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F ederal

reserve

Ba n k

DALLAS, TEXAS

of

Dallas

75222

Circular No. 71-l80
August 4, 1971

INTERPRETATION TO REGULATION Z

To All Banks, Other Creditors, and Others Concerned
in the Eleventh Federal Reserve District:
The Board of Governors of the Federal Reserve System
announced on July 29, 1971> the adoption of an interpretation
of Regulation Z, Truth in Lending, concerning changes in the
method of determining the balance on which finance charges are
computed on an open end credit account plan.
The interpretation is printed on the reverse side of
this circular.

Yours very truly,
P. E. Coldwell
President

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

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

IN T ER PR ETA TIO N O F R E G U L A T IO N Z

§ 226.705 Open end credit — change in the
method of determining the balance on which fi­
nance charges are computed

also provides that prior notice is not required if
the only change is a reduction in the “periodic
rate or rates, or in any minimum, fixed, check
service, transaction, activity, or similar charge
(a)
The creditor of an open end credit account applicable to the account.”
plan desires to change his method of determining
the balance on which finance charges are com­
(b)
Where a creditor changes his method of
puted from a method in which payments and
determining the balance on which finance charges
credits made during the billing cycle are not de­
are computed from a method in which payments
ducted in determining such balance to a method
and credits made during the billing cycle are not
in which such payments and credits are deducted
deducted in determining such balance, to a method
in determining such balance. This change results
in which such payments and credits are deducted
in a reduction in finance charges to the customer,
in determining such balance, § 226.7(e) requires
where full payment of the account is deferred.
no prior notice of such change in terms, provided
no other changes in terms applicable to the ac­
The question arises whether notice of such change
count are made sim ultaneously which would
is required to be sent to customers of open end
require § 226.7(e) notification.
credit accounts under § 226.7(e), since that Section

7/29/71

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