To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Compliance Officer and Chief Credit Policy Officer



On January 8, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision issued guidance governing account management and loss allowance practices for credit card lending. The agencies developed the guidance in response to recent examinations that disclosed a number of inappropriate account-management, risk-management, and loss-allowance practices. Their objective was to assist financial institutions in conducting credit card lending activities in a safe and sound manner, while meeting the needs of their customers.

The agencies carefully considered the comments received following publication of a draft of the guidance on July 22. In response to the comments, the agencies made changes to: clarify documentation expectations for line-increase programs; clarify expectations for over-limit practices; provide guidance for minimum payments and negative amortization; and revise the repayment period for workout accounts.

The agencies recognize that some institutions may require additional time to implement changes in policies, practices, and systems to achieve full consistency with the credit card guidance. Those institutions should work with their primary federal regulator to ensure implementation of needed changes as promptly as possible.

With respect to income recognition and loss allowance practices for credit card lending, the guidance reflects generally accepted accounting principles (GAAP), existing interagency policies on loss allowances, and current Call Report and Thrift Financial Report instructions.

For Further Information: A copy of the guidance is attached (21 KB, 6 pages). For more information, contact Dave Skidmore, Federal Reserve Board, at (202) 452-2955.