Temporary Rate Exception. This exception allows issuers to raise the APR for new transactions and existing balances after a temporary rate expires, provided the temporary rate lasts at least six months and the issuer discloses clearly and conspicuously the rate that will apply after the temporary rate expires.
Variable Rate Exception. The CARD Act recognizes that the rate on a variable rate card varies with market conditions. The act permits rate increases for existing balances and new transactions, provided the increase results because of an increase in an index on which the rate is based that is available to the public and over which the issuer has no control (for example, the prime rate).
Advance Notice Exception. Card issuers are permitted to raise rates, fees, and charges for future transactions (but not past transactions) if they provide an advance change-in-terms notice required under §226.9(b), (c) or (g). However, this exception cannot be used during the first year an account is open. In addition, the exception does not permit rate increases on existing balances.*
Delinquency Exception. This exception permits a card issuer to raise rates and fees on both future and existing balances if the cardholder has not made a required minimum payment within 60 days of the due date. However, before this exception can be implemented, the issuer must provide a 45-day change-in-terms notice, as discussed earlier. It is important to note that the card issuer must wait until the end of the 60-day period before it can send out the 45-day change-in-terms notice. Thus, the shortest period before an issuer could implement a rate increase because of the delinquency exception is 105 days.
Workout and Temporary Hardship Arrangement Exception. When a consumer experiences financial hardship, card issuers will sometimes temporarily lower the rate on the consumer's balances to facilitate repayment. This exception permits the issuer to raise the rate after the workout or temporary hardship arrangement ends or the consumer fails to comply with the terms of the arrangement. This exception has two requirements: the issuer must have clearly and conspicuously disclosed the terms of the workout before the arrangement began, and the higher rate that applies after the arrangement cannot, with respect to any existing balance at the time the arrangement began, exceed the rate that applied before the arrangement became effective. For example, if a consumer had an account with a $10,000 balance with a purchase APR of 10 percent, and the consumer ran into financial difficulty and arranged for the rate to be lowered to 5 percent for six months, the issuer could raise the rate to 15 percent after completion of the six-month arrangement for future transactions but could not increase the rate on the existing $10,000 balance at the time of the arrangement above 10 percent. This rule is designed to facilitate workout arrangements while preventing card issuers from using the exception to circumvent the rule against raising rates on existing balances. The workout exception permits a rate increase for future transactions after the workout arrangement expires but not for the existing balance when the workout was initiated.
Servicemembers Civil Relief Act (SCRA) Exception. Under §527(a) of the SCRA, interest on obligations of service members, who are defined in 10 U.S.C. §101(a)(5), cannot exceed 6 percent during the period of military service. This exception permits the issuer to raise the rate once the requirement of §527 no longer applies, provided that the new rate cannot, for transactions incurred before the rate decrease because of §527, exceed the rate that previously applied; that is, §527 cannot be used to circumvent the prohibition on raising the rate on an existing balance but does permit a rate increase on future transactions.