Federal Reserve Releases Final Rule Implementing Sections of Credit Card Act of 2009

The Board of Governors of the Federal Reserve System (the Board) recently released final amendments to Regulation Z (the Rule), implementing those sections of the Credit Card Act of 2009 (the Act) that take effect on Feb. 22, 2010. (The Act, enacted in May 2009, amended the Truth in Lending Act (TILA), among other statutes, and mandated studies on interchange regulation and other matters. The Act's TILA amendments take effect in three tranches—in August 2009, February 2010 and August 2010.) Significant amendments include restrictions on increasing interest rates on existing balances; a requirement that credit card issuers consider a consumer’s ability to make required payments on an account before opening the account and increasing a credit limit; and limits on fees for exceeding a credit limit.

The Board released its proposed Rule on Sept. 29, 2009 (the September Proposal), and the September Proposal was open for comment through Nov. 22, 2009. The September Proposal requested that commenters limit comments only to those questions expressly raised by the Board. Predictably, this request was disregarded by many commenters. Surprising and problematic changes from the September Proposal in response to public comments include, for example, the Rule’s treatment of variable rate floors and index values.

In finalizing the Rule, the Board withdrew its January 2009 amendments to both Regulation Z and Regulation AA and incorporated those amendments into the Rule. However, provisions in the January 2009 amendments that were not superseded by the Act remain scheduled to take effect on July 1, 2010, as originally provided in the January 2009 amendments. The Rule also finalizes the interim final rule that became effective Aug. 20, 2009.

This advisory first discusses significant differences between the Rule and the September Proposal (and notes where such changes were made in response to public comment). Next the advisory discusses the Board’s treatment of the provisions in the Rule that were expressly open to comment. Finally, the advisory turns to significant public comments requesting changes to the Rule that the Board addressed in the supplementary information but did not adopt.

Before continuing with this advisory, a word of caution. The fact that a billing or disclosure practice is consistent with the Rule does not necessarily mean that the practice is lawful. Such a practice may, for example, raise issues under Regulation B, implementing the Equal Credit Opportunity Act. Accordingly, proposed practices should be evaluated from all relevant perspectives before implementation.

Significant differences between the Rule and the September Proposal

Treating a Payment as Late. § 5(b)(2)(ii)(A)(2) of the Rule requires a card issuer to adopt reasonable procedures designed to ensure that a required minimum periodic payment received within 21 days after mailing or delivery of the related periodic statement is not treated as late for any purpose. Comment 5(b)(2)(ii)-2 states that treating a payment as late for any purpose includes increasing the rate as a penalty, reporting the consumer as delinquent to a credit reporting agency or assessing a late fee or any other fee based on the consumer’s failure to make a payment within a specified amount of time or by a specified date. Several commenters requested that the Board narrow or expand this language to clarify that certain activities are included or excluded. In response, the Board amended comment 5(b)(2)(ii)-2 to provide two additional examples of activities that constitute treating a payment as late for purposes of § 5(b)(2)(ii)(A)(2): terminating benefits (such as rewards on purchases) and initiating collection activities.

Payment Due Date for Charge Accounts and Charged-Off Accounts. § 5(b)(2)(ii)(B)(2) of the Rule provides that a creditor must adopt reasonable procedures designed to ensure that it does not impose finance charges as a result of the loss of a 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. New comment § 5(b)(2)(ii)-4 addresses commenter uncertainty regarding the interaction between the payment due date disclosure required in periodic statements under § 7(b)(11)(i)(A) and the 21-day requirements in § 5(b)(2)(ii) with respect to charge card accounts and charged-off accounts. The comment states that the contractual payment due date for a charge card account generally is the date on which the consumer receives the periodic statement. When an account is over 180 days past due and been placed in charged off status, full payment is due immediately. The comment also states that, because the payment due date disclosure in § 7(b)(11)(i)(A) does not apply to periodic statements provided solely for charge card accounts or for charged-off accounts where full payment of the entire account balance is due immediately, § 5(b)(2)(ii)(A)(1) does not apply to the mailing or delivery of periodic statements provided solely for such accounts.

• Payment Not Treated as Late. Comment 5(b)(2)(ii)-4 further states that, with respect to charge card accounts, § 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 that statement. Notwithstanding the contractual due date, consumers with charge card accounts must receive at least 21 days to make payment without penalty. With respect to charged-off accounts, comment 5(b)(2)(ii)-4 provides that a card issuer is only prohibited from treating a payment as late during the 21-day period following mailing or delivery of the periodic statement stating the due date for that payment. Because a charged-off account will generally have several past due payments, the card issuer may continue to treat those payments as late during the 21-day period for new payments.
• Grace Period. Comment 5(b)(2)(ii)-4 also states that § 5(b)(2)(ii)(B) does not apply to charge card accounts because, for purposes of that section, 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 the definition in § 2(a)(15)(iii), charge card accounts do not impose a finance charge based on a periodic rate. The comment states that § 5(b)(2)(ii)(B) 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.

Disclosure of Grace Periods. § 5a(b)(5) and § 6(b)(2)(v) of the Rule require that creditors disclose, among other things, any conditions on the availability of a grace period. § 54 of the Rule provides that, when a consumer pays some but not all of the balance subject to a grace period prior to expiration of the grace period, the card issuer is prohibited from imposing finance charges on the portion of the balance paid. Some industry commenters requested that the Rule state that § 5a(b)(5) and § 6(b)(2)(v) do not require card issuers to disclose this limitation. The Board inserted the requested clarification in new comments 5a(b)(5)-4 and 6(b)(2)(v)-4. New comment 7(b)(8)-3 further provides that a card issuer also is not required to include disclosure describing the requirements of §54 when disclosing, on a periodic statement, the date by which or the time period within which the new balance or any portion of the new balance must be paid to avoid additional finance charges pursuant to § 7(b)(8).

Variable Rate Disclosures at Point of Sale. § 6(b)(4)(ii) of the September Proposal sets forth the rules for variable-rate disclosures at account opening, including accuracy requirements for the disclosed rate. The general accuracy standard for variable rates disclosed at account opening is that a variable rate is accurate if it is a rate as of a specified date and in effect within 30 days before the disclosures are provided. New § 6(b)(4)(ii)(H) of the Rule states that a creditor imposing a variable rate who provides the disclosures required by § 6(b) in person at the time an account is established in connection with financing the purchase of goods or services may disclose in the table a rate, or range of rates to the extent permitted by § 6(b)(2)(i)(E), that was in effect within 90 days before the disclosures are provided, along with a reference directing the consumer to the account agreement or other disclosure provided with the account-opening table where an annual percentage rate applicable to the consumer’s account in effect within the last 30 days before the disclosures are provided is disclosed.

Charged-Off Accounts. Proposed § 7(b)(11) required creditors offering open-end (not home-secured) credit plans that charge a fee or impose a penalty rate for paying late to disclose on the periodic statement the payment due date and the amount of any late payment fee and any penalty APR that could be triggered by a late payment. The Rule incorporates into § 7(b)(11)(ii)(B) an industry comment requesting that the payment due date and late payment disclosure requirements set forth in §7(b)(11) do not apply to a charged-off account where full payment of the entire account balance is due immediately.

Same Payment Due Date Each Month. § 7(b)(11)(i) of the Rule requires that, for credit card accounts under open-end (not home-secured) consumer credit plans, the due date disclosed pursuant to § 7(b)(11)(i) must be the same day of the month for each billing cycle. In response to industry comments, comment 7(b)(11)-6 was revised from the September Proposal to provide that a consumer’s due date may be the last day of the month, notwithstanding the fact that this will not be the same numerical date for each month.

Repayment Disclosures. § 7(b)(12)(i)(F) of the Rule provides that a credit card issuer must disclose on each periodic statement the estimated monthly payment for repayment in 36 months and the total cost estimate for repayment in 36 months (except when the minimum payment repayment estimate is three years or less).

• Low Minimum Payment. Several commenters suggested that a card issuer should not be required to disclose the 36-month disclosures in a billing cycle where the minimum payment for that billing cycle is higher than the payment amount that would be disclosed in order to pay off the account in 36 months (i.e., the estimated monthly payment for repayment in 36 months). One commenter indicated that this can occur for credit card programs that use a graduated payment schedule, which require a larger minimum payment in the initial months after a transaction on the account. This may also occur when an account is past due, and the required minimum payment for a particular billing cycle includes the entire past due amount. Commenters were concerned that disclosing an estimated monthly payment for repayment in 36 months in a billing cycle where this estimated payment is lower than the required minimum payment for that billing cycle might be confusing and even deceptive to consumers. A consumer that paid the estimated monthly payment for repayment in 36 months (which is lower than the required minimum payment that billing cycle) could incur a late fee and be subject to other penalties. In response, § 7(b)(12)(i)(F)(2)(ii) of the Rule provides that a card issuer is not required to disclose the 36-month disclosures for any billing cycle where the estimated monthly payment for repayment in 36 months that is calculated for a particular billing cycle is less than the minimum payment required for the plan for that billing cycle.
• Fixed Repayment Feature. In addition, several commenters raised concerns that the 36-month disclosures could be misleading where an account has a fixed repayment feature (i.e., the required minimum payment amortizes the balance over a fixed period specified in the account agreement that is less than 36 months), and a revolving feature where the minimum payment does not amortize the balance over a fixed period. Commenters indicated that the required minimum due may initially be higher than would be required to repay the entire account balance in 36 equal payments. In addition, calculation of the estimated monthly payment for repayment in 36 months assumes that the entire balance may be repaid in 36 months, even though the account agreement may specify a shorter repayment schedule. The Board agreed with the commenters. In response, § 7(b)(12)(i)(F)(2)(ii) provides that a card issuer is not required to provide the 36-month disclosures on a periodic statement for a billing cycle when an account has both a fixed repayment feature and a revolving feature.

Credit Counseling Services. § 7(b)(12)(iv)(A) of the September Proposal required that a card issuer provide certain contact information for at least three organizations that have been approved by the United States Trustee or a bankruptcy administrator pursuant to 11 U.S.C. 111(a)(1) to provide credit counseling services in the state in which the billing address for the account is located or the state specified by the consumer. In response to several industry comments, particularly from smaller institutions and credit unions, the Board made several revisions to the section as proposed.

• Availability. The Board revised § 7(b)(12)(iv)(A) to state that card issuers are only required to disclose information regarding approved organizations to the extent available from the United States Trustee or a bankruptcy administrator.
• Location. The Board also revised the section to state that the card issuer must provide information regarding approved organizations in, at its option, either the state in which the billing address for the account is located or the state specified by the consumer.
• Language Other Than English. The Board removed the provision in § 7(b)(12)(iv)(B) requiring a card issuer to provide information about a counseling service in a language other than English at the request of the consumer. Instead, revised comment 7(b)(12)(iv)-2 states that a card issuer may at its option provide such information through its toll-free number or state that such information is available from the Web site operated by the United States Trustee.
• Name of Organization. Revised comment 7(b)(12)(iv)-2 states that, if requested by the organization, the card issuer may at its option disclose both the legal name and the name used by the organization and/or provide contact information different from that on file with United States Trustee or a bankruptcy administrator.
• Approval by United States Trustee. Revised comment 7(b)(12)(iv)-2 states that § 7(b)(12)(iv) does not require a card issuer to disclose that credit counseling organizations have been approved by the United States Trustee or a bankruptcy administrator. However, if a card issuer chooses to make such a disclosure, it must disclose the following additional information: (1) the United States Trustee or a bankruptcy administrator determined that the organization meets the minimum requirements for nonprofit pre-bankruptcy budget and credit counseling; (2) the organization may provide other credit counseling services that were not reviewed by the United States Trustee or a bankruptcy administrator; and (3) the United States Trustee or the bankruptcy administrator does not endorse or recommend any particular organization. Revised comment 7(b)(12)(iv)-6 states that disclosing the United States Trustee’s Web site address does not by itself constitute a statement that organizations have been approved by the United States Trustee.

Disclosure of Deferred Interest Programs. §7(b)(14) of the September Proposal required creditors to include on a periodic statement, for the two billing cycles immediately preceding the date on which deferred interest or similar transactions must be paid in full in order to avoid the imposition of interest charges, a disclosure that the consumer must pay such transactions in full by that date in order to avoid being obligated for the accrued interest.

• Deferred Interest Period. In response to comments from consumer groups, the Board revised § 7(b)(14) to require such disclosure on each periodic statement during the deferred interest period.
• Model Disclosure Language. In addition, industry commenters suggested modifying the model disclosure language in Sample G-18(H) of the September Proposal to clarify for consumers how much they should pay in order to avoid finance charges when there are other balances on the account in addition to the deferred interest balance. In response, the Board amended § 7(b)(14) to require that language used to make the disclosure be “similar,” instead of “substantially similar,” to Sample G-18(H).
• Deferred Interest Program. Some industry commenters requested that the Board clarify that programs in which a consumer is not charged interest, whether or not the consumer pays the balance in full by a certain time, are not deferred interest programs that are subject to these periodic statement disclosures. In response, amended comment 7(b)-1 references the definition of “deferred interest” in § 16(h)(2) and associated commentary. The Board also amended comment 7(b)-1 to be consistent with the requirement in § 55(b)(1) that a promotional or other temporary rate program that expires after a specified period of time (including a deferred interest or similar program) last for at least six months.

“Significant Changes” and Opt-Out. § 9(c)(2)(ii) of the September Proposal set forth a list of significant account changes that required 45 day notice. In response to consumer group comments, the acquisition of a security interest was added to the list of significant account changes.

Six-Month Cure. § 9(g)(3)(i)(B) of the September Proposal stated that, when the annual percentage rate applicable to a credit card account under an open-end consumer credit plan is increased due to the consumer’s failure to make a minimum periodic payment within 60 days from the due date for that payment, the issuer must provide 45 days’ notice setting forth the reason for the increase and disclosing that the increase will cease to apply if the creditor receives six consecutive required minimum periodic payments on or before the payment due date, beginning with the first payment due following the effective date of the increase. One issuer argued that § 9(c)(2) also should set forth guidance for disclosing the six-month cure right when a rate is increased via a change-in-terms notice (instead of a notice provided pursuant to § 9(c)(2)(i)) due to a delinquency of more than 60 days. In response, the Rule includes new § 9(c)(2)(iv)(C), which requires notice regarding the six-month cure right to be provided if the change-in-terms notice is disclosing an increase in an annual percentage rate or a fee or charge required to be disclosed under §§ 6(b)(2)(ii), (b)(2)(iii) or (b)(2)(xii) based on the consumer’s failure to make a minimum periodic payment within 60 days from the due date for that payment. The notice is required to state the reason for the increase and that the increase will cease to apply if the creditor receives six consecutive required minimum periodic payments on or before the payment due date, beginning with the first payment due following the effective date of the increase.

Model Forms. The Board amended proposed Sample G-20 and added a new Sample G-21 in the Rule to illustrate how a card issuer may comply with the requirements of § 9(c)(2)(iv). Sample G-20 is a disclosure of a rate increase applicable to a consumer’s credit card account. The sample explains when the new rate will apply to new transactions and to which balances the current rate will continue to apply. Sample G-21 illustrates an increase in the consumer’s late payment and returned payment fees and sets forth the content required in order to disclose the consumer’s right to reject those changes.

Point of Sale Notices. § 9(c)(2)(v)(B) of the Rule provides that a § 9(c)(2)(i) change in terms notice is not required when a rate increases after the expiration of a specified promotional period, provided that prior to the commencement of that period, the creditor disclosed to the consumer clearly and conspicuously in writing the length of the period and the annual percentage rate that would apply after that period. § 9(c)(2)(v)(B) requires that this disclosure be provided in close proximity and equal prominence to any disclosure of the rate that applies during that period, ensuring that it would be provided at the same time the consumer is informed of the temporary rate. Comment 9(c)(2)(v)-5 of the September Proposal stated that the required written disclosures may be provided as soon as reasonably practicable after the first transaction subject to a temporary rate if: (1) the first transaction subject to the temporary rate occurs when a consumer contacts a merchant by telephone to purchase goods and at the same time the consumer accepts an offer to finance the purchase at the temporary rate; (2) the merchant or third-party creditor permits consumers to return any goods financed subject to the temporary rate and return the goods free of cost after the merchant or third-party creditor has provided the written disclosures required by § 9(c)(2)(v)(B); and (3) the disclosures required by § 9(c)(2)(v)(B) and the consumer’s right to reject the temporary rate offer and return the goods are disclosed to the consumer as part of the offer to finance the purchase.

• Disclosure of Rate. New comment 9(c)(2)(v)-7 states that card issuers providing the disclosures required by § 9(c)(2)(v)(B) in person in connection with financing the purchase of goods or services may, at the creditor’s option, disclose the rate that would apply after expiration of the period on a separate page or document from the temporary rate and the length of the period, provided that the disclosure of the rate 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 and length of the period.
• Close Proximity. A card issuer asked that the Rule require that only the disclosures required by § 9(c)(2)(v)(B) be provided in close proximity and equal prominence to the first listing of the promotional rate, analogous to what § 16(g) requires for disclosures of promotional rates in advertisements. In response, new comment 9(c)(2)(v)-6 provides that the disclosures of the rate that will apply after expiration of the period and the length of the period are only required to be provided in close proximity and equal prominence to the first listing of the temporary rate in the disclosures provided to the consumer. The comment further provides that for purposes of § 9(c)(2)(v)(B), the first statement of the temporary rate is the most prominent listing on the front side of the first page of the disclosure. The comment notes that if the temporary rate does not appear on the front side of the first page of the disclosure, then the first listing of the temporary rate is the most prominent listing of the temporary rate on the subsequent pages of the disclosure.

Workout and Temporary Hardship Disclosures. §9(c)(2)(v)(D) of the Rule allows a creditor to raise a rate after the expiration or failure to complete a workout or temporary hardship arrangement so long as the creditor provides disclosures of the terms of the arrangement in advance. Several industry commenters stated that creditors should be permitted to provide the § 9(c)(2)(v)(D) disclosures orally with subsequent written confirmation. These commenters noted that oral disclosure of the terms of a workout arrangement would permit creditors to reduce rates and fees as soon as the consumer agrees to the arrangement without undue delay. In response, § 9(c)(2)(v)(D) of the Rule allows creditors to provide the disclosure of the terms of the workout or temporary hardship arrangement orally by telephone, provided that the creditor mails or delivers a written disclosure of the terms of the arrangement to the consumer as soon as reasonably practicable after the oral disclosure is provided. § 9(c)(2)(v)(D) and comment 9(c)(2)(v)-10 were also amended to provide that increases in the required minimum periodic payment are covered by the exception in § 9(c)(2)(v)(D) so long as they are disclosed as part of the terms of the workout or temporary hardship arrangement. (However, the Board did not simplify the content requirements for the notice required to be given prior to commencement of a workout or temporary hardship arrangement, as requested by one commenter.)

Account Renewal Disclosures. § 9(e)(1) of the Rule requires a card issuer that changes or amends any term of a cardholder’s account required to be disclosed under §§ 6(b)(1) and (b)(2) that was not previously disclosed to the consumer to mail or deliver written notice to the cardholder prior to renewal of the cardholder’s account. One industry commenter suggested that disclosing a change in terms on a periodic statement should be sufficient to constitute prior disclosure of that change for purposes of § 9(e)(1). In response, new comment 9(e)-10 states that clear and conspicuous disclosure of a changed term on a periodic statement provided to a consumer prior to renewal of the consumer’s account constitutes prior disclosure of that term for purposes of § 9(e)(1).

Rate Reductions after Cure Period. § 9(g)(3)(i)(B)(2) of the September Proposal required that a penalty rate be reduced on transactions that occurred prior to or within 14 days of the notice provided pursuant to § 9(c) or (g), when the consumer makes the first six required minimum periodic payments on time following the effective date of a rate increase due to a delinquency of more than 60 days. In response to an industry comment, amended § 9(g)(3)(i)(B)(2) now states that notice of a rate increase due to a penalty must state that such penalty rate will cease to apply with respect to transactions that occurred prior to or within 14 days of provision of the notice if the creditor receives six consecutive required minimum periodic payments on or before the payment due date, beginning with the first payment due following the effective date of the increase.

Prohibition on Penalty for Rejection. § 9(h)(2)(ii) of the Rule prohibits an issuer from imposing a fee or charge solely as a result of the consumer’s rejection of a significant change in terms. Comment 9(h)(2)(ii)-2 was revised for the Rule to state that, if credit availability is terminated or suspended as a result of the consumer’s rejection, a creditor is prohibited from imposing a periodic fee that was not charged before the consumer rejected the change (such as a closed account fee).

Repayment Restrictions. § 9(h)(2)(iii) of the Rule prohibits an issuer, after receiving notice of a rejection of a significant change in account terms, from requiring repayment of the outstanding balance using a method that is less beneficial to the consumer than one of the methods listed in § 55(c)(2). Amended comment 9(h)(2)(iii)-1 of the Rule states that, when applying the repayment methods listed in § 55(c)(2) pursuant to § 9(h)(2)(iii), a creditor may utilize the date on which the creditor was notified of the rejection or a later date (such as the date on which the change would have gone into effect but for the rejection). The comment further states that the provisions in § 55(c)(2) and the guidance in the commentary to § 55(c)(2) regarding protected balances also apply to a balance on the account subject to § 9(h)(2)(iii). Finally, the comment states that, if a creditor terminates or suspends credit availability based on a consumer’s rejection of a significant change in terms, the balance on the account for purposes of § 9(h)(2)(iii) is the balance at the end of the day on which credit availability was terminated or suspended. However, if a creditor does not terminate or suspend credit availability, the balance on the account is the balance on a date that is not earlier than the date on which the creditor was notified of the rejection.

Internet Payments. § 10(b)(2)(ii) of the September Proposal stated that a creditor may set reasonable cut-off times for payments to be received by mail, by electronic means, by telephone, and in person, provided that such cut-off times must be no earlier than 5 p.m. on the payment due date at the location specified by the creditor for the receipt of such payments. Proposed comment 10(b)-2 stated that if a creditor promotes electronic payment via its Web site, any payments made via the creditor’s Web site are generally conforming payments for purposes of § 10(b). An industry commenter requested that a creditor be permitted to set a cut-off time for payments via its Web site, consistent with the general rule in § 10(b). The final comment incorporates the requested change.

Payments at Branches. § 10(b)(3) of the Rule states that, notwithstanding the general rule in proposed § 10(b)(2)(ii), card issuers that are financial institutions that accept payments in person at a branch or office may not impose a cut-off time earlier than the close of business of that office or branch, even if the office or branch closes later than 5 p.m. (An industry commenter suggested that issuers should not be obligated to treat in-person payments at branches as conforming, but the Board did not incorporate that comment.)

• Early Closing Times. Some industry commenters argued that it was unclear whether the September Proposal required that bank branches remain open until 5 p.m. if a card issuer accepts in-person payments at a branch location. In response, amended § 10(b)(3)(i) states that, notwithstanding § 10(b)(2)(ii), a card issuer may impose a cut-off time earlier than 5 p.m. for payments on a credit card account under an open-end (not home-secured) consumer credit plan made in person at a branch or office of a card issuer that is a financial institution, if the close of business of the branch or office is earlier than 5 p.m.
• Definition of “Financial Institution.” The September Proposal proposed to adopt a definition in § 10(b)(3)(ii) of “financial institution” for purposes of § 10(b)(3); i.e., that “financial institution” has the same meaning as “depository institution” as defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(c)). In response to industry comments noting that “credit unions” were excluded from the proposal, revised § 10(b)(3)(ii) in the Rule states that a “financial institution” means a bank, savings association, or credit union.
• Application of Payments at Point of Sale. Comment 10(b)-5 of the September Proposal stated that if a creditor that is a financial institution issues a credit card that can be used only for transactions with a particular merchant or merchants, i.e., a private label card, and a consumer is able to make a payment on that credit card account at a retail location maintained by such a merchant, that retail location is not considered to be a branch or office of the creditor for purposes of § 10(b)(3). One industry commenter asked that this comment be expanded to cover co-branded cards in addition to private label credit cards. In response, comment 10(b)-5 in the Rule was expanded to address co-branded credit cards.
• Payments at Affiliates. New comment 10(b)-7 states that if an affiliate of a card issuer that is a financial institution shares a name with the card issuer and accepts in-person payments on the card issuer’s credit card accounts, those payments are subject to the requirements of § 10(b)(3). (The Board declined to incorporate an issuer’s comment that in-person payments made at a branch or location of a card issuer’s affiliate should not be treated as conforming payments.)

Treating a Payment as Late. §10(d) of the Rule states that that if the due date for payments is a day on which the creditor does not receive or accept payments by mail, the creditor may generally not treat a payment received by any method the next business day as late for any purpose.

• Interest. An industry commenter argued that § 10(d) should not prohibit charging interest for the period between the due date on which the creditor does not accept payments by mail and the following business day. In response, new comment 10(d)-2 cross-references the guidance on “treating a payment as late for any purpose” in comment 5(b)(2)(ii)-2, which does not prohibit charging interest. The comment also states that when an account is not eligible for a grace period, imposing a finance charge due to a periodic interest rate does not constitute treating a payment as late.
• Non-Standard Business Days. One industry commenter asked the Board to clarify the operation of § 10(d) if a holiday on which an issuer does not accept payments is on a Friday but the bank accepts payments by mail on the following Saturday. In response, revised § 10(d)(1) of the Rule states that, for the purposes of § 10(d), the “next business day” means the next day on which the creditor accepts or receives payments by mail. (However, the Board did not adopt a comment arguing that, if an issuer receives multiple mail deliveries on the next business day following a due date on which it does not accept mailed payments, only payments in the first delivery should be required to be treated as timely.)

Limitation on Fees Relating to Method of Payment. § 10(e) of the Rule generally prohibits creditors, in connection with a credit card account under an open-end (not home-secured) consumer credit plan, from imposing a separate fee to allow consumers to make a payment by any method, such as mail, electronic, or telephone payments, unless such payment method involves an expedited service by a customer service representative of the creditor.

• Separate Fee. Comment 10(e)-1 of the September Proposal defined “separate fee” as a fee imposed on a consumer for making a single payment to the account. The final comment was revised by removing the word “single” so that the prohibition on a “separate fee” applies to any general payment method which does not involve expedited service by a customer service representative and to any payment to an account, regardless of whether the payment involves a single payment transaction or multiple payment transactions. The term “separate fee” includes any fee which may be imposed periodically to allow consumers to make payments.
• Customer Service Representative. Comment 10(e)-3 of the September Proposal stated that expedited service by a live customer service representative of the creditor would be required in order for a creditor to charge a separate fee to allow consumers to make a payment. One commenter noted that some payment systems require an initial consumer contact through an automated system though the payment is ultimately handled by a live customer service representative. In response, revised comment 10(e)-3 notes that that a payment made with the assistance of a live representative or agent of the credit, which also requires an automated system for a portion of the transaction, is considered service by a live customer service representative.

Changes by Card Issuer. § 10(f) of the September Proposal prohibited a credit card issuer from imposing any late fee or finance charge for a late payment on a credit card account if a card issuer makes a material change in the address for receiving cardholder payments or procedures for handling cardholder payments, and such change causes a material delay in the crediting of a payment made during the 60-day period following the date on which the change took effect. The provision was revised in the Rule to state that the prohibition on imposing a late fee or finance charge applies only during the 60-day period following the date on which a material change took effect.

• Retail Location. Revised comment 10(f)-3.ii of the Rule provides a safe harbor specifically for card issuers with a retail location which accepts payment. A card issuer may impose a late fee or finance charge for a late payment during the 60-day period following a material change in a retail location which accepts payments, such as closing a retail location or no longer accepting payments at the retail location. However, if a card issuer 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 a 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. In addition, new comment 10(f)-4.vi addresses circumstances when a card issuer that accepts payment at a retail location makes a material change in procedures for handling cardholder payments at the retail location, such as no longer accepting payments in person as a conforming payment. The new example also provides guidance for circumstances when a card issuer is notified by a consumer that a late fee or finance charge for a late payment was caused by a material change. Under these circumstances, a card issuer must waive or remove the late fee or finance charge or credit the customer’s account in an amount equal to the fee or charge.
• Branch Location. Comment 10(f)-4.iv of the September Proposal identified a permanent closure of a local branch office of a card issuer as an example of a material change in address for receiving payment. Several industry commenters raised concerns about proposed comment 10(f)-4.iv. In particular, industry commenters argued that a branch closing of a bank is not a material change in the address for receiving payment. Two commenters noted that national banks and insured depository institutions are required to give 90 days’ advance notice related to the branch closing as well as post a notice at the branch location at least 30 days prior to closure. Commenters argued that these advance notice requirements provide adequate notice for customers to make alternative arrangements for payment. Furthermore, industry commenters stated that banks would have difficulty determining which customers “regularly make payments” at particular branches and which late payments were caused by the closing of a bank branch. In response to these comments, the revised comment in the Rule states that a card issuer is not required to determine whether a customer “regularly makes payments” at a particular branch. The comment as revised provides an example of a card issuer that chooses to rely on the safe harbor for the late payments on customer accounts that it reasonably believes may be affected by the branch closure.

Settlement of Estates. § 11(c)(1) of the September Proposal set forth the general rule that card issuers must adopt reasonable procedures designed to ensure that any administrator of an estate of a deceased account holder can determine the amount of and pay any balance on the decedent’s credit card account in a timely manner. Revised §11(c)(1) of the Rule requires that an issuer’s reasonable procedures be written.

• Administrator. New comment 11(c)-1 states that, for purposes of § 11(c), the term “administrator” of an estate means an administrator, executor, or any personal representative of an estate who is authorized to act on behalf of the estate. (The reference to “executor” in § 11(c) of the Rule was removed and proposed comment 11(c)-1 was renumbered as comment 11(c)-2.)
• Evidence. Industry commenters asked the Board to permit card issuers to require evidence, such as written documentation, that an administrator, executor, or personal representative has the authority to act on behalf of the estate; disclosing financial information to third parties raised privacy concerns. In response, new comment 11(c)-2.v states that a card issuer is permitted to establish reasonable procedures requiring verification of an administrator’s authority to act on behalf of an estate.
• Communication Channels. Commenters requested additional guidance regarding the use of designated communication channels, such as a specific toll-free number or mailing address. Industry commenters cited the reduced operational costs and burden associated with requiring administrators to use designated communication channels because specialized training and customer service representatives who handle estate matters could be consolidated. Other commenters recommended making additional methods available for providing an easily accessible point of contact for estate administrators or family members of deceased account holders. One commenter suggested a standardized form or format which an administrator may use to register an account holder as deceased at multiple card issuers. Another commenter argued that the examples for reasonable procedures should address practical procedures, and not “debt forgiveness.” In response to these comments, new comment 11(c)-2.vi states that a card issuer may designate a department, business unit, or communication channel for administrators in order to expedite handling estate matters. Additionally, new comment 11(c)-2.vii states that a card issuer should be able to direct administrators who call a toll-free number or send mail to a general correspondence address to the appropriate customer service representative, department, business unit, or communication channel.
• Periodic Statements. Comment 11(c)-5 of the September Proposal (renumbered as comment 11(c)-3 in the Rule) provided guidance to card issuers in complying with the requirement to provide a timely statement of balance under § 11(c)(3) of the September Proposal (renumbered as § 11(c)(2) in the Rule). Among other matters, the proposed comment stated that § 11(c)(3) of the September Proposal does not relieve card issuers of the requirements to provide a periodic statement under § 5(b)(2). A periodic statement may satisfy the requirements of § 11(c)(3) of the September Proposal if provided within 30 days of notice of the consumer’s death. A commenter stated that proposed comment 11(c)-5 should reference the 30-day period following the date of the balance request and not the notice of the account holder’s death. In response, comment 11(c)-3 in the Rule was revised to reference the date of the balance request with regard to using a periodic statement to satisfy the requirements of § 11(c)(2) of the Rule.

Ability to Pay. § 51(a)(1) in the September Proposal required that the card issuer’s consideration of the ability of the consumer to make the required minimum periodic payments must be based on the consumer’s income or assets and the consumer’s current obligations. The provision also required card issuers to have reasonable policies and procedures in place to consider this information. Industry comments argued that a review of income, assets and obligations is not solely predictive of a consumer’s ability to pay—for example, payment history or credit scores also are predictive—but the Rule incorporates the provision as proposed.

• Income/Assets Information. In response to comments from retailers listing challenges with respect to collecting income or asset information directly from consumers at point of sale, comment 51(a)-4, renumbered as comment 51(a)(1)-4 in the Rule, was revised to clarify that issuers need not obtain income or asset information directly from consumers. Card issuers may rely on information from third parties, subject to any applicable restrictions on information sharing. Furthermore, card issuers may rely on empirically derived, demonstrably and statistically sound models that reasonably estimate a consumer’s income or assets. (A conforming change—that issuers may rely on information from third parties—was also made in § 51(b)(1), regarding opening accounts and increasing credit lines for young consumers.) The Rule does not provide, as one commenter requested, a de minimis exception for considering a consumer’s income or assets.
• Policies and Procedures. The Rule moved the requirement to maintain policies and procedures to a new § 51(a)(1)(ii) and amended the provision to require that the reasonable policies and procedures be written. The Rule also added that reasonable policies and procedures to consider a consumer’s ability to make the required payments would 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. Furthermore, the provision provides that 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.
• Reg. B Factors. Comment 51(a)-1 of the September Proposal stated that card issuers may consider credit reports, credit scores, and any other factor consistent with Regulation B (12 CFR Part 202) in considering a consumer’s ability to pay. The comment, adopted as comment 51(a)(1)-1, was amended to include a reference to consumer reports.
• Consumer's Current Obligations. Comment 51(a)-5 of the September Proposal stated that, in considering a consumer’s current obligations, a card issuer may rely on information provided by the consumer or in a consumer’s credit report. The comment, adopted as 51(a)(1)-5, was revised so that, when evaluating a consumer’s current open-end obligations, card issuers should not be required to assume such obligations are fully utilized.
• Joint Accounts. New comment 51(a)(1)-6 states that, for joint accounts, a card issuer may consider the ability of both applicants or account holders to make the required payments, instead of considering the ability of each consumer individually.
• Minimum Payments and Promotional Programs. § 51(a)(2)(i) of the September Proposal required card issuers to use a reasonable method for estimating required minimum periodic payments, and proposed § 51(a)(2)(ii) provided a safe harbor that card issuers could use to comply with this requirement. Specifically, the proposed safe harbor required the card issuer to assume utilization of the full credit line that the issuer is considering offering to the consumer from the first day of the billing cycle. The proposed safe harbor also required the issuer to use a minimum payment formula employed by the issuer for the product the issuer is considering offering to the consumer or, in the case of an existing account, the minimum payment formula that currently applies to that account. If the applicable minimum payment formula includes interest charges, the proposed safe harbor required the card issuer to estimate those charges using an interest rate that the issuer is considering offering to the consumer for purchases or, in the case of an existing account, the interest rate that currently applies to purchases. Finally, if the applicable minimum payment formula included fees, the proposed safe harbor permitted the card issuer to assume that no fees have been charged to the account. New comment 51(a)(2)-1 states that if an account has or may have a promotional program, such as a deferred payment or similar program, where there is no applicable minimum payment formula during the promotional period, the issuer must estimate the required minimum periodic payment based on the minimum payment formula that will apply when the promotion ends.
• Minimum Payments – Computation. § 51(a)(2)(ii) of the September Proposal also provided that if the applicable minimum payment formula includes interest charges, the proposed safe harbor required the card issuer to estimate those charges using an interest rate that the issuer is considering offering to the consumer for purchases or, in the case of an existing account, the interest rate that currently applies to purchases. New comment 51(a)(2)-2 provides that if the interest rate for purchases is or may be a promotional rate, the safe harbor requires the issuer to use the post-promotional rate to estimate interest charges. Finally, § 51(a)(2)(ii) was revised to require that, if a minimum payment formula includes the addition of any mandatory fees, the safe harbor requires the card issuer to assume that such fees are charged. New comment 51(a)(2)-3 provides that mandatory fees for which a card issuer is required to assume are charged include those fees that a consumer will be required to pay if the account is opened, such as an annual fee.
• Cosigners. Comment 51(b)(2)-1 of the September Proposal provided that the requirement under § 51(b)(2) that a cosigner, guarantor, or joint account holder for a credit card account opened pursuant to § 51(b)(1)(ii) must agree in writing to assume liability for a credit line increase does not apply if the cosigner, guarantor or joint account holder who is at least 21 years old requests the increase. The proposed comment was modified in the Rule to state that it must be the cosigner, guarantor, or joint account holder who is at least 21 years old who initiates the request to increase the credit line.

Limitation on Fees. § 52(a)(1) of the Rule states that the total amount of fees a consumer is required to pay with respect to a credit card account during the first year must not exceed 25 percent of the credit limit in effect at account opening. Comment 52(a)(1)(i)-2 of the September Proposal stated that a card issuer that charges a fee to a credit card account that exceeds the 25 percent limit could comply with § 52(a)(1) by waiving or removing the fee and any associated interest charges or crediting the account for an amount equal to the fee and any associated interest charges at the end of the billing cycle during which the fee was charged. Some industry commenters expressed concern that, because fees are totaled at the end of the billing cycle, there would be circumstances in which their systems would not be able to identify a fee that exceeds the 25 percent limit in time to correct the account before the billing cycle ends (such as when the fee was charged late in the cycle). In response, the comment (redesignated 52(a)(1)-2 in the Rule) now requires card issuers to waive or remove the excess 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. Additionally, comment 52(a)(1)-3 of the Rule states that, if a card issuer decreases the credit limit during the first year after the account is opened, § 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 the fee was charged.

Allocation of Payments. § 53(a) of the Rule states that, except as provided in § 53(b), when a consumer makes a payment in excess of the required minimum periodic payment for a credit card account under an open-end (not home-secured) consumer credit plan, the card issuer must allocate the excess amount first to the balance with the highest annual percentage rate and any remaining portion to the other balances in descending order based on the applicable annual percentage rate.

• Date of Allocation. Comment 53-2 of the September Proposal stated that § 53 permits a card issuer to allocate an excess payment based on the annual percentage rates and balances on the date the preceding billing cycle ends, on the date the payment is credited to the account, or on any day in between those two dates. In response to consumer comments that card issuers could misuse this flexibility to systematically vary the dates on which payments are allocated at the account level in order to generate higher interest charges, the comment was revised in the Rule to state that the day used by the card issuer to determine the applicable annual percentage rates and balances for purposes of § 53 generally must be consistent from billing cycle to billing cycle, although the card issuer may adjust this day from time to time.
• Claim/Defense. Comment 53-3 of the September Proposal stated that, when a consumer asserts a claim or defense against the card issuer pursuant to § 12(c), the card issuer must apply the consumer’s payment in a manner that avoids or minimizes any reduction in the amount of that claim or defense. The proposed comment was revised so that the same requirements apply with respect to amounts subject to billing error disputes under § 13.
• Promotional Balances – Consumer Requests. § 53(b)(1) of the Rule provides that, when a balance is subject to a deferred interest or similar program, the card issuer must allocate any amount paid by the consumer in excess of the required minimum periodic payment consistent with § 53(a) 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 § 53(a). In response to industry comment, as an alternative, new § 53(b)(2) of the Rule permits a card issuer to allocate payments in excess of the minimum consistent with a consumer’s request when the account has a balance subject to a deferred interest or similar program. (If an account has no promotional balances, issuers are not permitted to allocate payments in accordance with the consumer’s request.) New comment 53(b)-3 states that § 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 § 53(b)(1). Comment 53(b)-3 also provides examples of what does and does not constitute a consumer request for purposes of § 53(b)(2) (e.g., a consumer makes a request for purposes of § 53(b)(2) if the consumer contacts the card issuer 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).
• Promotional Balances – Application. Comment 53(b)-2 of the September Proposal was revised to state that § 53(b) applies regardless of whether the consumer is required to make payments with respect to the balance subject to the deferred interest or similar program during the specified period. The revised comment also states that a temporary annual percentage rate of zero percent that applies for a specified period of time consistent with § 55(b)(1) is not a deferred interest or similar program for purposes of § 53(b) 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.

Limitations on the Imposition of Finance Charges. § 54(a)(1)(ii) of the Rule states that, except as provided in § 54(b), a card issuer must not impose finance charges as a result of the loss of a grace period on a credit card account if those finance charges are based on any portion of a balance subject to a grace period that was repaid prior to the expiration of the grace period. In response to industry commenters, comments 54(a)(1)-1 and -2 have been revised to state the circumstances in which § 54 applies:

• Conditioning Eligibility. A card issuer is permitted to condition eligibility for the grace period on the payment of certain transactions or balances within the specified period, rather than requiring consumers to pay in full all transactions or balances on the account within that period. § 54 does not limit the imposition of finance charges with respect to a transaction when the consumer is not eligible for a grace period on that transaction at the end of the billing cycle in which the transaction occurred.
• Interest Waiver/Rebate. The practice of waiving or rebating finance charges on an individualized basis (such as in response to a consumer’s request) and the practice of waiving or rebating trailing or residual interest do not constitute provision of a grace period for purposes of § 54. However, interest waiver or rebate programs, in which all interest accrued on purchases is waived or rebated if the purchase balance at the end of the billing cycle during which the purchases occurred is paid in full by the following payment due date, are subject to the requirements of § 54.

Variable Rate Floor and Index Adjustment. § 55(b)(2) of the Rule states that a creditor may increase an annual percentage rate applicable to existing and future balances if the rate varies according to an index that is not under the creditor’s control and that is available to the general public when the rate increase is due to an increase in the index.

• Rate Floors. Consumer groups and a member of Congress complained that an issuer exerts “control” over an index when the issuer sets a minimum rate or “floor” below which a variable rate cannot fall even if a decrease would be consistent with a change in the applicable index. In response, comment 55(b)(2)-2 was revised to state that a card issuer “exercises control” over the operation of the 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. (An issuer is permitted to set a fixed maximum rate or “ceiling” that does not permit the variable rate to increase consistent with increases in an index.)
• Rate Adjustment. The same commenters also complained about certain practices of some issuers when adjusting or resetting variable rates to account for changes in the index. Specifically, these commenters argued that an issuer controls an index if the variable rate can be calculated based on any index value (i.e., the highest value), during a period of time. In response, comment 55(b)(2)-2 was revised to state that, if the terms of the account allow an issuer to adjust the rate using any available index value, the card issuer cannot apply increases in the variable rate to existing balances pursuant to § 55(b)(2). The comment also provides that a card issuer is permitted to adjust the variable rate based on the value of the index on a particular day or, in the alternative, the average index value during a specified period.

Over-the-Limit Fees. § 56(b)(1) of the Rule prohibits a card issuer from assessing a fee or charge on a consumer’s account for paying an over-the-limit transaction unless the consumer is given notice and a reasonable opportunity to affirmatively consent, or opt in, to the issuer’s payment of over-the-limit transactions, and the consumer opted in. If the consumer opts in, the issuer must provide the consumer notice of the right to revoke that consent after assessing an over-the-limit fee or charge on the consumer’s account. Industry commenters stated that it was unclear in the September Proposal whether an issuer would be permitted to charge an over-the-limit fee where a transaction was authorized on the issuer’s reasonable belief that the consumer had sufficient available credit for a transaction but the transaction nonetheless exceeded the consumer’s credit limit when it later posts to the account (for example, because of an intervening charge).

• Reasonable Belief. Industry commenters requested guidance regarding the “reasonable belief” standard. Comment 56(b)-1 as revised states that § 56(b)(1)(i)-(v), including the requirements to provide notice and obtain a consumer’s affirmative consent to a card issuer’s payment of over-the-limit transactions, do not apply to any card issuer that has a policy and practice of declining to pay any over-the-limit transaction when the card issuer has a reasonable belief that completing the transaction will cause the consumer to exceed his or her credit limit. While the notice and opt in requirements of the rule do not apply to such card issuers, the prohibition against assessing an over-the-limit fee or charge without the consumer’s affirmative consent continues to apply. The revised comment also states that a card issuer has a policy and practice of declining transactions on a “reasonable belief” that a consumer does not have sufficient available credit if it only authorizes those transactions that the card issuer reasonably believes, at the time of authorization, would not cause the consumer to exceed a credit limit.
• Method of Assessment. Comment 56(b)-3 of the September Proposal provided that the opt in requirement applies whether an issuer assesses over-the-limit fees or charges on a per transaction basis or as a periodic account or maintenance fee that is imposed each cycle for the creditor’s payment of over-the-limit transactions regardless of whether the consumer exceeded the credit limit during a particular cycle (for example, a monthly “over-the-limit protection” fee). The Rule omits this comment.
• No Imposition of Fee. § 56(b)(2) of the September Proposal provided that a creditor may pay an over-the-limit transaction even if the consumer did not provide affirmative consent, so long as the creditor does not impose a fee or charge for paying the transaction. Proposed comment 56(b)(2)-1 stated that the prohibition on imposing fees for paying an over-the-limit transaction where the consumer did not opt in applies even in circumstances where the creditor is unable to avoid paying a transaction that exceeds the consumer’s credit limit. Industry commenters asked for exceptions to allow creditors to impose over-the-limit fees or charges even if the consumer did not consent when issuers are not able to block such transactions at the time of purchase. One industry commenter recommended a broad exception to the fee prohibition for any transactions that are approved based on a reasonable belief that the transaction would not exceed the consumer’s credit limit. The Board declined to incorporate these comments in the final rule. To reinforce the point, for the Rule, the Board added a third example to Comment 56(b)(2)-1, which addresses circumstances where an intervening transaction (for example, a recurring charge) that is charged to the account before a previously authorized transaction is submitted for payment causes the consumer to exceed his or her credit limit with respect to the authorized transaction. Under these circumstances, the card issuer would not be permitted to assess an over-the-limit fee or charge for the previously authorized transaction absent consumer consent to the payment of over-the-limit transactions.
• Other Fees. Comment 56(b)(2)-2 of the September Proposal stated that a creditor is not precluded from assessing other fees and charges unrelated to the payment of the over-the-limit transaction itself even where the consumer did not provide consent to the creditor’s over-the-limit service, to the extent permitted under applicable law. The comment was revised to state that a card issuer may debit the consumer’s account for the amount of the transaction, provided that the card issuer is permitted to do so under applicable law.
• Notice of Right to Revoke. § 56(d)(2) of the September Proposal provided that notice of the consumer’s right to revoke a prior election for the creditor’s over-the-limit service must appear on each periodic statement that reflects the assessment of an over-the-limit fee or charge on a consumer’s account. One industry commenter stated that the periodic statement requirement would be overly burdensome and costly for financial institutions, noting that providing a consumer notice of his or her right to revoke consent at the time of the opt in would sufficiently inform the consumer of that possibility without requiring creditors to bear the cost of providing a revocation notice on each statement reflecting an over-the-limit fee or charge. However, the Rule reflects the September Proposal. Additionally, the Rule omits proposed comment 56(d)-1, which would have permitted creditors to include a revocation notice on each periodic statement whether or not a consumer incurred an over-the-limit fee or charge.
• Description of Right to Revoke. § 56(e)(1)(iii) of the Rule requires card issuers to explain the consumer’s right to affirmatively consent to the card issuer’s payment of over-the-limit transactions, including the method(s) that the card issuer may use to exercise the right to opt in. Comment 56(e)-2 provides guidance regarding how a card issuer may describe this right. Under the comment as proposed, a creditor would have been permitted to describe the benefits of the payment of over-the-limit transactions. However, the Rule omits this option.
• Reversal of Fees. § 56(g) of the Rule provides that a consumer may affirmatively consent to a creditor’s payment of over-the-limit transactions at any time in the manner described in the opt in notice. Comment 56(g)-1 was revised to state that a consumer’s decision to revoke a prior consent would not require the card issuer to waive or reverse any over-the-limit fee or charges assessed to the consumer’s account for transactions that occurred prior to the card issuer’s implementation of the consumer’s revocation request. In addition, the Rule does not prevent the card issuer from assessing over-the-limit fees in a subsequent cycle if the consumer’s account balance continues to exceed the credit limit after the payment due date as a result of an over-the-limit transaction that occurred prior to the consumer’s revocation of consent.
• Limitation on Fee Assessments. § 56(j)(1)(i) of the September Proposal prohibited a creditor from imposing more than one over-the-limit fee or charge on a consumer’s credit card account in any billing cycle. The provision in the Rule further prohibits a card issuer from imposing any over-the-limit fees or charges for the same transaction in the second or third cycle unless the consumer failed to reduce the account balance below the credit limit by the payment due date of either cycle. Additionally, new comment 56(j)-1 states that an over-the-limit fee or charge may be assessed on a consumer’s account only if the consumer exceeded the credit limit during the billing cycle.
• Issuer Fees. § 56(j)(4) of the September Proposal prohibited card issuers from imposing an over-the-limit fee or charge if a consumer exceeds a credit limit solely because of fees or interest charged by the card issuer to the consumer’s account during the billing cycle. For purposes of this prohibition, the fees or interest charges that may not trigger the imposition of an over-the-limit fee or charge are considered charges imposed as part of the plan under § 6(b)(3)(i). New comment 56(j)-5 adds a prohibition on assessment of an over-the-limit fee or charge even if the credit limit was exceeded due to fees for services requested by the consumer if such fees constitute charges imposed as part of the plan (for example, fees for voluntary debt cancellation or suspension coverage). The prohibition does not, however, restrict card issuers from assessing over-the-limit fees due to accrued finance charges or fees from prior cycles that have subsequently been added to the account balance.

Registration with Board. § 57(d)(1) of the September Proposal required creditors that were a party to one or more college credit card agreements to register with the Board before submitting their first annual report. This registration requirement was eliminated from the Rule.

Content of Annual Reports. § 57(d) of the September Proposal required that annual reports include a copy of each college credit card agreement to which the card issuer was a party that was in effect during the period covered by the report, as well as certain related information specified in new TILA Section 127(r)(2), including the total dollar amount of payments pursuant to the agreement from the card issuer to the institution (or affiliated organization) during the period covered by the report, and how such amount is determined; the total number of credit card accounts opened pursuant to the agreement during the period; and the total number of such credit card accounts that were open at the end of the period. The Rule was amended to specify that annual reports must include “the method or formula used to determine” the amount of payments from an issuer to an institution of higher education or affiliated organization during the reporting period, rather than “how such amount is determined” as proposed. (The Board also solicited comment on whether issuers should be required to submit additional information on the terms and conditions of college credit card agreements in the annual report. One issuer argued that such additional information should not be required, citing the additional burdens. The Board agreed, and did not further amend the proposed provision.)

Internet Posting of Credit Card Agreements. Generally, § 58 of the Rule requires that card issuers post on their Web sites the credit card agreements they offer to the public. Issuers must also submit these agreements to the Board quarterly for posting on the Board’s public Web site.

• Definition of “Credit Card Agreement.” The definition of “credit card agreement” under § 58(b)(1) of the Rule indicates that an agreement may consist of a “document or documents.” New comment 58(b)(1)-2 states that a “credit card agreement” may consist of multiple documents that, taken together, define the legal obligation between the issuer and the consumer. As an example, the new comment notes that provisions that mandate arbitration or allow an issuer to unilaterally alter the terms of the issuer’s or consumer’s obligation are part of the agreement even if they are provided to the consumer in a document separate from the basic credit contract.
• Definition of “Open Account.” § 58(c)(5) of the Rule provides that a card issuer is not required to submit any credit card agreements to the Board if the card issuer had fewer than 10,000 open credit card accounts as of the last business day of the calendar quarter. Comment 58(e)-2 of the September Proposal provided additional guidance regarding the definition of open accounts for purposes of the de minimis exception. The Rule eliminates this comment and adds a new definition of “open account.” Under new § 58(b)(5), an account is an “open account” or “open credit card account” if it is a credit card account under an open-end (not home-secured) consumer credit plan and either: (i) the cardholder can obtain extensions of credit on the account; or (ii) there is an outstanding balance on the account that has not been charged off. An account suspended only temporarily (for example, due to a report by the cardholder of unauthorized use of the card) is considered an open account or open credit card account. The Rule also includes new comment 58(b)(5)-1, which states that, under the § 58(b)(5) definition of open account, an account is considered open if either of the two conditions set forth in the definition are met even if the account is inactive. The comment also states that an account is considered open if that account was closed for new activity (for example, due to default by the cardholder) but the cardholder is still making payments to pay off the outstanding balance.
• Definition of “Pricing Information.” § 58(b)(4) of the September Proposal defined the term “pricing information” to include: (1) the information under § 6(b)(2)(i) through (b)(2)(xii), (b)(3) and (b)(4) that is required to be disclosed in writing pursuant to § 5(a)(1)(ii); (2) the credit limit; and (3) the method used to calculate required minimum payments. In the Rule, “pricing information” omits the information listed in § 6(b)(3) but continues to include the information listed in § 6(b)(2)(i) through (b)(2)(xii) and § 6(b)(4). In addition, in response to industry comments arguing that the range of credit limits offered in connection with a particular agreement is likely to be so broad that it would not assist consumers in shopping for a credit card and that credit limits change so often that agreements would need to be updated regularly, “pricing information” does not include credit limits in the Rule. Citing similar concerns, industry commenters also argued that pricing information also excludes temporary or promotional rates and terms or rates and terms that apply only to protected balances. In response, the Rule also excludes that information from “pricing information.” Finally, the method used to calculate minimum payments also is excluded from “pricing information” in the Rule. (The Board declined to eliminate the requirement to post pricing information altogether, as requested by one industry commenter.)
• Registration with the Board. § 58(c) of the September Proposal required any card issuer that offered one or more credit card agreements as of December 31, 2009 to register with the Board. The Rule omits proposed § 58(c); instead, § 58(c)(1) of the Rule includes a new requirement that issuers submit, along with their quarterly submissions, identifying information relating to 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).
• Resubmission of Amended Agreements. Under § 58(c)(1) of the Rule, issuers need only resubmit an agreement to the Board when it is amended (as defined in § 58(b)(2)). Several commenters asked that issuers be permitted to submit a complete, updated set of credit card agreements on a quarterly basis, rather than tracking which agreements are being modified, withdrawn, or added. These commenters argued that requiring issuers to track which agreements are being modified, withdrawn, or amended could impose a substantial burden on some issuers with no corresponding benefit to consumers. In response, new comment 58(c)(1)-3 states that § 58(c)(1) permits an issuer to submit to the Board on a quarterly basis a complete, updated set of the credit card agreements the issuer offers to the public (and provides an example).
• De Minimis Exception. § 58(c)(5) of the Rule, proposed as § 58(e), provides an exception to the requirement that credit card agreements be submitted to the Board for issuers with fewer than 10,000 open credit card accounts under open-end (not home-secured) consumer credit plans. New comment 58(c)(5)-1 clarifies the relationship between the de minimis exception and the private label credit card and product testing exceptions. The de minimis exception is distinct from the private label credit card exception under § 58(c)(6) (see below) and the product testing exception under § 58(c)(7) (see below). While the de minimis exception provides that an issuer with fewer than 10,000 open credit card accounts is not required to submit any agreements to the Board, regardless of whether those agreements qualify for the private label credit card exception or the product testing exception, the private label credit card exception and the product testing exception provide that an issuer is not required to submit to the Board agreements offered solely in connection with certain types of credit card plans with fewer than 10,000 open accounts, regardless of the issuer’s total number of open accounts.
• Product Testing Exception. New § 58(c)(7) of the Rule provides an exception to the requirement that credit card agreements be submitted to the Board for certain agreements offered to the public solely as part of a product test by an issuer. Under § 58(c)(7)(i), an issuer is not required to submit to the Board a credit card agreement if, as of the last day of the calendar quarter, the agreement: (A) is offered as part of a product test offered to only a limited group of consumers for a limited period of time; (B) is used for fewer than 10,000 open accounts; and (C) is not offered to the public other than in connection with such a product test. § 58(c)(7)(ii) provides that if an agreement that previously qualified for the product testing exception ceases to qualify, the card issuer must submit the agreement to the Board no later than the first quarterly submission deadline after the date as of which the agreement ceased to qualify. § 58(c)(7)(iii) provides that if an agreement that did not previously qualify for the product testing exception qualifies for the exception, the card issuer must continue to make quarterly submissions to the Board with respect to that agreement until the issuer notifies the Board that the agreement is being withdrawn.
• Appendix N (Form and Content). In response to industry comments stating that the form and content requirements for submissions were unclear in the September Proposal, for the Rule, the Board eliminated proposed Appendix N and incorporated the form and content requirements set forth in that appendix as new § 58(c)(8).
• Form and Content – General. New § 58(c)(8)(i)(A) of the Rule states that each agreement must contain the provisions of the agreement and the pricing information in effect as of the last business day of the preceding calendar quarter. New comment 58(c)(8)-1 provides an example. New § 58(c)(8)(i)(B) states that agreements submitted to the Board must not include any personally identifiable information relating to any cardholder. New § 58(c)(8)(i)(C) identifies certain items that are not deemed to be part of the agreement for purposes of § 58 and are not required to be included in submissions to the Board. These items are: (i) disclosures required by state or federal law, such as affiliate marketing notices, privacy policies, or disclosures under the E-Sign Act; (ii) solicitation materials; (iii) periodic statements; (iv) ancillary agreements between the issuer and the consumer, such as debt cancellation contracts or debt suspension agreements; (v) offers for credit insurance or other optional products and other similar advertisements; (vi) documents that may be sent to the consumer along with the credit card or credit card agreement, such as a cover letter, a validation sticker on the card, or other information about card security; and, incorporated in response to an industry comment, (vii) ancillary agreements between the issuer and the consumer, such as debt cancellation contracts or debt suspension agreements. Finally, new § 58(c)(8)(i)(D) provides that agreements submitted to the Board must be presented in a clear and legible font.
• Pricing Information. New § 58(c)(8)(ii)(A) of the Rule specifies that pricing information must be set forth in a single addendum to the agreement that contains only the pricing information. New comment 58(c)(8)-2 states that pricing information must be set forth in the separate addendum described in § 58(c)(8)(ii)(A) even if it is also stated elsewhere in the agreement. § 58(c)(8)(ii)(B) provides that pricing information that may vary from one cardholder to another depending on the cardholder’s creditworthiness or state of residence or other factors must be disclosed either by setting forth all the possible variations (e.g., purchase APRs of 13 percent, 15 percent, 17 percent, and 19 percent) or by providing a range of possible variations (e.g., purchase APRs ranging from 13 percent to 19 percent). (The Rule does not incorporate a comment arguing that issuers should have the flexibility to either provide pricing information and other varying information in an addendum or to provide each variation as a separate agreement.) Additionally, new comment 58(c)(8)-3 states that variations in pricing information do not constitute a separate agreement for purposes of § 58(c) and provides an example. In response to industry comments, new § 58(c)(8)(ii)(C) of the Rule provides that if a rate included in the pricing information is a variable rate, the issuer must identify the index or formula used in setting the rate and the margin. Rates that may vary from one cardholder to another must be disclosed by providing the index and the possible margins or the range of possible margins (e.g., the prime rate plus from 5 percent to 12 percent). The value of the rate and the value of the index are not required to be disclosed.
• Optional Variable Terms Addendum. New § 58(c)(8)(iii) of the Rule provides that provisions of the agreement other than the pricing information that may vary from one cardholder to another depending on the cardholder’s creditworthiness or state of residence or other factors may be set forth in a single addendum to the agreement separate from the pricing information addendum. New comment 58(c)(8)-4 gives examples of provisions that might be included in the optional variable terms addendum.
• Integrated Agreement. New § 58(c)(8)(iv) of the Rule states that issuers may not provide provisions of the agreement or pricing information in the form of change-in-terms notices or riders (other than the pricing information addendum and optional variable terms addendum described in §§ 58(c)(8)(ii) and (c)(8)(iii)). Changes in the provisions or pricing information must be integrated into the body of the agreement, the pricing information addendum or the optional variable terms addendum, as appropriate. New comment 58(c)(8)-5 explains that only two addenda may be submitted as part of an agreement—the pricing information addendum and optional variable terms addendum described in § 58(c)(8). Changes in provisions or pricing information must be integrated into the body of the agreement, pricing information addendum, or optional variable terms addendum.
• Posting of Agreements Offered to the Public. § 58(f)(1) of the September Proposal required an issuer to post on its publicly available Web site the same agreements it submitted to the Board (i.e., the agreements the issuer offered to the public). The Board proposed additional guidance regarding the posting requirement in Appendix N, paragraph 2 of the September Proposal. In the Rule, proposed § 58(f)(1) was redesignated § 58(d), and the content of Appendix N, paragraph 2, was incorporated into that section. New comment 58(d)-1 states that issuers are only required to post and maintain on their publicly available Web site the credit card agreements that the issuer must submit to the Board under § 58(c). The comment also states that the issuer in both of these cases is still required to provide each individual cardholder with access to his or her specific credit card agreement under § 58(e) by posting and maintaining the agreement on the issuer’s Web site or by providing a copy of the agreement upon the cardholder’s request. New comment 58(d)-2 states that § 58(d) does not include a special rule for issuers that do not otherwise maintain a Web site. If an issuer is required to submit one or more agreements to the Board under § 58(c), that issuer must post those agreements on a publicly available Web site it maintains. (In response to industry comments, § 58(d)(1) provides that an issuer may comply by posting and maintaining an agreement offered solely for accounts under one or more private label credit card plans in accordance with the requirements of § 58(d) on the publicly available Web site of at least one of the merchants at which credit cards issued under each private label credit card plan with 10,000 or more open accounts may be used. New comment 58(d)-3 states how this provision would apply through two examples.)
• Provision of Agreements. § 58(f)(2) of the September Proposal required each issuer to provide each individual cardholder with access to his or her specific credit card agreement by either: (1) posting and maintaining the individual cardholder’s agreement on the issuer’s Web site; or (2) making a copy of each cardholder’s agreement available to the cardholder upon that cardholder’s request. § 58(f)(2) of the September Proposal, along with material from proposed Appendix N, paragraph 3, was incorporated into the Rule as § 58(e) with modifications described below.
• “Readily Available.” Under § 58(f)(2)(ii) of the September Proposal, a card issuer that chose to make agreements available upon request was required to provide the cardholder with the ability to request a copy of the agreement both: (1) by using the issuer’s Web site (such as by clicking on a clearly identified box to make the request); and (2) by calling a toll-free telephone number displayed on the Web site and clearly identified as to purpose. In response to industry comments that a toll-free number is too expensive, § 58(e)(1)(ii)(B) of the Rule does not require that the telephone number for cardholders to call to request copies of their agreements be toll-free but instead provides that the telephone line must be “readily available.” New comment 58(e)-2 provides guidance on the “readily available” standard, stating that to satisfy the readily available standard, the card issuer must provide enough telephone lines so that cardholders get a reasonably prompt response, but that the issuer need only provide telephone service during normal business hours. The comment also states that, within its primary service area, the issuer must provide a local or toll-free telephone number, but that the issuer need not provide a toll-free number or accept collect long-distance calls from outside the area where it normally conducts business.
• Web Sites. § 58(f)(2)(ii)(A) of the September Proposal, redesignated § 58(e)(1)(ii)(A) in the Rule, required issuers to provide cardholders the ability to request a copy of their agreement by using the issuer’s Web site. Commenters noted that many card issuers do not have interactive Web sites and that some may not have Web sites at all. In response, revised § 58(e)(2) sets forth a special rule for card issuers that do not have a Web site or that have a Web site that is not interactive (i.e., a Web site from which a cardholder cannot access specific information about his or her individual account). Revised § 58(e)(2) provides that, instead of complying with § 58(e)(1), such an issuer may make agreements available upon request by providing the cardholder with the ability to request a copy of the agreement by calling a readily available telephone line, the number for which is: (i) displayed on the issuer’s Web site and clearly identified as to purpose; or (ii) included on each periodic statement sent to the cardholder and clearly identified as to purpose. New comment 58(e)-3 states that an 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 issuer’s Web site. The comment also states that an issuer without a Web site of any kind could comply by disclosing the telephone number on each periodic statement; an issuer with a non-interactive Web site could comply in the same way, or alternatively could comply by displaying the telephone number on the issuer’s Web site.

Resolution of provisions open to comment

Mandatory Compliance Dates. As discussed in the introduction to this advisory, the September Proposal requested comment as to whether to accelerate the mandatory compliance date of the January 2009 amendments from July 1, 2010, to Feb. 22, 2010. Taking account of industry comments, the Rule takes effect Feb. 22, 2010. However, only provisions relating to the Act have a mandatory compliance date of Feb. 22, 2010, while the remainder of the provisions have a mandatory compliance date of July 1, 2010.

Specifically, compliance with the following provisions of the Rule (including provisions that took effect in July 2009) is mandatory as of Feb. 22, 2010:

• The portion of §5(a)(2)(iii) (disclosures in tabular format) regarding use of the term “fixed;”
• § 5(b)(2) (mailing of periodic statements at least 21 days before payment due date);
• §§ 7(b)(11), 7(b)(12) and 7(b)(13) (late payment and minimum repayment disclosures on periodic statements);
• § 9(c)(2) (45 day notice in advance of changes to significant account terms) (except for § 9(c)(2)(iv)(D), which requires such notice to be in a tabular format);
• § 9(e) (disclosures upon renewal of a credit card);
• § 9(g) (45 day notice in advance of increase in rates due to delinquency or default or penalty) (except for § 9(g)(3)(ii), which requires such notice to be in a tabular format);
• § 9(h) (consumer right to reject certain significant changes in terms);
• § 10 (crediting of payments);
• § 11(c) (timely settlement of estate debts);
• § 16(f) (misleading terms in advertising); and
• §§ 51-58 (respectively: consideration of ability to pay; limitations on fees; allocation of payments; limitations on the imposition of finance charges; limitations on rate increases; requirements for over-the-limit transactions; reporting and marketing rules for college students; and Internet posting of credit card agreements).

Card Substitution and Notification. Comment 5(b)(1)(i)-6 of the September Proposal stated that, when a card issuer substitutes or replaces an existing credit card account with another credit card account, the card issuer must either provide notice of the terms of the new account consistent with § 6(b) (i.e., new account opening disclosures) or provide notice of the changes in the terms of the existing account consistent with § 9(c)(2) (e.g., 45 days’ notice). The comment further stated that whether a substitution or replacement results in the opening of a new account or a change in the terms of an existing account for purposes of the disclosure requirements in § 6(b) and § 9(c)(2) is determined in light of all the relevant facts and circumstances. The comment listed specific “circumstances” to consider. The Board solicited comment on whether additional facts and circumstances were relevant and on alternative approaches to determining whether a substitution or replacement results in the opening of a new account or a change in the terms of an existing account. Industry commenters suggested that the Board’s proposed approach was overly restrictive. In response, the revised comment in the Rule adds the substitution or replacement of a retail card with a cobranded general purpose credit card as an example of a circumstance in which an account can be used to conduct transactions at a greater or lesser number of merchants after the substitution or replacement. A substitution or replacement in response to a consumer’s request was also added as an example of a substitution or replacement on an individualized basis. Finally, the revised comment states that, notwithstanding the listed facts and circumstances, a card issuer that replaces a credit card or provides a new account number because the consumer reported the card stolen or because the account appears to have been used for unauthorized transactions is not required to provide a notice under § 6(b) or § 9(c)(2) unless the card issuer changed a term of the account that is subject to either of those sections.

Credit Counseling – Updated Information. The Board solicited comment on whether card issuers should be required to update more or less frequently the credit counseling information provided to consumers pursuant to § 7(b)(12)(iv)(B) of the September Proposal. Commenters generally supported an annual requirement, which the Board adopted in the final provision. The Board also solicited comment on whether card issuers should provide information regarding more or fewer than three approved organizations. In response, § 7(b)(12)(iv)(A) of the Rule requires that card issuers provide information regarding three approved organizations.

Repayment Disclosure Exemptions. The Board’s January 2009 Regulation Z amendments exempted from the repayment disclosures required by § 7(b)(12) disclosures for accounts where a fixed repayment period is specified in the account agreement and the required minimum payments amortize the entire outstanding balance on the account within the fixed repayment period. The September Proposal solicited comment as to whether to retain this exemption, and, in spite of some industry comments, the Rule does not retain this exemption related to fixed repayment periods.

Payment Cut-Off Times – Time Zones. § 10(b)(2)(ii) of the September Proposal permitted a creditor to set reasonable cut-off times for payments to be received by mail, by electronic means, by telephone, and in person, provided that such cut-off times be no earlier than 5 p.m. on the payment due date at the location specified by the creditor for the receipt of such payments. The proposal referred to the time zone of the location specified by the creditor for the receipt of payments, and the Board solicited comment on whether this clarification is appropriate for payments made by methods other than mail. Industry commenters stated that it is appropriate for the 5 p.m. cut-off time to be determined by reference to the time zone of the location specified for making payments, including for payments by means other than mail. These commenters specifically noted the operational burden that would be associated with a rule requiring a creditor to process payments differently based on the time zone of the consumer. In response, the Rule, consistent with the proposal, refers to the time zone of the location specified by the creditor for making payments.

Changes by Card Issuer. § 10(f) of the Rule prohibits a credit card issuer from imposing any late fee or finance charge for a late payment on a credit card account for 60 days following the date that a card issuer makes a material change in the address for receiving cardholder payments or procedures for handling cardholder payments, and such change causes a material delay in the crediting of a payment made during the 60-day period following the date on which the change took effect. Comment 10(f)-3 of the September Proposal provided card issuers with a safe harbor for complying with the proposed rule. Specifically, a card issuer may elect not to impose a late fee or finance charge on a consumer’s account for the 60-day period following a change in address for receiving payment or procedures for handling cardholder payments which could be reasonably expected to cause a material delay in crediting of a payment to the consumer’s account. The Board solicited comment on other reasonable methods that card issuers could use in complying with proposed § 10(f). The Board did not receive significant comments in response. However, it revised comment 10(f)-3 of the September Proposal, which is renumbered comment 10(f)-3.i in the Rule, to state that, for purposes of § 10(f), a late fee or finance charge is not imposed if the fee or charge is waived or removed, or an amount equal to the fee or charge is credited to the account.

Settlement of Estates. § 11(c)(2)(i) of the September Proposal (renumbered as § 11(c)(3)(i) in the Rule) prohibited card issuers from imposing fees and charges on a deceased consumer’s account upon receiving a request for the amount of any balance from an administrator of an estate. The Board solicited comment on whether a card issuer should be permitted to resume the imposition of fees and charges if the administrator of an estate did not pay the account balance within a specified period of time. One industry commenter argued that there should be no prohibition against charging fees or interest because it was unreasonable to provide an interest-free loan for an indefinite period of time until an estate settled. Most industry commenters, however, requested that card issuers be permitted to resume charging fees and interest if the balance on the account has not been paid within a specified time period after the balance request was made. Most industry commenters stated 30 days was a reasonable time to pay before fees and interest would resume accruing, and two commenters stated 60 days may be reasonable. Two commenters also suggested that after the time to pay had elapsed, a creditor could be required to provide an updated statement upon subsequent request by an administrator. In response, revised § 11(c)(3)(i) of the Rule prohibits card issuers from imposing any fee, such as a late fee or annual fee, on a deceased consumer’s account upon receiving a request from an administrator of an estate. For the purposes of § 11(c), new § 11(c)(3)(i) also prohibits card issuers from increasing the annual percentage rate on an account and requires card issuers to maintain the applicable interest rate on the date of receiving the request, except as provided by § 55(b)(2). Additionally, new § 11(c)(3)(ii) of the Rule requires card issuers to waive or rebate trailing or residual interest if the balance disclosed pursuant to § 11(c)(2) is paid in full within 30 days after disclosure. A card issuer may continue to accrue interest on the account balance from the date on which a timely statement of balance is provided. However, the interest must be waived or rebated if the card issuer receives payment in full within 30 days. A card issuer is not required to waive or rebate interest if payment in full is not received within 30 days. Finally, new comment 11(c)-5 provides an example.

Over-the-Limit Fees. § 56 of the Rule generally prohibits a card issuer from assessing a fee or charge on a consumer’s account for paying an over-the-limit transaction unless the consumer is given notice and a reasonable opportunity to affirmatively consent, or opt in, to the issuer’s payment of over-the-limit transactions, and the consumer opts in.

• Segregation of Notice. § 56(b) of the September Proposal required card issuers to provide notice of the consumer’s right to opt in to over-the-limit transactions if a fee is charged. The Board solicited comment regarding whether creditors should be required to segregate the opt in notice from other account disclosures. Some industry commenters argued that it was unnecessary to require that the opt in notice be segregated from other disclosures because the consumer’s consent would be provided separately from other consents or acknowledgments obtained by the creditor. In addition, one industry commenter stated that the over-the-limit opt in notice was not more significant than other disclosures given to consumers and therefore the notice did not warrant a separate segregation requirement. One industry commenter asked whether it would be permissible to include a simplified notice on the credit application that provided certain key information about the opt in right but that referred the applicant to separate terms and conditions that included the remaining disclosures. § 56(b)(1)(i) of the Rule requires that the opt in notice be segregated from all other information. The provision would not prohibit card issuers from providing a simplified notice on an application regarding the opt in right that referred the consumer to the full notice elsewhere in the application disclosures, provided that the full notice contains all of the required content segregated from all other information. In addition, comment 56(b)-4 states that, regardless of the means by which the notice of the opt in right is provided, the consumer’s consent must be obtained separately from other consents or acknowledgments provided by the consumer. Finally, the comment provides that a card issuer could obtain a consumer’s affirmative consent by providing a blank signature line or a check box on the application that the consumer can sign or select to request the over-the-limit coverage, provided that the signature line or check box is used solely for the purpose of evidencing the consumer’s choice and not for any other purpose, such as to obtain consumer consents for other account services or features or to receive disclosures electronically.
• Written Confirmation. The Board also solicited comment on whether issuers should be required to provide the consumer with written confirmation once the consumer opted in under § 56(b)(1)(iii) of the September Proposal to verify that the consumer intended to make the election. Industry commenters opposed such a requirement, stating that the statute and proposed rule already require consumers to receive notices of their right to revoke a prior consent on each periodic statement reflecting an over-the-limit fee or charge (i.e., the revocation notice would provide sufficient confirmation of the consumer’s opt in choice). Further, written confirmation is not required by the statute, and, in the event that written confirmation were required, industry commenters requested that issuers be permitted to provide such notice on or with the next periodic statement provided to the consumer after the opt in election. § 56(b)(1)(iv) of the Rule requires that the card issuer provide the consumer with confirmation of the consumer’s consent in writing, or if the consumer agrees, electronically. New § 56(d)(2) requires that written confirmation must be provided no later than the first periodic statement sent after the consumer opted in. Under new comment 56(d)-5, a card issuer could comply with the written confirmation requirement by sending a letter to the consumer acknowledging that the consumer elected to opt in to the card issuer’s service, or, in the case of a mailed request, the card issuer could provide a copy of the consumer’s completed opt in form. The new comment also provides that a card issuer could satisfy the written confirmation requirement by providing notice on the first periodic statement sent after the consumer opted in. Finally, the new comment provides that a notice consistent with the revocation notice described in § 56(e)(2) would satisfy the requirement.
• Method of Consent. § 56(c) of the September Proposal provided that a consumer may consent or revoke consent to over-the-limit transactions orally, electronically, or in writing. Proposed comment 56(c)-1 stated that the creditor may determine the means by which consumers may provide affirmative consent. The creditor could decide, for example, whether to obtain consumer consent in writing, electronically, by telephone, or to offer some or all of these options. (In addition, proposed § 56(c) required that whatever method a creditor provides for obtaining consent, such method must be equally available to the consumer to revoke the prior consent.) The September Proposal solicited comment regarding whether the Rule should require creditors to allow consumers to opt in and to revoke that consent using any of the three methods (i.e., orally, electronically, and in writing). Industry commenters stated that the final rule should not require creditors to provide all three methods of consent and revocation, citing the compliance burden and costs of setting up separate systems for obtaining consumer consents and processing consumer revocations, particularly for small community banks and credit unions. Consistent with these comments, § 56(c) of the Rule allows a card issuer to obtain a consumer’s consent using a method designated by the card issuer.
• Contents of Notice. § 56(e)(1) of the September Proposal set forth content requirements for the opt in notice provided to consumers before a creditor may assess any fees or charges for paying an over-the-limit transaction. The Board solicited comment regarding whether the Rule should permit or require any other information to be included in the opt in notice. Industry commenters suggested various additions to the model form to enable creditors to provide more information that they deemed appropriate to enhance a consumer’s understanding of the risks and benefits associated with the opt in right. Industry commenters also stated that creditors should be able to include contractual terms or safeguards regarding the right. In response, revised § 56(e)(1) of the Rule does not permit card issuers to include any information in the opt in notice that is not specified or otherwise permitted by that provision. However, the Rule also does not require any disclosures other than those required by that provision. Additionally, under § 56(e)(1)(i) of the September Proposal, the opt in notice was required to include information about the dollar amount of any fees or charges assessed on a consumer’s credit card account for an over-the-limit transaction. Proposed comment 56(e)-1 permitted a creditor to disclose the maximum fee that may be imposed or a range of fees. However, the final comment omits the reference to the range of fees. To address tiered over-the-limit fees, comment 56(e)-1 of the Rule provides that the card issuer may indicate that the consumer may be assessed a fee “up to” the maximum fee.
• Period to Process Revocation. § 56(i) of the September Proposal required a creditor to implement a consumer’s revocation request “as soon as reasonably practicable” after the creditor receives the request. The Board solicited comment as to whether a safe harbor for implementing revocation requests would be useful to facilitate compliance with the proposed rule, such as five business days from the date of the request. In addition, the Board solicited comment on an alternative approach which would require creditors to implement revocation requests within the same time period that a creditor generally takes to implement opt in requests. Industry commenters varied in their recommendations of an appropriate safe harbor for implementing a revocation request, ranging from five to 20 days or the creditor’s normal billing cycle. In general, industry commenters believed that the Board should provide flexibility for creditors in processing revocation requests because the appropriate amount of time will vary due to a number of factors. One industry commenter supported the alternative approach, stating that opt in and revocation requests could be processed in the same period of time. Another industry commenter stated that the rule should provide creditors a reasonable period of time to implement a revocation request to prevent a consumer from engaging in transactions that may exceed the consumer’s credit limit before a creditor can update its systems to decline the transactions. § 56(i) of the Rule, consistent with the September Proposal, requires a card issuer to implement a consumer’s revocation request “as soon as reasonably practicable” after the creditor receives it, as proposed. The provision does not prescribe a specific period of time within which a card issuer must honor a consumer’s revocation request.
• Failure to Replenish Credit. § 56(j)(2) of the September Proposal prohibited creditors from assessing an over-the-limit fee or charge that is caused by the creditor’s failure to “promptly” replenish the consumer’s available credit. The Board solicited comment regarding whether the Rule should provide a safe harbor specifying the number of days following the crediting of a consumer’s payment by which a creditor must replenish a consumer’s available credit. Industry commenters offered suggestions ranging from three to 10 days in order to provide creditors sufficient time to mitigate any losses due to fraud or returned payments. One industry commenter cautioned that establishing any parameters regarding replenishment could contribute to a higher cost of credit if the established time period did not permit sufficient time for payments to clear. The Board adopted the provision as proposed.

Distance from Campus. Under TILA Section 140(f)(2), offering tangible items to college students near a campus is prohibited if the items are offered to induce the student to apply for or open an open-end consumer credit plan. TILA Section 140(f)(2)(B) requires the Board to determine what is considered “near the campus.” Comment 57(c)-3 of the September Proposal provided that a location that is within 1,000 feet of the border of the campus of an institution of higher education, as defined by the institution of higher education, be considered “near.” The Board solicited comment on other appropriate ways to determine a location that is considered “near the campus.” Several industry commenters suggested that the Board provide exceptions for either retailer-creditors or bank branches on or near campuses. Another industry commenter requested that the Board provide guidance on defining the campus of an institution of higher education. One industry commenter also suggested that the Board exempt online universities to avoid interpretations that a student’s home might constitute a part of the “campus.” The Board did not incorporate any of these comments and adopted comment 57(c)-3 as proposed.

Mailing of Tangible Items. Comment 57(c)-4 of the September Proposal stated that offers of tangible items mailed to a college student at an address on or near the campus of an institution of higher education would be subject to the restrictions in § 57(c). Some industry commenters opposed the Board’s proposed comment to include offers of tangible items that are mailed to a college student at an address on or near campus. Another industry commenter requested the Board clarify whether e-mailed offers constitute offers mailed to an address on or near campus. Incorporating none of these comments, comment 57(c)-4 was adopted as proposed. (Comment 57(c)-4 does not include mailings to an e-mail address.)

Definition of “Amends.” § 58 of the Rule requires that card issuers post on their Web sites, so as to be available to the public generally, the credit card agreements they offer to the public. Issuers must also submit these agreements to the Board quarterly for posting on the Board’s public Web site and resubmit agreements that have been changed since a previous posting. Under § 58(c), an issuer is required to resubmit an agreement following a change to the agreement only if that change constitutes an amendment as defined in § 58(b)(2). The Board solicited comment on whether issuers should be required to resubmit agreements to the Board following minor, technical changes. Card issuers noted that issuers frequently make nonsubstantive changes and that requiring resubmission following technical changes would impose a significant burden. In response, the Rule includes a new definition of “amends” as § 58(b)(2). The definition specifies that an issuer “amends” an agreement if it makes a substantive change to the agreement. A change is substantive if it alters the rights or obligations of the card issuer or the consumer under the agreement. To provide additional guidance regarding what types of changes would be considered amendments, the Rule adds two new comments, comment 58(b)(2)-1 and 58(b)(2)-2. Comment 58(b)(2)-1 gives examples of changes that generally would be considered substantive, such as the addition or deletion of a provision giving the issuer or consumer a right under the agreement (e.g., a clause that allows an issuer to unilaterally change the terms of an agreement). Comment 58(b)(2)-2 gives examples of changes that generally would not be considered substantive (e.g., correction of typographical errors that do not affect the meaning of any terms of the agreement).

Small Business Exception to Posting Agreements. Generally, § 58 of the Rule requires that card issuers post on their Web sites the credit card agreements they offer to the public. Issuers must also submit these agreements to the Board quarterly for posting on the Board’s public Web site. The Board solicited comment on whether the Board should create an exception applicable in § 58 to small credit card plans offered by an issuer of any size. In response to comments, the Rule added § 58(c)(6) of the Rule as an exception for small private label credit card plans.

• Exception. Under § 58(c)(6)(i), a card issuer is not required to submit to the Board a credit card agreement if, as of the last business day of the calendar quarter, the agreement: (A) is offered for accounts under one or more private label credit card plans each of which has fewer than 10,000 open accounts; and (B) is not offered to the public other than for accounts under such a plan. § 58(c)(6)(ii) provides that if an agreement that previously qualified for the private label credit card exception ceases to qualify, the card issuer must submit the agreement to the Board no later than the first quarterly submission deadline after the date as of which the agreement ceased to qualify. § 58(c)(6)(iii) provides that if an agreement that did not previously qualify for the private label credit card exception qualifies for the exception, the card issuer must continue to make quarterly submissions to the Board with respect to that agreement until the issuer notifies the Board that the agreement is being withdrawn.
• Commentary. The Rule includes six new related comments. Comment 58(c)(6)-1 gives two explanatory examples. Comment 58(c)(6)-2 states that whether the private label credit card exception applies is determined on an agreement-by-agreement basis. Some agreements offered by an issuer may qualify for the private label credit card exception even though the issuer also offers other agreements that do not qualify. Comment 58(c)(6)-3 clarifies the relationship between the private label credit card exception and the § 58(c)(5) de minimis exception. The comment notes that the two exceptions are distinct. The private label credit card exception exempts an issuer from submitting certain agreements under a private label plan to the Board, regardless of the issuer’s overall size as measured by the issuer’s total number of open accounts. In contrast, the de minimis exception exempts an issuer from submitting any credit card agreements to the Board if the issuer has fewer than 10,000 total open accounts. Comment 58(c)(6)-4 provides an example of when an agreement would not qualify for the private label credit card exception because it is offered to the public other than for accounts under a private label credit card plan with fewer than 10,000 open accounts. Comment 58(c)(6)-4 notes that an agreement does not qualify for the private label credit card exception if it is offered in connection with one private label credit card plan with fewer than 10,000 open accounts and one private label credit card plan with 10,000 or more open accounts. Comment 58(c)(6)-5 clarifies that the private label exception applies even if the same agreement is used for more than one private label credit card plan with fewer than 10,000 open accounts. Finally, comment 58(c)(6)-6 states that the private label credit card exception applies even if an issuer offers more than one agreement in connection with a particular private label credit card plan.
• New Definitions. § 58(b)(7) contains two new definitions, “private label credit card account” and “private label credit card plan,” used in connection with the exception set forth in § 58(c)(6). § 58(b)(7) defines a private label credit card account as a credit card account under an open-end (not home-secured) consumer credit plan with a credit card that can be used to make purchases only at a single merchant or an affiliated group of merchants and defines a private label credit card plan as all of the private label credit card accounts issued by a particular issuer with credit cards usable at the same single merchant or affiliated group of merchants. New comment 58(b)(7)-1 states that the term “private label credit card account” applies to any credit card account that meets the terms of the definition, regardless of whether the account is issued by the merchant or its affiliate or by an unaffiliated third party. New comment 58(b)(7)-2 states that accounts with cobranded credit cards are not considered private label credit card accounts. New comment 58(b)(7)-3 states that an “affiliated group of merchants” means two or more affiliated merchants or other persons that are related by common ownership or common corporate control. For example, the term would include franchisees that are subject to a common set of corporate policies or practices under the terms of their franchise licenses. The term also applies to two or more merchants or other persons that agree among each other, by contract or otherwise, to accept a credit card bearing the same name, mark, or logo (other than the mark, logo, or brand of a payment network such as Visa or MasterCard), for the purchase of goods or services solely at such merchants or persons. New comment 58(b)(7)-4 provides examples of which credit card accounts constitute a private label credit card plan under § 58(b)(7), determined by where the credit cards can be used. All of the private label credit card accounts issued by a particular issuer with credit cards that are 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.

Agreement Delivery. Under § 58(f)(2)(ii) of the September Proposal, if a cardholder requested a copy of his or her credit card agreement (either using the issuer’s Web site or by calling the telephone number provided), the issuer was required to send, or otherwise make available to, the cardholder a copy of the agreement within 10 business days after receiving the request. The Board solicited comment on whether issuers should have a shorter or longer period in which to respond to cardholder requests. Commenters responded with a range of answers, from 10 business days to 60 calendar days. In response, §§ 58(e)(1)(ii) and (e)(2) of the Rule provide that the issuer must send or otherwise make available to the cardholder the agreement in electronic or paper form within 30 calendar days after receiving the cardholder’s request.

Comments considered but not implemented

Definition of “Credit Card Account under An Open End (Not Home-Secured) Consumer Credit Plan.” § 2(a)(15)(ii) of the Rule, consistent with the September Proposal, defines a “credit card account under an open end (not home-secured) consumer credit plan” to mean any credit account accessed by a credit card except a credit card that accesses a home-equity plan subject to the requirements of § 5b of Regulation Z or an overdraft line of credit accessed by a debit card. Several industry commenters also requested that the Board exclude lines of credit accessed by a debit card that can be used only at automated teller machines and lines of credit accessed solely by account numbers, but the Board declined to exclude such accounts.

Repayment Disclosures – Lines of Credit. The Rule does not include an exception, requested by a commenter, such that creditors need not provide the due date and late payment disclosures required under § 7(b)(11) for lines of credit accessed solely by account numbers.

Same Payment Due Date Each Month. The Board did not adopt any change in response to an industry comment stating that comment 7(b)(11)(i)-7 of the September Proposal, which states that a due date may be adjusted from time to time so long as it is the same thereafter, is overly restrictive, and that consumers should be able to choose their desired date. The Board also did not adopt any change in response to industry comments that stated, with respect to comment 7(b)(11)-9 of the September Proposal, that creditors should be permitted to disclose the next business day as the due date if the regular due date falls on a weekend or holiday on which they do not receive or accept payments by mail.

Long Repayment Periods. One industry commenter indicated that it maintained accounts with very long repayment periods, usually when the required minimum payment is very low in proportion to the APRs on the account (most frequently when an issuer provides a temporary hardship or workout plan). The commenter stated that requiring an issuer to calculate and disclose a long repayment period pursuant to § 7(b)(11) would be problematic because the software program cannot be written to execute an ad infinitum number of cycles. The commenter requested that the Board establish a reasonable maximum number of years for repayment and provide an appropriate statement disclosure message to reflect an account that exceeds the number of years and total costs provided. The Board, however, did not amend the September Proposal in response to this comment.

Disclosure of Range of Fees and Rates. § 7(b)(11)(i)(B) provides that if a range of late payment fees or penalty APRs could be imposed on the consumer’s account, card issuers may disclose the highest late payment fee and rate, and at the creditor’s option, an indication (such as using the phrase “up to”) that lower fees or rates may be imposed. One industry commenter requested that the Board allow credit card issuers to disclose a range of rates or a highest rate for a card program where different penalty APRs apply to different accounts in the program. The commenter indicated that some systems do not have the operational capability to tailor the periodic statement warning message as a variable message and include the precise penalty APR that applies to each account. However, the Board adopted the section as proposed.

Repayment Disclosure Exemptions. § 7(b)(12)(v)(B) of the September Proposal provided that a card issuer is not required to include the repayment disclosures on the periodic statement for a particular billing cycle immediately following two consecutive billing cycles in which the consumer paid the entire balance in full, had a zero balance or had a credit balance. Several industry commenters requested that the Board broaden this exception to not require repayment disclosures in a particular billing cycle if there is a zero balance or credit balance in the current cycle, regardless of whether this condition existed in the previous cycle. However, the Rule retains the exception as proposed.

Point of Sale Notices. As discussed above, § 9(c)(2)(v)(B) of the Rule provides that a 45-day change-in-terms notice provided pursuant to § 9(c)(2)(i) is not required when a rate increases after the expiration of a specified promotional period, provided that prior to the commencement of that period, the creditor disclosed to the consumer clearly and conspicuously in writing the length of the period and the annual percentage rate that would apply after that period. § 9(c)(2)(v)(B) requires that this disclosure be provided in close proximity and equal prominence to any disclosure of the rate that applies during that period. Many industry and retailer commenters requested amendments to these provisions. Commenters requested that issuers be permitted to provide consumers with a disclosure of an “up to” annual percentage rate and not the specific rate that will apply to a consumer’s account upon expiration of the promotion. Commenters also suggested that the Rule permit issuers to provide the required disclosures or a portion of the required disclosures with a receipt or other document. One commenter stated that these disclosures should be permitted to be given at the conclusion of a transaction. An industry commenter requested that § 9(c)(2)(v)(B) disclosures be permitted to be provided electronically without regard to the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). None of these comments were adopted in the Rule.

“Expedited.” § 10(e) of the Rule generally prohibits creditors, in connection with a credit card account under an open-end (not home-secured) consumer credit plan, from imposing a separate fee to allow consumers to make a payment by any method, such as mail, electronic, or telephone payments, unless such payment method involves an expedited service by a customer service representative of the creditor. The Board did not adopt industry comments asking that the term “expedited” be revised to include representative-assisted payments that are scheduled to occur on a specific date, i.e., a future date, and then credited or posted immediately on the requested specified date.

Six-Month Cure. § 55(b)(4) of the Rule requires issuers to lower a penalty rate after the cardholder makes six consecutive timely payments following the date of the rate increase. Several industry commenters noted that the model forms for the table required to be provided at account opening disclose a cure right that is more advantageous to the consumer than the cure required by § 55(b)(4). Proposed Samples G-17(B) and G-17(C) stated that a penalty rate will apply until the consumer makes six consecutive minimum payments when due. In contrast, the substantive right under § 55 applies only if the consumer makes the first six consecutive required minimum periodic payments when due following the effective date of the rate increase. The Board, however, adopted the disclosure of penalty rates in Samples G-17(B) and G-17(C) as proposed.

Additional § 9(c)(2)(i) Notice Exceptions. Despite industry comments, the Board did not create any additional exceptions to account changes that trigger 45 day notice pursuant to § 9(c)(2), including for rate increases made when the provisions of the Servicemembers Civil Relief Act cease to apply; upon the termination of a preferential rate for employees; and when a change in terms is favorable to a consumer (other than reductions in finance charges).

Advance Notice of Penalty Rate. For months, this issue regarding the continued feasibility of charging penalty rates had been a focus of industry comment and concern. Industry commenters requested that a creditor be permitted to send a notice disclosing a rate increase applicable to both a consumer’s outstanding balances and new transactions prior to the consumer’s account actually becoming more than 60 days delinquent. Otherwise, under the Rule as proposed, issuers would need to wait at least 105 days prior to imposing rate increases as a result of a delinquency of greater than 60 days. The Board did not adopt these comments.

Right to Reject Account Changes. § 9(h) provides that in certain circumstances a consumer may reject significant changes to account terms. Some industry commenters argued that the right to reject should not apply when the consumer consents to the change in terms, when the change is unambiguously in the consumer’s favor, or in similar circumstances. Industry commenters also argued that the Board should exempt increases in fees from the right to reject if the fee is increased to a predisclosed amount after a specified period of time, similar to the exception for temporary rates in § 9(c)(2)(v)(B). However, the Board made no changes to the Rule in response to these comments.

Young Consumers’ Ability to Pay. § 51(b) of the Rule prohibits a card issuer from opening a credit card account or increasing a credit line for a consumer less than 21 years old unless the issuer follows the requirements set forth in the section. The Rule does not incorporate industry suggestions that the Rule: (i) provide that the age of the consumer be determined at account opening as opposed to the consumer’s age as of the date of submission of the application; (ii) resolve uncertainty regarding the interaction between Regulation B and consideration of ability to pay when opening an application under § 51(b); (iii) permit card issuers, in determining whether consumers under the age of 21 have the “independent” means to repay debts incurred, to consider a consumer’s spouse’s income; or (iv) permit an issuer to increase a credit line over the phone.

Limitation on Fees. §51(a)(1) of the Rule provides that, with certain exceptions, if a card issuer charges any fees to a credit card account under an open-end (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 was opened. Industry commenters objected that Congress intended this provision to apply only to fees imposed on subprime cards with low credit limits and not on all card accounts, but the Board declined to change the proposed language for the Rule.

Length of Promotional Period. § 55(b)(1) of the Rule requires promotional rates to last at least six months; comment 55(b)(1)-2 of the Rule states that § 55(b)(1) does not prohibit applying a promotional rate to a particular category of transactions so long as the consumer receives the benefit of the promotional rate for at least six months. Some industry commenters argued that the six-month requirement should not apply when the temporary rate is limited to a particular transaction. Other industry commenters argued that, even if a temporary rate is limited to a particular transaction, the six-month period required by § 55(b)(1) should always begin once the terms have been disclosed and the rate is available to consumers. Some industry commenters cited the operational difficulty of tracking transaction-specific expiration dates for temporary rates. The Board did not incorporate these comments. The Board also declined to follow the suggestion of some industry commenters who requested that the Rule exclude deferred interest and similar programs from the six-month requirement in § 55(b)(1). Finally, comment 55(b)(1)-4 states that § 55(b)(1) does not permit a card issuer to apply an increased rate that is contingent on a particular event or occurrence or that may be applied at the card issuer’s discretion. While some industry commenters requested that, when a reduced rate is provided to employees of a business, the Board permit application of an increased rate to existing balances when employment ends, the Board declined to do so.

Card Substitution. § 55(d)(2) provides that § 55 (prohibition on rate increases) continues to apply to a balance on a credit card account after the balance is transferred from a credit card account issued by a card issuer to another credit account issued by the same card issuer or its affiliate or subsidiary. Some industry commenters argued that this provision limits a card issuer’s ability to offer its existing cardholders a balance transfer offer with the same terms that it would offer another issuer’s cardholders. However, the Board declined to revise the provision.

Over-the-Limit Fees. Some industry commenters asserted that certain provisions of § 56, including the requirements to provide notice and obtain consumer consent to the payment of over-the-limit transactions, should not apply to existing accounts out of concern that transactions would otherwise be disrupted for consumers who may rely on the creditor’s over-the-limit service, but fail to provide affirmative consent by Feb. 22, 2010. The Board did not revise the provisions in response, however.

Definition of “College Student.” § 57(a)(2) of the September Proposal defined “college student” as an individual who is a full-time or a part-time student attending an institution of higher education. This definition is consistent with the definition of “college student” in TILA Section 127(r)(1)(C). An industry commenter suggested that the definition be limited to students who are under the age of 21, but the comment was not incorporated into the Rule.

Prohibited Inducements. § 57(c) of the September Proposal generally followed TILA Section 140(f)(2), which prohibits card issuers and creditors from offering to a student at an institution of higher education any tangible item to induce such student to apply for or participate in an open-end consumer credit plan offered by such card issuer or creditor, if such offer is made on the campus of an institution of higher education, near the campus of an institution of higher education, or at an event sponsored by or related to an institution of higher education. Some industry commenters requested that the provision be limited to credit card accounts only, but the provision was adopted as proposed. The Board also did not incorporate an industry comment requesting an exception to the restrictions on offering a tangible item in exchange for introducing open end credit as part of a wide range of financial services to a college student.

Initial Submission of Agreements. § 58(c)(2) of the Rule requires issuers to send initial submissions containing credit card agreements offered to the public as of Dec. 31, 2009, to the Board no later than Feb. 22, 2010. Several issuers argued that many card agreements will be amended between Dec. 31, 2009, and Feb. 22, 2010, in light of the Act and the Rule and that the initial submission should contain agreements as of Feb. 22, 2010. The Board, however, did not incorporate these comments.

Requested Exceptions to Posting of Card Agreements. § 58(e) of the Rule requires a card issuer to either post and maintain a cardholder’s agreement on its Web site or promptly provide a copy of the agreement to the cardholder upon request. Commenters variously suggested that the Rule provide an exception from the requirements of § 58(e) for accounts purchased from another issuer and for older accounts. In such cases, issuers may not have the agreements and therefore may find it difficult or impossible to comply. The Rule, however, does not incorporate these comments. Additionally, some commenters suggested that the Rule provide a grace period during which issuers would not be required to provide an integrated agreement upon request but could instead send the cardholder the initial agreement and all subsequent change in terms notices. Alternatively, it was suggested that such a grace period be provided for accounts opened prior to a specific date. The Rule also does not incorporate these comments.

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The Rule can be found here.

If you have any comments or would like more information please contact James H. Mann, Scot D. Tucker or Andrew Owens.

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