the Board clarifies 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 a card issuer 

is not permitted to consider spousal or 

other household income when 

evaluating a consumer’s ability to pay 

under § 226.51, the card issuer’s failure 

to consider such income when 

performing that evaluation does not 

violate Regulation B. 

Third, the Board understands that the 

use of the word ‘‘independent’’ in 

§ 226.51(b) but not in § 226.51(a) has 

been interpreted by some as prohibiting 

consideration of household income with 

respect to underage consumers but 

permitting it for other consumers. This 

difference in wording reflects the 

language in the statutory provisions 

implemented by § 226.51(a) and (b). 

Specifically, § 226.51(a)(1) follows TILA 

Section 150 in requiring a card issuer to 

consider the ability of the consumer to 

make the required payments, whereas 

§ 226.51(b)(1)(i) tracks TILA Section 

127(c)(8)(B)(ii) by requiring a card issuer 

to obtain financial information 

indicating that an underage consumer 

without a cosigner has an independent 

ability to make those payments. 

Congress’ use of ‘‘independent’’ in 

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

TILA Section 150 could be interpreted 

as establishing a less stringent standard 

for consideration of household income 

if the consumer is 21 or older. However, 

TILA Section 150 requires card issuers 

to consider ‘‘the ability of the consumer 

to make the required payments,’’ which 

indicates that Congress intended card 

issuers to base this evaluation only on 

the ability of the consumer (or 

consumers) applying for the account. 

Indeed, to the extent that TILA Section 

150 was intended to ensure that credit 

cards are not issued to consumers who 

lack the ability to pay, it could be 

inconsistent with that purpose to permit 

a card issuer to open a credit card 

account for a consumer without income 

or assets based on the income or assets 

of a spouse or other household member 

(unless the consumer has an ownership 

interest in the household income or 

assets). Accordingly, using its authority 

under TILA Section 105(a) and Section 

2 of the Credit Card Act, the Board 

proposes to amend § 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. In addition to 

providing a single, consistent standard 

for evaluating a consumer’s ability to 

pay, the Board believes that this 

proposed revision is consistent with the 

intent of TILA Section 150. 

Consistent with the proposed 

amendments to § 226.51, the Board 

would revise comment 51(a)(1)–4 to 

clarify that, as a general matter, 

consideration of information regarding 

the consumer’s household income or 

assets does not by itself satisfy the 

requirement in § 226.51(a)(1) to consider 

the consumer’s independent ability to 

pay. The comment would further clarify 

that, if, for example, a card issuer 

requests on its application form that 

applicants provide their household 

income, the card issuer may not rely 

solely on that income information to 

satisfy the requirements of § 226.51(a). 

Instead, the card issuer would need to 

obtain additional information about the 

applicants’ independent income (such 

as by contacting the applicants). 

However, the comment would also 

clarify that, if a card issuer requests on 

its application form that applicants 

provide their income (without referring 

to household income), the card issuer 

may rely on the information provided to 

satisfy the requirements of § 226.51(a). 

For organizational purposes, comment 

51(a)(1)–4 would be divided into 

subparagraphs, and this guidance would 

be set forth in subparagraph 51(a)(1)– 

4.iii. 

The Board would also add additional 

guidance regarding spousal income in 

new subparagraph 52(a)(1)–4.i, which 

addresses the types of income or assets 

that may be considered when 

performing the § 226.51(a) analysis. The 

Board would clarify that, when an 

applicant’s spouse is not a joint 

applicant or joint accountholder, a card 

issuer may consider the spouse’s 

income or assets to the extent that a 

federal or state statute or regulation 

grants the applicant an ownership 

interest in that income or those assets. 

For example, assume that a consumer is 

applying for a credit card account, but 

the consumer’s spouse is not a joint 

applicant. If the consumer and the 

spouse reside in a community property 

state where state law grants the 

consumer joint ownership of income or 

assets acquired by the spouse during the 

marriage, the income or assets are 

considered the consumer’s income or 

assets for purposes of the § 226.51(a) 

analysis. 

The Board acknowledges that the 

proposed amendments to § 226.51 and 

its commentary could prevent a 

consumer without income or assets from 

opening a credit card account despite 

the fact that the consumer has access to 

(but not an ownership interest in) the 

income or assets of a spouse or other 

household member. However, the Board 

has previously concluded that it would 

be inconsistent with the intent of the 

Credit Card Act for a card issuer to issue 

a credit card to a consumer who does 

not have any income or assets. See 

§ 226.51(a)(1)(ii). Furthermore, a 

consumer without independent income 

or assets could still open a credit card 

account by applying jointly with a 

spouse or household member who has 

sufficient income or assets. See 

comment 51(a)(1)–6. Nevertheless, the 

Board solicits comment on whether it 

would be appropriate to provide greater 

flexibility in these circumstances. 

The Board also notes that, as 

discussed in the February 2010 Final 

Rule, neither the Credit Card Act nor 

§ 226.51 requires verification of 

information provided by a consumer 

regarding income or assets. See 75 FR 

7721. Thus, while a card issuer that, for 

example, prompts applicants to provide 

household income on an application 

form could not rely on that information 

by itself to satisfy the requirements of 

§ 226.51(a), a card issuer that requests 

on the application form that applicants 

provide their own income is not 

required to verify that the income 

provided by the applicant does not 

include household income. 

Finally, consistent with the proposed 

amendments to §§ 226.9, 226.16, and 

226.55 regarding fees that increase after 

a specified period of time, the Board 


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5Late 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). 

6Although 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.’’ 

would amend comment 51(a)(2)–3 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. 

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.5 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 

proposes 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 

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 

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

disturbs 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 

proposes 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 to fees the consumer is 

required to pay before account opening 

and during the first year after account 

opening.6

The Board is also aware of some 

confusion regarding when the one-year 

period in § 226.52(a)(1) begins and ends. 

For this reason, the Board proposes to 

further 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 accountopening 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. However, because card 

issuers may have different processes for 

opening credit card accounts, the Board 

solicits comment on any operational 

difficulties posed by this amendment. 

The Board also 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 this result. Indeed, as 

discussed in the February 2010 Final 


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7 In particular, the Board would 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). 

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 would 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 would also make 

conforming amendments to comment 

52(a)(1)–1. 

The Board also proposes 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. 

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

In addition, 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 stated elsewhere in 

Regulation Z that such charges should 

be treated as fees. See comment 7(b)(6)– 

4. Accordingly, for consistency, the 

Board proposes 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 would clarify that § 226.52(a)(1) 

applies to other fixed finance charges. 

52(a)(3) Rule of Construction 

The Board proposes to correct a 

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

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

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

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 

proposes to amend § 226.52(b) and the 

accompanying commentary to provide 

additional guidance and illustrative 

examples. 

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

The safe harbors in 

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

card issuer 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 in the June 2010 Final 

Rule, the Board believes that permitting 

card issuers to impose a higher fee for 

repeated violations during a relatively 

brief period generally reflects the 

increased costs incurred by issuers as a 

result of repeated violations, deters 

future violations, and addresses 

consumer conduct that is more 

indicative of loss. See 75 FR 37531– 

37534, 37540–37543. 

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 would 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. The 

Board would also make additional, nonsubstantive clarifying amendments to 

§ 226.52(b)(1)(ii).7

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. 

However, if, for example, a consumer 

makes two separate payments that are 

returned during the same billing cycle, 

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 would revise 

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

permitted. The Board would also amend 

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

with the proposed revisions to 

§ 226.52(b)(1)(ii)(A)–(B) and provide an 

illustrative example in comment 

52(b)(2)(ii)–1. 

In addition, the Board would revise 

comment 52(b)(1)(ii)–1.ii 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-the-limit fees 

based on a single over-the-limit 

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. Because it appears that Congress 

intended to permit multiple over-thelimit fees based on a single over-thelimit transaction in these circumstances, 

the Board does not believe that it would 

be appropriate to interpret § 226.52(b) as 

prohibiting such fees. Accordingly, the 

Board would provide 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 the 

same over-the-limit transaction. The 

Board would further clarify 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 would be inserted to 

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

guidance and an illustrative example 

would also be provided. 

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 


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consumer fails to use the account for 

$2,000 in purchases over the course of 

a year. Furthermore, the comment 

clarifies 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 proposes 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). The promotion of waivers and 

rebates is discussed in detail below with 

respect to proposed § 226.55(e). 

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

Single Event or Transaction 

The Board proposes 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. 

The Board proposal also amends 

comment 52(b)(2)(ii)–1 to provide an 

example of the application of 

§ 226.52(b)(2)(ii) in circumstances 

where an over-the-limit fee and a 

returned payment fee could be based on 

a single event or transaction such that 

§ 226.52(b)(2)(ii) would only permit the 

card issuer to impose a single fee. In 

addition, the Board would provide an 

example illustrating that 

§ 226.52(b)(2)(ii) would permit multiple 

returned payment fees to be imposed 

during a single billing cycle if each fee 

was based on a separate returned 

payment. 

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 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 may be 

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 

proposes 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 in 

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

§ 226.53(b)(2) would provide 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. 

The Board would also revise the 

commentary to § 226.53 consistent with 

the proposed revisions to § 226.53(b). In 

particular, the Board would 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. 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67478 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

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 proposes 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. 

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 proposes 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 be placed on 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 would revise 

comment 55(b)–1 to clarify 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 would also provide 

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 

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). 

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; 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; see 

also comment 5a(b)(2)–4. 

Nevertheless, as discussed above with 

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


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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67479 

believes that, upon further review, it 

may be 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 proposes 

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, for 

example, § 226.55(b)(1) would permit a 

card issuer to 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 would amend 

comments 55(b)(1)–2 and –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 would also add 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 would 

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. 

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 

would 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. 

Finally, consistent with the proposed 

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

would clarify 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. 

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 would 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 would 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.’’ Corresponding amendments 

would be made to the relevant 

commentary. 

Finally, the Board understands 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 would 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 would also 

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. 

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 would revise 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. 

The Board would also 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67480 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

balances. 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 is proposing 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 would clarify 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). 

The Board notes that § 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, 

comment 55(e)-1 would clarify 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 comment would also 

provide examples of promotional waiver 

or rebate programs that would comply 

with § 226.55. 

Comment 55(e)-2 would clarify 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 would follow the existing 

guidance regarding advertisements in 

§ 226.2(a)(2) and the accompanying 

commentary. Thus, a card issuer would 

promote a waiver or rebate program for 

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

it disclosed the waiver or rebate in a 

newspaper, magazine, leaflet, 

promotional flyer, catalog, sign, or 

point-of-sale display. Similarly, a card 

issuer would promote a waiver or rebate 

program for purposes of § 226.55(e) if 

disclosed 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 would not promote 

a program for purposes of § 226.55(e) if 

it disclosed 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 Board would deviate 

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), 

it would be inconsistent with the 

purpose of § 226.55(e) to exclude from 

coverage waiver or rebate programs that 

are promoted directly to existing 

account holders. Accordingly, comment 

55(e)-2 would clarify that programs 

disclosed to existing account holders are 

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 

would clarify 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 would not be 

promoting a waiver or rebate if, for 

example, 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. 

Similarly, the comment would also 

provide 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 solicits 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. 

The Board understands 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 

understands 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 as the 

loss of a waiver or rebate of interest, 

fees, or other charges subject to § 226.55. 

Accordingly, comment 55(e)-2 would 

clarify 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 


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interest, fees, or other charges subject to 

§ 226.55. 

Finally, comment 55(e)-3 would 

provide guidance regarding the 

relationship between § 226.55(e) and a 

grace period. Specifically, this comment 

would clarify 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). 

Section 226.58 Internet Posting of 

Credit Card Agreements 

58(b) Definitions 

58(b)(4) Card Issuer 

The Board proposes to add new 

§ 226.58(b)(4) which would define the 

term card issuer solely for purposes of 

§ 226.58. New § 226.58(b)(4) would 

provide 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. 

The Board also proposes to add new 

comment 58(b)(4)–1, which would 

provide the following example of how 

the definition of card issuer would 

apply. 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. 

The Board understands that, in some 

cases, more than one institution is 

involved in the administration of a 

credit card program. For example, a 

smaller bank may partner with a larger 

bank to market credit cards to the 

smaller bank’s customers. The Board 

also understands that the terms of these 

arrangements 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. 

Section 226.2(a)(7) of Regulation Z 

defines a card issuer as a person that 

issues a credit card or that person’s 

agent with respect to the card. Under 

this definition, more than one card 

issuer may be associated with a single 

credit card account. This definition may 

be a source of confusion with respect to 

§ 226.58. For example, the § 226.58(c)(5) 

de minimis exception 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 

cases. In addition, § 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 therefore believes that it 

would be beneficial to clarify which 

institution is the card issuer for 

purposes of § 226.58. The Board is 

proposing to define card issuer with 

respect to a particular agreement as the 

entity to which a consumer is legally 

obligated, or would be legally obligated, 

under the terms of that agreement. The 

Board is proposing this approach for 

several reasons. 

First, the proposed definition creates 

a bright-line rule that would enable 

institutions involved in issuing credit 

cards to determine their obligations 

under § 226.58. Second, the proposed 

definition is consistent with the actual 

legal relationship into which a 

consumer enters under a credit card 

agreement. 

Third, the Board understands that the 

institution to which the consumer is 

legally obligated under the agreement in 

most cases will be in a better position 

to provide accurate, up-to-date 

agreements both to the Board and to 

consumers. The Board understands that, 

in many cases, the institution that is a 

party to the agreement also is the 

institution that prepares the agreement, 

sends the agreement to consumers at 

account opening, and updates and 

revises the agreement. That institution 

likely would be in the best position to 

determine which agreements currently 

are offered to the public and to identify 

the agreement to which a particular 

cardholder is subject. The Board also 

understands that, in many cases, the 

institution that is a party to the 

agreement also is the institution that 

maintains a Web site on which 

cardholders can obtain information 

about their accounts (if such a Web site 

is maintained). Many consumers would 

look to such a Web site when attempting 

to obtain a copy of their credit card 

agreements. 

Fourth, the Board understands that an 

institution that partners with multiple 

other institutions to issue credit cards in 

many cases will use the same agreement 

for all of the credit cards issued in 

connection with those arrangements. 

Therefore, while the number of credit 

cards issued with a given partner 

institution may be small, the total 

number of consumers subject to the 

corresponding agreement may be quite 

large. The Board believes that it would 

be beneficial to have such agreements 

submitted to the Board for posting on 

the Board’s Web site. 

The Board is aware that consumers in 

some cases may be unsure about which 

institution issues their credit card. For 

example, a consumer may apply for a 

credit card through a link on the Web 

site of a bank with which the consumer 

has a pre-existing relationship, and the 

face of the credit card may prominently 

display that bank’s logo. In some such 

cases, the consumer may assume that 

the card is issued by that bank, even 

though Web site disclaimers, the credit 

card agreement, the back of the credit 

card, and other materials explain that 

the card is issued by another institution. 

The Board believes, however, that 

institutions can take steps to alleviate 

this confusion, for example by 

disclosing the identity of the other 

institution and providing contact 

information for the other institution or 

a link to the other institution’s Web site. 

The Board also believes that consumers 

would benefit from having a clearer 

understanding of to what institution 

they are legally obligated under a credit 

card agreement. 

The proposed definition would apply 

solely with respect to § 226.58 and 

would not change the definition of card 

issuer for purposes of other provisions 


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67482 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

of Regulation Z. The proposed 

definition therefore should not affect 

other Regulation Z compliance 

obligations. 

The Board solicits comment on the 

proposed definition of card issuer, on 

what additional guidance with respect 

to the definition would be helpful, and 

on whether there are alternative, 

preferable approaches to defining card 

issuer for purposes of § 226.58. 

As a result of the Board’s proposal to 

add new § 226.58(b)(4) defining the term 

card issuer, the Board proposes to 

renumber §§ 226.58(b)(4), (b)(5), (b)(6), 

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

(b)(7), and (b)(8), respectively. The 

Board also proposes to make conforming 

changes to references to these 

subsections included in other 

subsections of § 226.58 and the official 

staff commentary. 

58(b)(6) Pricing Information 

The Board proposes to amend the 

definition of pricing information 

included in § 226.58(b) to omit the 

information listed in § 226.6(b)(4) from 

the definition. The Board continues to 

believe that consumers should receive 

the more robust disclosure regarding 

rates required by § 226.6(b)(4) in the 

account-opening disclosures governed 

by § 226.6(b). However, under § 226.58 

it appears that at least some of the 

additional disclosures required by 

§ 226.6(b)(4) may be a source of 

confusion to both consumers and 

issuers. For example, § 226.6(b)(4) 

requires card issuers to disclose the 

periodic rate as well as the 

corresponding APR. Account-opening 

disclosures reflect the terms of a specific 

consumer’s account at the time that 

account is opened. The APR is disclosed 

as a value, and the corresponding 

periodic rate therefore is relatively 

straightforward to state and understand. 

However, agreements submitted to the 

Board under § 226.58 reflect a range of 

pricing terms that may be offered in 

connection with a set of terms and 

conditions and are updated only 

quarterly. Section 226.58(c)(8)(ii)(C) 

therefore requires issuers to identify the 

index or formula and the margin used 

to set a variable rate, rather than the 

value of the rate or the value of the 

index. In this context, it is difficult to 

state the corresponding periodic rate in 

a way that is accurate and 

understandable. With respect to other 

information required to be disclosed 

under § 226.6(b)(4), such as the 

circumstances and frequency under 

which a variable rate may increase and 

any limitation on the amount a variable 

rate may change, it is not clear whether 

this information is useful to consumers 

when reviewing agreements under 

§ 226.58. 

The Board solicits 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 as 

proposed. 

58(c) Submission of Agreements to 

Board 

58(c)(1) Quarterly Submissions 

Quarterly Submission Deadlines. The 

Board proposes 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. 

Submission of Amended Agreements. 

The Board proposes to revise 

§ 226.58(c)(1)(iii) to clarify that issuers 

are required to submit amended 

agreements 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 also proposes to revise 

§ 226.58(c)(3) regarding amended 

agreements, as discussed below. 

Notice of Withdrawal of Agreements. 

The Board proposes 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. 

58(c)(2) Timing of First Two 

Submissions 

The Board proposes to delete the 

§ 226.58(c)(2) special rules 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. 

These special rules were necessary to 

reconcile the statutorily-mandated 

February 22, 2010, initial submission 

deadline with the ongoing reporting 

schedule based on calendar quarters set 

forth in the February 2010 Final Rule. 

Because the February 22, 2010, and 

August 2, 2010, deadlines have passed, 

§ 226.58(c)(2) has no prospective 

relevance. The Board therefore proposes 

to delete the special rules related to 

those deadlines and reserve this section. 

58(c)(3) Amended Agreements 

The Board proposes to amend 

§ 226.58(c)(3) to clarify that issuers are 

required to submit amended agreements 

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 proposes to revise 

comment 58(c)(3)–2 to reflect this 

clarification and to add new comment 

58(c)(3)–3, which would provide the 

following example of the application of 

revised § 226.58(c)(3): 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 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. 

The Board also proposes to renumber 

existing comment 58(c)(3)–3, regarding 

change-in-terms notices, as 58(c)(3)–4. 

58(c)(8) Form and Content of 

Agreements Submitted to the Board 

The Board proposes 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. The Board understands 

that the appropriate treatment of billing 

rights notices under this provision has 

been a source of confusion for card 

issuers and others. The Board therefore 

proposes to specifically indicate in 

§ 226.58(c)(8)(i)(C)(1) that billing rights 

notices are disclosures required by state 

or federal law that, like affiliate 


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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67483 

marketing notices, privacy policies, and 

E-Sign Act disclosures, are not 

considered to be part of the agreement 

for purposes of § 226.58. 

It is important to note that 

§ 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, the Board is 

proposing to address their treatment by 

amending § 226.58(c)(8)(i)(C)(1). 

58(e) Agreements for All Open Accounts 

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

Interactive Web Sites 

The Board proposes to revise 

comment 58(e)–3 to clarify the 

application of the special rule provided 

in § 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 

would clarify that such 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 special rule in § 226.58(e)(2) 

provides cardholders with a convenient 

means to request copies of their credit 

card agreements without requiring 

issuers that do not have interactive Web 

sites to build such Web sites for the sole 

purpose of facilitating cardholder 

requests for agreements. Building an 

interactive Web site and complying with 

privacy and data security requirements 

would represent a significant 

compliance burden, especially for 

smaller issuers. In adopting the 

§ 226.58(e)(2) final rule, the Board noted 

its belief that the added convenience to 

cardholders of being able to request a 

copy of their agreement through a Web 

site, rather than by alternative means, 

does not outweigh the burden on issuers 

that do not otherwise maintain 

interactive Web sites of creating such 

Web sites solely to facilitate cardholder 

requests for agreements. This rationale 

does not apply, however, to an issuer 

that already provides cardholders with 

access to individual account 

information through a Web site, whether 

through the issuer’s own Web site or 

through an arrangement with a third 

party. 

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 have 

requested additional clarification 

regarding what constitutes a rate 

increase for purposes of § 226.59. In 

particular, the Board understands that 

there is a need for 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 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 is proposing to adopt 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. Existing comments 59(a)(1)–3 and 

59(a)(1)–4 would be renumbered 

accordingly. Comment 59(a)(1)–3.i 

would provide that a change from a 

variable rate to a non-variable 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 

states that, for example, a change from 

a variable rate of 15.99% to a nonvariable 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 also cross-references 

§ 226.55 for limitations on the 

permissibility of changing from a nonvariable rate to a variable rate. 

Proposed comment 59(a)(1)–3.ii 

would set forth special guidance 

regarding a change from a non-variable 

to a variable rate. Proposed comment 

59(a)(1)–3.ii states 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 

illustrates 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 open-end (not homeVerDate Mar<15>2010 17:45 Nov 01, 2010 Jkt 223001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\02NOP2.SGM 02NOP2

srobinson on DSKHWCL6B1PROD with PROPOSALS2
67484 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

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 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 states 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 sets 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. 

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, the Board 

recognizes that a change from one type 

of rate to another (e.g., variable or nonvariable) 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 proposes to 

apply 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 nonvariable rate has 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 solicits comment on 

whether there are other types of changes 

to rates for which clarification of the 

applicability of § 226.59 would be 

appropriate. 

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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67485 

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. 

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 is proposing a new 

comment 59(d)–6 to clarify the 

application of the rule in these 

circumstances. Proposed comment 

59(d)–6 notes 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 notes 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 comment would clarify 

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 clarifies 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 would 

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 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 notes 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 believes that the clarification 

in proposed comment 59(d)–6 is 

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. 

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 

understands that some confusion has 

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 proposes 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. The Board 

notes that 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 believes 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. 

To clarify the relationship between 

§ 226.59(a) and (f), the Board is 

proposing to adopt a new comment 

59(f)–2, which would 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67486 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

8The Board notes that the proposed amendments 

to § 226.9(c)(2)(v)(B) would 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 anticipates that the 

proposed rule would impose no additional burden 

on card issuers because the proposed clarification 

would provide an alternative means of complying 

with disclosures that are otherwise required by 

§ 226.9(c)(2). 

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. 

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), the Board proposes to 

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), paragraph (f) of 

Appendix M1 would be revised 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. If a card 

issuer chooses under § 226.7(b)(12) to 

round the disclosures to the nearest 

whole dollar, 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 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 chooses, 

however, to round the disclosures to the 

nearest cent, 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 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). This 

ensures that the savings estimate for 

repayment in 36 months is calculated 

consistent with how the other 

disclosures will be shown on the 

periodic statement. 

IV. Regulatory Analysis 

This proposed rule would clarify 

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.) 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 proposed 

amendments are clarifications and 

would not, if adopted, alter the 

substance of these analyses and 

determinations, the Board continues to 

rely on those analyses and 

determinations for purposes of this 

rulemaking.8

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. 

List of Subjects in 12 CFR Part 226 

Advertising, Consumer protection, 

Federal Reserve System, Reporting and 

recordkeeping requirements, Truth in 

Lending. 

Text of Final Revisions 

For the reasons set forth in the 

preamble, the Board proposes to amend 

Regulation Z, 12 CFR part 226, as set 

forth below: 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67487 

10 [Reserved] 

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. 111–24 § 2, 

123 Stat. 1734. 

Subpart A—General 

* * * * * 

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 flthat isfi accessed by a credit 

card, except: 

(A) A øcredit card that accesses a¿ 

home-equity plan subject to the 

requirements of § 226.5b flthat is 

accessed by a credit cardfi; or 

(B) An overdraft line of credit flthat 

isfi accessed by a debit card flor an 

account numberfi. 

* * * * * 

3. Section 226.5 is amended by 

revising the heading to paragraph 

(b)(2)(ii)(A) and by revising paragraph 

(b)(2)(ii)(B) to read as follows: 

§ 226.5 General disclosure requirements. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Timing requirements. 

(A) flCredit card accounts under an 

open-end (not home-secured) consumer 

credit plan.fi øPayment due date.¿ 

* * * 

(B) flOpen-end consumer credit 

plans.fi øGrace period expiration 

date.¿ For flaccounts under anfi openend consumer credit planøs¿, a creditor 

must adopt reasonable procedures 

designed to ensure that: 

(1) flIf a grace period applies to the 

account: 

(i)fi Periodic statements are mailed 

or delivered at least 21 days prior to the 

date on which flthefi øany¿ grace 

period expires; and 

fl(ii)fi ø(2)¿ The creditor does not 

impose finance charges as a result of the 

loss of flthefi øa¿ 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. 

fl(2) If a grace period does not apply 

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.fi 

(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)fl, 

(b)(1)(iv)(C)fi 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 øor decreases¿ shall not be 

included in the table. 

* * * * * 

(iv) Penalty rates. (A) In general. 

Except as provided in paragraph 

(b)(1)(iv)(B) fland (b)(1)(iv)(C)fi 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 paragraph 

(b)(1) 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. 

(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. 

fl(C) Employee preferential rates. 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.fi 

* * * * * 

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 (b)(2)(v) (except for 

(b)(2)(i)(D)(2)) and (b)(2)(vii) through 

(b)(2)(xiv) of this section shall be in the 

table. Disclosures required by 

paragraphs (b)(2)(i)(D)(2), 

fl(b)(2)(i)(D)(3), fi(b)(2)(vi) and 

(b)(2)(xv) of this section shall be placed 

directly below the table. Disclosures 

required by paragraphs (b)(3) through 

(b)(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 øcard 

issuer¿flcreditorfi must disclose a rate 

based on the applicable index or 

formula in accordance with the 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67488 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

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) fland (b)(2)(i)(D)(3)fi 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 

the rate that will apply after the 

introductory rate is revoked. 

fl(3) Employee preferential rates. If a 

creditor 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 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.fi 

* * * * * 

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 

fleitherfi to the nearest whole dollar 

flor to the nearest cent, at the card 

issuer’s optionfi; 

(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 fleitherfi to the nearest whole 

dollar flor to the nearest cent, at the 

card issuer’s optionfi; 

(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 fleitherfi to the 

nearest whole dollar flor to the nearest 

cent, at the card issuer’s optionfi; 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 fleitherfi to the 

nearest whole dollar flor to the nearest 

cent, at the card issuer’s optionfi. 

(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, 

flafter rounding as set forth in 

paragraph (b)(12)(f)(1)(i) of this 

sectionfi ørounded to the nearest whole 

dollar¿ 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 fleitherfi to the nearest whole 

dollar flor to the nearest cent, at the 

issuer’s optionfi; 

(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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67489 

(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 flany page offi 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)(iii) and by 

revising paragraphs (c)(2)(i)(A), (c)(2)(ii), 

(iii), (c)(2)(iv) (A)(1), (c)(2)(iv)(B), 

(c)(2)(iv)(D), (c)(2)(v)(B), and (c)(2)(v)(C) 

to read as follows: 

§ 226.9 Subsequent disclosure 

requirements. 

* * * * * 

(b) * * * 

(3) * * * 

fl(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.fi 

(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 øto a term 

required to be disclosed under 

§ 226.6(b)(3), (b)(4) or (b)(5) or the 

required minimum periodic payment is 

increased¿, 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; the notice 

shall be given, however, before the 

effective date of the change. 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, fla change to a term 

required to be disclosed under 

§ 226.6(b)(4),fi 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 ømay¿flmustfi 

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) flor § 226.6(b)(4)fi, 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, flan 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 reductionfi øa change in the 

balance computation method applicable 

to consumer’s account necessary to 

comply with § 226.54¿, 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 fl, 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 creditorfi), 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 flor feefi 

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 

flor feefi that would apply after 

expiration of the period; 

(2) The disclosure of the length of the 

period and the annual percentage rate 

flor feefi 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 flor feefi that 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67490 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

applies during the specified period of 

time; and 

(3) The annual percentage rate flor 

feefi that applies after that period does 

not exceed the rate flor feefi 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 flor other 

accountfi 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 

* * * * * 

8. Section 226.10(b)(4) is revised to 

read as follows: 

§ 226.10 Payments. 

* * * * * 

(b) * * * 

(4) Nonconforming payments. 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 flvia a 

payment method that the creditor does 

not otherwise promotefi, the creditor 

shall credit the payment within five 

days of receipt. 

* * * * * 

9. Section 226.16(g) is revised to read 

as follows: 

§ 226.16 Advertising. 

* * * * * 

(g) Promotional rates fland feesfi. 

(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 øthe¿ 

fla fi promotional rate fl or 

promotional feefi may be applicable. 

fl(iv) Promotional fee means a fee 

required to be disclosed under 

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

(v) Introductory fee means a 

promotional fee offered in connection 

with the opening of an account.fi 

(3) Stating the term ‘‘introductory’’. If 

any annual percentage rate flor feefi 

that may be applied to the account is an 

introductory rate flor introductory 

feefi, the term introductory or intro 

must be in immediate proximity to each 

listing of the introductory rate flor 

introductory feefi in a written or 

electronic advertisement. 

(4) Stating the promotional period 

and post-promotional rate flor feefi. If 

any annual percentage rate that may be 

applied to the account is a promotional 

rate under paragraph (g)(2)(i) of this 

section flor any fee that may be applied 

to the account is a promotional fee 

under paragraph (g)(2)(iv) of this 

sectionfi, the information in paragraphs 

(g)(4)(i) andfl, as applicable,fi (g)(4)(ii) 

flor (g)(4)(iii)fi of this section must be 

stated in a clear and conspicuous 

manner in the advertisement. If the rate 

flor feefi is stated in a written or 

electronic advertisement, the 

information in paragraphs (g)(4)(i) and 

fl, as applicable,fi (g)(4)(ii) flor 

(g)(4)(iii)fi of this section must also be 

stated in a prominent location closely 

proximate to the first listing of the 

promotional rate flor promotional 

feefi. 

(i) When the promotional rate flor 

promotional feefi will end; øand¿ 

(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 applyø.¿fl; 

and 

(iii) The fee that will apply after the 

end of the promotional period.fi 

(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) * * * 

(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 flthe 

consumer’s independentfi ability øof 

the consumer¿ 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 flindependentfi income or 

assets and current obligations. 

Reasonable policies and procedures to 

consider a consumer’s flindependentfi 

ability to make the required payments 

include a 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 flindependentfi income 

or assets. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) * * * 

(B) Financial information indicating 

such cosigner, guarantor, or joint 

applicant has the flindependentfi 

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 flprior to account 

opening andfi during first year after 

account opening. (1) General rule. 

flExcept 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67491 

an open-end (not home-secured) 

consumer credit plan prior to account 

opening or during the first year after 

account opening must not exceed 25 

percent of the credit limit in effect when 

the account is opened.fi øExcept as 

provided in paragraph (a)(2) of this 

section, if a card issuer charges any fees 

to a credit card account under an openend (not home-secured) consumer credit 

plan during the first year after the 

account is opened, the total amount of 

fees the consumer is required to pay 

with respect to the account during that 

year must not exceed 25 percent of the 

credit limit in effect when the account 

is opened.¿ flFor 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.fi 

* * * * * 

(3) Rule of construction. øThis 

paragraph (a)¿flParagraph (a) of this 

sectionfi 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 

fl, as applicablefi: 

(A) fl$25.00;fi øFor the first 

violation of a particular type, $25.00, 

adjusted annually by the Board to reflect 

changes in the Consumer Price Index;¿ 

(B) fl$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;fi 

øFor an additional violation of the same 

type during the next six billing cycles, 

$35.00, adjusted annually by the Board 

to reflect changes in the Consumer Price 

Index;¿ or 

(C) flThree 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.fi 

øWhen a card issuer has not received 

the required payment for two or more 

consecutive billing cycles for a charge 

card account that requires payment of 

outstanding balances in full at the end 

of each billing cycle, three percent of 

the delinquent balance.¿ 

fl(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.fi 

* * * * * 

12. Section 226.53(b) is revised to 

read as follows: 

§ 226.53 Allocation of payments. 

* * * * * 

(b) Special ruleflsfi øfor accounts 

with balances subject to deferred 

interest or similar programs¿. fl(1) 

Accounts with balances subject to 

deferred interest or similar program.fi 

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: 

fl(i)fi ø(1)¿ 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 

fl(ii)fi ø(2)¿ 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. 

fl(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.fi 

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 fl, fee, or 

chargefi exception. A card issuer may 

increase an annual percentage rate flor 

a fee or charge required to be disclosed 

under § 226.6(b)(2)(ii), (b)(2)(iii), or 

(b)(2)(xii)fi 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 

fl, fee, or chargefi 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 fl, fee, or 

chargefi to transactions that occurred 

prior to the period that exceeds the 

annual percentage rate fl, fee, or 

chargefi 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 fl, fee, or chargefi to 

transactions that occurred within 14 

days after provision of the notice that 

exceeds the annual percentage rate fl, 

fee, or chargefi 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 fl, fee, or 

chargefi to transactions that occurred 

during the period that exceeds the 

increased annual percentage rate fl, fee, 

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

during the first year after the account is 

opened fl, 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 transactionsfi. 

* * * * * 

(6) Servicemembers Civil Relief Act 

exception. If an annual percentage rate 

flor a fee or charge required to be 

disclosed under § 226.6(b)(2)(ii), 

(b)(2)(iii), or (b)(2)(xii)fi has been 

decreased pursuant to 50 U.S.C. app. 

527 flor a similar federal or state statute 

or regulationfi, a card issuer may 

increase that annual percentage ratefl, 

fee, or chargefi once 50 U.S.C. app. 527 

flor the similar statute or regulationfi 

no longer applies, provided that the 

card issuer must not apply to any 

transactions that occurred prior to the 

decrease an annual percentage ratefl, 

fee, or chargefi that exceeds the annual 

percentage ratefl, fee, or chargefi that 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67492 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

applied to those transactions prior to the 

decrease. 

* * * * * 

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

and applies the waiver or rebate to a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan, any cessation of the waiver or 

rebate constitutes an increase in an 

annual percentage rate, fee, or charge for 

purposes of this section.fi 

14. Section 226.58 is amended by: 

A. Redesignating paragraphs (b)(4) 

through (b)(7) as (b)(5) through (b)(8) 

respectively; 

B. Adding a new paragraph (b)(4); 

C. Revising paragraphs (b)(1), (b)(2), 

newly redesignated paragraph (b)(7); 

and 

D. Revising paragraphs (c)(1), (c)(2), 

(c)(3), and (c)(8)(i)(C)(1) 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) 

consumer credit plan. ‘‘Agreement’’ or 

‘‘credit card agreement’’ also includes 

the pricing information, as defined in 

ø§ 226.58(b)(6)¿fl§ 226.58(b)(7)fi. 

(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 

ø§ 226.58(b)(6)¿fl§ 226.58(b)(7)fi, is 

deemed to be substantive. 

* * * * * 

fl(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.fi 

ø(4)¿fl(5)fi * * * 

ø(5)¿fl(6)fi * * * 

ø(6)¿fl(7)fi Pricing information. For 

purposes of this section, ‘‘pricing 

information’’ means the information 

listed in § 226.6(b)(2)(i) through 

(b)(2)(xii) [and (b)(4)]. Pricing 

information does not include temporary 

or promotional rates and terms or rates 

and terms that apply only to protected 

balances. 

ø(7)¿fl(8)fi * * * 

(c) * * * 

(1) Quarterly submissions. A card 

issuer must make quarterly submissions 

to the Board, in the form and manner 

specified by the Boardfl. 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:fiø, that 

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 fland that the card 

issuer offered to the public as of the last 

business day of the preceding calendar 

quarterfi, 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 

fl§ 226.58(c)(4), (c)(5), (c)(6), and 

(c)(7)fiø§ 226.58(c)(4) and (c)(5)¿. 

(2) flReserved.fiøTiming of first two 

submissions. The first submission 

following the effective date of this 

section must be sent to the Board no 

later than February 22, 2010, and must 

contain the credit card agreements that 

the card issuer offered to the public as 

of December 31, 2009. The next 

submission must be sent to the Board no 

later than August 2, 2010, and must 

contain: 

(i) Any credit card agreement that the 

card issuer offered to the public as of 

June 30, 2010, that the card issuer has 

not previously submitted to the Board; 

(ii) Any credit card agreement 

previously submitted to the Board that 

was amended after December 31, 2009, 

and on or before June 30, 2010, as 

described in § 226.58(c)(3); and 

(iii) Notification regarding any credit 

card agreement previously submitted to 

the Board that the issuer is withdrawing 

as of June 30, 2010, as described in 

§ 226.58(c)(4) and (c)(5).¿ 

(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 

fland 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 

effectivefi, 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) * * * 

(i) * * * 

(C) * * * 

(1) disclosures required by state or 

federal law, such as affiliate marketing 

notices, privacy policies, flbilling 

rights notices,fi or disclosures under 

the E–Sign Act; 

* * * * * 

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. flWhen 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 

total cost estimate calculated under 

paragraph (c) of this appendix (rounded to 

the nearest cent).fi øWhen calculating the 

saving 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 this 

appendix (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 this appendix (rounded to 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67493 

the nearest whole dollar as set forth in 

§ 226.7(b)(12)(i)(C)).¿ 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 

deleted. 

C. Under Section 226.5a—Credit and 

Charge Card Applications and 

Solicitations, subheading 5a(b) Required 

disclosures: 

i. Under 5a(b)(1) Annual percentage 

rate, paragraph 5. is revised; 

ii. Under 5a(b)(2) Fees for issuance or 

availability, paragraph 4. is revised; and 

iii. Under 5a(b)(5) Grace period, 

paragraph 1. is revised and paragraph 4. 

is deleted; and 

iv. Under 5a(b)(6) Balance 

computation method, paragraph 1. is 

revised. 

D. Under Section 226.6—AccountOpening Disclosures: 

i. Under 6(b)(2)(v) Grace period, 

paragraphs 1. and 3. are revised and 

paragraph 4. is deleted; and 

ii. Under 6(b)(2)(vi) Balance 

computation method, paragraph 1. is 

revised and paragraph 2. is added. 

E. Under Section 226.7—Periodic 

Statement, under 7(b) Rules affecting 

open-end (not home-secured) plans: 

i. Paragraph 1. is revised; 

ii. Under 7(b)(5) Balance on which 

finance charge computed, paragraphs 7. 

and 8. are revised; 

iii. Under 7(b)(6) Charges imposed, 

paragraph 3. is revised; and 

iv. Under 7(b)(12) Repayment 

disclosures, paragraph 1. is added. 

F. Under Section 226.9—Subsequent 

Disclosure Requirements: 

i. Under 9(b) Disclosures for 

supplemental credit access devices and 

additional features, under 9(b)(3) 

Checks that access a credit card 

account, under 9(b)(3)(i) Disclosures, 

paragraph 2. is added; 

ii. Under 9(c) Change in terms, under 

9(c)(2) Rules affecting open-end (not 

home-secured) plans: 

1. Paragraph 1. is revised; 

2. Under 9(c)(2)(iii) Charges not 

covered by § 226.6(b)(1) and (b)(2), 

paragraph 1. is revised; 

3. Under 9(c)(2)(iv) Disclosure 

requirements, paragraphs 3. and 4. are 

revised; and 

4. Under 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. 

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, under 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, under 13(c) Time for 

resolution; general procedures, under 

Paragraph 13(c)(2), paragraph 2. is 

revised. 

J. Under Section 226.14— 

Determination of Annual Percentage 

Rate, under 14(a) General rule, 

paragraph 6. is added. 

K. Under Section 226.16— 

Advertising: 

i. Paragraphs 1. and 2. are revised; 

and 

ii. Under 16(g) Promotional rates, 

paragraphs 2., 3., and 4. are revised. 

L. Under Section 226.30—Limitation 

on Rates, paragraph 8. is revised. 

M. Under Section 226.51—Ability to 

Pay: 

i. Under 51(a) General rule, 

paragraphs 1., 2. and 4. are revised; and 

ii. Under 51(a)(2) Minimum periodic 

payments, paragraph 3. is revised. 

N. Under Section 226.52—Limitations 

on Fees: 

i. Under 52(a) Limitations during first 

year after account opening: 

1. The heading 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; 

2. Under 52(a)(1) General rule, 

paragraphs 1., 2., and 3. are revised; and 

3 Under 52(a)(2) Fees not subject to 

limitations, paragraph 1. is revised; 

ii. Under 52(b) Limitations on penalty 

fees: 

1. Under 52(b)(1)(ii) Safe harbors, 

paragraph 1. is revised; and 

2. Under 52(b)(2) Prohibited fees: 

A. Under 52(b)(2)(i) Fees that exceed 

dollar amount associated with violation, 

paragraph 5. is revised; and 

B. Under 52(b)(2)(ii) Multiple fees 

based on single event or transaction, 

paragraph 1. is revised. 

O. Under Section 226.53— Allocation 

of Payments: 

i. Paragraphs 4. and 5. are revised; 

and 

ii. Under 53(b) Special rule for 

accounts with balances subject to 

deferred interest or similar programs: 

1. The heading is revised to read 53(b) 

Special rules; and 

2. Paragraphs 1., 2., and 3. are revised. 

P. Under Section 226.55—Limitations 

on Increasing Annual Percentage Rates, 

Fees, and Charges: 

i. Under 55(a) General rule, paragraph 

1. is revised; 

ii. Under 55(b) Exceptions, paragraphs 

1. and 3. are revised; 

iii. Under 55(b)(1) Temporary rate 

exception: 

1. The heading is revised to read 

55(b)(1) Temporary rate, fee, or charge 

exception; and 

2. Paragraphs 2. and 4. are revised and 

paragraph 5. is added; 

iv. Under 55(b)(6) Servicemembers 

Civil Relief Act exception, paragraphs 1. 

and 2. are revised and paragraph 3. is 

added; 

v. Under 55(c) Treatment of protected 

balances, under 55(c)(1) Definition of 

protected balance, paragraph 3. is 

revised and paragraph 4. is added; and 

vi. The heading 55(e) Promotional 

waivers or rebates of interest, fees, and 

other charges is added and paragraphs 

1., 2., and 3. are added under that 

heading. 

Q. Under Section 226.58—Internet 

Posting of Credit Card Agreements: 

i. Under 58(b) Definitions: 

1. Under 58(b)(1) Agreement, 

paragraph 1. is revised; 

2 Under 58(b)(2) Amends, paragraph 

1. is revised; 

3. The heading 58(b)(4) Card issuer is 

added and paragraph 1. is added under 

that heading; 

4. The heading 58(b)(4) Offers is 

revised to read 58(b)(5) Offers; 

5. The heading 58(b)(5) Open account 

is revised to read 58(b)(6) Open account; 

and 

6. The heading 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 heading paragraphs 

2. and 4. are revised; 

ii. Under 58(c) Submission of 

agreements to Board, under 58(c)(3) 

Amended agreements, paragraph 2. is 

revised, paragraph 3. is renumbered as 

paragraph 4., and a new paragraph 3. is 

added; and 

iii. Under 58(e) Agreements for all 

open accounts, paragraph 3. is revised. 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67494 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

R. Under Section 226.59— 

Reevaluation of Rate Increases: 

i. Under 59(a) General rule, under 

59(a)(1) Evaluation of increased rate, 

paragraphs 3., 4., and 5. are renumbered 

and a new paragraph 3. is added; 

ii. Under 59(d) Factors, paragraph 6. 

is added; and 

iii. Under 59(f) Termination of 

obligation to review factors, paragraph 

2. is added. 

Supplement I to Part 226—Official Staff 

Interpretations 

* * * * * 

Subpart A—General 

* * * * * 

Section 226.2—Definitions and Rules of 

Construction 

* * * * * 

2(a)(15) Credit card. 

* * * * * 

2. Examples. 

* * * * * 

ii. In contrast, credit card does not include, 

for example: 

* * * * * 

flC. 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). Furthermore, if the line of 

credit can also be accessed by a card (such 

as a debit card or prepaid card), that card is 

a credit card for purposes of 

§ 226.2(a)(15)(i).fi 

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. 

flIn particular, references to credit card 

accounts under an open-end (not homesecured) consumer credit plan in Subparts B 

and G generally include charge cards.fi The 

term charge card is, however, distinguished 

from credit card flor credit card account 

under an open-end (not home-secured) 

consumer credit planfi in §§ 226.5a, 

fl226.6(b)(2)(xiv),fi 226.7(b)(11), 

226.7(b)(12), 226.9(e), 226.9(f)fl,fi øand¿ 

226.28(d), fl226.52(b)(1)(ii)(C),fi and 

appendices G–10 through G–13. øWhen the 

term credit card is used in those provisions, 

it refers to credit cards other than charge 

cards.¿ 

fl4. Credit card account under an openend (not home-secured) consumer credit 

plan. An open-end consumer credit account 

is a credit card account under an open-end 

(not home-secured) 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).fi 

* * * * * 

Subpart B—Open-End Credit 

Section 226.5—General Disclosure 

Requirements 

* * * * * 

5(b) Time of disclosures. 

* * * * * 

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 

flor 14-dayfi period required by 

§ 226.5(b)(2)(ii) when determiningfl, as 

applicable,fi the payment due date fl for 

purposes of § 226.5(b)(2)(ii)(A),fi øand¿ the 

date on which any grace period expires for 

purposes of fl§ 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).fi 

ø§ 226.5(b)(2)(ii)(A)(1) and (b)(2)(ii)(B)(1).¿ 

For examplefl:fi ø,¿ 

flA. Iffi øif¿ a creditor has adopted 

reasonable procedures designed to ensure 

that periodic statements flfor a credit card 

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

under an open-end consumer credit plan that 

provides a grace periodfi are mailed or 

delivered to consumers no later than three 

days after the closing date of the billing 

cycle, the payment due date flfor purposes 

of § 226.5(b)(2)(ii)(A)fi and the date on 

which any grace period expires flfor 

purposes of § 226.5(b)(2)(ii)(B)(1)fi 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)ø(2)¿ and 

(b)(2)(ii)(B)fl(1)fiø(2)¿ on treating a 

payment as late and imposing finance 

charges apply for 24 days after the closing 

date of the billing cycle. 

flB. 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.fi 

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 prohibitionflsfi 

in § 226.5(b)(2)(ii)(A)(2) fland 

(b)(2)(B)(2)(ii)fi on treating a payment as late 

for any purpose flapply fi øapplies¿ only 

during the 21-day flor 14-dayfi period 

fl(as applicable)fi 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 thatfl, for a credit card account 

under an open-end (not home-secured) 

consumer credit plan,fi 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. 

* * * * * 

fliv. 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.fi 

3. Grace periods. 

* * * * * 

ii. Applicability of 

§ 226.5(b)(2)(ii)(B)fl(1)fi. Section 

226.5(b)(2)(ii)(B)fl(1)fi 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)fl(1)fi 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)fl(1)(ii)fi 

ø(2)¿ 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67495 

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)fl(i)fi 

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) 

fl(1)(ii)fi ø(2)¿ 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) fl(1)(ii)fi ø(2)¿ 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 

flfor a credit card account under an openend (not home-secured) consumer credit 

planfi 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. Section 226.5(b)(2)(ii)(B)fl(1)fi 

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 with 

§ 226.2(a)(15)(iii), charge card accounts do 

not impose a finance charge based on a 

periodic rate. flSimilarly, 

§ 226.5(b)(2)(ii)(B)(2) does not apply to 

charge card accounts.fi 

ii. Charged-off accounts. For purposes of 

§ 226.5(b)(2)(ii)(A)(1), the payment due date 

flfor a credit card account under an openend (not home-secured) consumer credit 

planfi 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. flSimilarly, 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.fi Section 

226.5(b)(2)(ii)(B)fl(1)fi 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. 

* * * * * 

øParagraph 5(b)(2)(iii). 

1. Computer malfunction. The exceptions 

identified in § 226.5(b)(2)(iii) of this section 

do not extend to the failure to provide a 

periodic statement because of computer 

malfunction.¿ 

* * * * * 

Section 226.5a—Credit and Charge Card 

Applications and Solicitations 

* * * * * 

5a(b) Required disclosures. 

* * * * * 

5a(b)(1) Annual percentage rate. 

* * * * * 

5. Increased penalty rates. i. In general. For 

rates that are not introductory rates flor 

employee preferential ratesfi, 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 flto any 

balancesfi indefinitely, flto the extent 

permitted by §§ 226.55(b)(4) and 226.59, the 

issuer should disclose that the penalty rate 

may apply indefinitelyfi øthat fact should be 

stated¿. flThe 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 

§§ 226.54(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.fi 

(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 

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 fldirectly beneathfiøin¿ 

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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67496 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

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.’’ 

fliv. 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.’’fi 

* * * * * 

5a(b)(2) Fees for issuance or availability. 

* * * * * 

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 fldisclosedfi 

øprovided¿ 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 flin accordance with the 

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

226.55(b)(1)fi. 

* * * * * 

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. flAn 

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.’’fi øAn 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 these 

requirements 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.’’¿ 

flHowever, 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. For example, 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, 

§ 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.fi 

* * * * * 

ø4. Limitations on the imposition of 

finance charges in § 226.54. Section 

226.5a(b)(5) does not require a card issuer to 

disclose the limitations on the imposition of 

finance charges in § 226.54.¿ 

* * * * * 

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 the 

regulation, 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 the regulation, 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). ø(See the commentary to 

§ 226.5a(g) for guidance on particular 

methods.)¿ 

* * * * * 

Section 226.6—Account-Opening Disclosures 

* * * * * 

6(b)(2)(v) Grace period. 

1. Grace period. Creditors must state any 

conditions on the applicability of the grace 

period. flA 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] _ 

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.’’fi [A creditor 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 these 

requirements 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 

your account if you pay your entire balance 

by the due date each month.’’]fl 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.fi 

* * * * * 

3. Grace period on some features. øSee 

Samples G–17(B) and G–17(C) for guidance 

on complying with § 226.6(b)(2)(v) when a 

creditor offers a grace period for purchases 

but no grace period on balance transfers and 

cash advances.¿ flSome creditors do not 

offer a grace period on cash advances and 

balance transfers, but offers 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67497 

balance transfers 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. 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. 

For example, a creditor 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, § 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. 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. fi 

ø4. Limitations on the imposition of 

finance charges in § 226.54. Section 

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

to disclose the limitations on the imposition 

of finance charges in § 226.54.¿ 

6(b)(2)(vi) Balance computation method. 

ø1. Content.¿fl1. 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.fi 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. 

fl2. 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.fi 

* * * * * 

Section 226.7—Periodic Statement 

* * * * * 

7(b) Rules affecting open-end (not homesecured) plans. 

1. Deferred interest or similar transactions. 

* * * 

* * * * * 

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 flany page offi 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)(5) Balance on which finance charge 

computed. 

* * * * * 

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). flIn 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.fi 

* * * * * 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67498 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

7(b)(6) Charges imposed. 

* * * * * 

3. Total fees fland interest chargedfi 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 øa¿ calendaryear-to-date totalflsfi at the end of the 

calendar year by aggregating flfinance 

charges attributable to periodic interest rates 

andfi 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 

year-to-date totalflsfi for flinterest charged 

andfi 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 

year-to-date totalflsfi for flinterest charged 

andfi fees imposed January 1, 2011, through 

December 31, 2011. 

B. A creditor may disclose a calendar-yearto-date totalflsfi at the end of the calendar 

year by aggregating flfinance charges 

attributable to periodic interest rates andfi 

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 

year-to-date totalflsfi for flinterest charged 

andfi fees imposed from December 10, 2010, 

through December 9, 2011. 

* * * * * 

7(b)(12) Repayment disclosures. 

fl1. 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.fi 

* * * * * 

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. 

9(b)(3)(i) Disclosures. 

* * * * * 

fl2. 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).fi 

* * * * * 

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 flconsistent with 

any applicable requirementsfi, such as 

flrate or fee increases upon expiration of a 

specific period of time that were disclosed in 

accordance with § 226.9(c)(2)(v)(B) orfi 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 the rate at its discretion. 

* * * * * 

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 

ømay¿flmustfi 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. 

* * * * * 

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 flgenerallyfi 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. 

flHowever, 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 non-variable rate in order to 

comply with 50 U.S.C. app. 527 or a similar 

federal or state statute or regulation.fi 

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 

non-variable rate to a variable rate, the 

creditor flgenerallyfi 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. 

flHowever, 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.fi 

* * * * * 

9(c)(2)(v) Notice not required. 

* * * * * 

2. Skip features. i. øGeneral¿flSkipped or 

reduced paymentsfi. If a credit program 

allows consumers to skip or reduce one or 

more payments during the yearø, or involves 

temporary reductions in finance charges 

other than reductions in an interest rate 

(except if § 226.9(c)(2)(v)(B) or (c)(2)(v)(D) 

applies)¿, no notice of the change in terms 

is required either prior to the reduction flin 

paymentsfi or upon resumption of the 

higher [finance charges or] payments if these 

features are explained on the accountopening 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 flpaymentfi schedule øor 

finance charge¿, even though no notice is 

required prior to the reduction. The changein-terms notice may be combined with the 

notice offering the reduction. For example, 

the periodic statement reflecting the 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67499 

øreduction or¿ skip feature may also be used 

to notify the consumer of the resumption of 

the original flpaymentfi schedule øor 

finance charge¿, either by stating explicitly 

when the higher payment [or charges] 

resumeflsfi 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 

flor feesfi. If a credit program involves 

temporary reductions in an interest rate flor 

feefi, no notice of the change in terms is 

required either prior to the reduction or upon 

resumption of the original rate flor feefi 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 flor feefi, even though no 

notice is required prior to the reduction. The 

notice provided prior to resuming the 

original rate flor feefi 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. flSee comment 9(c)(2)(iv)–3.fi 

[If a creditor is changing a rate applicable to 

a consumer’s account from a variable rate to 

a non-variable rate, the creditor 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. (See comment 9(c)(2)(iv)(A)–3.)] 

4. Changing from a non-variable rate to a 

variable rate. flSee comment 9(c)(2)(iv)–4.fi 

[If a creditor is changing a rate applicable to 

a consumer’s account from a non-variable 

rate to a variable rate, the creditor 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. (See comment 9(c)(2)(iv)(A)–4.)] 

5. Temporary rate flor feefi 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) flor the 

imposition of a fee that will be in effect for 

a specified period of time (a temporary fee)fi 

if: 

i. The consumer accepts the offer of the 

temporary rate flor temporary feefi by 

telephone; 

ii. The creditor permits the consumer to 

reject the temporary rate flor temporary 

feefi offer and have the rate or rates flor 

feefi 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)fl, 

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 feefi; and 

iii. The disclosures required by 

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

reject the temporary rate flor temporary 

feefi offer and have the rate or rates flor 

feefi that previously applied to the 

consumer’s account reinstatedfl, if 

applicable,fi are disclosed to the consumer 

as part of the temporary rate flor temporary 

feefi 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 flor feefi in the disclosure 

provided to the consumer. For purposes of 

§ 226.9(c)(2)(v)(B), the first statement of the 

temporary rate flor feefi is the most 

prominent listing on the front side of the first 

page of the disclosure. If the temporary rate 

flor feefi does not appear on the front side 

of the first page of the disclosure, then the 

first listing of the temporary rate flor feefi 

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 

flor feefi that would apply after expiration 

of the period on a separate page or document 

from the temporary rate flor feefi and the 

length of the period, provided that the 

disclosure of the annual percentage rate flor 

feefi 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 flor feefi and length 

of the period. 

* * * * * 

fl10. 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.fi 

ø10¿fl11fi. 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), 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. 

ø11¿fl12fi. Index not under creditor’s 

control. See comment 55(b)(2)–2 for guidance 

on when an index is deemed to be under [the 

card issuer’s] fla creditor’sfi control. 

ø12¿fl13fi. 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. 

* * * * * 

Section 226.10—Payments 

* * * * * 

10(b) Specific requirements for payments. 

* * * * * 

2. Payment flmethods promoted by 

creditorfiø via creditor’s Web site¿. flIf 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67500 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

payments for purposes of § 226.10(b). For 

example:fi 

fli.fi 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). 

flii. 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).fi 

* * * * * 

10(e) Limitations on fees related to method 

of payment. 

* * * * * 

fl4. Third parties. For purposes of 

§ 226.10(e), the term ‘‘creditor’’ includes 

third-party service providers or other third 

parties who collect, receive, or process 

payments on behalf of the creditor.fi 

* * * * * 

10(f) Changes by card issuer. 

* * * * * 

3. Safe harbor. 

* * * * * 

(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 øconsumer¿flcard issuerfi 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. 

* * * * * 

Section 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. 

flHowever, 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. For examples of how to 

comply with §§ 226.12 and 226.53 for credit 

card accounts under an open-end (not homesecured) consumer credit plan, see comment 

53–3. For other types of credit card 

accountsfi øTo determine the amount of 

credit outstanding for purposes of this 

section¿, payments and other credits 

flmayfi øshall¿ be applied to: (i) Late 

charges in the order of entry to the account; 

then to (ii) finance charges in the order of 

entry to the account; and then to (iii) any 

øother¿ debits flother than the transaction 

subject to the claim or defensefi in the order 

of entry to the account. In these 

circumstances, iffi øIf¿ 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. 

* * * * * 

Section 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, fl§ 226.13(c)(2) prohibits afi øthe¿ 

creditor øwould be prohibited¿ 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. flHowever, if a 

consumer receives more than one credit to 

correct the same billing error, this section 

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.fi 

* * * * * 

Section 226.14—Determination of Annual 

Percentage Rate 

14(a) General rule. 

* * * * * 

fl6. 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.fi 

* * * * * 

Section 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 flor 

promotional feefi 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 

printed in a certain type size nor need they 

appear in any particular place in the 

advertisement. 

* * * * * 

2. Clear and conspicuous standard— 

promotional ratesfl, fees,fi or payments; 

deferred interest or similar offers. 

* * * * * 

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) andfl, as applicable,fi 

(g)(4)(ii) fland (g)(4)(iii)fi must be equally 

prominent to the promotional rate flor 

promotional feefi to which it applies. If the 

information in § 226.16(g)(4)(i) andfl, as 

applicable,fi (g)(4)(ii) fland (g)(4)(iii)fi is 

the same type size as the promotional rate 

flor promotional feefi 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67501 

the deferred interest period, the disclosure 

would be deemed to be equally prominent. 

* * * * * 

16(g) Promotional rates. 

* * * * * 

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 flor 

introductory feefi 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) andfl, as applicable,fi 

(g)(4)(ii) fland (g)(4)(iii)fi that is in the same 

paragraph as the first listing of the 

promotional rate flor promotional feefi 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 flor promotional feefi 

is the most prominent listing of the rate flor 

feefi 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 

flor promotional feefi does not appear on 

the front side of the first page of the principal 

promotional document, then the first listing 

of the promotional rate flor promotional 

feefi is the most prominent listing of the rate 

flor feefi on the subsequent pages of the 

principal promotional document. If the 

promotional rate flor promotional feefi 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 flor feefi 

on the front side of the first page of each 

document listing the promotional rate flor 

promotional feefi. If the promotional rate 

flor promotional feefi does not appear on 

the front side of the first page of a document, 

then the first listing of the promotional rate 

flor promotional feefi is the most 

prominent listing of the rate flor feefi on 

the subsequent pages of the document. If the 

listing of the promotional rate flor 

promotional feefi with the largest type size 

on the front side of the first page (or 

subsequent pages if the promotional rate flor 

promotional feefi is not listed on the front 

side of the first page) of the principal 

promotional document (or each document 

listing the promotional rate flor promotional 

feefi if the promotional rate flor 

promotional feefi 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). 

* * * * * 

Section 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: 

* * * * * 

C. The interest rate will not exceed X%, or 

X percentage points øabout¿flabovefi [a 

rate to be determined at some future point in 

time], whichever is less. 

* * * * * 

Subpart G—Special Rules Applicable to 

Credit Card Accounts and Open-End Credit 

Offered to College Students 

* * * * * 

Section 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 flindependentfi 

ability to make the required minimum 

periodic payments under the terms of an 

account based on the consumer’s 

flindependentfi 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 

flindependentfi 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. 

* * * * * 

4. flInformation regarding income,fi 

øIncome,¿ assets, and employment. 

fli. Types of information. flFor purposes 

of § 226.51(a), a card issuer may consider any 

current or reasonably expected income or 

assets of the consumer or consumers who are 

applying for a new account or, when the card 

issuer is considering whether to increase the 

credit limit on an existing account, the 

consumer or consumers who are 

accountholders.fi øAny current or 

reasonably expected assets or income may be 

considered by the card issuer.¿ For example, 

a card issuer may use 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 øthat the 

consumer can or will be able to use¿. flIn 

addition, when a consumer’s spouse is not a 

joint applicant or joint accountholder, a card 

issuer may consider the spouse’s income or 

assets to the extent that a federal or state 

statute or regulation grants the consumer an 

ownership interest in the spouse’s income or 

asserts.fi 

flii. Sources of information.fi A card 

issuer may consider the consumer’s income 

or assets based on information provided by 

the consumer, in connection with this credit 

card account or any other financial 

relationship the card issuer or its affiliates 

has with the consumer, subject to any 

applicable information-sharing rules, and 

information obtained through third parties, 

subject to any applicable information-sharing 

rules. A card issuer may also consider 

information obtained through any 

empirically derived, demonstrably and 

statistically sound model that reasonably 

estimates a consumer’s income or assets. 

fliii. Information regarding household 

income or assets. Consideration of 

information regarding a consumer’s 

household income or assets 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 form that applicants 

provide their household income, the card 

issuer may not rely solely on the information 

provided 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 form 

that applicants provide their income (without 

reference to household income), the card 

issuer may rely on the information provided 

to satisfy the requirements of § 226.51(a).fi 

* * * * * 

51(a)(2) Minimum periodic payments. 

* * * * * 

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. flIf 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).fi 

* * * * * 

Section 226.52—Limitations on Fees 

52(a) Limitations flprior to account 

opening andfi during first year after account 

opening. 

52(a)(1) General rule. 

1. Application. øSection 226.52(a)(1) 

applies if a card issuer charges any fees to the 

account during the first year after the account 

is opened (unless the fees are specifically 

exempted by § 226.52(a)(2)). Thus, if a card 

issuer charges a non-exempt fee to the 

account during the first year after account 

opening, § 226.52(a)(1) provides that the total 

amount of non-exempt fees the consumer is 

required to pay with respect to the account 

during the first year cannot exceed 25 

percent of the credit limit in effect when the 

account is opened.¿ flThefi øThis¿ 25 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67502 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

percent limit flin § 226.52(a)(1)fi 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 consumerfl’s 

asset accountfi to the card issuer or from 

another credit account provided by the card 

issuer). For example: 

* * * * * 

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 flprior to account opening orfi 

during the first year after account 

openingfl.fiøor¿ flSection 226.52(a)(1) 

also prohibits the card issuer fromfi 

requiring the consumer to open a separate 

credit account with the card issuer to fund 

the payment of additional non-exempt fees 

flprior to the opening of the credit card 

account or fi during the first year flafter the 

credit card account is openedfi. 

fliii. 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 card issuer also 

permits the consumer to begin using the 

account for transactions on 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.fi 

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 flthe example infi 

comment 52(a)(1)–1fl.i.fi 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. 

* * * * * 

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 flthe credit limit 

was reducedfiøthe fee was charged¿. For 

examplefl:fiø,¿ 

flA. Assumefiøassume¿ 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. 

flB. 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.fi 

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 

flor other chargesfi that a card issuer will 

or may require the consumer to pay with 

respect to a credit card account flprior to 

account opening andfi during the first year 

after account openingfl, other than charges 

attributable to periodic interest ratesfi. For 

example, § 226.52(a) applies to: 

* * * * * 

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); 

øand¿ 

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))fl;fiø.¿ 

flv. 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.fi 

* * * * * 

52(b) Limitations on penalty fees. 

* * * * * 

52(b)(1)(ii) Safe harbors. 

1. Multiple violations of same type. 

øSection 226.52(b)(1)(ii)(A) permits a card 

issuer to impose a fee that does not exceed 

$25 for the first violation of a particular type. 

For a subsequent violation of the same type 

during the next six billing cycles, 

§ 226.52(b)(1)(ii)(B) permits the card issuer to 

impose a fee that does not exceed $35.¿ 

i. flSame billing cycle or next six billing 

cycles.fi øNext six billing cycles.¿ flA 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.fi øA fee may be imposed 

pursuant to § 226.52(b)(1)(ii)(B) if, during the 

six billing cycles following the billing cycle 

in which a violation occurred, another 

violation of the same type occurs.¿ 

* * * * * 

ii. Relationship to §§ 226.52(b)(2)(ii) and 

226.56(j)(1)ø(i)¿. 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). flHowever, 

§ 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-the-limit 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.fi 

iii. Examplesfl.fi ø:¿ * * * * * 

* * * * * 

52(b)(2) Prohibited fees. 

* * * * * 

52(b)(2)(i) Fees that exceed dollar amount 

associated with violation. 

* * * * * 

5. Inactivity fees. Section 

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

from imposing a fee flwith respect to a 

credit card account under an open-end (not 

home-secured) consumer credit planfi based 

on øaccount¿ inactivity flon that accountfi 

(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 flwhen a credit card 

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

øwhen a consumer fails to use the account¿ 

for flat leastfi $2,000 in purchases over the 

course of a year. Similarly, flif the card 

issuer promotes the waiver or rebate of an 

annual fee for purposes of § 226.55(e) with 

respect to a particular type of account,fi 

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


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67503 

from imposing a $50 annual fee on all flsuch 

fi accounts but waiving the fee flon any 

account that is usedfi øif the consumer uses 

the account¿ for flat leastfi $2,000 in 

purchases over the course of a year. 

flHowever, if the card issuer does not 

promote the waiver or rebate of an 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).fi 

* * * * * 

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. flIf 

§ 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).fi 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. 

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. flConsistent 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, §fi øSection¿ 

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). øHowever, § 226.52(b)(2)(ii) does not 

prohibit the card issuer from imposing an 

additional late payment fee if the required 

minimum periodic payment due on April 25 

(which may include the $20 due on March 

25) is not received on or before that date.¿ 

flA. 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.fi 

* * * * * 

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. 

flNo 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), 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-the-limit fees 

unless another over-the-limit transaction 

occurs. However, if an over-the-limit 

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).fi 

flv. Assume that the credit limit for the 

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.fi 

* * * * * 

Section 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67504 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

periodic payment in the manner requested by 

the consumer pursuant to 

§ 226.53(b)fl(1)(ii)fi ø(2)¿, 

§ 226.53(b)(1)fl(i)fi requires the card issuer 

to apply any excess payments first to the 

$1,000 purchase balance except during the 

last two 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)fl(1)(ii)fi ø(2)¿. 

Thus, § 226.53(b)(1)fl(i)fi 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)fl(i)fi 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)fl(i)fi 

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)fl(1)(ii)fi ø(2)¿. 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)fl(1)(ii)fi ø(2)¿ 

permits the card issuer to allocate the $800 

excess payment in the manner requested by 

the consumer. 

53(b) Special ruleflsfi øfor accounts with 

balances subject to deferred interest or 

similar programs¿. 

1. Deferred interest and similar programs. 

Section 226.53(b)fl(1)fi 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)fl(1)fi, ‘‘deferred interest’’ has the 

same meaning as in § 226.16(h)(2) and 

associated commentary. Section 

226.53(b)fl(1)fi 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)fl(1)fi. 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)fl(1)fi 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 fldeferred interest or 

similarfi program during billing cycle. For 

purposes of § 226.53(b)(1)fl(i)fi, 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)fl(1)(ii)fi ø(2)¿. 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)fl(i)fi 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)fl(i)fi 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 § 226.53fl(a)fi or (b)(1)fl(i), 

as applicablefi. 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 § 226.53fl(a)fi or (b)(1)fl(i), as 

applicablefi. Similarly, a card issuer that 

accepts requests pursuant to 

§ 226.53(b)fl(1)(ii) or (b)fi(2) must allocate 

amounts paid by a consumer in excess of the 

required minimum periodic payment 

consistent with § 226.53fl(a)fi or (b)(1)fl(i), 

as applicable,fi if the consumer does not 

submit a request. Furthermore, øin these 

circumstances,¿ a card issuer flthat accepts 

requests pursuant to § 226.53(b)(1)(ii) or 

(b)(2)fi must allocate consistent with 

§ 226.53fl(a)fi or (b)(1)fl(i), as 

applicable,fi 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 § 226.53fl(b)(1)(ii) orfi (b)(2). A 

consumer has made a request for purposes of 

§ 226.53fl(b)(1)(ii) orfi (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 flor the period of 

time that a balance on the account is secured 

fi. 

B. The consumer completes fland submits 

to the card issuerfi 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 flor the period of 

time that a balance on the account is 

securedfi øand submits that form or coupon 

to the card issuer¿. 

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 § 226.53fl(a) orfi (b)(1)fl(i), 

as applicable,fi instead be allocated in a 

different manner. 

iii. Examples of consumer requests that do 

not satisfy § 226.53fl(b)(1)(ii) orfi (b)(2). A 

consumer has not made a request for 

purposes of § 226.53fl(b)(1)(ii) orfi (b)(2) if: 

A. The terms and conditions of the account 

agreement contain preprinted language 

stating that by applying to open an 

accountfl,fi øor¿ by using that account for 

transactions subject to a deferred interest or 

similar programfl, or by using the account 

to purchase property in which the card issuer 

holds a security interestfi the consumer 

requests that payments 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, flpurchasing 

property in which the card issuer holds a 

security interest,fi making a payment, or 

receiving account services or features. 

* * * * * 

Section 226.55—Limitations on Increasing 

Annual Percentage Rates, Fees, and Charges 

55(a) General rule. 

1. flIncrease in rate, fee, or chargefi 

øExamples¿. 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). flExcept as 

specifically provided in § 226.55(b), this 

prohibition applies even if the circumstances 

under which an increase will occur are 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67505 

disclosed in advance.fi 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. 

* * * * * 

55(b) Exceptions. 

1. Exceptions not mutually exclusive. 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) 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. 

flHowever, 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).fi 

* * * * * 

3. * * * 

* * * * * 

iii. * * * 

flC. 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.fi 

55(b)(1) Temporary rate fl, fee, or 

chargefi exception. 

* * * * * 

2. Period of six months or longer. A 

temporary annual percentage rate fl, fee, or 

chargefi must apply øto transactions¿ for a 

specified period of six months or longer 

before a card issuer can increase that rate fl, 

fee, or chargefi pursuant to § 226.55(b)(1). 

The specified period must expire no less than 

six months after the date on which the 

flcard issuerfi øcreditor¿ 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 fl, fee, or chargefi 

applies. Section 226.55(b)(1) does not 

prohibit a card issuer from limiting the 

application of a temporary annual percentage 

rate fl, fee, or chargefi to a particular 

category of transactions (such as balance 

transfers or purchases over $100). However, 

in circumstances where the card issuer limits 

application of the temporary ratefl, fee, or 

chargefi to a flsinglefi øparticular¿ 

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): 

* * * * * 

flvii. 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)).fi 

* * * * * 

4. Contingent or discretionary ørate¿ 

increases. Section § 226.55(b)(1) permits a 

card issuer to increase a temporary annual 

percentage rate fl, fee, or chargefi 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 fl, fee, 

or chargefi 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: 

* * * * * 

fliii. 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).fi 

fl5. 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.fi 

* * * * * 

55(b)(6) Servicemembers Civil Relief Act 

exception. 

1. Ratefl, fee, or chargefi that does not 

exceed rate that applied before decrease. 

flWhen a rate or a fee or charge subject to 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67506 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

§ 226.55 has been decreased pursuant to 50 

U.S.C. app. 527 or a similar federal or state 

statute or regulation, § 226.55(b)(6) permits 

the card issuer to increase the rate, fee, or 

charge once 50 U.S.C. app. 527 or the similar 

statute or regulation no longer applies. 

However, § 226.55(b)(6) prohibits the card 

issuer from applying to any transactions that 

occurred prior to the decrease a rate, fee, or 

charge that exceeds the rate, fee, or charge 

that applied to those transactions prior to the 

decrease (except to the extent permitted by 

one of the other exceptions in § 226.55(b)).fi 

øOnce 50 U.S.C. app. 527 no longer applies, 

§ 226.55(b)(6) prohibits a card issuer from 

applying an annual percentage rate to any 

transactions that occurred prior to a decrease 

in rate pursuant to 50 U.S.C. app. 527 that 

exceeds the rate that applied to those 

transactions prior to the decrease. However, 

this provision does not prohibit the card 

issuer from applying an increased annual 

percentage rate once 50 U.S.C. app. 527 no 

longer applies, to the extent consistent with 

any of the other exceptions in § 226.55(b).¿ 

For example, if a temporary rate applied 

prior to fla decrease in rate pursuant to 50 

U.S.C. app. 527fi øthe decrease¿ and flthe 

temporary ratefi øthat rate¿ expired during 

the period that 50 U.S.C. app. 527 applied to 

the account, the card issuer may apply an 

increased rate once 50 U.S.C. app. 527 no 

longer applies to the extent consistent with 

§ 226.55(b)(1). Similarly, if a variable rate 

applied prior to fla decrease in rate pursuant 

to 50 U.S.C. app. 527fi øthe decrease¿, the 

card issuer may apply any increase in that 

variable rate once 50 U.S.C. app. 527 no 

longer applies to the extent consistent with 

§ 226.55(b)(2). 

fl2. Decreases in rates, fees, and charges 

to amounts consistent with 50 U.S.C. app. 

527 or similar statute or regulation. If a card 

issuer deceases all annual percentage rates 

and all fees and charges subject to § 226.55 

to amounts that are consistent with 50 U.S.C. 

app. 527 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).fi 

fl3.fi ø2.¿ Example. Assume that on 

December 31 of year one the annual 

percentage rate that applies to a $5,000 

balance on a credit card account is a variable 

rate that is determined by adding a margin 

of 10 percentage points to a publiclyavailable index that is not under the card 

issuer’s control. flThe account is also 

subject to a monthly maintenance fee of 

$10.fi On January 1 of year two, the card 

issuer reduces the rate that applies to the 

$5,000 balance to a non-variable rate of 6% 

fland ceases to impose the $10 monthly 

maintenance fee and other fees (including 

late payment fees)fi pursuant to 50 U.S.C. 

app. 527. flThe card issuer also decreases 

the rate that applies to new transactions to 

6%. During year two, the consumer uses the 

account for $1,000 in new transactions.fi On 

January 1 of year three, 50 U.S.C. app. 527 

ceases to apply and the card issuer provides 

a notice pursuant to § 226.9(c) informing the 

consumer that on February 15 of year three 

the variable rate determined using the 10- 

point margin will apply to any remaining 

portion of the $5,000 balance fland to any 

remaining portion of the $1,000 balance. The 

notice also states that the $10 monthly 

maintenance fee and other fees (including 

late payment fees) will resume on February 

15 of year three. Consistent with 

§ 226.9(c)(2)(iv)(B), the card issuer is not 

required to provide a right to reject in these 

circumstancesfi. On February 15 of year 

three, § 226.55(b)(6) permits the card issuer 

to begin accruing interest on any remaining 

portion of the $5,000 fland $1,000fi 

balanceflsfi at the variable rate determined 

using the 10-point margin fland to resume 

imposing the $10 monthly maintenance fee 

and other fees (including late payment 

fees)fi. 

55(c) Treatment of protected balances. 

55(c)(1) Definition of protected balance. 

* * * * * 

3. Increased fees and charges. flExcept as 

provided in § 226.55(b)(3)(iii)fi [Once an 

account has been open for more than one 

year], § 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. flTo the 

extent consistent with § 226.55(b)(3)(iii), afi 

øA¿ 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 may add flor increase anfi øa new¿ 

annual or a monthly maintenance fee flfor 

an active 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)fi 

øto an account or increase such a fee so long 

as the fee is not based solely on the protected 

balance¿. flHowever, 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). 

Furthermorefi øHowever¿, 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. 

fl4. 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.fi 

* * * * * 

fl55(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 cease or 

terminate the waiver or rebate 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 

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 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), unless 

the communication relates 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. 

i. The following are examples of 

circumstances in which a card issuer is 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67507 

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. 

B. A card issuer discloses the waiver or 

rebate on radio or television or through 

electronic advertisements (such as on the 

Internet). 

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. 

To the extent that a card issuer provides such 

disclosures to its current accountholders, the 

issuer is promoting a waiver or rebate for 

purposes of § 226.55(e) if the disclosure is 

provided before the issuer has waived or 

rebated the interest, fees, or other charges 

subject to § 226.55 (unless the disclosure 

relates to an inquiry or dispute about a 

specific charge). 

ii. 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 

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 

consistent with § 226.5a, § 226.6, or § 226.7. 

E. A card issuer provides an undisclosed 

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).fi 

* * * * * 

Section 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 

ø§ 226.58(b)(6)¿fl§ 226.58(b)(7)fi. For 

example, the basic credit contract may not 

specify rates, fees and other information that 

constitutes pricing information as defined in 

ø§ 226.58(b)(6)¿fl§ 226.58(b)(7)fi; 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. 

* * * * * 

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 

ø§ 226.58(b)(6)¿fl§ 226.58(b)(7)fi, 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. 

* * * * * 

fl58(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. fi 

ø58(b)(4)¿fl58(b)(5)fi Offers. 

* * * * * 

ø58(b)(5)¿fl58(b)(6)fi Open account. 

* * * * * 

ø58(b)(7)¿fl58(b)(8)fi Private label credit 

card account and private label credit card 

plan. 

* * * * * 

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 ø§ 226.58(b)(7)¿fl§ 226.58(b)(8)fi. 

* * * * * 

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 

ø§ 226.58(b)(7)¿fl§ 226.58(b)(8)fi—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 

ø§ 226.58(b)(7)¿fl§ 226.58(b)(8)fi. The open 

accounts with credit cards usable only at 

Merchant A do not constitute three separate 

private label credit card plans under 

ø§ 226.58(b)(7)¿fl§ 226.58(b)(8)fi, even 

though the accounts are subject to different 

terms. 

* * * * * 

58(c) Submission of agreements to Board. 

* * * * * 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
67508 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

58(c)(3) Amended agreements. 

* * * * * 

2. Submission of amended agreements. 

flIf 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.fi øIf 

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 by the first quarterly submission 

deadline after the last 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 and the card issuer must 

submit the entire amended agreement to the 

Board no later than January 31.¿ 

fl3. 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 

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.fi 

ø3.¿fl4.fi Change-in-terms notices not 

permissible. * * * 

* * * * * 

58(e) Agreements for all open accounts. 

* * * * * 

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. flAn 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).fi 

* * * * * 

Section 226.59—Reevaluation of Rate 

Increases 

59(a) General rule. 

59(a)(1) Evaluation of increased rate. 

* * * * * 

fl3. Change in type of rate. i. Generally. 

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

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. 

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.fi 

ø3.¿ fl4.fi 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 


srobinson on DSKHWCL6B1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67509 

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. 

ø4.¿ fl5.fi Amount of rate decrease. 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. 

* * * * * 

59(d) Factors. 

* * * * * 

fl6. 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 

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. 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: (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 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 

rate to the account as a result of the 

consumer’s payment history or other 

behavior on the account, § 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. 

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%.fi 

* * * * * 

59(f) Termination of obligation to review 

factors. 

* * * * * 

fl2. 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.fi 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, October 18, 2010. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. 2010–26515 Filed 11–1–10; 8:45 am] 

BILLING CODE 6210–01–P 


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