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F ederal Reserve Ba nk
DALLAS. TEXAS

of

Dallas

75222

Circular No. 71-195
August 19 j 1971

INTERPRETATION OF 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 August 12, 1971? the adoption of an interpretation
of Regulation Z, Truth in Lending, relating to annual member­
ship fees charged by some credit card issuers.
The interpretation is printed on the reverse 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

INTERPRETATION OF REGULATION Z

§ 226.407 Charges for membership In open end
credit plan

for the purpose of obtaining credit. The question
arises whether these fees are finance charges under
§ 226.4(a) of Regulation Z.

(a)
A credit card issuer charges the cardholder
an annual fee for membership in the credit plan
and for issuance of a credit card for use in con­
junction with the plan. The payment of the fee
is required as a condition of membership in the
plan, whether or not the cardholder uses his card

(b) Since such fees are imposed as a qualification
of membership in the plan and for the issuance
of a credit card, and not as incident to or as a
condition of any specific extension of credit, they
do not fall within the definition of a “finance
charge” under § 226.4(a) of Regulation Z.

8/12/71

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