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F e d e r a l R e s e r v e Ba n k o f D a lla s
DALLAS, TEXAS

75222
C irc u la r No. 75-64
May 14, 1975

PROPOSED AMENDMENTS TO THE TRUTH IN LENDING ACT
(REGULATION Z)
Fair C redit Billing Act
TO ALL BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T he Board of G o v e rn ors of the Federal R eserv e System p u b lis h e d for comment
d ra ft re gu lation s to implement the new Fair C re d it Billing Act, enacted to p ro tect consum ers
a g a in st in ac cu ra te and u n fa ir c r e d it billing and c red it c a r d p ra c tic e s .
T he new Act, which goes into effect on October 28, 1975, am ends the T r u th in
Lending Act. It d i re c ts the Federal R eserv e to issu e implementing re g u la tion s which will be
enforced by the same Federal ag encies which enforce the other p a r ts of the T ru th in Lending
Act. Following re c e ip t and s tu d y of comment on the d ra ft re g u la tio n s , the Board will issue
final re g u la tio n s to become effective October 28, 1975. Comment should be receiv ed by the
Board th ro u g h May 30, 1975.
This action was the second time in two w eeks that the Board issu ed d ra ft r e g u la ­
tions to implement new c o n s u m e r -o rie n te d legislation for which the C o n g res s d es ig n a te d the
Board as ru le - w r i t i n g a u th o rity . Last week the Board p u b lis h e d for comment a p ro p o sed
regulation to g iv e effect to the p ro v is io n s of the Equal C redit O ppo rtu n ity Act b a r r i n g d i s ­
crim ination in the g ra n tin g of cred it on the b asis of sex o r marital s ta tu s . T h at Act a n d the
B o ard 's final reg u latio n s also go into effect October 28, 1975.
C re d it exte nd ed on an account by u s e of a c r e d it card is the p rim a ry su b ject of the
r e q u irem en ts of the Fair C red it Billing Act. The chief p u rp o s e of the Act, and of the B o ard's
d ra ft re g u la tio n s , is to help con su m ers reso lv e c r e d it billing d is p u te s prom ptly and fairly .
C ertain p ra c tic e s deemed unfair to co n su m ers a r is i n g out of the use of c r e d it c a r d s or oth er
o p e n - e n d c r e d it accounts and ce rtain anticom petitive p ra c tic e s between c r e d it ca rd i s s u e r s
and the retail m erc h an ts who sell m erc h an d ise on the b asis of such c a r d s , a r e p ro h ib ited
by the Act and re g u la tio n s .
In terested p e r s o n s a r e invited to subm it re le v a n t d ata , v ie w s , o r a rg u m e n ts con­
c e rn in g this p ro p o sa l, including p o s s ib le effects on the cost and the availability of consum er
c r e d i t . Any s u c h material should be subm itted in w ritin g to the S e c r e t a r y , Board of G over­
n o rs of the Federal R eserv e System, W ashington, D .C . 20551, to be re ceiv e d not later than
May 30, 1975.
P rin ted on the following pages is a copy of the p ro p o sed reg u latio n as it ap p e a re d
in the FEDERAL REGISTER on May 5, 1975. Additional copies will be fu r n is h e d upon re q u e s t
to the S e c r e t a r y 's Office of this Bank.
S in c ere ly y o u r s ,
T . W. Plant
F irs t Vice P re s id e n t

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

E x tra c t From
FEDERAL REGISTER,
VOL. 40, NO. 87,
Monday, May 5, 1975,
p p . 19489 - 19495

FEDERAL RESERVE SYSTEM
[Reg. Z]

[ 12 CFR Part 226 ]
TRUTH IN LENDING
Fair Credit Billing

In order to im plem ent the am end­
m ents to the Truth in Lending Act (15
U.S.C. Chapter 41, secs. 1601-1681) in ­
cluded in T itle i n — (Pair Credit Billing)
of Pub. L. 93-495 (sec. 301-308), the
Board proposes to amend R egulation Z.
These am endm ents would provide:
(1) T hat the term “creditor” as de­
fined in the regulation shall include
credit card issuers for certain purposes,
w hether or not a finance charge is im ­
posed, and the term “open end credit”
shall include consumer credit extended
by use of a credit card for certain lim ited
purposes.
(2) TTiat, for certain lim ited purposes,
persons who honor credit cards shall be
termed “creditors” as defined by th e reg­
ulation.
(3) T hat discounts not in excess of
5 percent offered by sellers to induce pur­
chasers to pay by cash rather than by use
of a credit card are not finance charges if
they are available to all prospective pur­

chasers and are disclosed as required in
the regulation.
(4) T hat customers shall be apprised
of their rights under the Act and the
regulation by the creditor when they
open an account, or, in the case of ac­
counts in existence on the effective date
of the Act and regulation, during the
first billing cycle in which they are ac­
tive, and sem iannually. A form for this
disclosure is provided in the regulation.
(5) T hat a periodic statem ent m ust be
sent to all customers of an open end
credit plan if there is a debit or credit
balance in the account during the cycle.
If the plan provides a period during
which the customer can pay w ithout in ­
curring a finance or late paym ent charge,
the periodic statem ent m ust be m ailed
or delivered to th e customer, w ith some
exceptions, 14 days prior to the end of
the period.
(6) T hat payments by a customer of
an open end credit plan m ust be credited
to the account as of the date the payment
is received by the creditor. This require­
m ent would relate only to the crediting
of paym ents to the account as of the day
of receipt for the purpose of the com­
putation of finance charges and late pay­
m ent charges; it would not impose any
requirements w ith respect to the date on
which physical posting of payments to
the account takes place.
(7) T hat notification of refunds for
returned m erchandise or forgiven debt
for services which are to be made in the
form of a credit to a customer’s credit
card account shall be made promptly by
the seller and the am ount of the refund
shall be credited promptly by the card
issuer. If a seller gives refunds for re­
turns by cash to cash customers, refunds
by credit m ust be given to credit card
customers unless the seller discloses to
the contrary at the tim e of the trans­
action.
(8) That creditors who extend other
than open end credit by use of a credit
card shall, for certain purposes under
the regulation, be required to comply
w ith provisions which generally apply
only to open end.
(9) That, with certain exceptions and
lim itations, credit cardholders will be
able to withhold paym ent and assert
claim s and defenses which they may
have with respect to defective m erchan­
dise purchased by use of a credit card
against the card issuer.
(10) T hat credit card issuers may not
offset a custom er’s debt by using the cus­
tom er’s funds held by the creditor in any
deposit accounts except by court order or
remedies which are constitutionally
available to all creditors generally.
(11) T hat credit card Issuers shall not
require persons who honor their cards to
open accounts w ith, or procure any serv­
ices from, them; nor shall they prohibit
persons who honor their cards from o f­
fering discounts to their customers to
induce them to pay by cash rather than
by use of a credit card.
(12) A procedure for prompt response
to, and resolution of, billing Inquiries by
customers directed to open end creditors,
as defined in the regulation. H ie regula­

tion sets tim e lim its for the exercise of
th e responsibilities of the parties and
provides a forfeiture penalty for cred­
itors who fail to comply w ith the require­
m ents.
(13) A definition of a “billing error,”
which includes extensions of credit im ­
properly charged to a customer’s ac­
count; requests for clarification or ex­
planation of item s on a statem ent, in ­
cluding requests for documentary evi­
dence of the indebtedness; extensions of
credit for goods not accepted by, or de­
livered to, the customer in accordance
with the agreem ent w ith the seller; fa il­
ure to properly reflect paym ents or cred­
its to the customer’s account; com puta­
tion or accounting errors; and failure to
send a statem ent to the customer’s cur­
rent address.
(14) A procedure for preventing bank
credit card issuers from autom atically
debiting credit card debts from a cus­
tomer’s deposit account when some or all
of the item s on a periodic statem ent are
disputed by the customer.
(15) That a customer’s account may
not be closed or restricted before th e
creditor has fulfilled its responsibilities
under the error resolution procedure
solely because the customer fails to pay
the am ount in dispute.
(16) For suspension of the accrual of
finance charges on am ounts in dispute
during the pendency of th e error resolu­
tion procedure, whether or not the dis­
pute is ultim ately resolved in th e cus­
tom er’s favor; and for recapture of m ini­
mum payments not made during the dis­
pute period if it is later determined that
the customer owes some or all of the dis­
puted amount.
(17) A system for treatm ent of delin­
quency credit reports and threats by
creditors to report adversely to third
parties w ith respect to am ounts which
are disputed. The regulation prohibits
such threats and reports during the
pendency of th e dispute resolution pro­
cedure and requires qualification of such
reports made before and a fter the reso­
lution process to indicate the disputed
nature of the am ount and any resolution
of the dispute. Creditors’ failure to com ­
ply with these requirements m ay also
result in a forfeiture penalty being im ­
posed.
Pursuant to the authority granted in
15 U.S.C. 1604 (1970) the Board pro­
poses to amend R egulation Z, 12 CFR
Part 226, as follows:
1. To Implement section 302, S 226.1
(a) would be amended as follows:
a. Section 226.1(a) (1) Is revised as set
forth below.
b. Section 226.1(a) (2) is amended by
inserting th e following sentence im ­
m ediately before the last sentence to
read as set forth below.
§ 2 2 6 .1
A uthority, sco p e, and p u rp ose,
etc.

(a)
A u t h o r i t y , s c o p e , a n d p u r p o s e . (1)
This part comprises the regulations Is­
sued by the Board of Governors o f the
Federal Reserve System pursuant to
Title I (Truth in Lending A ct) and T itle
V (General Provisions) of th e Consumer

Credit Protection Act, as amended (15
(j) “B illingerror” includes:
U.S.C. 1601 et seq .). Except as otherwise
(1) A reflection on a periodic state­
provided herein, this part, w ithin the m ent of an extension of credit which was
context of its related provisions, applies not made to the customer or from which
to all persons who are creditors, as de­ he receives no benefit, or, if made, was
fined in paragraph (s) of § 226.2.
not in the amount indicated on the peri­
(2)
* * * In addition, this part is de­odic statem ent, or
signed to assist the customer to resolve
(2) A reflection on a periodic state­
credit billing disputes in a fair and m ent of an extension of credit or indebt­
tim ely manner, to regulate certain bill­ edness for which the customer requests
ing and credit card practices, and to explanation or clarification, including re­
strengthen the legal rights of con­ quests for documentary evidence of the
sumers. * * *
indebtedness reflected therein, or
(3) A reflection on a periodic
2. Certain paragraphs of §§ 226.2 and m ent of an extension of credit for state­
goods
226.13 are redesignated as shown below. or services not accepted1 by the customer
New section
or his designee, or not delivered to the
O ld section No.
No.
customer or his designee in accordance
2 2 6 .1 3 (a )(1 )....... ......................
226.2(a)
w ith any agreement made in connection
2 2 6 .1 3 (a )(2 )---------------- ------ 226.2(c)
w ith the transaction, or
2 2 6 .1 3 (a )(3 )----------------------- 226.2(m )
(4) Any failure to properly reflect on
2 2 6 .1 3 (a )(4 )------------------------ 226.2(1)
a periodic statem ent, a payment or other
2 2 6 .1 3 (a )(6 ).---------------------- 226.2(r)
2 2 6 .1 3 (a )(7 )----------------------- 226.2(11)
credit to the customer’s account, or
2 26 .2(a)----------------------------- - 226.2(b)
(5) A com putation error or sim ilar
2 2 6 .2 (b )----------------------------- 226.2(d)
error of an accounting nature made by
226.2(c)--------------------- ------- - 226.2(e)
the creditor on a periodic statem ent, in ­
22 6.2 (d )------------------------------ 226.2(f)
cluding errors in computing finance
226.2(e)------- ------- -------- ----- 226.2(g)
charges or late payment charges, or
2 2 6 .2 (f)------------------------------ 226.2(h)
(6) A failure to m ail or deliver a cus­
2 26.2(g).................................. ..
226.2(1)
tomer’s periodic statem ent to his current
2 2 6 .2 (h )......................... ............ 226.2 (k)
226.2(1)...................... .................. 226.2 (n )
address, which results in an additional
226.2 ( J ) ------------------------------- 226.2(0)
finance charge or additional minimum
226.2 ( k ) ----------------------------- - 226.2 (p)
payment, if the customer notified the
226.2(1) ---------------------------- 226.2 (q)
creditor of his change of address by the
226.2 ( m ) ------------------ ------- 226.2(8)
closing date of the previous billing cycle.
226.2 ( n ) ------- ---------------------- 226.2 (t)
226 .2 ( 0 ) ----------------------------- -

2 2 6 .2(p )-----------------------------22 6 .2 (q )------- --------- -----------226.2 ( r ) ..... ............ .......... ...........
226.2(8)------------------------------226.2 ( t ) ------------ ------------ ----226.2 (U )-----------------------------2 2 6.2(v)---- ------- -----------------226.2(w )----------------------------226.2 ( x ) ___________________
226.2(y).....................................
2 26.2(z)-----------------------------226.2 ( a a ) __________________
226.2 ( b b ) ____ _____________
226.2 ( c c ).................................... .
226.2 ( d d ) .....................................

226.2 (u )
226.2 (v)
226.2 (w)
226.2 (x)
226.2(y)
226.2 (z)
226.2 (aa)
226.2 (bb)
22$.2(dd)
226.2 (ee)
226.2 (ff)
226J2(gg)
226.2 (h h )
226.2 (JJ)
226.2 (kk)
226.2(11)

(p) “Consumer credit” m eans credit
offered or extended to a natural person,
in w hich the money, property, or service
which is the subject of the transaction
is primarily for personal, fam ily, house­
hold, or agricultural purposes. “Con­
sumer loan” is one type of “consumer
credit.”
(q) “Credit” means the right granted
by a creditor to a customer to defer
paym ent of debt, incur debt and defer its
payment, or purchase property or serv­
ices and defer payment therefor. (See
also paragraph (jj) of this section.)
3. To implement sections 103 and 161,
(s) “Creditor” means a person who in
in § 226.2, redesignated paragraphs (h ), the ordinary course of business regularly
(p ), (q ), (s), (u ), and (x) are revised, extends or arranges for the extension
and new paragraphs (j) and (cc) are of consumer credit, or offers to extend
added as set forth below:
or arrange for the extension of such
§ 2 2 6 .2 D e fin itio n s a n d ru le s o f c o n ­ credit, which is payable by agreement
s tru c tio n .
in more than four instalm ents, or for
which the paym ent of a finance charge is
*
*
(h)
“Arrange for the extension of or may be required, whether in connec­
credit” means to provide or offer to pro­ tion with loans, sales of property or serv­
vide consumer credit which is or will be ices, or otherwise. For purposes of the re­
extended by another person under a busi­ quirements of §§ 226.7(a) (6 ), (7 ), (8 ),
ness or other relationship pursuant to and (9 ); 226.7(b) (1) CD, (ii), (iii), (ix ),
and (x ); 226.7(b )(2); 226.7(c), (d ), (f),
which the person arranging such credit
(1) Receives or will receive a fee, com ­ (g ), (h ), and ( i ) ; 226.13; and 226.14, the
pensation, or other consideration for term “creditor” shall also Include card
issuers, whether or not the payment of
such service, or
(2) Has knowledge of the credit terms a finance charge is or may be required.
and participates in the preparation of For purposes of the requirements of
the contract documents required in con­ §§ 226.4(1) and 226.13(k), the term
“creditor” shall include any person who
nection with the extension of credit.
honors a credit card.
It does not include honoring a credit card
or sim ilar device where no finance charge
is Imposed a t the tim e of that trans­
1 T h e te rm "accep ted ” sh all b e c o n stru ed
action.
to m ean "acceptance” aa defined In section
2-606 o f th e U niform Com m ercial Code.

(u)
“Customer” means (1) a card­
holder or (2) a natural person to whom
consumer credit is offered or to whom
it is or will be extended, and Includes a
comaker, endorser, guarantor, or surety
for such natural person who is or may
be obligated to repay the extension of
consumer credit.
*
*
*
*
*
(x) “Open end credit” m eans con­
sumer credit extended on an account
pursuant to a plan under which (1) the
creditor may perm it the customer to
make purchases or obtain loans, from
tim e to time, directly from the creditor
or indirectly by use o f a credit card,
check, or other device, as the plan may
provide; (2) the customer has the privi­
lege of paying the balance in full or in
Installments; and (3) a finance charge
m ay be computed by the creditor from
tim e to tim e on an outstanding unpaid
balance. For purposes of the require­
m ents of §§ 226.7(a) (6 ), (7 ), (8 ), and
(9); 226.7(b) ( l ) ( i ) , (ii), (iii), (ix ), and
(x ); 226.7(b) (2); 226.7(c), (d ), (f) , (g ),
and ( i ) ; 226.13; and 226.14, the term in (h ), and (i); 226.13; and 226.14, the rm
includes consumer credit extended on an
account by use of a credit card, whether
or not a finance charge may be Imposed.
The term does not Include negotiated ad­
vances under an open end real estate
mortgage or a letter of credit.
*

*

*

*

*

(cc) “Proper written notification of a
billing error” is any written notification
(on a payment medium or other m aterial
accompanying the periodic statem ent
or on a separate sheet, if the creditor so
stipulates in the disclosure required by
§ 226.7 (a) (9), (d ), and ( j ) ) , received at
the address disclosed under § 226.7(b)
(1) (x) within 60 days of the first m ailing
or delivering to the customer’s current
address (as required in § 226.7(b)) of the
periodic statem ent on which the disputed
item (s) or am ount(s) is reflected in
which the customer
(1) Sets forth or otherwise enables
the creditor to identify the nam e and ac­
count number (if any) of the customer,
(2) Indicates the customer’s belief
that the periodic statem ent contains a
billing error and the suspected amount
of such error, and
(3) Sets forth the reasons for such be­
lief, to the extent possible.
§ 2 2 6 .3

[A m en d ed ]

4. Footnote in § 226.3 would be redesig­
nated as follows:
Footnote 1 is redesignated la , and new
footnote 1 is added as set forth in § 226.2
(j) (3) s u p r a .
5. To implement section 167, § 226.4(1)
would be added as follows:
§ 2 2 6 .4 D eterm in ation
charge.

of

fin a n ce

(i) D i s c o u n t s f o r p a y m e n t s i n c a s h .
(1) Notwithstanding any other provision
of this section, a discount which a person
offers, allows, or otherwise makes avail­
able for the purpose of inducing payment

(b) Describe th e
hy (to th e
for a purchase by cash, check, or sim ilar Act, then that provision of State law is t e n t you can) you erro r an d wis a n erro r.ex­
believe It
If
m eans rather than by use of an open not inconsistent w ith the provisions of you only need m ore Info rm atio n, ex p lain th e
end credit card account, w hether or not the Act or this part.
item you are n o t su re a b o u t, a n d if you wish,
•
*
•
•
*
a credit card Is physically used, is not a
ask for evidence of th e charge su c h as a copy
of th e sales slip. D on’t send in yo u r copy of
finance charge: P r o v i d e d , That:
(k) T r a n s i t i o n p e r i o d . Any creditor
(1) Such discount does not exceed five who can dem onstrate th at he has taken a sales slip or o th e r d o cu m en t u n less you
percent when computed or expressed as bona fide steps, prior to October 28,1975, have a d u p lic a te copy fo r yo u r records.
(c) T h e do llar a m o u n t of th e susp ected
a percentage of the tag, posted, or ad­ to obtain printed form s which are neces­
you can.
vertised price of the goods or services sary to comply w ith the requirements of e rro r ifAny o th e r in fo rm a tio n (su ch as your
(d)
which are the subject of the transaction, this part may, until such forms are re­ address) w hich you th in k will h elp th e com ­
(ii) Such discount is available to all ceived but in no event later than April 30, p a n y (b an k ) to id e n tify you or th e reason
prospective buyers,
1976, utilize existing supplies of printed for your co m p la in t or in q uiry .
2. Send your b illin g erro r n otice to th e a d ­
(iii) The availability of such discount forms for the purpose of complying with
is clearly and conspicuously disclosed to the disclosure requirements of this part, dress o n your b ill w hich is liste d a fte r th e
all prospective buyers by a sign or dis­ other than the requirements of para­ w ords: “Send In q u irie s T o :” M ail It as soon
as you can, b u in
y
en
h to
play posted at or near each public en­ graphs (a) (9 ), (d ), and (i) of § 226.7: reach th e com tpanya n(b acase early in o u gdays
n k ) w ith
60
trance to the seller’s place of business P r o v i d e d , T hat such form s are altered or a fte r th e bill was m ailed to you.
wherein such discount is offered, and at supplem ented as necessary to assure that
If yo u r b a n k a u to m a tic ally pays th ese b in s
all locations w ithin the place of business all of the item s of inform ation the cred­ from your checking or savings acco u n t, you
where a purchase m ay be made, and
itor is required to disclose to the cus­ c an sto p p a y m e n t o n th e a m o u n t you th in k
(iv) If an offer of sale is advertised tomer are set forth clearly and con­ is w rong by m ailin g yo u r no tice w ith in 10
days a fte r receiving y o u r biU. You d o n ’t have
in any medium or if offers to buy are spicuously.
to m eet th is 10 day deadline, th o u g h , to g et
invited or allowed by a seller to be made
*
*
*
*
*
yo ur biU corrected.
by m ail, telephone, or by m eans other
7.
To im plem ent sections 12 7 (a )(8 ), 3. T he com pany (b an k ) m u st answ er all
than personal contact between the cus­
le tte rs p o in tin g o u t possible erro rs a n d m u st
tomer and seller and if customers are 1 27(b )( 1 1 ) ,127(c),163,164,165, and 167, do so w ith in 30 days. W ith in 90 days a fte r
receiving you r le tte r, th e com pany (b an k )
allowed to pay by use of a credit card or § 226.7 is amended as follows:
a. Paragraph (a) (9) is added as set m u st e ith e r co rrect th e erro r or show why th e
its underlying account and such fact is
bill w as correct.
disclosed by the advertisem ent, telephone forth below.
4. M eanw hile, n e ith e r th e com pany (b an k )
b. The text following the heading of
contact, or in the course of the m ail cor­
rn
n
a collection
respondence, the availability of a dis­ paragraph (b) is redesignated as para­ n o r dits a ttod u e y in o r le tte rs. Y ou agency tm ay
sen you
nn g
c a n n o be
count for paym ents in cash m ust be graph ( b ) (1).
th re a te n e d w ith dam age to y our c red it ra tin g
(c) Paragraphs (b) (1) through (9)
clearly and conspicuously disclosed in
or sued fo r th e a m o u n t in q uestion , n o r can
any advertisem ent for such offerings are redesignated as paragraphs (b) (1) th e d isp u ted a m o u n t be re p o rte d to a c red it
b u re au or to o th e r c red ito rs as d e lin q u e n t.
and, in any case, before the transaction (i) through (ix ).
,d- Paragraph (b) (1) (x) is added as set
5. If i t Is d eterm in ed t h a t you owe all or
has been com pleted by use of the credit
forth below.
a p a rt of th e d isp u te d am o u n t, you w ill have
card or its underlying account.
e. Redesignated paragraphs (b) (1) to pay an y finance charges on th e d isp u ted
(2) Notw ithstanding anything con­
a m o u n t(s) t h a t you owe u p to th e tim e you
tained in the foregoing paragraph to the (iii), (v ), and (ix) are revised as set se n t th e erro r notice. B u t no finance charges
forth below.
contrary, any surcharge added to the tag,
th
o n t in d
f. Paragraph (b) (2) is added as set m ay be eim posed on noe a mis ureceived isp u te
posted, or otherwise generally available
from th tim e yo ur
tice
untU
forth below.
th e e rro r is resolved. You will h ave to m ake
price of goods or services offered for sale
g. Paragraph (c) (3) is amended by u p an y m issed m in im u m p ay m en ts fro m th e
by a seller, which is imposed by such
seller as a condition or consequence of adding a last sentence to read as set tim e you received th e b ill on w hich th e su s­
p ected erro r first appeared. T h e com pany
the use of th e credit card w ith respect to forth below.
h. Paragraphs (d) and (e) are redesig­ (b an k ) m u st send you a sta te m e n t o f w h a t
a transaction involving such goods or
you owe, a n d you m u s t be given th e sam e
services, shall be a finance charge subject nated as paragraphs (e) and (f), new tim e to pay w hich you no rm ally are given to
paragraphs (d ), (g ), (h ), and (i) are
to the requirements of this section.
pay u n d isp u te d am o u n ts.
(3) W ith respect to any discount for added, and redesignated paragraph (e)
6. If th e com pany’s (b a n k ’s) e x p lan atio n
is revised as set forth below.
d oesn’t satisfy you a n d you n o tify th e credi­
cash in excess of five per cent, the total
to r in w ritin g t h a t you s till refu se to pay th e
amount of the discount shall constitute § 2 2 6 .7 O p en en d credit accou nts—
d isp u ted a m o u n t, th e com pany (b an k ) m ay
sp ec ific disclosu res.
a finance charge under § 226.4(a) to be
re p o rt you to c red it b u re a u s a n d o th e r cred i­
disclosed in accordance with § 226.7 ( e ).
(a) • • •
tors. B u t it m u st te ll th e m t h a t you d o n ’t
6. To im plem ent section 171(a) and to (9) The following notice: "N o t i c e : See th in k you owe th e m oney, a n d i t m u s t le t
provide a transition period for the use of accom panying statem ent for im portant you know to w hom it h a s rep o rted you. Once
e
ttle betw een you
old forms, § 226.6(b) (1) (i), (b )(2) and inform ation regarding your rights to dis­ th e m a tte r h as bbeen ) se t m d st send followa n d
pany
n ,i
pute billing errors,” and a separate th comto th o ( atok w hom ut re p o rte d you-up
(k) would be revised as follows:
n otices
se
i
as
statem ent containing substantially the d e lin q u e n t.
§ 2 2 6 .6 G eneral
disclosu re
req uirefollow ing text, as applicable, w ritten
7. C om panies (b an ks) t h a t d o n ’t follow
m en ls.
clearly and conspicuously on one side of th ese ru les a re n o t allowed to collect th e
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a separate page, shall accompany such a first $50 of a d isp u te d a m o u n t, even if th e
(b) I n c o n s i s t e n t S t a t e r e q u i r e m e n t s . statem ent; or the language w ithout the bill tu r n s o u t to be correct.
8. You m ay have good g ro u nd s in a law
(1) W ith respect to the requirements of preceding notice may be included on the
this Part, State law is inconsistent w ith statem ent required by paragraph (a) of s u it fo r w ith h o ld in g p a y m e n t of th e a m o u n t
the requirements of the Act and this Part, this section if disclosed clearly and con­ you still owe fo r m erch an d ise o r services t h a t
prove defective if th re e c o n d itio n s a re m e t:
w ithin the m eaning of sections 111(a) spicuously:
(1) you m u st first give th e m e rc h a n t a n
and 171(a) of the Act to the extent that
o p p o rtu n ity to correct th e problem ;
I n C a se o f E r r o r s o n Y o u r B il l
it:
(2) you m u st have m ade th e p urch ase in
T he Federal T ru th In L ending Act requ ires y o ur h om e s ta te o r w ith in 100 m iles of your
(1) Requires a creditor to make dis­
m
of
H ere’s
closures or take actions different from p roa t p t co rrection th inbillin g m istakes.rong or hom e (w hichever is f a r th e r ) ; a n d
w h to do if you
k your bUl Is w
(3) th e p u rch ase price m u st be m ore th a n
the requirements of this part with re­ If you need m ore in fo rm a tio n a b o u t a n item
$60.
spect to form, content, terminology, or o n yo ur bU l:
tim e of delivery;
1.
D on’t w rite o n th e bill. O n a sep arate However, th e d o lla r an d d istan ce lim ita ­
•

•

•

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(2) If any provision of State law pro­
vides greater protection to the consumer
than th at provided by Chapter 4 of the

sh eet of p ap er w rite (you m ay telep h on e your tio n s do n o t apply if th e m e rc h a n t a n d th e
in q u iry b u t doing so wiU n o t preserve yo ur c red it card com pany are th e sam e or a re ­
la te d org anizatio n, o r if th e c red it card com ­
rig h ts u n d e r th is law ) th e follow ing:
(a)
T o u r n am e a n d acc o u n t n u m b er (If p a n y p a rtic ip a te d In offering th e m erc h an ­
a n y ).
dise o r services th ro u g h th e m all.

(b)
P e r i o d i c s t a t e m e n t s r e q u i r e d . (1) the customer may repay any portion of
s u r e s , at the tim e of th at transaction,
Except in the case of an account which the new balance w ithout incurring an and the annual percentage rate to be dis­
the creditor deems to be uncollectable additional finance charge or a late pay­ closed shall be determined by dividing the
or with respect to which delinquency col­ m ent charge, no such charge may be im ­ amount of th e finance charge by the
lection procedures have been instituted, posed with respect to any portion of such amount financed and m ultiplying the
the creditor of any open end credit ac­ new balance unless the periodic state­ quotient (expressed as a percentage) by
count shall m ail or deliver to the cus­ m ent disclosing such new balance is 12.
tom er’s current address (if the customer m ailed or delivered to the customer’s
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has notified the creditor of his change current address (if the customer has
(g) P r o m p t c r e d i t i n g o f p a y m e n t s . R e­
of address by the closing date of the notified the creditor of his change of ad­
previous billing cycle), for each billing dress by the closing date of the previous gardless of the date of actual posting of
cycle at the end of which there is an out­ billing cycle) at least 14 days prior to the payments to an account, any payments
standing debit or credit balance in ex­ date specified in the statem ent as being shall be credited to the custom er’s ac­
cess of $1 in that account or w ith respect the date by which paym ent m ust be made count as of the date such paym ent is re­
to which a finance charge is imposed, a in order to avoid the im position of that ceived by the creditor and no finance
statem ent or statem ents which the cus­ finance charge or late payment charge, charge or late paym ent charge m ay be
tom er may retain, setting forth in ac­ except that such tim e lim itation shall not imposed with respect to the am ount of
cordance with paragraph (c) of this apply in any case where the creditor has such paym ent which is properly received
section each of the following item s to been prevented, delayed, or hindered in by the creditor on or before the time
the extent applicable:
m ailing or delivering such periodic sta te­ indicated by the creditor to avoid impo­
m ent w ithin such tim e lim it because of sition thereof, except that:
( 1) The creditor m ay specify reason­
an act of God, war, civil disorder, natu­
able requirements w ith respect to the
(iii)
The amounts posted to the ac­ ral disaster, or strike.
form, amount, manner, location, and
count during the billing cycle for pay­
(c) • • •
m ents, using the term “paym ents,” and
(3)
• * * The disclosure required by tim e of such paym ents in order that such
for other credits including returns, re­ paragraph (b) (1) (x) of this section payments will be credited as of the day of
bates of finance charges, overpayments, m ay be made on the reverse side of the receipt provided that:
(1) If no particular hour of the day has
and adjustm ents, using the term periodic statem ent.
“credits,” and unless previously fur­
(d) S e m i a n n u a l n o t i c e r e q u i r e d . (1) been clearly indicated to the customer
nished a brief Identification of each of creditor shall m ail or deliver sem ian­ on the periodic statem ent as the tim e by
the item s included in such other credits. nually to each customer entitled to re­ which paym ent m ust be received by the
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ceive a periodic statem ent under 5-226.7 creditor in order to obtain crediting to
the customer’s account on such date,
(v)
Each periodic rate, using the term(b ), the notice required by § 226.7(a) (9), payments m ade prior to the close of
“periodic rate” (or “rates”) , that may be w ritten clearly and conspicuously on one business on th at day m ust be credited
used to compute the finance charge side of a separte page or included with as of that date, and
(whether or not applied during the bill­ the disclosures required by paragraph
(ii) If no location(s) has been clearly
ing cy cle), the range of balances to which (b) of this section if disclosed clearly Indicated on the periodic statem ent as
it is applicable, and the corresponding and conspicuously.
(2) The semiannual notice shall be the location(s) at which paym ent may
annual percentage rate determined by
m ailed or delivered not less than 5 nor be made, then paym ent at any location
m ultiplying the periodic rate by the num ­
where the creditor conducts business
ber of periods in a year. The words “cor­ more than 7 m onths after th e m onth in shall be credited as of the date such pay­
which the last preceding such notice was
responding annual percentage rate,”
m ent is presented, and
“corresponding nom inal annual per­ m ailed or delivered: P r o v i d e d , That,
(iii) If no particular m anner of pay­
(i) In any case the creditor shall mail
centage rate,” “nom inal annual per­
or deliver such notices at least twice in m ent has been clearly indicated on the
centage rate” or “annual percentage
periodic statem ent, then paym ent by
rate” (or “rates”) may be used to de­ any 12 month calendar period, and
(ii) The first sem iannual notice to any check, cash, money order, bank draft, or
scribe the corresponding annual per­
other sim ilar instrum ent in properly ne­
centage rate. The requirements of new customer may be mailed or delivered gotiable form shall constitute proper
§ 226.6(a) with respect to disclosing the to that customer during the n ext reg­ m anner of payment.
term “annual percentage rate” more ularly scheduled m ailing or delivery of
(2) If the creditor accepts paym ent at
conspicuously than other required ter­ sem iannual notices.
(3) If the creditor chooses to alter the locations other than th at indicated as
minology shall not be applicable to the
necessary for crediting as of the date of
disclosure made under this paragraph, cycle of m ailm g or delivering semiannual receipt, the creditor m ust credit the cus­
notices, the creditor may m ail or deliver
although such term (or words incor­
tom er’s account as of the day payment
porating such term) may, at the credi­ the semiannual notice less than 5 m onths is received at the alternate location (s),
tor’s option, be shown as conspicuously after the last preceding such notice was even though the actual posting m ay oc­
as the terminology required under para­ m ailed or delivered: P r o v i d e d , That the cur at a later day.
graph (b) (1) (vi) of this section. Where creditor m ails or delivers at least 3 such
(h) C r e d i t i n g a n d r e f u n d i n g e x c e s s
a minimum charge may be applicable to notices in the n ext twelve m onths com­ p a y m e n t s . (1) W henever & customer
th e account, the amount of such m ini­ puted from the m onth in which th e last m ails or delivers paym ent to the creditor
preceding sem iannual notice was mailed
mum charge shall be disclosed.8
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in excess of the total balance due on the
or delivered.
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(4) Nothing in this subsection shall be account, the creditor shall:
(ix) The closing date of the billing construed to prohibit a creditor from
(i) Credit the customer’s account
cycle and the outstanding balance in the m ailing or delivering the notice required
with the amount of the overpayment
account on that date, using the term by this subsection more frequently than
as of the date of receipt as specified
“new balance,” accompanied by the semiannually, such as m onthly.
in paragraph (g) of this section, or
statem ent of the date by which, or the
(e) F i n a n c e c h a r g e i m p o s e d a t t h e t i m e
(ii) If the creditor so elects and,
period, if any, w ithin which, paym ent o f t r a n s a c t i o n . Any creditor, other than
in any case, if the customer has pre­
m ust he made to avoid additional finance the creditor of the open end credit ac­
viously
requested
in
writing,
charges or late payment charges.
count, who imposes a finance charge not
promptly (in no case more than 5
(x) An address to be used by the credi­ excepted by § 226.4 (i) D i s c o u n t s f o r
business days from receipt of the
tor for the purpose of receiving billing p a y m e n t i n c a s h , at the tim e of honor­
payment) refund the amount of the
Inquiries from customers. Such address ing a customer’s credit card, shall make
overpayment.
shall be preceded by the caption: “Send
the disclosures required under para­
(2)
Notwithstanding the provisions of
Inquiries T o:”.
graphs (b) (2) and (d) of § 226.8 C r e d i t subparagraph (1) of this paragraph, up­
(2)
If the term s of the open end credit
plan provide a tim e period w ithin which o t h e r t h a n o p e n e n d — s p e c i f i c d i s c l o ­ on receipt of a customer’s request, the

(ii) The amount of credit extended by
9. To im plem ent section 171, § 226.12
creditor shall promptly (in no case more
th e card issuer to the custom er to pur­
than 5 business days from receipt of a (a) and (b) are revised as follows:
customer’s request) refund the amount § 226.12 E x e m p tio n o f certain State reg ­ chase the property or services which re­
sulted in the assertion of th e claim or
of any overpaym ent(s).
u la ted transactions.
defense by the customer exceeds $50, and
(i)
O p e n e n d c r e d it a c c o u n ts e x is tin g
(a) E xem ption fo r S ta te regulated
(iii) The in itial transaction which
o n O c t o b e r 2 8 , 1 9 7 5 . In the case of any
open end credit account in existence and transactions. In accordance w ith the pro­ gave rise to the assertion of the claim or
in which a balance of more than $1 re­ visions of Supplements II, IV, and V to defense by the customer occurred in the
mains unpaid at or after the closing date Regulation Z, any State may make ap­ same State as the m ailing address pre­
of the creditor’s first full billing cycle plication to the Board for exem ption of viously provided by the cardholder or
after October 28, 1975, and which bal­ any class of transactions w ithin the w ithin 100 m iles from such address
ance is deemed to be collectible and not State from the requirements of Chap­ (whichever is greater), except that the
subject to delinquency collection proce­ ters 2 and 4 of the Act and the cor­ lim itations stated in paragraphs ( i) ( l)
dures, the item s described in paragraph responding provisions of this part: Pro­ (ii) and (iii) of this section shall not
apply when the person honoring the
(a) of this section, to the extent applica­ vided, That:
(1) The Board determines that, under credit card:
ble and not previously disclosed to the
(A) Is the same person as the card
customer, shall be disclosed in the form the law of that State, that class of trans­
prescribed in paragraph (a) of this sec­ actions is subject to requirements sub­ issuer, or
stantially sim ilar to those imposed under
tion, and m ailed or delivered to the cus­
(B) Is controlled, directly or in di­
tomer not later than Mie tim e of m ailing Chapter 2 or Chapter 4 of the Act or rectly, by the card issuer, or
or delivery of the periodic statem ent re­ both and the corresponding provisions
(C) Is under the direct and Indirect
quired under paragraph (b) of this sec­ of this part; or in the case of Chapter 4, control of a third person who also di­
the consumer is afforded greater protec­ rectly or indirectly controls th e card
tion for th a t billing cycle.
tion than is afforded under Chapter 4 of issuer, or
8.
To im plem ent section 103(f) and to
clarify certain disclosure requirements the Act, and
(D) Is a franchised dealer in the card
(2) There is adequate provision for issuer’s products or services, or
w ith respect to credit other than open
end which is extended on an account by enforcem ent.
(E) Has obtained th e order for the
(b) Procedures and criteria. The pro­ transaction relative to w hich the
use of a credit card, § 226.8 (n) is revised
cedures and criteria under which any claim (s) or defense (s) is asserted
and (q) Is added as follows:
State may apply for the determ ination through a m all solicitation m ade by or
§ 2 2 6 .8 Credit o th er than o p e n end—
provided for in paragraph (a) of this participated In ” by th e card issuer, in
sp e c ific d isclosu res.
section are set forth in Supplem ent II which the cardholder is solicited to enter
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to Regulation Z w ith respect to disclosure into such transaction by using the credit
(n) P e r i o d i c s t a t e m e n t s . (1) If a cred­ and rescission requirements (§§ 121-131 card issued by the card issuer, or
itor transm its a periodic billing state­ of Chapter 2), Supplement IV w ith re­
(F) Controls, directly or indirectly,
m ent “ other than a delinquency notice, spect to the prohibition of the issuance the card issuer.
paym ent coupon book, or paym ent pass­ of unsolicited credit cards and the liabil­
(2)
The amount of the claim s or de­
book, or a statem ent, billing, or advice ity of the cardholder for unauthorized fenses assertable by the cardholder under
use of a credit card (§ 132-133 of Chap­ this subsection m ay not exceed the
relating exclusively to am ounts to be
paid by the customer as escrows for pay­ ter 2 ), and in Supplem ent V which will am ount of credit outstanding w ith re­
m ent of taxes, insurance, and water, be issued on or before October 28, 1975, spect to the transaction which gave rise
sewer, and land rents, it shall be in a with respect to fair credit billing require­ to the assertion of the claim (s) or de­
form which the customer may retain and m ents (§§ 161-171 of Chapter 4 ).
fen se^ ) at the tim e the cardholder first
shall set forth:
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notifies the card issuer or th e person
(1) The annual percentage rate or
10. To im plem ent sections 166, 167, honoring the credit card for such trans­
rates unless exem pted by § 226.8(b) (2); 168, 169, and 170, § 226.13 is amended as action of the existence of such clalm (s)
and
or defense ( s ) . For purposes of determ in­
follow s:
(ii)
The date by which, or the period, a. Paragraphs (a) (1) through (4 ), and ing the am ount of credit outstanding
if any, w ithin which paym ent m ust be (a) (6) and (7), are incorporated Into w ith respect to such transactions as pro­
made in order to avoid late paym ent or § 226.2 as shown in the redesignation vided in the preceding sentence, pay­
delinquency charges.
m ents and other credits to the card­
table of paragraph 2 above.
(2) If the creditor is required to send
holder’s account will be deemed to have
b. Paragraph (a) (5) is deleted.
a periodic statem ent under paragraph
c. Paragraphs (b) through (h) are re­ been applied, in the order indicated, to
(q) of this section, the disclosures re­ designated as paragraphs (a) through the paym ent of:
quired by §§ 226.7(b) (1) (i), (ii), (iii), (g) and
(i) Late charges in the order of entry
(ix ), and (x ), and 226.7(b)(2) shall be
d. Paragraphs (i), (j), (k ), and (1) to the account;
made In addition to the disclosures re­ are added as follows:
(ii) Finance charges in the order of
quired by this subsection.
entry to the account;
§ 226.13 Credit card transactions— sp e­
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(iii) Any other debits in the order in
cial req u irem en ts.
which feach debit entry was made to the
(q) C r e d i t c a r d a c c o u n t s . In addition,
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account; and
to the requirements of this section credit
(i)
R ig h t o f cardholder to assert (iv) When more than one item is in ­
other than open end which is extended
on an account by use of a credit card claims or defenses against card issuer. cluded in a single extension of credit,
shall also be subject to the requirements (1) W hen a person who sells property or credits are to be distributed pro rata ac­
of 55 226.7(a) (6 ), (7), (8 ), and (9); services fails to satisfactorily resolve a cording to prices and applicable taxes.
226.7(b)(1) (i), (ii) ,(iii), (ix ), and ( x ) ; dispute as to defective property or serv­
226.7(c), (d ), (g ), (h ), and ( i ) ; 226.13; ices purchased by use of a credit card,
MThese claim s sh all n o t include to r t claim s
and 226.14, to the extent not required by the cardholder may assert all claim s"
and defenses arising out of the transac­ o r o o n tra c t claim s of dam ages to person or
other portions of this section.
tion and relating to such failure against p ro p erty re su ltin g fro m th e m e rc h a n t's
the card issuer who has issued the credit fa ilu re to resolve a d isp u te as to defective
p ro p e rty o r services. T h e exclusion of t o r t
u Any sta te m e n t, notice, o r rem in d er of card i f :
p a y m e n t du e on a n y tra n s a c tio n payable
(i)
The customer has made a goodclaim s is n o t in te n d e d to d e fea t th e a ssertio n
In in sta llm e n ts w hich Is m ailed or delivered faith attem pt to obtain satisfactory res­ of claim s t h a t could a lte rn ativ ely be pleaded
In t o r t o r c o n tra ct.
periodically to th e c u sto m er In advance of
1 “p a rtic ip a te d in ” does n o t In clud e a
T
th e due d a te of th e In sta llm e n t sh a ll be a olution of a disagreem ent or problem
relative to the transaction from the per­ m ere In d ica tio n by a p erso n t h a t h e h o n o rs
periodic b illin g sta te m e n t for th e purpose of
th is p a rag rap h .
a p a rtic u la r c re d it c a rd (s ).
son honoring the credit card,

(3)
This § 226.13(1) does not apply toinduce such customers to pay by cash, rlodic statem ent reflects property or
cash advances obtained with a credit check, or other sim ilar m eans rather than services not delivered to the customer or
card when the advance is obtained from by use of a credit card or its underly­ h is designee In accordance w ith any
th e card Issuer and is unrelated to any ing account for the purchase of property agreem ent m ade in connection w ith the
or services; or
transaction giving rise to the disputed
specific credit sale item .
(2)
Require any person to open or am ount, a creditor m ay not construe
( j) P r o h i b it io n o f o ffs e ts b y c a r d is s u e r.
(1) A card Issuer m ay not take any action m aintain an account or procure any such am ount to be correctly shown on
to offset a cardholder’s Indebtedness other service or device from the card th e billing statem ent unless th e creditor
arising in connection w ith a consumer issuer, its subsidiary, agent, or any other determines, upon reasonable inquiry and
credit transaction under the relevant person, as a condition of participation investigation, th at such property or serv­
ices were actually delivered, mailed, or
credit card plan or underlying account in a credit card plan.
otherwise sent to the customer and pro­
against funds of th e cardholder held on
11.
To im plem ent sections 161,162, and
vides the customer w ith a w ritten sta te­
deposit w ith the card issuer unless a 170, § 226.14 is added as follows:
m ent explaining such determ ination. In
court order is obtained.“
(2) The prohibition in paragraph (j) § 2 2 6 .1 4 B illin g errors— reso lu tio n p ro­ any case where the customer alleges that
ced u re.
an am ount of a transaction reflected on
(1) of this section does not apply to
credit card plans whereby the cardholder
(a)
C o r r e c t i o n o f b i l l i n g e r r o r s . Afterth e periodic statem ent is improper be­
authorizes the card issuer as a m ethod th e creditor receives proper written no­ cause the person honoring the credit card
of paym ent to periodically deduct all or tification of a billing error reflected on has made an incorrect report to th e card
a portion of th e cardholder’s credit card a periodic statem ent from a customer, Issuer of the am ount which should have
debt from h is deposit account (subject to unless the customer has subsequently been charged, the card issuer m ay not
th e lim itations in § 226.14(a) (2 )): P r o ­ agreed in writing that the periodic state­ construe such amount to be correctly re­
flected on the periodic statem ent unless
v i d e d , That,
m ent Is correct, the creditor shall:
(1) Such autom atic debit was previ­
(1) Not later than 30 days after re­ the creditor determines, upon reasonable
ously authorized in writing by the card­ ceipt of such notification, m ail or deliver inquiry and investigation, th a t the
holder, or
w ritten acknowledgment thereof to the proper am ount is shown on the periodic
(ii)
W ith respect to such autom atic customer’s current address, unless the statem ent and provides the customer
debit accounts In existence on October 28, appropriate actions in subparagraph w ith a w ritten statem ent explaining such
1975, the creditor has given notice of (2) of this paragraph are taken w ithin determ ination.
(b)
M in im u m p a y m e n ts a n d fin a n c e
the provisions of paragraph (j) of this such 30 day period; and
section to such accounts prior to re­
(2) Resolve the dispute not later than c h a r g e s o n d i s p u t e d a m o u n t s . (1) W hen
newal of th e authorization (in no case 2 com plete billing cycles (In no event a customer is perm itted to m ake a m in­
later than October 28, 1976).
more than 90 days) from the date of re­ imum payment, he need only m ake a
(k) P r o m p t n o t i f i c a t i o n o f r e t u r n s . (1) ceipt of the notice of billing error and minimum payment calculated on the
W hen any person accepts the return of prior to any action by the creditor to col­ basis of am ounts not in dispute. W hen
property or forgives a debt for services lect any portion of the am ount(s) the disputed am ount Is only a part of
which is to be reflected as a credit to indicated by the customer as being in dis­ the total amount of an item , th e cus­
th e custom er’s credit card account, he pute or any finance charges or late pay­ tom er rem ains obligated to pay the
shall prom ptly Cin no case later than m ent charges computed on such disputed am ount not in dispute, and any m ini­
mum payment and finance charges or
3 business days from the date the return am ount(s) by
payment charges may be calculated
Is agreed to) m all or deliver to the card
(i) Making any appropriate correc­ late the undisputed amount. If, at the
issuer a credit statem ent w ith respect tions In the account of the customer on
thereto in thfe manner, tim e, and loca­ with regard to any disputed am ounts er­ com pletion of the error resolution pro­
tion Indicated by the card Issuer as roneously billed, Including the crediting cedure, it Is determined th at th e cus­
being necessary to im m ediately credit of any finance charges or late payment tomer owes some or all of th e disputed
th e customer's account and furnish the charges Imposed upon any am ounts er­ am ount, the creditor may require pay­
custom er w ith a copy of such statem ent. roneously billed, and m ailing or deliver­ m ent of any m inimum paym ent am ounts
(2) Upon receipt of such credit state­ ing to the customer a w ritten notification which the customer failed to pay because
of the dispute. The creditor m ay not,
m ent, th e card issuer shall credit the of corrections;" or
however, accelerate the customer’s en­
account of such customer as he would a
(ii) Correcting the customer’s account tire debt solely because the customer has
properly transm itted paym ent under by a differing am ount from th at in ­
§ 226.7(g). If the card issuer does not dicated by the customer as being errone­ exercised rights provided by th e Act or
indicate a specific manner, tim e, and ously billed and m ailing or delivering to this part.
(2)
After the resolution of a dispute,
location for prompt receipt of credits for the customer an explanation of the
returns, then the assumptions In § 226.7 change ( s ) , accompanied by documentary finance charges or late paym ent charges
(g) w ill apply.
evidence of the customer’s indebtedness which could have been im posed on
(3) I f it Is the seller’s policy to give as to the am ount in dispute, If such am ounts in dispute prior to receipt by
cash refunds to cash customers, he m ust evidence is requested by the customer; or the creditor of th e proper w ritten notifi­
cation of a billing error m ay be collected,
also give credit refunds to credit card
(111)
M ailing or delivering a written
customers, unless he clearly and con­ explanation or clarification to the cus­ unless:
(i) It 1s resolved th at th e customer
spicuously discloses th a t he does not tomer, after having conducted a reason­
give credit refunds at the tim e th e pur­ able investigation setting forth, to the owes none of the am ount In dispute, in
which case no finance charges or late
chase transaction is consummated.
extent applicable, the reasons why the paym ent charges m ay be collected for
(1)
P r o h i b i t e d a c t s o f c a r d is s u e r s . creditor believes the am ount (s) was cor­
N otw ithstanding any existing agree­ rectly shown on the periodic statem ent any tim e on th at amount; or
(ii) It is resolved th at the customer
m ent (s) to the contrary, no card Issuer and, if the customer so requests, furnish­
owes some of the disputed amount, In
may, by contract or otherwise,
(1)
Prohibit any person from offeringing copies of any documentary evidence which case finance charges or late pay­
a discount to all customers of such per­ of th e customer's indebtedness w ith re­ m ent charges for such period m ay be
son, including cardholder customers, to spect to a disputed amount. In any case imposed only on the am ount owed.
In no case m ay finance charges or late
where the customer alleges that the pepaym ent charges be imposed on disputed
MT h is p a ra g ra p h does n o t a lte r o r affect
am ounts during the tim e the dispute
» A n o tic e o n a su b se q u e n t b illin g s ta te ­ resolution procedure of this section is In
th e r ig h t of a c a rd Issuer a ctin g u n d e r S ta te
law to a tta c h o r oth erw ise levy u p o n fu n d s m e n t clearly Id en tify in g a n y a m o u n t cred ited process. A fter the com pletion o f a dispute
o f a c ard h o ld er h e ld o n d ep o sit w ith th e th e c u sto m er’s a c c o u n t p u rs u a n t to a bU llng
h
c ard issu e r U t h a t rem edy Is c o n s titu tio n ­ e rro r n o tic e ■ ’ o-U be deem ed a p ro p er tr a n s ­ resolution procedure, as provided In par­
m itta l of a w ritte n n o tific atio n o f corrections. agraph (a) o f this section, th e creditor
ally av ailab le t o cred ito rs generally.

shall promptly m all or deliver to the cus­ person unless such am ount remains un­ than open end, whether or not a periodic
tomer a statem ent of the amount owed paid after creditor has complied with all statem ent is m ailed or delivered, unless
by the customer according to the require­ the requirements of this section and has such credit is extended on an account by
allowed that customer the same number use of a credit card.
m ents of S 226.7(b) (2).
12. D raft regulations to implem ent sec­
(3) Nothing in this section shall be of days thereafter as he customarily or
construed to prohibit the m ailing or de­ by credit agreem ent allows, whichever tions 409 and 411 of title TV of Pub. L.
livery of periodic statem ents to the is longer (in no case less than 10 d ay s), 93-495 will be issued by the Board at a
customer: P r o v i d e d , T hat the creditor for the customer to pay undisputed later date.
13. The effective date of these regula­
indicates to the customer on the face of amounts.
(2) If, w ithin the time lim it allowed tions shall be October 28, 1975.
the periodic statem ent th at paym ent of
14. This notice is published pursuant
the specific am ount in dispute is not for paym ent in paragraph (1) of this
required pending the creditor’s compli­ subsection, the creditor receives a fur­ to section 553(b) of title 5, United States
ance with the provisions of this section. ther w ritten notification from the cus­ Code, and § 262.2(a) of the Rules of Pro­
(4) N othing in this section shall pro­ tomer th at any portion of a previously cedure of the Board of Governors of the
hibit any action by a creditor to collect disputed am ount is still In dispute, the Federal Reserve System (12 CFR 262.2
any am ount which has not been indi­ creditor m ay not report to any third (a ) ) .
Interested persons are invited to sub­
cated by the customer to contain a bill­ party th at such am ount is delinquent,
unless th e creditor also reports th at the m it relevant data, views, or argum ents
ing error.
(c) A u t o m a t i c d e b i t o f d i s p u t e d am ount Is in dispute pursuant to the ap­ concerning this proposal, Including pos­
plicable provisions of this section and, sible effects on the cost and the avail­
a m o u n t s . (1) In the case of credit plans
where the cardholder has agreed to per­ at the sam e tim e, notifies the customer ability of consumer credit. Any such m a­
m it the card issuer to periodically pay in writing of the name and address of terial should be subm itted in w riting to
th e cardholder’s Indebtedness by deduct­ each party to whom the creditor is re­ the Secretary, Board of Governors of the
ing the appropriate am ount from the porting inform ation concerning the Federal Reserve System , W ashington,
D.C. 20551, to be received not later than
cardholder’s deposit account, th e credi­ delinquency.
(3) If a creditor has reported a dis­ May 30,1975. Such m aterial w ill be made
tor shall not autom atically debit any
disputed am ounts if the customer has puted am ount as being delinquent to any available for Inspection and copying upon
mailed or delivered a proper w ritten third person, the creditor shall report request, except as provided in § 261.6(a)
notification of a billing error w ithin 10 promptly in writing to any person to of the Board’s Rules Regarding A vail­
days of receipt of the periodic statem ent whom such report was made any subse­ ability of Inform ation.
on w hich the suspected billing error first quent resolution of the reported delin­
By order of the Board of Governors,
quency.
appears.
April 28, 1975.
(4) If a creditor has reported an
(2) Upon receipt of such notification,
[ s e a l]
G r i f f i t h L. G a rw o o d ,
if the creditor has already autom atically amount as being delinquent, to a third
A s s is ta n t S e c re ta ry o f th e B o a r d .
debited the custom er’s account, the cred­ party, and such am ount is subsequently
itor shall promptly (in no case no more disputed by the customer in accordance
[FR Doc.75—
11619 P iled 5 -l-7 5 ;8 :4 5 am ]
than one business day after receipt of with the requirements of paragraph (a)
the notice) restore to the customer’s of this section, the creditor shall prom pt­
deposit account any portion of the dis­ ly (in no case more than 5 business days
puted am ount which was previously after receipt by the creditor of the proper
w ritten notification of the billing error)
deducted.
(3) N othing in this subsection shall m ail or deliver a w ritten notice to each
lim it the customer’s right to dispute an third party to whom the delinquency was
am ount he believes to be In error w ithin reported that the am ount is in dispute,
60 days as otherwise provided in this and shall promptly notify each such
third party of any subsequent resolution
section.
(d) C l o s i n g o f a c c o u n t s . A creditor of the dispute. A creditor need n ot com ­
m ay not, prior to complying with the ply with the requirements of this para­
requirements of paragraphs (a) and (b) graph if the dispute is resolved w ithin 5
of th is section, restrict or close an ac­ business days after receipt by the credi­
count w ith respect to which the cus­ tor of proper w ritten notification of a
tomer indicated a belief that such ac­ billing error.
(f) F o r f e i t u r e p e n a l t y . (1) Any credi­
count contains a billing error solely
because of the customer’s refusal or tor who fails to comply with the require­
failure to pay the am ount indicated to m ents of this section forfeits any right
be In error. This subsection does not to collect from the customer the am ount
prohibit the creditor from applying any indicated by the customer as being in
such am ount to the customer’s credit error, whether or not such am ount is in
fact in error, and any corresponding fi­
lim itation.
(e) C r e d i t r e p o r t s o n a m o u n t s i n d i s ­ nance charges: P r o v i d e d , That the
am ount so forfeited under this section
p u t e . (1) After receiving a proper w rit­
ten notification of a billing error pur­ shall not exceed $50 for each item or
suant to this section, neither the creditor transaction on a periodic statem ent in ­
nor h is agent may directly or indirectly dicated by the customer as being in error.
threaten to report adversely to any per­ In no case shall a creditor forfeit any
son on the customer’s credit standing or am ount for an error in a total figure or
credit rating because of the customer’s subtotal figure reflected on a statem ent
failure to pay the am ount specified in which is caused solely by an error in an­
such notification as being In error or other item which is the subject of a dis­
any finance charge Imposed on th e dis­ pute, nor shall a creditor suffer any for­
puted amount, nor shall such am ount feit more than once for any item or
be reported as delinquent" to any third transaction which may appear on a pe­
riodic statem ent.
(2)
Nothing In this subsection shall be
30A re p o rt by a c red ito r w ith reference to a
d isp u te d a m o u n t m u s t in clu d e a reference construed to lim it a customer’s right to
t h a t th e a m o u n t Is In d isp u te p u rs u a n t to recover under section 130 of the Act.
th e a p p licab le provisions of th is sectio n a n d
(g) E x c e p t i o n s t o g e n e r a l r u l e . This
sh a ll n o t be considered to be "re p o rte d as
d e lin q u e n t.”
section does not apply to credit other


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102