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Federal R eserve Bank
OF DALLAS

August 28, 1989
W IL L IA M

H. W ALLACE

FIRST V IC E PR ES ID EN T

DALLAS, TEXAS 7 5 2 2 2

AND C H IE F O PER ATING O FFICER

Circular 89-51

TO:

The Chief Executive Officer of all
member banks and others concerned in
the Eleventh Federal Reserve District

SUBJECT
Corrections to Circular 89-30 on final rule to Regulation Z (Truth in
Lending) to implement the Fair Credit and Charge Card Disclosure Act
DETAILS
The Board of Governors of the Federal Reserve System recently adopted
fianl amendments to Regulation Z (Truth in Lending) implementing the Fair
Credit and Charge Card Disclosure Act to require certain disclosures by credit
and charge card issuers, effective April 3, 1989, but compliance is optional
until August 31, 1989. This was announced in Circular 89-30 dated April 27,
1989. The Federal Register document on Regulation Z contained several minor
errors and the Board is making some technical revisions which are attached.
ATTACHMENTS
The corrections as published in the Federal Register are attached.
MORE INFORMATION
For further information, please contact Jane Anne Schmoker at (214)
651-6228. For additional copies of this circular, please contact the Public
Affairs Department at (214) 651-6289.
Sincerely yours,

For additional copies of any circular please conta c t the Public A ffairs D ep artm en t at (214) 6 51 -6 2 8 9 . Banks and others are
encouraged to use the follow ing in coming W A TS numbers in contacting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800)
5 2 7 -9 2 0 0 (interstate).

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

Federal Register / Vol. 54, No. 154 / Friday, August 11, 1989 / Rules and Regulations

32933

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. H-0654]

Truth in Lending; Credit and Charge
Card Disclosures; Corrections
Board of Governors of th e
Federal Reserve System.
ACTION: Final rule; corrections.
agency:

SUMMARY: The Board is making
corrections to its final rule revising
Regulation Z to implement the Fair
Credit and Charge Card Disclosure Act
amendments to the Truth in Lending
Act, which appeared in the Federal
Register on April 8,1939 (54 FR 13356).
FOR FURTHER INFORMATION CONTACT:

The following attorneys in the Division
of Consumer and Community Affairs, at
(202) 452-2412 or 452-3867: Michael S.
Bylsma or Adrienne D. Hurt, Senior
Attorneys, or Jane Ahrens, Staff
Attorney: for the hearing impaired only,
contact Eamestine Hill or Dorothea

32954

Federal Register / Vol. 54, No. 154 / Friday, August 11, 1989 / Rules and Regulations

Thompson, Telecommunications Device
for the Deaf at (202) 452-3544, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
SU PP LE M E N T A R Y IN FO R M ATIO N : The
Board is making corrections to the
Federal Register notice that contains its
final rule revising Regulation Z to
implement the Fair Credit and Charge
Card Disclosure Act amendments to the
Truth in Lending Act, including
technical revisions to §§ 226.5a(a)(3),
226.5a(g), 226.9(e), and 226.9(f) of the
regulation.
Section 226.5a(a)(3) currently provides
that the disclosures under § 226.5a are
not required for applications and
solicitations to open home equity lines
of credit accessed by a credit or charge
card that are "subject to” § 226.5b of
Regulation Z (which implements the
Home Equity Loan Consumer Protection
Act). Paragraphs (e) and (f) of § 226.9
state that the requirements of those
paragraphs are applicable to credit or
charge card accounts “subject to”
section 226.5a. A literal reading of this
language could too narrowly construe
the exception in § 226.5a(a)(3) and the
requirements in § 226.9(e) and § 226.9(f).
Therefore the phrase “subject to" is
being changed to “of the type subject
to.”
The technical revisions to the above
mentioned sections are intended to
clarify that these provisions apply to the
type of plans or card accounts referred
to in the relevant provisions. Therefore,
the exception from coverage for home
equity lines of credit accessed by a
credit or charge card applies to the
general types of plans that will be
subject to § 226.5b of Regulation Z
including those entered into before
November 7,1989, the mandatory
effective date of the home equity line
disclosure amendments (see 54 FR
24670).
The renewal notice requirements of
§ 226.9(e) apply to all of a card issuer’s
“traditional” credit and charge card
accounts used primarily to purchase
goods and services for which a fee to
renew the account is imposed, including
those in existence before the effective
date of the new rule. Beginning on
August 31,1989, card issuers must give
renewal disclosures in one of the two
ways the regulation permits. For
example, if a card issuer that bills
monthly follows the notice requirements
of § 226.9(e)(1)—advance notice of
renewal—the issuer must provide
renewal notices to all cardholders who
will be billed for renewal on or after
September 30,1989. If the card issuer
follows the notice requirements of
§ 226.9(e)(2), it must provide renewal

notices to all cardholders that receive a
periodic statement reflecting a renewal
fe& on or after August 31,1989. Also, in
accordance with § 226.9(f), on or after
August 31,1989, a card issuer must
provide notice if it changes the company
providing credit insurance on any
existing “traditional” credit card
account.
Technical revisions also are being
made to paragraphs (g)(2)(i) and (ii) of
§ 226.5a, which describe the "two-cycle
average daily balance” method of
computing finance charges on credit
card accounts. Both sections currently
provide that, in a two-cycle method, the
balance for the billing cycle preceding
the current cycle is figured “in the same
w ay” as the balance for the current
cycle. The language is too limiting
insofar as it would unnecessarily
exclude too many plans from these
categories. The categories were
intended to include not only those card
accounts in which the balance for the
prior cycle is figured in exactly the same
way as that for the current cycle, but
also those accounts in which the
balance for the prior cycle is an average
daily balance but is figured differently
from the balance for the current cycle.
Deletion of the phrase “and is figured in
the same way as the first balance”
clarifies the broad coverage intended for
the two-cycle average daily balance
descriptions. With the revisions, for
example, it will be clear that the name
“two-cycle average daily balance
(excluding new purchases)” should be
used to describe a method in which the
finance charge for the current cycle,
figured on an average daily balance
(excluding new purchases), will be
added to the finance charge for the prior
cycle, figured on an average daily
balance of only new transactions during
that prior cycle.
Corrections
The following corrections are made in
FR Doc. 89-8225, Truth in Lending;
Credit and Charge Card Disclosures:
1. On page 13855, third column, third
full paragraph, line 7, “a ” should be
inserted after “to.”
2. On page 13862, first column, first
full paragraph, line 6, "cards” should
read “card."
3. On page 13864, first column, first
full paragraph, line 1, "sectin” should
read “section.”
4. On page 13864, first column, last
paragraph, line 3, “regulated” should
read "related."
5. On page 13864, first column, last
paragraph, line 18, “from” should read
“form.”

6. On page 13864, second column,
fourth full paragraph, line 2, “provide"
should read "provided."
7. On page 13864, third column, line
31, “card” should be inserted after
“credit.”
§ 226.5a

[Corrected]

8. On page 13865, third column, under
| 226.5a(a)(3), line 4, "of the type”
should be inserted before “subject to."
9. On page 13866, first column, under
§ 226.5a(d)(2), line 3, “need not be given
if the card issuer either” should be
inserted after “section.”
10. On page 13866, third column, under
§ 226.5a(g)(2)(i), the words “and is
figured in the same way as the first
balance” should be removed from the
end of the last sentence.
11. On page 13867, first column, under
§ 226.5a(g)(2)(ii), the words “and is
figured in the same way as the first
balance” should be removed from the
end of the last sentence.
i 226.9

[Corrected]

12. On page 13867, first column, under
§ 226.9(e)(1), line 7, “of the type” should
be inserted before “subject to."
13. On page 13867, second column,
under 1226.9(f)(1), line 7, "of the type”
should be inserted before "subject to.”
§ 226.28

[Corrected]

14. On page 13868, first column, line 6,
umjer § 226.28(a), “consistency” should
read “inconsistency.”
By order of the Board of Governors of the
Federal Reserve System, dated August 7,

1989.
W illiam W . W iles,

Secretary of the Board.
[FR Doc. 89-18806 Filed 8-10-89; 8:45 am]
BILLING CODE 6210-01-M