Consumer Compliance Outlook: Third Quarter 2009

Compliance Alert: Regulation Z Interim Final Rule in Effect

On July 15, 2009, the Board announced an interim final rule for Regulation Z to implement sections 101(a) and 106(b) of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), which became effective on August 20, 2009, as follows:

  • Creditors must provide written notice to consumers 45 days before increasing an annual percentage rate on a credit card account or making a "significant change" to the terms of a credit card account. The interim final rule defines "significant change" to include changes in annual percentage rates, fees for issuance or availability, fixed finance charges, transaction charges, grace periods, balance computation methods, cash advance fees, late fees, over-the-limit fees, balance transfer fees, return payment fees, and required insurance, debt cancellation, or debt suspension coverage.
  • Creditors must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect. If the consumer closes the account, creditors are generally prohibited from applying the increase or change to the account. The rule also addresses permissible repayment terms for the account balance if the consumer rejects the creditors' changes and closes the account. Additionally, there are prohibitions for imposing penalties or fees as a result of the consumer's rejection of the changes and closure of the account.
  • Creditors generally must mail or deliver periodic statements for open-end credit accounts at least 21 days before payment is due and adopt reasonable procedures to accomplish this. The rule also generally prohibits a creditor from treating a payment as late or imposing additional finance charges unless the creditor mailed or delivered the periodic statement at least 21 days before the payment due date. While most of the provisions of the CARD Act apply only to credit cards, the periodic statement rule in section 106(b) applies to all open-end credit accounts, including home equity lines of credit.

Comments on the interim final rule were due by September 21, 2009. The other provisions of the CARD Act are being implemented in two phases and become effective on either February 22, 2010 or August 22, 2010. The Board will publish amendments to Regulation Z to implement these provisions in the future. The Board's announcement and the interim final rule are available at http://www.federalreserve.gov/ newsevents/press/bcreg/20090715a.htm External Site.