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Monday,
February 22, 2010

Part II

Federal Reserve
System

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12 CFR Parts 226 and 227
Truth in Lending; Unfair or Deceptive
Acts or Practices; Final Rules

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
I. Background and Implementation of
the Credit Card Act

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1370]

Truth in Lending
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION:

Final rule.

SUMMARY: The Board is amending
Regulation Z, which implements the
Truth in Lending Act, and the staff
commentary to the regulation in order to
implement provisions of the Credit Card
Accountability Responsibility and
Disclosure Act of 2009 that are effective
on February 22, 2010. The rule
establishes a number of new substantive
and disclosure requirements to establish
fair and transparent practices pertaining
to open-end consumer credit plans,
including credit card accounts. In
particular, the rule limits the
application of increased rates to existing
credit card balances, requires credit card
issuers to consider a consumer’s ability
to make the required payments,
establishes special requirements for
extensions of credit to consumers who
are under the age of 21, and limits the
assessment of fees for exceeding the
credit limit on a credit card account.

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DATES: Effective date. The rule is
effective February 22, 2010.
Mandatory compliance dates. The
mandatory compliance date for the
portion of § 226.5(a)(2)(iii) regarding use
of the term ‘‘fixed’’ and for
§§ 226.5(b)(2)(ii), 226.7(b)(11),
226.7(b)(12), 226.7(b)(13), 226.9(c)(2)
(except for 226.9(c)(2)(iv)(D)), 226.9(e),
226.9(g) (except for 226.9(g)(3)(ii)),
226.9(h), 226.10, 226.11(c), 226.16(f),
and §§ 226.51–226.58 is February 22,
2010. The mandatory compliance date
for all other provisions of this final rule
is July 1, 2010.
FOR FURTHER INFORMATION CONTACT:
Jennifer S. Benson or Stephen Shin,
Attorneys, Amy Henderson, Benjamin
K. Olson, or Vivian Wong, Senior
Attorneys, or Krista Ayoub or Ky TranTrong, Counsels, Division of Consumer
and Community Affairs, Board of
Governors of the Federal Reserve
System, at (202) 452–3667 or 452–2412;
for users of Telecommunications Device
for the Deaf (TDD) only, contact (202)
263–4869.
SUPPLEMENTARY INFORMATION:

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January 2009 Regulation Z and FTC Act
Rules
On December 18, 2008, the Board
adopted two final rules pertaining to
open-end (not home-secured) credit.
These rules were published in the
Federal Register on January 29, 2009.
The first rule makes comprehensive
changes to Regulation Z’s provisions
applicable to open-end (not homesecured) credit, including amendments
that affect all of the five major types of
required disclosures: Credit card
applications and solicitations, accountopening disclosures, periodic
statements, notices of changes in terms,
and advertisements. See 74 FR 5244
(January 2009 Regulation Z Rule). The
second is a joint rule published with the
Office of Thrift Supervision (OTS) and
the National Credit Union
Administration (NCUA) under the
Federal Trade Commission Act (FTC
Act) to protect consumers from unfair
acts or practices with respect to
consumer credit card accounts. See 74
FR 5498 (January 2009 FTC Act Rule).
The effective date for both rules is July
1, 2010.
On May 5, 2009, the Board published
proposed clarifications and technical
amendments to the January 2009
Regulation Z Rule (May 2009 Regulation
Z Proposed Clarifications) in the
Federal Register. See 74 FR 20784. The
Board, the OTS, and the NCUA
(collectively, the Agencies) concurrently
published proposed clarifications and
technical amendments to the January
2009 FTC Act Rule. See 74 FR 20804
(May 2009 FTC Act Rule Proposed
Clarifications). In both cases, as stated
in the Federal Register, these proposals
were intended to clarify and facilitate
compliance with the consumer
protections contained in the January
2009 final rules and not to reconsider
the need for—or the extent of—those
protections. The comment period on
both of these proposed sets of
amendments ended on June 4, 2009.
The Credit Card Act
On May 22, 2009, the Credit Card
Accountability Responsibility and
Disclosure Act of 2009 (Credit Card Act)
was signed into law. Public Law No.
111–24, 123 Stat. 1734 (2009). The
Credit Card Act primarily amends the
Truth in Lending Act (TILA) and
establishes a number of new substantive
and disclosure requirements to establish
fair and transparent practices pertaining
to open-end consumer credit plans.
Several of the provisions of the Credit
Card Act are similar to provisions in the

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Board’s January 2009 Regulation Z and
FTC Act Rules, while other portions of
the Credit Card Act address practices or
mandate disclosures that were not
addressed in the Board’s rules.
The requirements of the Credit Card
Act that pertain to credit cards or other
open-end credit for which the Board has
rulemaking authority become effective
in three stages. First, provisions
generally requiring that consumers
receive 45 days’ advance notice of
interest rate increases and significant
changes in terms (new TILA Section
127(i)) and provisions regarding the
amount of time that consumers have to
make payments (revised TILA Section
163) became effective on August 20,
2009 (90 days after enactment of the
Credit Card Act). A majority of the
requirements under the Credit Card Act
for which the Board has rulemaking
authority, including, among other
things, provisions regarding interest rate
increases (revised TILA Section 171),
over-the-limit transactions (new TILA
Section 127(k)), and student cards (new
TILA Sections 127(c)(8), 127(p), and
140(f)) become effective on February 22,
2010 (9 months after enactment).
Finally, two provisions of the Credit
Card Act addressing the reasonableness
and proportionality of penalty fees and
charges (new TILA Section 149) and reevaluation by creditors of rate increases
(new TILA Section 148) are effective on
August 22, 2010 (15 months after
enactment). The Credit Card Act also
requires the Board to conduct several
studies and to make several reports to
Congress, and sets forth differing time
periods in which these studies and
reports must be completed.
As is discussed further in the
supplementary information to
§ 226.5(b)(2), on November 6, 2009,
TILA Section 163 was further amended
by the Credit CARD Technical
Corrections Act of 2009 (Technical
Corrections Act), which narrowed the
application of the requirement regarding
the time consumers receive to pay to
credit card accounts. Public Law 111–
93, 123 Stat. 2998 (Nov. 6, 2009). The
Board is as adopting amendments to
§ 226.5(b)(2) to conform to the
requirements of TILA Section 163 as
amended by the Technical Corrections
Act.
Implementation of Credit Card Act
On July 22, 2009, the Board published
an interim final rule to implement those
provisions of the Credit Card Act that
became effective on August 20, 2009
(July 2009 Regulation Z Interim Final
Rule). See 74 FR 36077. As discussed in
the supplementary information to the
July 2009 Regulation Z Interim Final

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
Rule, the Board is implementing the
provisions of the Credit Card Act in
stages, consistent with the statutory
timeline established by Congress.
Accordingly, the interim final rule
implemented those provisions of the
statute that became effective August 20,
2009, primarily addressing change-interms notice requirements and the
amount of time that consumers have to
make payments. The Board issued rules
in interim final form based on its
determination that, given the short
implementation period established by
the Credit Card Act and the fact that
similar rules were already the subject of
notice-and-comment rulemaking, it
would be impracticable and
unnecessary to issue a proposal for
public comment followed by a final
rule. The Board solicited comment on
the interim final rule; the comment
period ended on September 21, 2009.
The Board has considered comments on
the interim final rule in connection with
this rule.
On October 21, 2009 the Board
published a proposed rule in the
Federal Register to implement the
provisions of the Credit Card Act that
become effective February 22, 2010
(October 2009 Regulation Z Proposal).
74 FR 54124. The comment period on
the October 2009 Regulation Z Proposal
closed on November 20, 2009. The
Board received approximately 150
comments in response to the proposed
rule, including comments from credit
card issuers, trade associations,
consumer groups, individual
consumers, and a member of Congress.
As discussed in more detail elsewhere
in this supplementary information, the
Board has considered comments
received on the October 2009 Regulation
Z Proposal in adopting this final rule.
The Board is separately considering
the two remaining provisions under the
Credit Card Act regarding reasonable
and proportional penalty fees and
charges and the re-evaluation of rate
increases, and intends to finalize
implementing regulations upon notice
and after giving the public an
opportunity to comment.
To the extent appropriate, the Board
has used its January 2009 rules and the
underlying rationale as the basis for its
rulemakings under the Credit Card Act.
This final rule incorporates in substance
those portions of the Board’s January
2009 Regulation Z Rule that are
unaffected by the Credit Card Act,
except as specifically noted in V.
Section-by-Section Analysis. Because
the requirements of the Board’s January
2009 Regulation Z and FTC Act Rules
are incorporated in this rule, the Board
is publishing elsewhere in this Federal

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Register two notices withdrawing the
January 2009 Regulation Z Rule and its
January 2009 FTC Act Rule.
Provisions of January 2009 Regulation Z
Rule Applicable to HELOCs
The final rule incorporates several
sections of the January 2009 Regulation
Z Rule that are applicable only to homeequity lines of credit subject to the
requirements of § 226.5b (HELOCs). In
particular, the final rule includes new
§§ 226.6(a), 226.7(a) and 226.9(c)(1),
which are identical to the analogous
provisions adopted in the January 2009
Regulation Z Rule. These sections, as
discussed in the supplementary
information to the January 2009
Regulation Z Rule, are intended to
preserve the existing requirements of
Regulation Z for home-equity lines of
credit until the Board’s ongoing review
of the rules that apply to HELOCs is
completed. On August 26, 2009, the
Board published proposed revisions to
those portions of Regulation Z affecting
HELOCs in the Federal Register. See 74
FR 43428 (August 2009 Regulation Z
HELOC Proposal). This final rule is not
intended to amend or otherwise affect
the August 2009 Regulation Z HELOC
Proposal. However, the Board believes
that these sections are necessary to give
HELOC creditors clear guidance on how
to comply with Regulation Z after the
effective date of this rule but prior to the
effective date of the forthcoming final
rules directly addressing HELOCs.
Finally, the Board has incorporated in
the regulatory text and commentary for
§§ 226.1, 226.2, and 226.3 several
changes that were adopted in the
Board’s recent rulemaking pertaining to
private education loans. See 74 FR
41194 (August 14, 2009) for further
discussion of these changes.
Effective Date and Mandatory
Compliance Dates
As noted above, the effective date of
the Board’s January 2009 Regulation Z
Rule was July 1, 2010. However, the
effective date of the provisions of the
Credit Card Act implemented by this
final rule is February 22, 2010. Many of
the provisions of the Credit Card Act as
implemented by this final rule are
closely related to provisions of the
January 2009 Regulation Z Rule. For
example, § 226.9(c)(2)(ii), which
describes ‘‘significant changes in terms’’
for which 45 days’ advance notice is
required, cross-references § 226.6(b)(1)
and (b)(2) as adopted in the January
2009 Regulation Z Rule.
For consistency with the Credit Card
Act, the Board is making the effective
date for the final rule February 22, 2010.
However, in the October 2009

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Regulation Z Proposal, the Board
solicited comment on whether
compliance should be mandatory on
February 22, 2010 for the provisions of
the January 2009 Regulation Z Rule that
are not directly affected by the Credit
Card Act.
Many industry commenters urged the
Board to retain the original July 1, 2010
mandatory compliance date for
amendments to Regulation Z that are
not specifically required by the Credit
Card Act. These commenters noted that
there would be significant operational
issues associated with accelerating the
effective date for all of the revisions
contained in the January 2009
Regulation Z Rule that are not specific
requirements of the Credit Card Act.
Commenters noted that they have
already allocated resources and planned
for a July 1, 2010 mandatory compliance
date for the January 2009 Regulation Z
Rule and that it would be unworkable,
if not impossible, to comply with all of
the requirements of this final rule by
February 22, 2010. The Board notes that
this final rule is being issued less than
two months prior to the February 22,
2010 effective date of the majority of the
Credit Card Act requirements, and that
an acceleration of the mandatory
compliance date for provisions
originally adopted in the January 2009
Regulation Z Rule that are not directly
impacted by the Credit Card Act would
be extremely burdensome for creditors.
For some creditors, it may be impossible
to implement these provisions by
February 22, 2010. Accordingly, the
Board is generally retaining a July 1,
2010 mandatory compliance date for
those provisions originally adopted in
the January 2009 Regulation Z Rule that
are not requirements of the Credit Card
Act.1
Accordingly, as discussed further in
VI. Mandatory Compliance Dates, the
mandatory compliance date for the
portion of § 226.5(a)(2)(iii) regarding use
of the term ‘‘fixed’’ and for
§§ 226.5(b)(2)(ii), 226.7(b)(11),
226.7(b)(12), 226.7(b)(13), 226.9(c)(2)
(except for 226.9(c)(2)(iv)(D)), 226.9(e),
226.9(g) (except for 226.9(g)(3)(ii)),
226.9(h), 226.10, 226.11(c), 226.16(f),
1 The Board notes that the provisions regarding
advance notice of changes in terms and rate
increases set forth in § 226.9(c)(2) and (g) apply to
all open-end (not home-secured) plans. The Credit
Card Act’s requirements regarding advance notice
of changes in terms and rate increases, as
implemented in this final rule, apply only to credit
card accounts under an open-end (not homesecured) consumer credit plan. In order to have one
consistent rule for all open-end (not home-secured)
plans, compliance with the requirements of
§ 226.9(c)(2) and (g) (except for specific formatting
requirements) is mandatory for all open-end (not
home-secured) plans on February 22, 2010.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations

and §§ 226.51–226.58 is February 22,
2010. The mandatory compliance date
for all other provisions of this final rule
is July 1, 2010.
II. Summary of Major Revisions
A. Increases in Annual Percentage Rates
Existing balances. Consistent with the
Credit Card Act, the final rule prohibits
credit card issuers from applying
increased annual percentage rates and
certain fees and charges to existing
credit card balances, except in the
following circumstances: (1) When a
temporary rate lasting at least six
months expires; (2) when the rate is
increased due to the operation of an
index (i.e., when the rate is a variable
rate); (3) when the minimum payment
has not been received within 60 days
after the due date; and (4) when the
consumer successfully completes or
fails to comply with the terms of a
workout arrangement. In addition, when
the annual percentage rate on an
existing balance has been reduced
pursuant to the Servicemembers Civil
Relief Act (SCRA), the final rule permits
the card issuer to increase that rate once
the SCRA ceases to apply.
New transactions. The final rule
implements the Credit Card Act’s
prohibition on increasing an annual
percentage rate during the first year after
an account is opened. After the first
year, the final rule provides that a card
issuer is permitted to increase the
annual percentage rates that apply to
new transactions so long as the issuer
provides the consumer with 45 days
advance notice of the increase.

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B. Evaluation of Consumer’s Ability To
Pay
General requirements. The Credit
Card Act prohibits credit card issuers
from opening a new credit card account
or increasing the credit limit for an
existing credit card account unless the
issuer considers the consumer’s ability
to make the required payments under
the terms of the account. Because credit
card accounts typically require
consumers to make a minimum monthly
payment that is a percentage of the total
balance (plus, in some cases, accrued
interest and fees), the final rule requires
card issuers to consider the consumer’s
ability to make the required minimum
payments.
However, because an issuer will not
know the exact amount of a consumer’s
minimum payments at the time it is
evaluating the consumer’s ability to
make those payments, the Board
proposed to require issuers to use a
reasonable method for estimating a
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proposed a safe harbor that issuers
could use to satisfy this requirement.
For example, with respect to the
opening of a new credit card account,
the proposed safe harbor provided that
it would be reasonable for an issuer to
estimate minimum payments based on a
consumer’s utilization of the full credit
line using the minimum payment
formula employed by the issuer with
respect to the credit card product for
which the consumer is being
considered.
Based on comments received and
further analysis, the final rule adopts
these aspects of the proposal. In
addition, the final rule provides that—
if the applicable minimum payment
formula includes fees and accrued
interest—the estimated minimum
payment must include mandatory fees
and must include interest charges
calculated using the annual percentage
rate that will apply after any
promotional or other temporary rate
expires.
The proposed rule would also have
specified the types of factors card
issuers should review in considering a
consumer’s ability to make the required
minimum payments. Specifically, it
provided that an evaluation of a
consumer’s ability to pay must include
a review of the consumer’s income or
assets as well as current obligations, and
a creditor must establish reasonable
policies and procedures for considering
that information. When considering a
consumer’s income or assets and current
obligations, an issuer would have been
permitted to rely on information
provided by the consumer or
information in a consumer’s credit
report.
Based on comments received and
further analysis, the final rule adopts
these aspects of the proposal. In
addition, when evaluating a consumer’s
ability to pay, the final rule requires
issuers to consider 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 (i.e., residual income).
Furthermore, the final rule provides that
it would be unreasonable for an 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. Finally, in order to
provide flexibility regarding
consideration of income or assets, the
final rule permits issuers to make a
reasonable estimate of the consumer’s
income or assets based on empirically
derived, demonstrably and statistically
sound models.

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Specific requirements for underage
consumers. Consistent with the Credit
Card Act, the final rule prohibits a
creditor from issuing a credit card to a
consumer who has not attained the age
of 21 unless the consumer has
submitted a written application that
meets certain requirements.
Specifically, the application must
include either: (1) Information
indicating that the underage consumer
has the ability to make the required
payments for the account; or (2) the
signature of a cosigner who has attained
the age of 21, who has the means to
repay debts incurred by the underage
consumer in connection with the
account, and who assumes joint liability
for such debts.
C. Marketing to Students
Prohibited inducements. The Credit
Card Act limits a creditor’s ability to
offer a student at an institution of higher
education any tangible item to induce
the student to apply for or open an
open-end consumer credit plan offered
by the creditor. Specifically, the Credit
Card Act prohibits such offers: (1) On
the campus of an institution of higher
education; (2) near the campus of an
institution of higher education; or (3) at
an event sponsored by or related to an
institution of higher education.
The final rule contains official staff
commentary to assist creditors in
complying with these prohibitions. For
example, the commentary clarifies that
‘‘tangible item’’ means a physical item
(such as a gift card, t-shirt, or magazine
subscription) and does not include nonphysical items (such as discounts,
rewards points, or promotional credit
terms). The commentary also clarifies
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) is considered
near the campus of that institution.
Finally, consistent with guidance
recently adopted by the Board with
respect to certain private education
loans, the commentary states that an
event is related to an institution of
higher education if the marketing of
such event uses words, pictures, or
symbols identified with the institution
in a way that implies that the institution
endorses or otherwise sponsors the
event.
Disclosure and reporting
requirements. The final rule also
implements the provisions of the Credit
Card Act requiring institutions of higher
education to publicly disclose
agreements with credit card issuers
regarding the marketing of credit cards.
The final rule states that an institution
may comply with this requirement by,

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
for example, posting the agreement on
its Web site or by making the agreement
available upon request.
In addition, the final rule implements
the provisions of the Credit Card Act
requiring card issuers to make annual
reports to the Board regarding any
business, marketing, or promotional
agreements between the issuer and an
institution of higher education (or an
affiliated organization) regarding the
issuance of credit cards to students at
that institution. The first report must
provide information regarding the 2009
calendar year and must be submitted to
the Board by February 22, 2010.2

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D. Fees or Charges for Transactions
That Exceed the Credit Limit
Consumer consent requirement.
Consistent with the Credit Card Act, the
final rule requires credit card issuers to
obtain a consumer’s express consent (or
opt-in) before imposing any fees on a
consumer’s credit card account for
making an extension of credit that
exceeds the account’s credit limit. Prior
to obtaining this consent, the issuer
must disclose, among other things, the
dollar amount of any fees or charges that
will be assessed for an over-the-limit
transaction as well as any increased rate
that may apply if the consumer exceeds
the credit limit. In addition, if the
consumer consents, the issuer is also
required to provide a notice of the
consumer’s right to revoke that consent
on any periodic statement that reflects
the imposition of an over-the-limit fee
or charge.
The final rule applies these
requirements to all consumers
(including existing accountholders) if
the issuer imposes a fee or charge for
paying an over-the-limit transaction.
Thus, after February 22, 2010, issuers
are prohibited from assessing any overthe-limit fees or charges on an account
until the consumer consents to the
payment of transactions that exceed the
credit limit.
Prohibited practices. Even if the
consumer has affirmatively consented to
the issuer’s payment of over-the-limit
transactions, the Credit Card Act
prohibits certain practices in connection
with the assessment of over-the-limit
fees or charges. Consistent with these
statutory prohibitions, the final rule
would prohibit an issuer from imposing
more than one over-the-limit fee or
charge per billing cycle. In addition, an
issuer could not impose an over-thelimit fee or charge on the account for the
2 Technical specifications for these submissions
are set forth in Attachment I to this Federal Register
notice.

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same over-the-limit transaction in more
than three billing cycles.
The Credit Card Act also directs the
Board to prescribe regulations that
prevent unfair or deceptive acts or
practices in connection with the
manipulation of credit limits designed
to increase over-the-limit fees or other
penalty fees. Pursuant to this authority,
the proposed rule would have
prohibited issuers from assessing overthe-limit fees or charges that are caused
by the issuer’s failure to promptly
replenish the consumer’s available
credit. The proposed rule would have
also prohibited issuers from
conditioning the amount of available
credit on the consumer’s consent to the
payment of over-the-limit transactions.
Finally, the proposed rule would have
prohibited the imposition of any overthe-limit fees or charges if the credit
limit is exceeded solely because of the
issuer’s assessment of fees or charges
(including accrued interest charges) on
the consumer’s account. The final rule
adopts these prohibitions.
E. Payment Allocation
When different rates apply to different
balances on a credit card account, the
Board’s January 2009 FTC Act Rule
required banks to allocate payments in
excess of the minimum first to the
balance with the highest rate or pro rata
among the balances. The Credit Card
Act contains a similar provision, except
that excess payments must always be
allocated first to the balance with the
highest rate. In addition, the Credit Card
Act provided that, when a balance on an
account is subject to a deferred interest
or similar program, excess payments
must be allocated first to that balance
during the last two billing cycles of the
deferred interest period so that the
consumer can pay the balance in full
and avoid deferred interest charges.
The final rule mirrors the statutory
requirements. However, in order to
provide consumers who utilize deferred
interest programs with an additional
means of avoiding deferred interest
charges, the final rule also permits
issuers to allocate excess payments in
the manner requested by the consumer
at any point during a deferred interest
period. This exception allows issuers to
retain existing programs that permit
consumers to, for example, pay off a
deferred interest balance in installments
over the course of the deferred interest
period. However, this provision applies
only when a balance on an account is
subject to a deferred interest or similar
program.

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F. Timely Settlement of Estates
The Credit Card Act directs the Board
to prescribe regulations requiring credit
card issuers to establish procedures
ensuring that any administrator of an
estate can resolve the outstanding credit
card balance of a deceased
accountholder in a timely manner. The
proposed rule would have imposed two
specific requirements designed to
enable administrators to determine the
amount of and pay a deceased
consumer’s balance in a timely manner.
First, upon request by the
administrator, the issuer would have
been required to disclose the amount of
the balance in a timely manner. The
final rule adopts this requirement.
Second, once an administrator has
requested the account balance, the
proposed rule would have prohibited
the issuer from imposing additional fees
and charges on the account so that the
amount of the balance does not increase
while the administrator is arranging for
payment. However, because the Board
was concerned that a permanent
moratorium on fees and interest charges
could be unduly burdensome, the
proposal solicited comment on whether
a particular period of time would
generally be sufficient to enable an
administrator to arrange for payment.
Based on comments received and
further analysis, the Board believes that
it would not be appropriate to
permanently prohibit the accrual of
interest on a credit card account once an
administrator requests the account
balance because interest will continue
to accrue on other types of credit
accounts that are part of the estate.
Instead, the final rule provides that—if
the administrator pays the balance
stated by the issuer in full within 30
days—the issuer must waive any
additional interest charges. However,
the final rule retains the proposed
prohibition on the imposition of
additional fees so that the account is
not, for example, assessed late payment
fees or annual fees while the
administrator is settling the estate.
G. On-Line Disclosure of Credit Card
Agreements
The Credit Card Act requires issuers
to post credit card agreements on their
Web sites and to submit those
agreements to the Board for posting on
its Web site. The Credit Card Act further
provides that the Board may establish
exceptions to these requirements in any
case where the administrative burden
outweighs the benefit of increased
transparency, such as where a credit
card plan has a de minimis number of
accountholders.

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The final rule adopts the proposed
requirement that issuers post on their
Web sites or otherwise make available
their credit card agreements with
current cardholders. In addition,
consistent with the Credit Card Act, the
final rule generally requires that—no
later than February 22, 2010—issuers
submit to the Board for posting on its
Web site all credit card agreements
offered to the public as of December 31,
2009. Subsequent submissions are due
on August 2, 2010 and on a quarterly
basis thereafter.3
However, the final rule also adopts
certain exceptions to this submission
requirement. First, the final rule adopts
the proposed de minimis exception for
issuers with fewer than 10,000 open
credit card accounts. Because the
overwhelming majority of credit card
accounts are held by issuers that have
more than 10,000 open accounts, the
information provided through the
Board’s Web site would still reflect
virtually all of the terms available to
consumers. Similarly, based on
comments received and further analysis,
the final rule provides that issuers are
not required to submit agreements for
private label plans offered on behalf of
a single merchant or a group of affiliated
merchants or for plans that are offered
in order to test a new credit card
product so long as the plan involves no
more than 10,000 credit card accounts.
Second, the final rule adopts the
proposed exception for agreements that
are not currently offered to the public.
The Board believes that the primary
purpose of the information provided
through the Board’s Web site is to assist
consumers in comparing credit card
agreements offered by different issuers
when shopping for a new credit card.
Including agreements that are no longer
offered to the public would not facilitate
comparison shopping by consumers. In
addition, including such agreements
could create confusion regarding which
terms are currently available.
G. Additional Provisions
The final rule also implements the
following provisions of the Credit Card
Act, all of which go into effect on
February 22, 2010.
Limitations on fees. The Board’s
January 2009 FTC Act Rule prohibited
banks from charging to a credit card
account during the first year after
account opening certain accountopening and other fees that, in total,
constituted the majority of the initial
credit limit. The Credit Card Act
3 Technical specifications for these submissions
are set forth in Attachment I to this Federal Register
notice.

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contains a similar provision, except that
it applies to all fees (other than fees for
late payments, returned payments, and
exceeding the credit limit) and limits
the total fees to 25% of the initial credit
limit.
Double-cycle billing. The Board’s
January 2009 FTC Act Rule prohibited
banks from imposing finance charges on
balances for days in previous billing
cycles as a result of the loss of a grace
period (a practice sometimes referred to
as ‘‘double-cycle billing’’). The Credit
Card Act contains a similar prohibition.
In addition, when a consumer pays
some but not all of a balance prior to
expiration of a grace period, the Credit
Card Act prohibits the issuer from
imposing finance charges on the portion
of the balance that has been repaid.
Fees for making payment. The Credit
Card Act prohibits issuers from charging
a fee for making a payment, except for
payments involving an expedited
service by a service representative of the
issuer.
Minimum payments. The Board’s
January 2009 Regulation Z Rule
implemented provisions of the
Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005
requiring creditors to provide a toll-free
telephone number where consumers
could receive an estimate of the time to
repay their account balances if they
made only the required minimum
payment each month. The Credit Card
Act substantially revised the statutory
requirements for these disclosures. In
particular, the Credit Card Act requires
the following new disclosures on the
periodic statement: (1) The amount of
time and the total cost (interest and
principal) involved in paying the
balance in full making only minimum
payments; and (2) the monthly payment
amount required to pay off the balance
in 36 months and the total cost (interest
and principal) of repaying the balance
in 36 months.
III. Statutory Authority
General Rulemaking Authority
Section 2 of the Credit Card Act states
that the Board ‘‘may issue such rules
and publish such model forms as it
considers necessary to carry out this Act
and the amendments made by this Act.’’
This final rule implements several
sections of the Credit Card Act, which
amend TILA. TILA mandates that the
Board prescribe regulations to carry out
its purposes and specifically authorizes
the Board, among other things, to do the
following:
• Issue regulations that contain such
classifications, differentiations, or other
provisions, or that provide for such

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adjustments and exceptions for any
class of transactions, that in the Board’s
judgment are necessary or proper to
effectuate the purposes of TILA,
facilitate compliance with the act, or
prevent circumvention or evasion. 15
U.S.C. 1604(a).
• Exempt from all or part of TILA any
class of transactions if the Board
determines that TILA coverage does not
provide a meaningful benefit to
consumers in the form of useful
information or protection. The Board
must consider factors identified in the
act and publish its rationale at the time
it proposes an exemption for comment.
15 U.S.C. 1604(f).
• Add or modify information required
to be disclosed with credit and charge
card applications or solicitations if the
Board determines the action is
necessary to carry out the purposes of,
or prevent evasions of, the application
and solicitation disclosure rules. 15
U.S.C. 1637(c)(5).
• Require disclosures in
advertisements of open-end plans. 15
U.S.C. 1663.
For the reasons discussed in this
notice, the Board is using its specific
authority under TILA and the Credit
Card Act, in concurrence with other
TILA provisions, to effectuate the
purposes of TILA, to prevent the
circumvention or evasion of TILA, and
to facilitate compliance with the act.
Authority To Issue Final Rule With an
Effective Date of February 22, 2010
Because the provisions of the Credit
Card Act implemented by this final rule
are effective on February 22, 2010,4 this
final rule is also effective on February
22, 2010 (except as otherwise provided).
The Administrative Procedure Act (5
U.S.C. 551 et seq.) (APA) generally
requires that rules be published not less
than 30 days before their effective date.
See 15 U.S.C. 553(d). However, the APA
provides an exception when ‘‘otherwise
provided by the agency for good cause
found and published with the rule.’’ Id.
§ 553(d)(3). Although the Board is
issuing this final rule more than 30 days
before February 22, 2010, it is unclear
whether it will be published in the
Federal Register more than 30 days
before that date.5 Accordingly, the
Board finds that good cause exists to
publish the final rule less than 30 days
before the effective date.
4 See

Credit Card Act § 3.
date on which the Board’s notice is
published in the Federal Register depends on a
number of variables that are outside the Board’s
control, including the number and size of other
notices submitted to the Federal Register prior to
the Board’s notice.
5 The

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Similarly, although 12 U.S.C.
4802(b)(1) generally requires that new
regulations and amendments to existing
regulations take effect on the first day of
the calendar quarter which begins on or
after the date on which the regulations
are published in final form (in this case,
April 1, 2010), the Board has
determined that—in light of the
statutory effective date—there is good
cause for making this final rule effective
on February 22, 2010. See 12 U.S.C.
4802(b)(1)(A) (providing an exception to
the general requirement when ‘‘the
agency determines, for good cause
published with the regulation, that the
regulations should become effective
before such time’’). Furthermore, the
Board believes that providing creditors
with guidance regarding compliance
before April 1, 2010 is consistent with

general provision in TILA Section
105(d).
IV. Applicability of Provisions
While several provisions under the
Credit Card Act apply to all open-end
credit, others apply only to certain types
of open-end credit, such as credit card
accounts under open-end consumer
credit plans. As a result, the Board
understands that some additional
clarification may be helpful as to which
provisions of the Credit Card Act as
implemented in Regulation Z are
applicable to which types of open-end
credit products. In order to clarify the
scope of the revisions to Regulation Z,
the Board is providing the below table,
which summarizes the applicability of
each of the major revisions to
Regulation Z.6

Provision

Applicability

§ 226.5(a)(2)(iii) ...............................
§ 226.5(b)(2)(ii)(A) ...........................
§ 226.5(b)(2)(ii)(B) ...........................
§ 226.7(b)(11) ..................................
§ 226.7(b)(12) ..................................
§ 226.7(b)(14) ..................................
§ 226.9(c)(2) ....................................
§ 226.9(e) ........................................
§ 226.9(g) ........................................
§ 226.9(h) ........................................
§ 226.10(b)(2)(ii) ..............................
§ 226.10(b)(3) ..................................
§ 226.10(d) ......................................
§ 226.10(e) ......................................
§ 226.10(f) .......................................
§ 226.11(c) ......................................
§ 226.16(f) .......................................
§ 226.16(h) ......................................
§ 226.51 ...........................................
§ 226.52 ...........................................
§ 226.53 ...........................................
§ 226.54 ...........................................
§ 226.55 ...........................................
§ 226.56 ...........................................
§ 226.57 ...........................................

All open-end (not home-secured) consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
All open-end consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
All open-end (not home-secured) consumer credit plans.
All open-end (not home-secured) consumer credit plans.
Credit or charge card accounts subject to § 226.5a.
All open-end (not home-secured) consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
All open-end consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
All open-end consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
All open-end consumer credit plans.
All open-end (not home-secured) consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan.
Credit card accounts under an open-end (not home-secured) consumer credit plan, except that § 226.57(c)
applies to all open-end consumer credit plans.
Credit card accounts under an open-end (not home-secured) consumer credit plan.

§ 226.58 ...........................................

V. Section-by-Section Analysis
Section 226.2
Construction

Definitions and Rules of

2(a) Definitions

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12 U.S.C. 4802(b)(1)(C), which provides
an exception to the general requirement
when ‘‘the regulation is required to take
effect on a date other than the date
determined under [12 U.S.C. 4802(b)(1)]
pursuant to any other Act of Congress.’’
Finally, TILA Section 105(d) provides
that any regulation of the Board (or any
amendment or interpretation thereof)
requiring any disclosure which differs
from the disclosures previously required
by Chapters 1, 4, or 5 of TILA (or by any
regulation of the Board promulgated
thereunder) shall have an effective date
no earlier than ‘‘that October 1 which
follows by at least six months the date
of promulgation.’’ However, even
assuming that TILA Section 105(d)
applies to this final rule, the Board
believes that the specific provision in
Section 3 of the Credit Card Act
governing effective dates overrides the

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2(a)(15) Credit Card
In the January 2009 Regulation Z
Rule, the Board revised § 226.2(a)(15) to
read as follows: ‘‘Credit card means any
card, plate, or other single credit device
that may be used from time to time to
obtain credit. Charge card means a
credit card on an account for which no
6 This table summarizes the applicability only of
those new paragraphs or provisions added to
Regulation Z in order to implement the Credit Card
Act, as well as the applicability of proposed

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periodic rate is used to compute a
finance charge.’’ 74 FR 5257. In order to
clarify the application of certain
provisions of the Credit Card Act that
apply to ‘‘credit card account[s] under
an open end consumer credit plan,’’ the
October 2009 Regulation Z Proposal
would have further revised
§ 226.2(a)(15) by adding a definition of
‘‘credit card account under an open-end
(not home-secured) consumer credit
plan.’’ Specifically, proposed
§ 226.2(a)(15)(ii) would have defined

this term 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 § 226.5b
or an overdraft line of credit accessed by
a debit card. The Board proposed to
move the definitions of ‘‘credit card’’
and ‘‘charge card’’ in the January 2009
Regulation Z Rule to § 226.2(a)(15)(i)
and (iii), respectively.
The Board noted that the exclusion of
credit cards that access a home-equity
plan subject to § 226.5b was consistent

provisions addressing deferred interest or similar
offers. The Board notes that it has not changed the
applicability of provisions of Regulation Z amended

by the January 2009 Regulation Z Rule or May 2009
Regulation Z Proposed Clarifications.

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with the approach adopted by the Board
in the July 2009 Regulation Z Interim
Final Rule. See 74 FR 36083.
Specifically, in the interim final rule,
the Board used its authority under TILA
Section 105(a) and § 2 of the Credit Card
Act to interpret the term ‘‘credit card
account under an open-end consumer
credit plan’’ in new TILA Section 127(i)
to exclude home-equity lines of credit
subject to § 226.5b, even if those lines
could be accessed by a credit card.
Instead, the Board applied the
disclosure requirements in current
§ 226.9(c)(2)(i) and (g)(1) to ‘‘credit card
accounts under an open-end (not homesecured) consumer credit plan.’’ See 74
FR 36094–36095. For consistency with
the interim final rule, the Board
proposed to generally use its authority
under TILA Section 105(a) and § 2 of the
Credit Card Act to apply the same
interpretation to other provisions of the
Credit Card Act that apply to a ‘‘credit
card account under an open end
consumer credit plan.’’ See, e.g., revised
TILA § 127(j), (k), (l), (n); revised TILA
§ 171; new TILA §§ 140A, 148, 149,
172.7 The Board noted that this
interpretation was also consistent with
the Board’s historical treatment of
HELOC accounts accessible by a credit
card under TILA; for example, the credit
and charge card application and
solicitation disclosure requirements
under § 226.5a expressly do not apply to
home-equity plans accessible by a credit
card that are subject to § 226.5b. See
current § 226.5a(a)(3); revised
§ 226.5a(a)(5)(i), 74 FR 5403. The Board
has issued the August 2009 Regulation
Z HELOC Proposal to address changes
to Regulation Z that it believes are
necessary and appropriate for HELOCs
and will consider any appropriate
revisions to the requirements for
HELOCs in connection with that review.
Commenters generally supported this
exclusion, which is adopted in the final
rule.
The Board also proposed to interpret
the term ‘‘credit card account under an
open end consumer credit plan’’ to
exclude a debit card that accesses an
overdraft line of credit. Although such
cards are ‘‘credit cards’’ under current
§ 226.2(a)(15), the Board has generally
excluded them from the provisions of
Regulation Z that specifically apply to
7 In certain cases, the Board has applied a
statutory provision that refers to ‘‘credit card
accounts under an open end consumer credit plan’’
to a wider range of products. Specifically, see the
discussion below regarding the implementation of
new TILA Section 127(i) in § 226.9(c)(2), the
implementation of new TILA Section 127(m) in
§§ 226.5(a)(2)(iii) and 226.16(f), and the
implementation of new TILA Section 127(o)(2) in
§ 226.10(d).

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credit cards. For example, as with credit
cards that access HELOCs, the
provisions in § 226.5a regarding credit
and charge card applications and
solicitations do not apply to overdraft
lines of credit tied to asset accounts
accessed by debit cards. See current
§ 226.5a(a)(3); revised § 226.5a(a)(5)(ii),
74 FR 5403.
Instead, Regulation E (Electronic
Fund Transfers) generally governs debit
cards that access overdraft lines of
credit. See 12 CFR part 205. For
example, Regulation E generally governs
the issuance of debit cards that access
an overdraft line of credit, although
Regulation Z’s issuance provisions
apply to the addition of a credit feature
(such as an overdraft line) to a debit
card. See 12 CFR 205.12(a)(1)(ii) and
(a)(2)(i). Similarly, when a transaction
that debits a checking or other asset
account also draws on an overdraft line
of credit, Regulation Z treats the
extension of credit as incident to an
electronic fund transfer and the error
resolution provisions in Regulation E
generally govern the transaction. See 12
CFR 205.12 comment 12(a)–1.i.8
Consistent with this approach, the
Board believes that debit cards that
access overdraft lines of credit should
not be subject to the regulations
implementing the provisions of the
Credit Card Act that apply to ‘‘credit
card accounts under an open end
consumer credit plan.’’ As discussed in
the January 2009 Regulation Z Rule, the
Board understands that overdraft lines
of credit are not in wide use.9
Furthermore, as a general matter, the
Board understands that creditors do not
generally engage in the practices
addressed in the relevant provisions of
the Credit Card Act with respect to
overdraft lines of credit. For example, as
discussed in the January 2009
Regulation Z Rule, overdraft lines of
credit are not typically promoted as—or
8 However, the error resolution provisions in
§ 226.13(d) and (g) do apply to such transactions.
See 12 CFR 205.12 comment 12(a)–1.ii.D; see also
current §§ 226.12(g) and 13(i); current comments
12(c)(1)–1 and 13(i)–3; new comment 12(c)–3, 74
FR 5488; revised comment 12(c)(1)–1.iv., 74 FR
5488. In addition, if the transaction solely involves
an extension of credit and does not include a debit
to a checking or other asset account, the liability
limitations and error resolution requirements in
Regulation Z apply. See 12 CFR 205.12(a)–1.i.
9 The 2007 Survey of Consumer Finances data
indicates that few families (1.7 percent) had a
balance on lines of credit other than a home-equity
line or credit card at the time of the interview. In
comparison, 73 percent of families had a credit
card, and 60.3 percent of these families had a credit
card balance at the time of the interview. See Brian
Bucks, et al., Changes in U.S. Family Finances from
2004 to 2007: Evidence from the Survey of
Consumer Finances, Federal Reserve Bulletin
(February 2009) (‘‘Changes in U.S. Family Finances
from 2004 to 2007’’).

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used for—long-term extensions of
credit. See 74 FR 5331. Therefore,
because proposed § 226.9(c)(2) would
require a creditor to provide 45 days’
notice before increasing an annual
percentage rate for an overdraft line of
credit, a creditor is unlikely to engage in
the practices prohibited by revised TILA
Section 171 with respect to the
application of increased rates to existing
balances. Similarly, because creditors
generally do not apply different rates to
different balances or provide grace
periods with respect to overdraft lines of
credit, the provisions in proposed
§§ 226.53 and 226.54 would not provide
any meaningful protection. Accordingly,
the Board proposed to use its authority
under TILA Section 105(a) and § 2 of the
Credit Card Act to create an exception
for debit cards that access an overdraft
line of credit.
Commenters generally supported this
exclusion, which is adopted in the final
rule. 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. These
commenters argued that—like overdraft
lines of credit accessed by a debit card—
these products are not ‘‘traditional’’
credit cards and that creditors may be
less willing to provide these products if
they are required to comply with the
provisions of the Credit Card Act. They
also noted that the Board has excluded
these products from the disclosure
requirements for credit and charge cards
in § 226.5a and the definition of
‘‘consumer credit card account’’ in the
January 2009 FTC Act Rule. See
§ 226.5a(a)(5); 12 CFR 227.21(c), 74 FR
5560.
The Board believes that, as a general
matter, Congress intended the Credit
Card Act to apply broadly to products
that meet the definition of a credit card.
As discussed above, the Board’s
exclusion of HELOCs and overdraft
lines of credit accessed by cards is based
on the Board’s determination that
alternative forms of regulation exist that
are better suited to protecting
consumers from harm with respect to
those products. No such alternative
exists for lines of credit accessed solely
by account numbers. Similarly,
although the protections in Regulation E
generally apply when a debit card is
used at an automated teller machine to
credit a deposit account with funds
obtained from a line of credit,10
10 12 CFR 205.3(a) (stating that Regulation E
‘‘applies to any electronic fund transfer that
authorizes a financial institution to debit or credit
a consumer’s account’’).

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Regulation E generally does not apply
when a debit card is used at an
automated teller machine to obtain cash
from the line of credit. Furthermore,
because it appears that both type of
credit lines are more likely to be used
for long-term extensions of credit than
overdraft lines, consumers are more
likely to experience substantial harm
if—for example—an increased annual
percentage rate is applied to an
outstanding balance.11 Thus, the Board
does not believe that an exclusion is
warranted for lines of credit accessed by
a debit card that can be used only at
automated teller machines or lines of
credit accessed solely by account
numbers.
Finally, the Board notes that the
revisions to 226.2(a)(15) are not
intended to alter the scope or coverage
of provisions of Regulation Z that refer
generally to credit cards or open-end
credit rather than the new defined term
‘‘credit card account under an open-end
(not home-secured) consumer credit
plan.’’
Section 226.5 General Disclosure
Requirements

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5(a) Form of Disclosures
5(a)(2) Terminology
New TILA Section 127(m) (15) U.S.C.
1637(m)), as added by Section 103 of the
Credit Card Act, states that with respect
to the terms of any credit card account
under an open-end consumer credit
plan, the term ‘‘fixed,’’ when appearing
in conjunction with a reference to the
APR or interest rate applicable to such
account, may only be used to refer to an
APR or interest rate that will not change
or vary for any reason over the period
specified clearly and conspicuously in
the terms of the account. In the January
2009 Regulation Z Rule, the Board had
adopted §§ 226.5(a)(2)(iii) and 226.16(f)
to restrict the use of the term ‘‘fixed,’’ or
any similar term, to describe a rate
disclosed in certain required disclosures
and in advertisements only to instances
when that rate would not increase until
the expiration of a specified time
period. If no time period is specified,
then the term ‘‘fixed,’’ or any similar
term, may not be used to describe the
rate unless the rate will not increase
while the plan is open. As discussed in
the October 2009 Regulation Z Proposal,
the Board believes that §§ 226.5(a)(2)(iii)
11 Commenters that supported an exclusion for
lines of credit accessed by a debit card that can be
used only at automated teller machines noted that—
unlike most credit cards—the debit card cannot
access the line of credit for purchases at point of
sale. However, it appears that consumers can use
the debit card to obtain extensions of credit either
in the form of cash or a transfer of funds to a deposit
account.

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and 226.16(f), as adopted in the January
2009 Regulation Z Rule, would be
consistent with new TILA Section
127(m). Sections 226.5(a)(2)(iii) and
226.16(f) were therefore republished in
the October 2009 Regulation Z Proposal
to implement TILA Section 127(m). The
Board did not receive any comments on
§§ 226.5(a)(2)(iii) and 226.16(f), and
they are adopted as proposed.
5(b) Time of Disclosures
5(b)(1) Account-Opening Disclosures
5(b)(1)(i) General Rule
In certain circumstances, a creditor
may substitute or replace one credit
card account with another credit card
account. For example, if an existing
cardholder requests additional features
or benefits (such as rewards on
purchases), the creditor may substitute
or replace the existing credit card
account with a new credit card account
that provides those features or benefits.
The Board also understands that
creditors often charge higher annual
percentage rates or annual fees to
compensate for additional features and
benefits. As discussed below, § 226.55
and its commentary address the
application of the general prohibitions
on increasing annual percentage rates,
fees, and charges during the first year
after account opening and on applying
increased rates to existing balances in
these circumstances. See § 226.55(d);
comments 55(b)(3)–3 and 55(d)–1
through –3.
In order to clarify the application of
the disclosure requirements in
§§ 226.6(b) and 226.9(c)(2) when one
credit card account is substituted or
replaced with another, the Board has
adopted comment 5(b)(1)(i)–6, which
states 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 § 226.6(b) or
provide notice of the changes in the
terms of the existing account consistent
with § 226.9(c)(2). The Board
understands that, when an existing
cardholder requests new features or
benefits, disclosure of the new terms
pursuant to § 226.6(b) may be preferable
because the cardholder generally will
not want to wait 45 days for the new
terms to take effect (as would be the
case if notice were provided pursuant to
§ 226.9(c)(2)). Thus, this comment is
intended to provide card issuers with
flexibility regarding whether to treat the
substitution or replacement as the
opening of a new account (subject to
§ 226.6(b)) or a change in the terms of

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an existing account (subject to
§ 226.9(c)(2)).
However, the comment is not
intended to permit card issuers to
circumvent the disclosure requirements
in § 226.9(c)(2) by treating a change in
terms as the opening of a new account.
Accordingly, the comment further states
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 §§ 226.6(b)
and 226.9(c)(2) is determined in light of
all the relevant facts and circumstances.
The comment provides the following
list of relevant facts and circumstances:
(1) Whether the card issuer provides the
consumer with a new credit card; (2)
whether the card issuer provides the
consumer with a new account number;
(3) whether the account provides new
features or benefits after the substitution
or replacement (such as rewards on
purchases); (4) whether the account can
be used to conduct transactions at a
greater or lesser number of merchants
after the substitution or replacement; (5)
whether the card issuer implemented
the substitution or replacement on an
individualized basis; and (6) whether
the account becomes a different type of
open-end plan after the substitution or
replacement (such as when a charge
card is replaced by a credit card). The
comment states that, when most of these
facts and circumstances are present, the
substitution or replacement likely
constitutes the opening of a new
account for which § 226.6(b) disclosures
are appropriate. However, the comment
also states that, when few of these facts
and circumstances are present, the
substitution or replacement likely
constitutes a change in the terms of an
existing account for which § 226.9(c)(2)
disclosures are appropriate.12
In the October 2009 Regulation Z
Proposal, the Board solicited comment
on whether additional facts and
circumstances were relevant. The Board
also solicited comment 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 for purposes of the disclosure
requirements in §§ 226.6(b) and
226.9(c)(2).
On the one hand, consumer groups
commenters stated that the Board’s
proposed approach was not sufficiently
restrictive. They argued that
§ 226.9(c)(2) should apply whenever a
12 The comment also provides cross-references to
other provisions in Regulation Z and its
commentary that address the substitution or
replacement of credit card accounts.

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credit card account is substituted or
replaced with another credit card
account so that consumers will always
receive 45 days’ notice before any
significant new terms take effect.
However, the Board is concerned that
this strict approach may not be
beneficial to consumers overall. As
discussed above, when an existing
cardholder has requested new features
or benefits, the cardholder generally
will not want to wait 45 days to receive
those features or benefits. Although a
card issuer could provide the new
features or benefits immediately, it may
not be willing to do so if it cannot
simultaneously compensate for the
additional features or benefits by, for
example, charging a higher annual
percentage rate on new transactions or
adding an annual fee.
On the other hand, industry
commenters stated that the Board’s
proposed approach was overly
restrictive. They argued that § 226.6(b)
should apply whenever the substitution
or replacement was requested by the
consumer so that the new terms can be
applied immediately. However, the
Board has generally declined to provide
a consumer request exception to the 45day notice requirement in § 226.9(c)(2)
because of the difficulty of defining by
regulation the circumstances under
which a consumer is deemed to have
requested a change versus the
circumstances in which the change is
‘‘suggested’’ by the card issuer. See
revised § 226.9(c)(2)(i). Thus, the Board
does not believe that the determination
of whether §§ 226.6(b) or 226.9(c)(2)
applies should turn solely on whether a
consumer has requested the
replacement or substitution.
For the foregoing reasons, the Board
believes that the proposed standard
provides the appropriate degree of
flexibility insofar as it states that
whether §§ 226.6(b) or 226.9(c)(c)(2)
applies is determined in light of the
relevant facts and circumstances.
However, in response to requests from
commenters, the Board has clarified
some of the listed facts and
circumstances. Specifically, the Board
has added 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. Similarly,
the Board has added a substitution or
replacement in response to a consumer’s
request as an example of a substitution
or replacement on an individualized
basis. Finally, the Board has clarified
that, notwithstanding the listed facts

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and circumstances, a card issuer that
replaces a credit card or provides a new
account number because the consumer
has reported the card stolen or because
the account appears to have been used
for unauthorized transactions is not
required to provide a notice under
§ 226.6(b) or 226.9(c)(2) unless the card
issuer has changed a term of the account
that is subject to §§ 226.6(b) or
226.9(c)(2).
5(b)(2) Periodic Statements
As amended by the Credit Card Act in
May 2009, TILA Section 163 generally
prohibited a creditor from treating a
payment as late or imposing additional
finance charges unless the creditor
mailed or delivered the periodic
statement at least 21 days before the
payment due date and the expiration of
any period within which any credit
extended may be repaid without
incurring a finance charge (i.e., a ‘‘grace
period’’). See Credit Card Act
§ 106(b)(1). Unlike most of the Credit
Card Act’s provisions, the amendments
to Section 163 applied to all open-end
consumer credit plans rather than just
credit card accounts.13 The Board’s July
2009 Regulation Z Interim Final Rule
implemented the amendments to TILA
Section 163 by revising § 226.5(b)(2)(ii)
and the accompanying official staff
commentary. Both the statutory
amendments and the interim final rule
became effective on August 22, 2009.
See Credit Card Act § 106(b)(2).
However, in November 2009, the
Credit CARD Technical Corrections Act
of 2009 (Technical Corrections Act)
further amended TILA Section 163,
narrowing application the requirement
that statements be mailed or delivered at
least 21 days before the payment due
date to credit card accounts. Public Law
111–93, 123 Stat. 2998 (Nov. 6, 2009).14
Accordingly, the Board adopts
§ 226.5(b)(2)(ii) and its commentary in
this final rule with revisions
implementing the Technical Corrections
Act and clarifying aspects of the July
2009 interim final rule in response to
comments.
5(b)(2)(ii) Mailing or Delivery
Prior to the Credit Card Act, TILA
Section 163 required creditors to send
13 Specifically, while most provisions in the
Credit Card Act apply to ‘‘credit card account[s]
under an open end consumer credit plan’’ (e.g.,
§ 101(a)), the May 2009 amendments to TILA
Section 163 applied to all ‘‘open end consumer
credit plan[s].’’
14 As discussed below, the Technical Corrections
Act did not alter the requirement in amended TILA
Section 163 that all open-end consumer credit plans
generally mail or deliver periodic statements at
least 21 days before the date on which any grace
period expires.

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periodic statements at least 14 days
before the expiration of the grace period
(if any), unless prevented from doing so
by an act of God, war, natural disaster,
strike, or other excusable or justifiable
cause (as determined under regulations
of the Board). 15 U.S.C. 1666b. The
Board’s Regulation Z, however, applied
the 14-day requirement even when the
consumer did not receive a grace period.
Specifically, § 226.5(b)(2)(ii) required
that creditors mail or deliver periodic
statements 14 days before the date by
which payment was due for purposes of
avoiding not only finance charges as a
result of the loss of a grace period but
also any charges other than finance
charges (such as late fees). See also
comment 5(b)(2)(ii)–1.
In the January 2009 FTC Act Rule, the
Board and the other Agencies prohibited
institutions from treating payments on
consumer credit card accounts as late
for any purpose unless the institution
provided a reasonable amount of time
for consumers to make payment. See 12
CFR 227.22(a), 74 FR 5560; see also 74
FR 5508–5512.15 This rule included a
safe harbor for institutions that adopted
reasonable procedures designed to
ensure that periodic statements
specifying the payment due date were
mailed or delivered to consumers at
least 21 days before the payment due
date. See 12 CFR 227.22(b)(2), 74 FR
5560. The 21-day safe harbor was
intended to allow seven days for the
periodic statement to reach the
consumer by mail, seven days for the
consumer to review their statement and
make payment, and seven days for that
payment to reach the institution by
mail. However, to avoid any potential
conflict with the 14-day requirement in
TILA Section 163(a), the rule expressly
stated that it would not apply to any
grace period provided by an institution.
See 12 CFR 227.22(c), 74 FR 5560.
The Credit Card Act’s amendments to
TILA Section 163 codified aspects of the
Board’s § 226.5(b)(2)(ii) as well as the
provision in the January 2009 FTC Act
Rule regarding the mailing or delivery of
periodic statements. Specifically, like
the Board’s § 226.5(b)(2)(ii), amended
TILA Section 163 applies the mailing or
delivery requirement to both the
expiration of the grace period and the
payment due date. In addition, similar
to the January 2009 FTC Act Rule,
15 Although the Board, OTS, and NCUA adopted
substantively identical rules under the FTC Act,
each agency placed its rules in its respective part
of Title 12 of the Code of Federal Regulations.
Specifically, the Board placed its rules in part 227,
the OTS in part 535, and the NCUA in part 706.
For simplicity, this supplementary information
cites to the Board’s rules and official staff
commentary.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
amended TILA Section 163 adopts 21
days as the appropriate time period
between the date on which the
statement is mailed or delivered to the
consumer and the date on which the
consumer’s payment must be received
by the creditor to avoid adverse
consequences.
Rather than establishing an absolute
requirement that periodic statements be
mailed or delivered 21 days in advance
of the payment due date, amended TILA
Section 163(a) codifies the same
standard adopted by the Board and the
other Agencies in the January 2009 FTC
Act Rule, which requires creditors to
adopt ‘‘reasonable procedures designed
to ensure’’ that statements are mailed or
delivered at least 21 days before the
payment due date. Notably, however,
the 21-day requirement for grace periods
in amended TILA Section 163(b) does
not include similar language regarding
‘‘reasonable procedures.’’ Because the
payment due date generally coincides
with the expiration of the grace period,
the Board believes that it will facilitate
compliance to apply a single standard to
both circumstances. The ‘‘reasonable
procedures’’ standard recognizes that,
for issuers mailing hundreds of
thousands of periodic statements each
month, it would be difficult if not
impossible to know whether a specific
statement is mailed or delivered on a
specific date. Furthermore, applying
different standards could encourage
creditors to establish a payment due
date that is different from the date on
which the grace period expires, which
could lead to consumer confusion.
Accordingly, the Board’s interim final
rule amended § 226.5(b)(2)(ii) to require
that creditors adopt reasonable
procedures designed to ensure that
periodic statements are mailed or
delivered at least 21 days before the
payment due date and the expiration of
the grace period. In doing so, the Board
relied on its authority under TILA
Section 105(a) to make adjustments that
are necessary or proper to effectuate the
purposes of TILA and to facilitate
compliance therewith. See 15 U.S.C.
1604(a).
For clarity, the interim final rule also
amended § 226.5(b)(2)(ii) to define
‘‘grace period’’ as ‘‘a period within which
any credit extended may be repaid
without incurring a finance charge due
to a periodic interest rate.’’ This
definition is consistent with the
definition of grace period adopted by
the Board in its January 2009 Regulation
Z Rule. See §§ 226.5a(b)(5),
226.6(b)(2)(v), 74 FR 5404, 5407; see
also 74 FR 5291–5294, 5310.
Finally, the Credit Card Act removed
prior TILA Section 163(b), which stated

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that the 14-day mailing requirement
does not apply ‘‘in any case where a
creditor has been prevented, delayed, or
hindered in making timely mailing or
delivery of [the] periodic statement
within the time period specified * * *
because of an act of God, war, natural
disaster, strike, or other excusable or
justifiable cause, as determined under
regulations of the Board.’’ 15 U.S.C.
1666b(b). The Board believes that the
Credit Card Act’s removal of this
language is consistent with the adoption
of a ‘‘reasonable procedures’’ standard
insofar as a creditor’s procedures for
responding to any of the situations
listed in prior TILA Section 163(b) will
now be evaluated for reasonableness.
Accordingly, the interim final rule
removed the language implementing
prior TILA Section 163(b) from footnote
10 to § 226.5(b)(2)(ii).16
Commenters generally supported the
interim final rule, with one notable
exception. Credit unions and
community bank commenters strongly
opposed the interim final rule on the
grounds that requiring creditors to mail
or deliver periodic statements at least 21
days before the payment due date with
respect to open-end consumer credit
plans other than credit card accounts
was unnecessary and unduly
burdensome. In particular, these
commenters noted that the requirement
disproportionately impacted credit
unions, which frequently provide openend products with multiple due dates
during a month (such as bi-weekly due
dates that correspond to the dates on
which the consumer is paid) as well as
consolidated periodic statements for
multiple open-end products with
different due dates. These commenters
argued that applying the 21-day
requirement to these products would
significantly increase costs by requiring
multiple periodic statements or cause
creditors to cease offering such products
altogether. However, these commenters
noted that the requirement that
statements be provided at least 21 days
before the expiration of a grace period
was not problematic because these
products do not provide a grace period.
The Technical Corrections Act
addressed these concerns by narrowing
the application of the 21-day
requirement in TILA Section 163(a) to
credit cards. However, open-end
consumer credit plans that provide a
grace period remain subject to the 21day requirement in Section 163(b). The
final rule revises § 226.5(b)(2)(ii)
16 The Board notes that the October 2009
Regulation Z Proposal erroneously included this
language in § 226.5(b)(2)(iii). The final rule corrects
this error.

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7667

consistent with the Technical
Corrections Act. Specifically, because
the Technical Corrections Act amended
TILA Section 163 to apply different
requirements to different types of openend credit accounts, the Board has
reorganized § 226.5(b)(2)(ii) into
§ 226.5(b)(2)(ii)(A) and
§ 226.5(b)(2)(ii)(B). This reorganization
does not reflect any substantive revision
of the interim final rule beyond those
changes necessary to implement the
Technical Corrections Act.
5(b)(2)(ii)(A) Payment Due Date
Section 226.5(b)(2)(ii)(A)(1) provides
that, for consumer credit card accounts
under an open-end (not home-secured)
consumer credit plan, a card issuer must
adopt reasonable procedures designed
to ensure that periodic statements are
mailed or delivered at least 21 days
prior to the payment due date.
Furthermore, § 226.5(b)(2)(ii)(A)(2)
provides that the card issuer must also
adopt reasonable procedures designed
to ensure that a required minimum
periodic payment received by the card
issuer within 21 days after mailing or
delivery of the periodic statement
disclosing the due date for that payment
is not treated as late for any purpose.
For clarity and consistency,
§ 226.5(b)(2)(ii)(A)(1) provides that a
periodic statement generally must be
mailed or delivered at least 21 days
before the payment due date disclosed
pursuant to § 226.7(b)(11)(i)(A). As
discussed in greater detail below,
§ 226.7(b)(11)(i)(A) implements the
Credit Card Act’s requirement that
periodic statements for credit card
accounts disclose a payment due date.
See amended TILA Section
127(b)(12)(A).17 The Board believes
that—like the mailing or delivery
requirements for periodic statements in
the January 2009 FTC Act Rule—the
Credit Card Act’s amendments to TILA
Section 163 are intended to ensure that
consumers have a reasonable amount of
time to make payment after receiving
their periodic statements. For that
reason, the Board believes that it is
important to ensure that the payment
due date disclosed pursuant to
§ 226.7(b)(11)(i)(A) is consistent with
requirements of § 226.5(b)(2)(ii)(A). If
creditors were permitted to disclose a
payment due date on the periodic
statement that was less than 21 days
17 Although the 21-day requirement in amended
TILA Section 163(a) is specifically tied to provision
of a periodic statement that ‘‘includ[es] the
information required by [TILA] section 127(b)],’’ the
July 2009 interim final rule did not cross-reference
the due date disclosure because that disclosure was
not scheduled to go into effect until February 22,
2010.

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after mailing or delivery of the periodic
statement, consumers could be misled
into believing that they have less time
to pay than provided under TILA
Section 163 and § 226.5(b)(2)(ii)(A).
The interim final rule adopted a new
comment 5(b)(2)(ii)–1, which clarifies
that, under the ‘‘reasonable procedures’’
standard, a creditor is not required to
determine the specific date on which
periodic statements are mailed or
delivered to each individual consumer.
Instead, a creditor complies with
§ 226.5(b)(2)(ii) if it has adopted
reasonable procedures designed to
ensure that periodic statements are
mailed or delivered to consumers no
later than a certain number of days after
the closing date of the billing cycle and
adds that number of days to the 21-day
period required by § 226.5(b)(2)(ii) when
determining the payment due date and
the date on which any grace period
expires. For example, if a creditor has
adopted reasonable procedures designed
to ensure that periodic statements are
mailed or delivered to consumers no
later than three days after the closing
date of the billing cycle, the payment
due date and the date on which any
grace period expires must be no less
than 24 days after the closing date of the
billing cycle. The final rule retains this
comment with revisions to reflect the
reorganization of § 226.5(b)(2)(ii).18
The interim final rule also adopted a
new comment 5(b)(2)(ii)–2, which
clarifies that treating a payment as late
for any purpose includes increasing the
annual percentage 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.19 Several commenters
requested that the Board narrow or

expand this language to clarify that
certain activities are included or
excluded. The current language is
consistent with the Board’s intent that
the prohibition on treating a payment as
late for purpose be broadly construed
and that the list of examples be
illustrative rather than exhaustive.
Nevertheless, in order to provide
additional clarity, the final rule amends
comment 5(b)(2)(ii)–2 to provide two
additional examples of activities that
constitute treating a payment as late for
purposes of § 226.5(b)(2)(ii)(A)(2):
terminating benefits (such as rewards on
purchases) and initiating collection
activities. However, the provision of
additional examples should not be
construed as a determination by the
Board that other activities would not
constitute treating a payment as late for
any purpose.
In the October 2009 Regulation Z
Proposal, the Board proposed to amend
other aspects of comment 5(b)(2)(ii)–2.
In particular, the Board proposed to
clarify that the prohibition in
§ 226.5(b)(2)(ii) on treating a payment as
late for any purpose or collecting
finance or other charges applies only
during the 21-day period following
mailing or delivery of the periodic
statement stating the due date for that
payment. Thus, if a creditor does not
receive a payment within 21 days of
mailing or delivery of the periodic
statement, the prohibition does not
apply and the creditor may, for
example, impose a late payment fee.
Commenters generally supported this
clarification. Accordingly, the Board has
adopted this guidance—with additional
clarifications—in the final rule. In
addition, for consistency with the
reorganization of § 226.5(b)(2)(ii), the
Board has moved the guidance
regarding grace periods to comment
5(b)(2)(ii)–3.

18 The Board and the other Agencies adopted a
similar comment in the January 2009 FTC Act Rule.
See 12 CFR 227.22 comment 22(b)–1, 74 FR 5511,
5561. The interim final rule deleted prior comment
5(b)(2)(ii)–1 because it referred to the 14-day rule
for grace periods and was therefore no longer
consistent with § 226.5(b)(2)(ii). In doing so, the
Board concluded that, to the extent that the
comment clarified that § 226.5(b)(2)(ii) applied in
circumstances where the consumer is not eligible or
ceases to be eligible for a grace period, it was no
longer necessary because that requirement was
reflected in amended § 226.5(b)(2)(ii) and elsewhere
in the amended commentary.
19 The Board and the other Agencies adopted a
similar comment in the January 2009 FTC Act Rule.
See 12 CFR 227.22 comment 22(a)–1, 74 FR 5510,
5561. The interim final rule deleted prior comment
5(b)(2)(ii)–2, which clarified that the emergency
circumstances exception in prior footnote 10 does
not extend to the failure to provide a periodic
statement because of computer malfunction. As
discussed above, prior footnote 10 was based on
prior TILA Section 163(b), which has been
repealed.

5(b)(2)(ii)(B) Grace Period Expiration
Date
Section 226.5(b)(2)(ii)(B)(1) provides
that, for open-end consumer credit
plans, a creditor must adopt reasonable
procedures designed to ensure that
periodic statements are mailed or
delivered at least 21 days prior to the
date on which any grace period expires.
Furthermore, § 226.5(b)(2)(ii)(B)(2)
provides that the creditor must also
adopt reasonable procedures designed
to ensure that the creditor 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. Finally, the interim final
rule’s definition of ‘‘grace period’’ has

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been moved to § 226.5(b)(2)(ii)(B)(3)
without any substantive change.
The interim final rule adopted
comment 5(b)(2)(ii)–3, which clarified
that, for purposes of § 226.5(b)(2)(ii),
‘‘payment due date’’ generally excluded
courtesy periods following the
contractual due date during which a
consumer could make payment without
incurring a late payment fee. This
comment was intended to address openend consumer credit plans other than
credit cards and therefore is not
necessary in light of the Technical
Corrections Act.20 Accordingly, the
guidance in current comment
5(b)(2)(ii)–3 has been replaced with
guidance regarding application of the
grace period requirements in
§ 226.5(b)(2)(ii)(B). Specifically, this
comment incorporates current comment
5(b)(2)(ii)–4, which clarifies that the
definition of ‘‘grace period’’ in
§ 226.5(b)(2)(ii) does not include a
deferred interest or similar promotional
program under which the consumer is
not obligated to pay interest that accrues
on a balance if that balance is paid in
full prior to the expiration of a specified
period of time. The comment also
clarifies that courtesy periods following
the payment due date during which a
late payment fee will not be assessed are
not grace periods for purposes of
§ 226.5(b)(2)(ii)(B) and provides a crossreference to comments 7(b)(11)–1 and
–2 for additional guidance regarding
such periods.
Comment 5(b)(2)(ii)–3 also clarifies
the applicability of § 226.5(b)(2)(ii)(B).
Specifically, it states that
§ 226.5(b)(2)(ii)(B) applies if an account
is eligible for a grace period when the
periodic statement is mailed or
delivered. It further states that
§ 226.5(b)(2)(ii)(B) does not require the
creditor to provide a grace period or
prohibit the creditor from placing
limitations and conditions on a grace
period to the extent consistent with
§ 226.5(b)(2)(ii)(B) and § 226.54. Finally,
it states that the prohibition in
§ 226.5(b)(2)(ii)(B)(2) applies only
during the 21-day period following
mailing or delivery of the periodic
statement and applies only when the
creditor receives a payment that satisfies
the terms of the grace period within that
21-day period. An illustrative example
is provided.
20 Furthermore, similar guidance is provided in
comments 7(b)(11)–1 and –2, which the Board is
adopting in this final rule (as discussed below). The
Board initially adopted comments 7(b)(11)–1 and –2
in the January 2009 Regulation Z Rule. See 74 FR
5478. However, because this commentary was not
yet effective, the July 2009 Regulation Z Interim
Final Rule provided similar guidance in current
comment 5(b)(2)(ii)–3.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
As noted above, current comment
5(b)(2)(ii)–4 has been incorporated into
comment 5(b)(2)(ii)–3. In its place, the
Board has adopted guidance to address
confusion regarding the interaction
between the payment due date
disclosure in proposed
§ 226.7(b)(11)(i)(A) and the 21-day
requirements in § 226.5(b)(2)(ii) with
respect to charge card accounts and
charged-off accounts. Charge cards are
typically products where outstanding
balances cannot be carried over from
one billing cycle to the next and are
payable when the periodic statement is
received. See § 226.5a(b)(7). Therefore,
the contractual payment due date for a
charge card account is the date on
which the consumer receives the
periodic statement (although charge
card issuers generally request that the
consumer make payment by some later
date). See comment 5a(b)(7)–1.
Similarly, when an account is over 180
days past due and has been placed in
charged off status, full payment is due
immediately.
However, as discussed below, the
Board has concluded that it would not
be appropriate to apply the payment
due date disclosure in
§ 226.7(b)(11)(i)(A) to periodic
statements provided solely for charge
card accounts or periodic statements
provided for charged-off accounts where
full payment of the entire account
balance is due immediately. In addition,
a card issuer could not comply with the
requirement to mail or deliver the
periodic statement 21 days before the
payment due date if the payment due
date is the date that the consumer
receives the statement. Accordingly,
comment 5(b)(2)(ii)–4 clarifies that,
because the payment due date
disclosure in § 226.7(b)(11)(i)(A) does
not apply to periodic statements
provided solely for charge card accounts
or periodic statements provided for
charged-off accounts where full
payment of the entire account balance is
due immediately, § 226.5(b)(2)(ii)(A)(1)
does not apply to the mailing or
delivery of periodic statements provided
solely for such accounts.
Comment 5(b)(2)(ii)–4 further clarifies
that, with respect to charge card
accounts, § 226.5(b)(2)(ii)(A)(2)
nevertheless 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. Thus, notwithstanding
the contractual due date, consumers
with charge card accounts must receive
at least 21 days to make payment
without penalty.

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With respect to charged-off accounts,
comment 5(b)(2)(ii)–4 clarifies that, as
discussed above with respect to
comment 5(b)(2)(ii)–2, 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. Thus, 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.
Comment 5(b)(2)(ii)–4 also clarifies
the application of the grace period
requirements in § 226.5(b)(2)(ii)(B) to
charge card and charged-off accounts.
Specifically, the comment states that
§ 226.5(b)(2)(ii)(B) does not apply to
charge card accounts because, for
purposes of § 226.5(b)(2)(ii)(B), 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 § 226.2(a)(15)(iii), charge card
accounts do not impose a finance charge
based on a periodic rate. Similarly, the
comment states that § 226.5(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.
The final rule does not alter current
comment 5(b)(2)(ii)–5, which provides
that, when a consumer initiates a
request, the creditor may permit, but
may not require, the consumer to pick
up periodic statements. Finally, the
Board has adopted the proposed
revisions to comment 5(b)(2)(ii)–6,
which amend the cross-reference to
reflect the restructuring of the
commentary to § 226.7.
Section 226.5a Credit and Charge Card
Applications and Solicitations
5a(b) Required Disclosures
5a(b)(1) Annual Percentage Rate
The Board republished proposed
comment 5a(b)(1)–9 in the October 2009
Regulation Z Proposal, which was
originally published in the May 2009
Regulation Z Proposed Clarifications.
The comment clarified that an issuer
offering a deferred interest or similar
plan may not disclose a rate as 0% due
to the possibility that the consumer may
not be obligated for interest pursuant to
a deferred interest or similar
transaction. The Board did not receive
any comments opposing this provision,
and the comment is adopted as
proposed. The Board notes that
comment 5a(b)(1)–9 would apply to

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account opening disclosures pursuant to
comment 6(b)(1)–1.
5a(b)(5) Grace Period
Sections 226.5a(b)(5) and 6(b)(2)(v)
require that creditors disclose, among
other things, any conditions on the
availability of a grace period. As
discussed below with respect to
§ 226.54, the Credit Card Act 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. Industry
commenters requested that the Board
clarify that §§ 226.5a(b)(5) and 6(b)(2)(v)
do not require card issuers to disclose
this limitation.
In the January 2009 Regulation Z
Rule, the Board provided the following
model language for the disclosures
required by §§ 226.5a(b)(5) and
6(b)(2)(v): ‘‘Your due date is at least 25
days after the close of each billing cycle.
We will not charge you any interest on
purchases if you pay your entire balance
by the due date each month.’’ See, e.g.,
App. G–10(B).21 This language was
developed through extensive consumer
testing. However, the Board has not
been able to conduct additional
consumer testing with respect to
disclosure of the limitations on the
imposition of finance charges in
§ 226.54. Accordingly, the Board is
concerned that the inclusion of language
attempting to describe those limitations
could reduce the effectiveness of the
disclosure.
Furthermore, the Board does not
believe that such a disclosure is
necessary insofar as the model language
accurately states that a consumer
generally will not be charged any
interest on purchases if the entire
purchase balance is paid by the due
date. Thus, although § 226.54 limits the
imposition of finance charges if the
consumer pays less than the entire
balance, the model language achieves its
intended purpose of explaining
succinctly how a consumer can avoid
all interest charges.
Accordingly, the Board has created
new comments 5a(b)(5)–4 and
6(b)(2)(v)–4, which clarify that
§§ 226.5a(b)(5) and 6(b)(2)(v) do not
require card issuers to disclose the
limitations on the imposition of finance
charges in § 226.54. For additional
clarity, the Board also states in a new
comment 7(b)(8)–3 that a card issuer is
21 The model forms in Appendix G–17(B) and (C)
also state: ‘‘We will begin charging interest on cash
advances and balance transfers on the transaction
date.’’

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not required to include this disclosure
when disclosing 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
§ 226.7(b)(8).
Section 226.6
Disclosures

Account-Opening

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6(b) Rules Affecting Open-End (Not
Home-Secured) Plans
6(b)(2)(i) Annual Percentage Rate
Section 226.6(b)(2)(i) sets forth
disclosure requirements for rates that
apply to open-end (not home-secured)
accounts. Under the January 2009
Regulation Z Rule, creditors generally
must disclose the specific APRs that
will apply to the account in the table
provided at account opening. The
Board, however, provided a limited
exception to this rule where the APRs
that creditors may charge vary by state
for accounts opened at the point of sale.
See § 226.6(b)(2)(i)(E). Pursuant to that
exception, creditors imposing APRs that
vary by state and providing the
disclosures required by § 226.6(b) in
person at the time an open-end (not
home-secured) plan is established in
connection with financing the purchase
of goods or services may, at the
creditor’s option, disclose in the
account-opening table either (1) the
specific APR applicable to the
consumer’s account, or (2) the range of
the APRs, if the disclosure includes a
statement that the APR varies by state
and refers the consumer to the account
agreement or other disclosure provided
with the account-opening summary
table where the APR applicable to the
consumer’s account is disclosed, for
example in a list of APRs for all states.
In the May 2009 Regulation Z
Proposed Clarifications, the Board
proposed to provide similar flexibility
to the disclosure of APRs at the point of
sale when rates vary based on the
consumer’s creditworthiness. Thus, the
Board proposed to amend
§ 226.6(b)(2)(i)(E) to state that creditors
providing the disclosures required by
§ 226.6(b) in person at the time an openend (not home-secured) plan is
established in connection with
financing the purchase of goods or
services may, at the creditor’s option,
disclose in the account-opening table
either (1) the specific APR applicable to
the consumer’s account, or (2) the range
of the APRs, if the disclosure includes
a statement that the APR varies by state
or depends on the consumer’s
creditworthiness, as applicable, and
refers the consumer to an account
agreement or other disclosure provided

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with the account-opening summary
table where the APR applicable to the
consumer’s account is disclosed, for
example in a separate document
provided with the account-opening
table.
The Board noted in the
supplementary information to the
proposed clarifications that if creditors
are not given additional flexibility, some
consumers could be disadvantaged
because creditors may provide a single
rate for all consumers rather than
varying the rate, with some consumers
receiving lower rates than would be
offered under a single-rate plan. Thus,
without the proposed change, some
consumers may be harmed by receiving
higher rates. Moreover, the Board noted
its understanding that the operational
changes necessary to provide the
specific APR applicable to the
consumer’s account in the table at point
of sale when that rate depends on the
consumer’s creditworthiness may be too
burdensome and increase creditors’ risk
of inadvertent noncompliance.
Currently, creditors that establish openend plans at point of sale provide
account-opening disclosures at point of
sale before the first transaction, with a
reference to the APR in a separate
document provided with the account
agreement, and commonly provide a
second, additional set of disclosures
which reflect the actual APR for the
account when, for example, a credit
card is sent to the consumer.
Industry commenters generally
supported the proposed clarification, for
the reasons stated by the Board in the
supplementary information to the May
2009 Regulation Z Proposed
Clarifications. Consumer group
commenters opposed the proposed
clarification. However, the Board notes
that the consumer group comments
were premised on consumer groups’
understanding that the clarification
would require disclosure of the actual
rate that will apply to the consumer’s
account only at a later point of time,
subsequent to when the other accountopening disclosures are provided at
point of sale. The Board notes that the
proposed clarification would require the
disclosure of the specific APR that will
apply to the consumer’s account at the
same time that other account-opening
disclosures are provided at point of sale.
The clarification would, however,
provide creditors with the flexibility to
disclose the specific APR on a separate
page or document than the tabular
disclosure.
The Board is adopting the
clarification to § 226.6(b)(2)(i)(E) as
proposed. The Board believes that
permitting creditors to provide the

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specific APR information outside of the
table at point of sale, with the
expectation that consumers will also
receive a second set of disclosures with
the specific APR applicable to the
consumer properly formatted in the
account-opening table at a later time,
strikes the appropriate balance between
the burden on creditors and the need to
disclose to consumers the specific APR
applicable to the consumer’s account in
the account-opening table provided at
point of sale. Under the final rule, the
consumer must receive a disclosure of
the actual APR that applies to the
account at the point of sale, but that rate
could be provided in a separate
document.
6(b)(2)(v) Grace Period
See discussion regarding
§ 226.5a(b)(5).
6(b)(4) Disclosure of Rates for Open-End
(Not Home-Secured) Plans
6(b)(4)(ii) Variable-Rate Accounts
Section 226.6(b)(4)(ii) as adopted in
the January 2009 Regulation Z Rule sets
forth the rules for variable-rate
disclosures at account-opening,
including accuracy requirements for the
disclosed rate. The accuracy standard as
adopted provides that a disclosed rate is
accurate if it is in effect as of a
‘‘specified date’’ within 30 days before
the disclosures are provided. See
§ 226.6(b)(4)(ii)(G).
Currently, creditors generally update
rate disclosures provided at point of sale
only when the rates have changed. The
Board understands that some confusion
has arisen as to whether the new rule as
adopted literally requires that the
account-opening disclosure specify a
date as of which the rate was accurate,
and that this date must be within 30
days of when the disclosures are given.
Such a requirement could pose
operational challenges for disclosures
provided at point of sale as it would
require creditors to reprint disclosures
periodically, even if the variable rate
has not changed since the last time the
disclosures were printed.
The Board did not intend such a
result. Requiring creditors to update rate
disclosures to specify a date within the
past 30 days would impose a burden on
creditors with no corresponding benefit
to consumers, where the disclosed rate
is still accurate within the last 30 days
before the disclosures are provided.
Accordingly, the Board proposed in
May 2009 to revise the rule to clarify
that a variable rate is accurate if it is a
rate as of a specified date and this rate
was in effect within the last 30 days
before the disclosures are provided. No

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
significant issues were raised by
commenters on this clarification, which
is adopted as proposed.
The Board is adopting one additional
amendment to § 226.6(b)(4)(ii), to
provide flexibility when variable rates
are disclosed at point of sale. The Board
understands that one consequence of
the Credit Card Act’s amendments
regarding repricing of accounts, as
implemented in § 226.55 of this final
rule, is that private label and retail card
issuers may be more likely to impose
variable, rather than non-variable, rates
when opening new accounts. The Board
further understands that accountopening disclosures provided at point of
sale are often pre-printed, which
presents particular operational
difficulties when those disclosures must
be replaced at a large number of retail
locations. As discussed above, 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 this rate
was in effect within the last 30 days
before the disclosures are provided. The
Board notes that for a creditor
establishing new open-end accounts at
point of sale, this could mean that the
disclosures at each retail location must
be replaced each month, if the creditor’s
variable rate changes in accordance with
an index value each month.
For reasons similar to those discussed
above in the supplementary information
to § 226.6(b)(2)(i)(E), the Board believes
that additional flexibility is appropriate
for issuers providing account-opening
disclosures at point of sale when the
rate being disclosed is a variable rate.
The Board believes that permitting
issuers to provide a variable rate in the
table that is in effect within 90 days
before the disclosures are provided,
accompanied by a separate disclosure of
a variable rate in effect within the last
30 days will strike the balance between
operational burden on creditors and
ensuring that consumers receive clear
and timely disclosures of the terms that
apply to their accounts.
Accordingly, the Board is adopting a
new § 226.6(b)(4)(ii)(H), which states
that creditors imposing annual
percentage rates that vary according to
an index that is not under the creditor’s
control that provide the disclosures
required by § 226.6(b) in person at the
time an open-end (not home-secured)
plan 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 § 226.6(b)(2)(i)(E), that was in effect
within the last 90 days before the
disclosures are provided, along with a
reference directing the consumer to the

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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.
Section 226.7

Periodic Statement

7(b) Rules Affecting Open-End (Not
Home-Secured) Plans
7(b)(8) Grace Period
See discussion regarding
§ 226.5a(b)(5).
7(b)(11) Due Date; Late Payment Costs
In 2005, the Bankruptcy Act amended
TILA to add Section 127(b)(12), which
required creditors that charge a late
payment fee to disclose on the periodic
statement (1) the payment due date or,
if the due date differs from when a late
payment fee would be charged, the
earliest date on which the late payment
fee may be charged, and (2) the amount
of the late payment fee. See 15 U.S.C.
1637(b)(12). In the January 2009
Regulation Z Rule, the Board
implemented this section of TILA for
open-end (not home-secured) credit
plans. Specifically, the final rule added
§ 226.7(b)(11) to require 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.
For ease of reference, this
supplementary information will refer to
the disclosure of any late payment fee
and any penalty APR that could be
triggered by a late payment as ‘‘the late
payment disclosures.’’
Section 226.7(b)(13), as adopted in the
January 2009 Regulation Z Rule, sets
forth formatting requirements for the
due date and the late payment
disclosures. Specifically, § 226.7(b)(13)
requires that the due date be disclosed
on the front side of the first page of the
periodic statement. Further, the amount
of any late payment fee and any penalty
APR that could be triggered by a late
payment must be disclosed in close
proximity to the due date.
Section 202 of the Credit Card Act
amends TILA Section 127(b)(12) to
provide that for a ‘‘credit card account
under an open-end consumer credit
plan,’’ a creditor that charges a late
payment fee must disclose in a
conspicuous location on the periodic
statement (1) the payment due date, or,
if the due date differs from when a late
payment fee would be charged, the
earliest date on which the late payment
fee may be charged, and (2) the amount

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7671

of the late payment fee. In addition, if
a late payment may result in an increase
in the APR applicable to the credit card
account, a creditor also must provide on
the periodic statement a disclosure of
this fact, along with the applicable
penalty APR. The disclosure related to
the penalty APR must be placed in close
proximity to the due-date disclosure
discussed above.
In addition, Section 106 of the Credit
Card Act adds new TILA Section 127(o),
which requires that the payment due
date for a credit card account under an
open-end (not home-secured) consumer
credit plan be the same day each month.
15 U.S.C. 1637(o).
As discussed in more detail below, in
the October 2009 Regulation Z Proposal,
the Board proposed to retain the due
date and the late payment disclosure
provisions adopted in § 226.7(b)(11) as
part of the January 2009 Regulation Z
Rule, with several revisions. Format
requirements relating to the due date
and the late payment disclosure
provisions are discussed in more detail
in the section-by-section analysis to
§ 226.7(b)(13).
Applicability of the due date and the
late payment disclosure requirements.
The due date and the late payment
disclosures added to TILA Section
127(b)(12) by the Bankruptcy Act
applied to all open-end credit plans.
Consistent with TILA Section
127(b)(12), as added by the Bankruptcy
Act, the due date and the late payment
disclosures in § 226.7(b)(11) (as adopted
in the January 2009 Regulation Z Rule)
apply to all open-end (not homesecured) credit plans, including credit
card accounts, overdraft lines of credit
and other general purpose lines of credit
that are not home secured.
The Credit Card Act amended TILA
Section 127(b)(12) to apply the due date
and the late payment disclosures only to
creditors offering a credit card account
under an open-end consumer credit
plan. Consistent with newly-revised
TILA Section 127(b)(12), in the October
2009 Regulation Z Proposal, the Board
proposed to amend § 226.7(b)(11) to
require the due date and the late
payment disclosures only for a ‘‘credit
card account under an open-end (not
home-secured) consumer credit plan,’’
as that term would have been defined
under proposed § 226.2(a)(15)(ii). Based
on the proposed definition of ‘‘credit
card account under an open-end (not
home-secured) consumer credit plan,’’
the due date and the late payment
disclosures would not have applied to
(1) open-end credit plans that are not
credit card accounts such as general
purpose lines of credit that are not
accessed by a credit card; (2) HELOC

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accounts subject to § 226.5b even if they
are accessed by a credit card device; and
(3) overdraft lines of credit even if they
are accessed by a debit card. In addition,
as discussed in more detail below,
under proposed § 226.7(b)(11)(ii), the
Board also proposed to exempt charge
card accounts from the late payment
disclosure requirements.
In response to the October 2009
Regulation Z Proposal, several
consumer groups encouraged the Board
to use its authority under Section 105(a)
of TILA to require the payment due date
and late payment disclosures for all
open-end credit, not just ‘‘credit card
accounts under an open-end (not homesecured) consumer credit plan.’’
However, the final rule applies the
payment due date and late payment
disclosures only to credit card accounts
under an open-end (not home-secured)
consumer credit plan, as that term is
defined in § 226.2(a)(15)(ii). Thus, the
due date and the late payment
disclosures would not apply to (1) openend credit plans that are not credit card
accounts such as general purpose lines
of credit that are not accessed by a
credit card; (2) HELOC accounts subject
to § 226.5b even if they are accessed by
a credit card device; and (3) overdraft
lines of credit even if they are accessed
by a debit card. In addition, as
discussed in more detail below, under
§ 226.7(b)(11)(ii), the final rule also
exempts charge card accounts and
charged-off accounts from the payment
due date and late payment disclosure
requirements.
1. HELOC accounts. In the August
2009 Regulation Z HELOC Proposal, the
Board did not propose to use its
authority in TILA Section 105(a) to
apply the due date and late payment
disclosures to HELOC accounts subject
to § 226.5b, even if they are accessed by
a credit card device. In the
supplemental information to the August
2009 Regulation Z HELOC Proposal, the
Board stated its belief that the payment
due date and late payment disclosures
are not needed for HELOC accounts to
effectuate the purposes of TILA. The
consequences to a consumer of not
making the minimum payment by the
payment due date are less severe for
HELOC accounts than for unsecured
credit cards. Unlike with unsecured
credit cards, creditors offering HELOC
accounts subject to 226.5b typically do
not impose a late-payment fee until 10–
15 days after the payment is due. In
addition, as proposed in the August
2009 Regulation Z HELOC Proposal,
creditors offering HELOC accounts
would be restricted from terminating
and accelerating the account,
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reducing the credit line, or imposing
penalty rates or penalty fees (except for
the contractual late-payment fee) for a
consumer’s failure to pay the minimum
payment due on the account, unless the
payment is more than 30 days late. For
unsecured credit cards, under the Credit
Card Act, after the first year an account
is opened, unsecured credit card issuers
may increase rates and fees on new
transactions for a late payment, even if
the consumer is only one day late in
making the minimum payment. Unlike
with unsecured credit cards, as
proposed in the August 2009 Regulation
HELOC Proposal, even after the first
year that the account is open, creditors
offering HELOC accounts subject to
§ 226.5b could not impose penalty rates
or penalty fees (except for a contractual
late-payment fee) on new transactions
for a consumer’s failure to pay the
minimum payment on the account,
unless the consumer’s payment is more
than 30 days late. For these reasons, the
final rule does not extend the payment
due date and late payment disclosures
to HELOC accounts subject to § 226.5b,
even if they are accessed by a credit
card device.
2. Overdraft lines of credit and other
general purpose credit lines. For several
reasons, the Board also does not use its
authority in TILA Section 105(a) to
apply the due date and late payment
disclosures to overdraft lines of credit
(even if they are accessed by a debit
card) and general purpose credit lines
that are not accessed by a credit card.
First, these lines of credit are not in
wide use. The 2007 Survey of Consumer
Finances data indicates that few
families—1.7 percent—had a balance on
lines of credit other than a home-equity
line or credit card at the time of the
interview. (By comparison, 73 percent
of families had a credit card, and 60.3
percent of these families had a credit
card balance at the time of the
interview.) 22 Second, the Board is
concerned that the operational costs of
requiring creditors to comply with the
payment due date and late payment
disclosure requirements for overdraft
lines of credit and other general purpose
lines of credit may cause some
institutions to no longer provide these
products as accommodations to
consumers, to the detriment of
consumers who currently use these
products. For these reasons, the final
rule does not extend the payment due
date and late payment disclosure
22 Brian Bucks, et al., Changes in U.S. Family
Finances from 2004 to 2007: Evidence from the
Survey of Consumer Finances, Federal Reserve
Bulletin (February 2009).

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requirements to overdraft lines of credit
and other general purpose credit lines.
3. Charge card accounts. As discussed
above, the late payment disclosures in
TILA Section 127(b)(12), as amended by
the Credit Card Act, apply to ‘‘creditors’’
offering credit card accounts under an
open-end consumer credit plan. Issuers
of ‘‘charge cards’’ (which are typically
products where outstanding balances
cannot be carried over from one billing
period to the next and are payable when
a periodic statement is received) are
‘‘creditors’’ for purposes of specifically
enumerated TILA disclosure
requirements. 15 U.S.C. 1602(f);
§ 226.2(a)(17). The late payment
disclosure requirement in TILA Section
127(b)(12), as amended by the Credit
Card Act, is not among those
specifically enumerated.
Under the October 2009 Regulation Z
Proposal, a charge card issuer would
have been required to disclose the
payment due date on the periodic
statement that was the same day each
month. However, under proposed
§ 226.7(b)(11)(ii), a charge card issuer
would not have been required to
disclose on the periodic statement the
late payment disclosures, namely any
late payment fee or penalty APR that
could be triggered by a late payment.
The Board noted that, as discussed
above, the late payment disclosure
requirements are not specifically
enumerated in TILA Section 103(f) to
apply to charge card issuers. In
addition, the Board noted that for some
charge card issuers, payments are not
considered ‘‘late’’ for purposes of
imposing a fee until a consumer fails to
make payments in two consecutive
billing cycles. Therefore, the Board
concluded that it would be undesirable
to encourage consumers who in January
receive a statement with the balance due
upon receipt, for example, to avoid
paying the balance when due because a
late payment fee may not be assessed
until mid-February; if consumers
routinely avoided paying a charge card
balance by the due date, it could cause
issuers to change their practice with
respect to charge cards.
An industry commenter noted that
charge cards should also be exempt
from the requirement in new TILA
Section 127(o) that the payment due
date be the same day each month
because that requirement, like the late
payment disclosure requirements in
revised TILA Section 127(b)(12), is not
specifically enumerated in TILA Section
103(f) as applying to charge card issuers.
Historically, however, the Board has
generally used its authority under TILA
Section 105(a) to apply the same
requirements to credit and charge cards.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
See § 226.2(a)(15); comment 2(a)(15)–3.
The Board has taken a similar approach
with respect to implementation of the
Credit Card Act. See § 226.2(a)(15)(ii).
Nevertheless, in these circumstances,
the Board believes that it would not be
appropriate to apply the requirements in
TILA Section 127(b)(12) and (o) to
periodic statements provided solely for
charge card accounts.
Charge card accounts generally
require that the consumer pay the full
balance upon receipt of the periodic
statement. See comment 2(a)(15)–3. In
practice, however, the Board
understands that charge card issuers
generally request that consumers make
payment by some later date. See
comment 5a(b)(7)–1. As discussed
below, proposed comments 7(b)(11)–1
and –2 clarify that the payment due date
disclosed pursuant to
§ 226.7(b)(11)(i)(A) must be the date on
which the consumer is legally obligated
to make payment, even if the contract or
state law provides that a late payment
fee cannot be assessed until some later
date. Thus, proposed § 226.7(b)(11)(i)(A)
would have required a charge card
issuer to disclose that payment was due
immediately upon receipt of the
periodic statement. As discussed above
with respect to § 226.5(b)(2)(ii), the
Board believes that such a disclosure
would be unnecessarily confusing for
consumers and would prevent a charge
card issuer from complying with the
requirement that periodic statements be
mailed or delivered 21 days before the
payment due date. Instead, the Board
believes that it is appropriate to amend
proposed § 226.7(b)(11)(ii)(A) to exempt
charge card periodic statements from
the requirements of § 226.7(b)(11)(i).
However, as discussed above, charge
card issuers are still prohibited by
§ 226.5(b)(2)(ii)(A)(2) from treating a
payment as late for any purpose during
the 21-day period following mailing or
delivery of the periodic statement.
Furthermore, § 226.7(b)(11)(ii) makes
clear the exemption is for periodic
statements provided solely for charge
card accounts; periodic statements
provided for credit card accounts with
a charge card feature and revolving
feature must comply with the due date
and late payment disclosure provisions
as to the revolving feature. The Board is
also retaining comment app. G–9 (which
was adopted in the January 2009
Regulation Z Rule). Comment app. G–9
explains that creditors offering card
accounts with a charge card feature and
a revolving feature may revise
disclosures, such as the late payment
disclosures and the repayment
disclosures discussed in the section-bysection analysis to § 226.7(b)(12) below,

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to make clear the feature to which the
disclosures apply.
4. Charged-off accounts. In response
to the October 2009 Regulation Z
Proposal, one commenter requested that
credit card issuers not be required to
provide the payment due date and late
payment disclosures for charged-off
accounts since, on those accounts,
consumers are over 180 days late, the
accounts have been placed in charge-off
status, and full payment is due
immediately. The final rule provides
that the payment due date and late
payment disclosures do not apply to a
charged-off account where full payment
of the entire account balance is due
immediately. See § 226.7(b)(11)(ii)(B). In
these cases, it would be impossible for
card issuers to ensure that the payment
due date is the same day each month
because the payment is due
immediately upon receipt of the
periodic statement, and issuers cannot
control which day the periodic
statement will be received. In addition,
the late payment disclosures are not
likely to be meaningful to consumers
because consumers are likely aware of
any penalties for late payment when an
account is 180 days late.
5. Lines of credit accessed solely by
account numbers. In response to the
October 2009 Regulation Z Proposal,
one commenter requested that the Board
provide an exemption from the due date
and late payment disclosures for lines of
credit accessed solely by account
numbers. This commenter believed that
this exemption would simplify
compliance issues, especially for
smaller retailers offering in-house
revolving open-end accounts, in view of
some case law indicating that a reusable
account number could constitute a
‘‘credit card.’’ The final rule does not
contain a specific exemption from the
payment due date and late payment
disclosure requirements for lines of
credit accessed solely by account
numbers. The Board believes that
consumers that use these lines of credit
(to the extent they are considered credit
card accounts) would benefit from the
due date and late payment disclosures.
Payment due date. As adopted in the
January 2009 Regulation Z Rule,
§ 226.7(b)(11) requires creditors offering
open-end (not home-secured) credit to
disclose the due date for a payment if
a late payment fee or penalty rate could
be imposed under the credit agreement,
as discussed in more detail as follows.
As adopted in the January 2009
Regulation Z Rule, § 226.7(b)(11) applies
to all open-end (not home-secured)
credit plans, even those plans that are
not accessed by a credit card device. In
the October 2009 Regulation Z Proposal,

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the Board proposed generally to retain
the due date disclosure, except that this
disclosure would have been required
only for a card issuer offering a ‘‘credit
card account under an open-end (not
home-secured) consumer credit plan,’’
as that term would have been defined in
proposed § 226.2(a)(15)(ii).
In addition, the Board proposed
several other revisions to § 226.7(b)(11)
in order to implement new TILA
Section 127(o), which requires that the
payment due date for a credit card
account under an open-end (not homesecured) consumer credit plan be the
same day each month. In addition to
requiring that the due date disclosed be
the same day each month, in order to
implement new TILA Section 127(o),
the Board proposed to require that the
due date disclosure be provided
regardless of whether a late payment fee
or penalty rate could be imposed and
proposed to require that the due date be
disclosed for charge card accounts,
although charge card issuers would not
be required to provide the late payment
disclosures set forth in proposed
§ 226.7(b)(11)(i)(B). The final rule
retains this provision with one
modification. For the reasons discussed
above, the final rule amends proposed
§ 226.7(b)(11)(ii) to provide that the due
date and late payment disclosure
requirements do not apply to periodic
statements provided solely for charge
card accounts or to periodic statements
provided for charged-off accounts where
payment of the entire account balance is
due immediately.
1. Courtesy periods. In the January
2009 Regulation Z Rule, § 226.7(b)(11)
interpreted the due date to be a date that
is required by the legal obligation.
Comment 7(b)(11)–1 clarified that
creditors need not disclose informal
‘‘courtesy periods’’ not part of the legal
obligation that creditors may observe for
a short period after the stated due date
before a late payment fee is imposed, to
account for minor delays in payments
such as mail delays. In the October 2009
Regulation Z Proposal, the Board
proposed to retain comment 7(b)(11)–1
with technical revisions to refer to card
issuers, rather than creditors, consistent
with the proposal to limit the due date
and late payment disclosures to a ‘‘credit
card account under an open-end (not
home-secured) consumer credit plan,’’
as that term would have been defined in
proposed § 226.2(a)(15)(ii). The Board
received no comments on this
provision. The final rule adopts
comment 7(b)(11)–1 as proposed.
2. Assessment of late fees. Under
TILA Section 127(b)(12), as revised by
the Credit Card Act, a card issuer must
disclose on periodic statements the

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payment due date or, if different, the
earliest date on which the late payment
fee may be charged. Some state laws
require that a certain number of days
must elapse following a due date before
a late payment fee may be imposed.
Under such a state law, the later date
arguably would be required to be
disclosed on periodic statements.
In the January 2009 Regulation Z
Rule, the Board required creditors to
disclose the due date under the terms of
the legal obligation, and not a later date,
such as when creditors are restricted by
state or other law from imposing a late
payment fee unless a payment is late for
a certain number of days following the
due date. Specifically, comment
7(b)(12)–2 (as adopted as part of the
January 2009 Regulation Z Rule) notes
that some state or other laws require
that a certain number of days must
elapse following a due date before a late
payment fee may be imposed. For
example, assume a payment is due on
March 10 and state law provides that a
late payment fee cannot be assessed
before March 21. Comment 7(b)(11)–2
clarifies that creditors must disclose the
due date under the terms of the legal
obligation (March 10 in this example),
and not a date different than the due
date, such as when creditors are
restricted by state or other law from
imposing a late payment fee unless a
payment is late for a certain number of
days following the due date (March 21
in this example). Consumers’ rights
under state law to avoid the imposition
of late payment fees during a specified
period following a due date are
unaffected by the disclosure
requirement. In this example, the
creditor would disclose March 10 as the
due date for purposes of § 226.7(b)(11),
even if under state law the creditor
could not assess a late payment fee
before March 21.
The Board was concerned that
disclosure of the later date would not
provide a meaningful benefit to
consumers in the form of useful
information or protection and would
result in consumer confusion. In the
example above, highlighting March 20
as the last date to avoid a late payment
fee may mislead consumers into
thinking that a payment made any time
on or before March 20 would have no
adverse financial consequences.
However, failure to make a payment
when due is considered an act of default
under most credit contracts, and can
trigger higher costs due to loss of a grace
period, interest accrual, and perhaps
penalty APRs. The Board considered
additional disclosures on the periodic
statement that would more fully explain
the consequences of paying after the due

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date and before the date triggering the
late payment fee, but such an approach
appeared cumbersome and overly
complicated.
For these reasons, notwithstanding
TILA Section 127(b)(12) (as revised by
the Credit Card Act), in the October
2009 Regulation Z Proposal, the Board
proposed to continue to require card
issuers to disclose the due date under
the terms of the legal obligation, and not
a later date, such as when creditors are
restricted by state or other law from
imposing a late payment fee unless a
payment is late for a certain number of
days following the due date.
Thus, the Board proposed to retain
comment 7(b)(11)–2 with several
revisions. First, the comment would
have been revised to refer to card
issuers, rather than creditors, consistent
with the proposal to limit the due date
and late payment disclosures to a ‘‘credit
card account under an open-end (not
home-secured) consumer credit plan,’’
as that term would have been defined in
proposed § 226.2(a)(15)(ii). Second, the
comment would have been revised to
address the situation where the terms of
the account agreement (rather than state
law) limit a card issuer from imposing
a late payment fee unless a payment is
late a certain number of days following
a due date. The Board proposed to
revise comment 7(b)(11)–2 to provide
that in this situation a card issuer must
disclose the date the payment is due
under the terms of the legal obligation,
and not the later date when a late
payment fee may be imposed under the
contract.
The Board did not receive any
comments on this aspect of the October
2009 Regulation Z Proposal. For the
reasons described above, comment
7(b)(11)–2 is adopted as proposed. The
Board adopts this exception to the TILA
requirement to disclose the later date
pursuant to the Board’s authority under
TILA Section 105(a) to make
adjustments that are necessary to
effectuate the purposes of TILA. 15
U.S.C. 1604(a).
3. Same due date each month. The
Credit Card Act created a new TILA
Section 127(o), which states in part that
the payment due date for a credit card
account under an open end consumer
credit plan shall be the same day each
month. The Board proposed to
implement this requirement by revising
§ 226.7(b)(11)(i). The text the Board
proposed to insert into amended
§ 226.7(b)(11)(i) generally tracked the
statutory language in new TILA Section
127(o) and stated that for credit card
accounts under open-end (not homesecured) consumer credit plans, the due
date disclosed pursuant to

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§ 226.7(b)(11)(i) must be the same day of
the month for each billing cycle.
The Board proposed several new
comments to clarify the requirement
that the due date be the same day of the
month for each billing cycle. Proposed
comment 7(b)(11)–6 clarified that the
same day of the month means the same
numerical day of the month. The
proposed comment noted that one
example of a compliant practice would
be to have a due date that is the 25th
of every month. In contrast, it would not
be permissible for the payment due date
to be the same relative date, but not
numerical date, of each month, such as
the third Tuesday of the month. The
Board believes that the intent of new
TILA Section 127(o) is to promote
predictability and to enhance consumer
awareness of due dates each month to
make it easier to make timely payments.
The Board stated in the proposal that
requiring the due date to be the same
numerical day each month would
effectuate the statute, and that the Board
believed permitting the due date to be
the same relative day each month would
not as effectively promote predictability
for consumers.
The Board noted that in practice the
requirement that the due date be the
same numerical date each month would
preclude creditors from setting due
dates that are the 29th, 30th, or 31st of
the month. The Board is aware that
some credit card issuers currently set
due dates for a portion of their accounts
on every day of the month, in order to
distribute the burden associated with
processing payments more evenly
throughout the month. The Board
solicited comment on any operational
burden associated with processing
additional payments received on the 1st
through 28th of the month in those
months with more than 28 days.
Several industry commenters
requested that the Board permit
creditors to set a due date that is the last
day of each month, even though the last
day of the month will fall on a different
numerical date in some months. Other
industry commenters stated that the rule
should permit due dates that are the
29th or 30th of each month, noting that
February is the only month that has
fewer than 30 days. One commenter
noted that there could be customer
service problems with the rule as
proposed, especially if a consumer
requests a payment due date that is the
last day of the month. The Board
believes that the intent of new TILA
Section 127(o) is that a consumer’s due
date be predictable and generally not
change from month to month. However,
comment 7(b)(11)–6 has been revised
from the proposal to provide that a

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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. The Board believes
that consumers can generally
understand what the last day of the
month will be, and that this clarification
effectuates the intent of new TILA
Section 127(o) that consumer’s due date
be predictable from month to month.
Proposed comment 7(b)(11)(i)–7
provided that a creditor may adjust a
consumer’s due date from time to time,
for example in response to a consumerinitiated request, provided that the new
due date will be the same numerical
date each month on an ongoing basis.
The proposed comment cross-referenced
existing comment 2(a)(4)–3 for guidance
on transitional billing cycles that might
result when the consumer’s due date is
changed. The Board stated its belief that
it is appropriate to permit creditors to
change the consumer’s due date from
time to time, for example, if the creditor
wishes to honor a consumer request for
a new due date that better coincides
with the time of the month when the
consumer is paid by his or her
employer. While the proposed comment
referred to consumer-initiated requests
as one example of when a change in due
date might occur, proposed
§ 226.7(b)(11)(i) and comment 7(b)(11)–
7 did not prohibit changes in the
consumer’s due date from time to time
that are not consumer-initiated, for
example, if a creditor acquires a
portfolio and changes the consumer’s
due date as it migrates acquired
accounts onto its own systems.
The Board received only one
comment on proposed comment
7(b)(11)(i)–7, which is adopted as
proposed. One industry commenter
stated that the guidance that the due
date may be adjusted from time to time,
but must be the same thereafter is overly
restrictive. This commenter stated that
consumers should be able to choose
their desired due date. The Board
believes that comment 7(b)(11)(i)–7 does
permit sufficient flexibility for card
issuers to permit consumers to change
their due dates from time to time.
However, the Board believes that
clarification that the due date must
generally be the same each month is
necessary to effectuate the purposes of
new TILA Section 127(o) and to provide
predictability to consumers regarding
their payment due dates.
Regulation Z’s definition of ‘‘billing
cycle’’ in § 226.2(a)(4) contemplates that
the interval between the days or dates
of regular periodic statements must be
equal and no longer than a quarter of a
year. Therefore, some creditors may
have billing cycles that are two or three

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months in duration. The Board
proposed comment 7(b)(11)–8 to clarify
that new § 226.7(b)(11)(i) does not
prohibit billing cycles that are two or
three months, provided that the due
date for each billing cycle is on the same
numerical date of each month. The
Board received no comments on
comment 7(b)(11)–8, which is adopted
as proposed.
Finally, the Board proposed comment
7(b)(11)–9 to clarify the relationship
between §§ 226.7(b)(11)(i) and
226.10(d). As discussed elsewhere in
this supplementary information,
§ 226.10(d) provides that if the payment
due date is a day on which the creditor
does not receive or accept payments by
mail, the creditor is generally required
to treat a payment received the next
business day as timely. It is likely that,
from time to time, a due date that is the
same numerical date each month as
required by § 226.7(b)(11)(i) may fall on
a date on which the creditor does not
accept or receive mailed payments, such
as a holiday or weekend. Proposed
comment 7(b)(11)–9 clarified that in
such circumstances the creditor must
disclose the due date according to the
legal obligation between the parties, not
the date as of which the creditor is
permitted to treat the payment as late.
For example, if the consumer’s due date
is the 4th of every month, a card issuer
may not accept or receive payments by
mail on Thursday, July 4. Pursuant to
§ 226.10(d), the creditor may not treat a
mailed payment received on the
following business day, Friday, July 5,
as late for any purpose. The creditor
must nonetheless, however, disclose
July 4 as the due date on the periodic
statement and may not disclose a July 5
due date.
Two industry commenters objected to
proposed comment 7(b)(11)–9 and
stated 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.
One commenter noted that this
proposed requirement could create
operational difficulties, because some
creditors’ systems do not process
payments as timely if the payment is
received after the posted due date on the
periodic statement. The commenter
stated that this would require some
creditors to apply back-end due
diligence to ensure that they are not
inadvertently creating penalties, which
can pose a significant burden on
creditors.
The Board is adopting comment
7(b)(11)–9 as proposed. The Board
believes that the purpose of TILA
Section 127(o) is to promote consistency

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and predictability regarding a
consumer’s due date. The Board
believes that predictability is not
promoted by permitting creditors to
disclose different numerical dates
during months where the consumer’s
payment due date falls, for example, on
a weekend or holiday when the card
issuer does not receive or accept
payments by mail. This is consistent
with the approach that the Board has
taken with regard to payment due dates
in comments 7(b)(11)–1 and –2, where
the due date disclosed is required to
reflect the legal obligation between the
parties, not any courtesy period offered
by the creditor or required by state or
other law.
Late payment fee and penalty APR. In
the January 2009 Regulation Z Rule, the
Board adopted § 226.7(b)(11) to require
creditors offering open-end (not homesecured) credit plans that charge a fee or
impose a penalty rate for paying late to
disclose on the periodic statement the
amount of any late payment fee and any
penalty APR that could be triggered by
a late payment (in addition to the
payment due date discussed above).
Consistent with TILA Section
127(b)(12), as revised by the Credit Card
Act, proposed § 226.7(b)(11) would have
continued to require that a card issuer
disclose any late payment fee and any
penalty APR that may be imposed on
the account as a result of a late payment,
in addition to the payment due date
discussed above. No comments were
received on this aspect of the proposal.
The final rule adopts this provision as
proposed.
Fee or rate triggered by multiple
events. In the January 2009 Regulation
Z Rule, the Board added comment
7(b)(11)–3 to provide guidance on
complying with the late payment
disclosure if a late fee or penalty APR
is triggered after multiple events, such
as two late payments in six months.
Comment 7(b)(11)–3 provides that in
such cases, the creditor may, but is not
required to, disclose the late payment
and penalty APR disclosure each
month. The disclosures must be
included on any periodic statement for
which a late payment could trigger the
late payment fee or penalty APR, such
as after the consumer made one late
payment in this example. In the October
2009 Regulation Z Proposal, the Board
proposed to retain this comment with
technical revisions to refer to card
issuers, rather than creditors, consistent
with the proposal to limit the late
payment disclosures to a ‘‘credit card
account under an open-end (not homesecured) consumer credit plan,’’ as that
term would have been defined in
proposed § 226.2(a)(15)(ii).

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In response to the October 2009
Regulation Z Proposal, one commenter
suggested that consumers would benefit
from disclosure of the issuer’s policy on
late fee and penalty APRs on each
periodic statement, whether or not the
cardholder could trigger such
consequences by making a late payment
with respect to a particular billing
period. The final rule retains comment
7(b)(11)–3 as proposed. The Board
believes that issuers should be given the
flexibility to tailor the late payment
disclosure to the activity on the
consumer’s account, which will likely
make the disclosure more useful to
consumers.
Range of fees and rates. In the January
2009 Regulation Z Rule,
§ 226.7(b)(11)(i)(B) provides that if a
range of late payment fees or penalty
APRs could be imposed on the
consumer’s account, creditors 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. Comment 7(b)(11)–4 was
added to illustrate the requirement. The
final rule also permits creditors to
disclose a range of fees or rates. In the
October 2009 Regulation Z Proposal, the
Board proposed to retain
§ 226.7(b)(11)(i)(B) and comment
7(b)(11)–4 with technical revisions to
refer to card issuers, rather than
creditors, consistent with the proposal
to limit the late payment disclosures to
a ‘‘credit card account under an openend (not home-secured) consumer credit
plan,’’ as that term would have been
defined in proposed § 226.2(a)(15)(ii).
This approach recognizes the space
constraints on periodic statements and
provides card issuers flexibility in
disclosing possible late payment fees
and penalty rates.
In response to the October 2009
Regulation Z Proposal, 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. According to the commenter,
different penalty APRs may apply to
consumers’ accounts within the same
card program because some consumers
in a program may not have received a
change in terms for a program (possibly
because the account was not active at
the time of the change), or the consumer
may have opted out of a change in terms
related to an increase in the penalty
APR. The commenter indicates that
some systems do not have the
operational capability to tailor the
periodic statement warning message as
a variable message and include the

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precise penalty APR that applies to each
account. The commenter believed that
there is no detriment to a consumer in
allowing a more generic warning
message because the intent of the
warning message is to give consumers
notice that paying late can have serious
consequences. Section 226.7(b)(11)(i)(B)
and comment 7(b)(11)–4 are adopted as
proposed. The Board did not amend
these provisions to allow card issuers to
disclose to a consumer a range of rates
or highest rate for a card program, where
those rates do not apply to a consumer’s
account. The Board is mindful of
compliance costs associated with
customizing the disclosure to reflect
terms applicable to a consumer’s
account; however, the Board believes
the purposes of TILA would not be
served if a consumer received a latepayment disclosure for a penalty APR
that exceeded, perhaps substantially,
the penalty APR the consumer could be
assessed under the terms of the legal
obligation of the account. For that
reason, § 226.7(b)(11)(i)(B) and comment
7(b)(11)–4 provide that ranges or the
highest fee or penalty APR must be
those applicable to the consumer’s
account. Accordingly, a creditor may
state a range or highest penalty APR
only if all penalty APRs in that range or
the highest penalty APR would be
permitted to be imposed on the
consumer’s account under the terms of
the consumer’s account.
Penalty APR in effect. In the January
2009 Regulation Z Rule, comment
7(b)(11)–5 was added to provide that if
the highest penalty APR has previously
been triggered on an account, the
creditor may, but is not required to,
delete as part of the late payment
disclosure the amount of the penalty
APR and the warning that the rate may
be imposed for an untimely payment, as
not applicable. Alternatively, the
creditor may, but is not required to,
modify the language to indicate that the
penalty APR has been increased due to
previous late payments, if applicable. In
the October 2009 Regulation Z Proposal,
the Board proposed to retain this
comment with technical revisions to
refer to card issuers, rather than
creditors, consistent with the proposal
to limit the late payment disclosures to
a ‘‘credit card account under an openend (not home-secured) consumer credit
plan,’’ as that term would have been
defined in proposed § 226.2(a)(15)(ii).
In response to the October 2009
Regulation Z Proposal, one commenter
suggested that the Board revise
comment 7(b)(11)–5 to provide that if
the highest APR has previously been
triggered on an account, a creditor must
modify the language of the late payment

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disclosure to indicate that the penalty
APR has been increased due to previous
late payment. The final rule adopts
comment 7(b)(11)–5 as proposed. To
ease compliance burdens, the Board
believes that it is appropriate to provide
flexibility to card issuers in providing
the late payment disclosure when the
highest penalty APR has previously
been triggered on the account. The
Board notes that consumers will receive
advance notice under § 226.9(g) when a
penalty APR is being imposed on the
consumer’s account. In cases where the
highest penalty APR has been imposed,
the Board does not believe that allowing
the late payment disclosures to continue
to include the amount of the penalty
APR and the warning that the rate may
be imposed for an untimely payment is
likely to confuse consumers.
7(b)(12) Repayment Disclosures
The Bankruptcy Act added TILA
Section 127(b)(11) to require creditors
that extend open-end credit to provide
a disclosure on the front of each
periodic statement in a prominent
location about the effects of making only
minimum payments. 15 U.S.C.
1637(b)(11). This disclosure included:
(1) A ‘‘warning’’ statement indicating
that making only the minimum payment
will increase the interest the consumer
pays and the time it takes to repay the
consumer’s balance; (2) a hypothetical
example of how long it would take to
pay off a specified balance if only
minimum payments are made; and (3) a
toll-free telephone number that the
consumer may call to obtain an estimate
of the time it would take to repay his or
her actual account balance (‘‘generic
repayment estimate’’). In order to
standardize the information provided to
consumers through the toll-free
telephone numbers, the Bankruptcy Act
directed the Board to prepare a ‘‘table’’
illustrating the approximate number of
months it would take to repay an
outstanding balance if the consumer
pays only the required minimum
monthly payments and if no other
advances are made. The Board was
directed to create the table by assuming
a significant number of different APRs,
account balances, and minimum
payment amounts; the Board was
required to provide instructional
guidance on how the information
contained in the table should be used to
respond to consumers’ requests.
Alternatively, the Bankruptcy Act
provided that a creditor may use a tollfree telephone number to provide the
actual number of months that it will
take consumers to repay their
outstanding balances (‘‘actual repayment
disclosure’’) instead of providing an

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estimate based on the Board-created
table. A creditor that does so would not
need to include a hypothetical example
on its periodic statements, but must
disclose the warning statement and the
toll-free telephone number on its
periodic statements. 15 U.S.C.
1637(b)(11)(J)–(K).
For ease of reference, this
supplementary information will refer to
the above disclosures in the Bankruptcy
Act about the effects of making only the
minimum payment as ‘‘the minimum
payment disclosures.’’
In the January 2009 Regulation Z
Rule, the Board implemented this
section of TILA. In that rulemaking, the
Board limited the minimum payment
disclosures required by the Bankruptcy
Act to credit card accounts, pursuant to
the Board’s authority under TILA
Section 105(a) to make adjustments that
are necessary to effectuate the purposes
of TILA. 15 U.S.C. 1604(a). In addition,
the final rule in § 226.7(b)(12) provided
that credit card issuers could choose
one of three ways to comply with the
minimum payment disclosure
requirements set forth in the Bankruptcy
Act: (1) Provide on the periodic
statement a warning about making only
minimum payments, a hypothetical
example, and a toll-free telephone
number where consumers may obtain
generic repayment estimates; (2) provide
on the periodic statement a warning
about making only minimum payments,
and a toll-free telephone number where
consumers may obtain actual repayment
disclosures; or (3) provide on the
periodic statement the actual repayment
disclosure. The Board issued guidance
in Appendix M1 to part 226 for how to
calculate the generic repayment
estimates, and guidance in Appendix
M2 to part 226 for how to calculate the
actual repayment disclosures. Appendix
M3 to part 226 provided sample
calculations for the generic repayment
estimates and the actual repayment
disclosures discussed in Appendices
M1 and M2 to part 226.
The Credit Card Act substantially
revised Section 127(b)(11) of TILA.
Specifically, Section 201 of the Credit
Card Act amends TILA Section
127(b)(11) to provide that creditors that
extend open-end credit must provide
the following disclosures on each
periodic statement: (1) A ‘‘warning’’
statement indicating that making only
the minimum payment will increase the
interest the consumer pays and the time
it takes to repay the consumer’s balance;
(2) the number of months that it would
take to repay the outstanding balance if
the consumer pays only the required
minimum monthly payments and if no
further advances are made; (3) the total

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cost to the consumer, including interest
and principal payments, of paying that
balance in full, if the consumer pays
only the required minimum monthly
payments and if no further advances are
made; (4) the monthly payment amount
that would be required for the consumer
to pay off the outstanding balance in 36
months, if no further advances are
made, and the total cost to the
consumer, including interest and
principal payments, of paying that
balance in full if the consumer pays the
balance over 36 months; and (5) a tollfree telephone number at which the
consumer may receive information
about credit counseling and debt
management services. For ease of
reference, this supplementary
information will refer to the above
disclosures in the Credit Card Act as
‘‘the repayment disclosures.’’
The Credit Card Act provides that the
repayment disclosures discussed above
(except for the warning statement) must
be disclosed in the form and manner
which the Board prescribes by
regulation and in a manner that avoids
duplication; and be placed in a
conspicuous and prominent location on
the billing statement. By regulation, the
Board must require that the disclosure
of the repayment information (except for
the warning statement) be in the form of
a table that contains clear and concise
headings for each item of information
and provides a clear and concise form
stating each item of information
required to be disclosed under each
such heading. In prescribing the table,
the Board must require that all the
information in the table, and not just a
reference to the table, be placed on the
billing statement and the items required
to be included in the table must be
listed in the order in which such items
are set forth above. In prescribing the
table, the statute states that the Board
shall use terminology different from that
used in the statute, if such terminology
is more easily understood and conveys
substantially the same meaning. With
respect to the toll-free telephone
number for providing information about
credit counseling and debt management
services, the Credit Card Act provides
that the Board must issue guidelines by
rule, in consultation with the Secretary
of the Treasury, for the establishment
and maintenance by creditors of a tollfree telephone number for purposes of
providing information about accessing
credit counseling and debt management
services. These guidelines must ensure
that referrals provided by the toll-free
telephone number include only those
nonprofit budget and credit counseling

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agencies approved by a U.S. bankruptcy
trustee pursuant to 11 U.S.C. 111(a).
As discussed in more detail below, in
the October 2009 Regulation Z Proposal,
the Board proposed to revise
§ 226.7(b)(12) to implement Section 201
of the Credit Card Act.
Limiting the repayment disclosure
requirements to credit card accounts.
Under the Credit Card Act, the
repayment disclosure requirements
apply to all open-end accounts (such as
credit card accounts, HELOCs, and
general purpose credit lines). As
discussed above, in the January 2009
Regulation Z Rule, the Board limited the
minimum payment disclosures required
by the Bankruptcy Act to credit card
accounts. For similar reasons, in the
October 2009 Regulation Z Proposal, the
Board proposed to limit the repayment
disclosures in the Credit Card Act to
credit card accounts under open-end
(not home-secured) consumer credit
plans, as that term would have been
defined in proposed § 226.2(a)(15)(ii).
As proposed, the final rule limits the
repayment disclosures in the Credit
Card Act to credit card accounts under
open-end (not home-secured) consumer
credit plans, as that term is defined in
§ 226.2(a)(15)(ii). As discussed in more
detail in the section-by-section analysis
to § 226.2(a)(15)(ii), the term ‘‘credit card
account under an open-end (not homesecured) consumer credit plan’’ means
any open-end account accessed by a
credit card, except this term does not
include HELOC accounts subject to
§ 226.5b that are accessed by a credit
card device or overdraft lines of credit
that are accessed by a debit card. Thus,
based on the proposed exemption to
limit the repayment disclosures to credit
card accounts under open-end (not
home-secured) consumer credit plans,
the following products would be exempt
from the repayment disclosures in TILA
Section 127(b)(11), as set forth in the
Credit Card Act: (1) HELOC accounts
subject to § 226.5b even if they are
accessed by a credit card device; (2)
overdraft lines of credit even if they are
accessed by a debit card; and (3) openend credit plans that are not credit card
accounts, such as general purpose lines
of credit that are not accessed by a
credit card.
The Board adopts this rule pursuant
to its exception and exemption
authorities under TILA Section 105.
Section 105(a) authorizes the Board to
make exceptions to TILA to effectuate
the statute’s purposes, which include
facilitating consumers’ ability to
compare credit terms and helping
consumers avoid the uninformed use of
credit. See 15 U.S.C. 1601(a), 1604(a).
Section 105(f) authorizes the Board to

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exempt any class of transactions from
coverage under any part of TILA if the
Board determines that coverage under
that part does not provide a meaningful
benefit to consumers in the form of
useful information or protection. See 15
U.S.C. 1604(f)(1). The Board must make
this determination in light of specific
factors. See 15 U.S.C. 1604(f)(2). These
factors are (1) the amount of the loan
and whether the disclosure provides a
benefit to consumers who are parties to
the transaction involving a loan of such
amount; (2) the extent to which the
requirement complicates, hinders, or
makes more expensive the credit
process; (3) the status of the borrower,
including any related financial
arrangements of the borrower, the
financial sophistication of the borrower
relative to the type of transaction, and
the importance to the borrower of the
credit, related supporting property, and
coverage under TILA; (4) whether the
loan is secured by the principal
residence of the borrower; and (5)
whether the exemption would
undermine the goal of consumer
protection.
As discussed in more detail below,
the Board has considered each of these
factors carefully, and based on that
review, believes that the exemption is
appropriate.
1. HELOC accounts. In the August
2009 Regulation Z HELOC Proposal, the
Board proposed that the repayment
disclosures required by TILA Section
127(b)(11), as amended by the Credit
Card Act, not apply to HELOC accounts,
including HELOC accounts that can be
accessed by a credit card device. See 74
FR 43428. The Board proposed this rule
pursuant to its exception and exemption
authorities under TILA Section 105(a)
and 105(f), as discussed above. In the
supplementary information to the
August 2009 Regulation Z HELOC
Proposal, the Board stated its belief that
the minimum payment disclosures in
the Credit Card Act would be of limited
benefit to consumers for HELOC
accounts and are not necessary to
effectuate the purposes of TILA. First,
the Board understands that most
HELOCs have a fixed repayment period.
Under the August 2009 Regulation Z
HELOC Proposal, in proposed
§ 226.5b(c)(9)(i), creditors offering
HELOCs subject to § 226.5b would be
required to disclose the length of the
plan, the length of the draw period and
the length of any repayment period in
the disclosures that must be given
within three business days after
application (but not later than account
opening). In addition, this information
also must be disclosed at account
opening under proposed

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§ 226.6(a)(2)(v)(A), as set forth in the
August 2009 Regulation Z HELOC
Proposal. Thus, for a HELOC account
with a fixed repayment period, a
consumer could learn from those
disclosures the amount of time it would
take to repay the HELOC account if the
consumer only makes required
minimum payments. The cost to
creditors of providing this information a
second time, including the costs to
reprogram periodic statement systems,
appears not to be justified by the limited
benefit to consumers.
In addition, in the supplementary
information to the August 2009
Regulation Z HELOC Proposal, the
Board stated its belief that the
disclosure about total cost to the
consumer of paying the outstanding
balance in full (if the consumer pays
only the required minimum monthly
payments and if no further advances are
made) would not be useful to consumers
for HELOC accounts because of the
nature of consumers’ use of HELOC
accounts. The Board understands that
HELOC consumers tend to use HELOC
accounts for larger transactions that they
can finance at a lower interest rate than
is offered on unsecured credit cards,
and intend to repay these transactions
over the life of the HELOC account. By
contrast, consumers tend to use
unsecured credit cards to engage in a
significant number of small dollar
transactions per billing cycle, and may
not intend to finance these transactions
for many years. The Board also
understands that HELOC consumers
often will not have the ability to repay
the balances on the HELOC account at
the end of each billing cycle, or even
within a few years. To illustrate, the
Board’s 2007 Survey of Consumer
Finances data indicates that the median
balance on HELOCs (for families that
had a balance at the time of the
interview) was $24,000, while the
median balance on credit cards (for
families that had a balance at the time
of the interview) was $3,000.23
As discussed in the supplementary
information to the August 2009
Regulation Z HELOC Proposal, the
nature of consumers’ use of HELOCs
also supports the Board’s belief that
periodic disclosure of the monthly
payment amount required for the
consumer to pay off the outstanding
balance in 36 months, and the total cost
to the consumer of paying that balance
in full if the consumer pays the balance
over 36 months, would not provide
useful information to consumers for
HELOC accounts.

For all these reasons, the final rule
exempts HELOC accounts (even when
they are accessed by a credit card
account) from the repayment disclosure
requirements set forth in TILA Section
127(b)(11), as revised by the Credit Card
Act.
2. Overdraft lines of credit and other
general purpose credit lines. The final
rule also exempts overdraft lines of
credit (even if they are accessed by a
debit card) and general purpose credit
lines that are not accessed by a credit
card from the repayment disclosure
requirements set forth in TILA Section
127(b)(11), as revised by the Credit Card
Act, for several reasons. 15 U.S.C.
1637(b)(11). First, these lines of credit
are not in wide use. The 2007 Survey of
Consumer Finances data indicates that
few families—1.7 percent—had a
balance on lines of credit other than a
home-equity line or credit card at the
time of the interview. (By comparison,
73 percent of families had a credit card,
and 60.3 percent of these families had
a credit card balance at the time of the
interview.) 24 Second, these lines of
credit typically are neither promoted,
nor used, as long-term credit options of
the kind for which the repayment
disclosures are intended. Third, the
Board is concerned that the operational
costs of requiring creditors to comply
with the repayment disclosure
requirements for overdraft lines of credit
and other general purpose lines of credit
may cause some institutions to no
longer provide these products as
accommodations to consumers, to the
detriment of consumers who currently
use these products. For these reasons,
the Board uses its TILA Section 105(a)
and 105(f) authority (as discussed
above) to exempt overdraft lines of
credit and other general purpose credit
lines from the repayment disclosure
requirements, because in this context
the Board believes the repayment
disclosures are not necessary to
effectuate the purposes of TILA. 15
U.S.C. 1604(a) and (f).

23 Changes in U.S. Family Finances from 2004 to
2007.

24 Changes in U.S. Family Finances from 2004 to
2007.

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7(b)(12)(i) In General
TILA Section 127(b)(11)(A), as
amended by the Credit Card Act,
requires that a creditor that extends
open-end credit must provide the
following disclosures on each periodic
statement: (1) A ‘‘warning’’ statement
indicating that making only the
minimum payment will increase the
interest the consumer pays and the time
it takes to repay the consumer’s balance;
(2) the number of months that it would
take to repay the outstanding balance if

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the consumer pays only the required
minimum monthly payments and if no
further advances are made; (3) the total
cost to the consumer, including interest
and principal payments, of paying that
balance in full, if the consumer pays
only the required minimum monthly
payments and if no further advances are
made; (4) the monthly payment amount
that would be required for the consumer
to pay off the outstanding balance in 36
months, if no further advances are
made, and the total cost to the
consumer, including interest and
principal payments, of paying that
balance in full if the consumer pays the
balance over 36 months; and (5) a tollfree telephone number at which the
consumer may receive information
about accessing credit counseling and
debt management services.
In implementing these statutory
disclosures, proposed § 226.7(b)(12)(i)
would have set forth the repayment
disclosures that a credit card issuer
generally must provide on the periodic
statement. As discussed in more detail
below, proposed § 226.7(b)(12)(ii) would
have set forth the repayment disclosures
that a credit card issuer must provide on
the periodic statement when negative or
no amortization occurs on the account.
Warning statement. TILA Section
127(b)(11)(A), as amended by the Credit
Card Act, requires that a creditor
include the following statement on each
periodic statement: ‘‘Minimum Payment
Warning: Making only the minimum
payment will increase the amount of
interest you pay and the time it takes to
repay your balance,’’ or a similar
statement that is required by the Board
pursuant to consumer testing. 15 U.S.C.
1637(b)(11)(A). Under proposed
§ 226.7(b)(12)(i)(A), if amortization
occurs on the account, a credit card
issuer generally would have been
required to disclose the following
statement with a bold heading on each
periodic statement: ‘‘Minimum Payment
Warning: If you make only the
minimum payment each period, you
will pay more in interest and it will take
you longer to pay off your balance.’’ The
proposed warning statement would
have contained several stylistic
revisions to the statutory language,
based on plain language principles, in
an attempt to make the language of the
warning more understandable to
consumers.
The Board received no comments on
this aspect of the proposal. The Board
adopts the above warning statement as
proposed. The Board tested the warning
statement as part of the consumer
testing conducted by the Board on credit
card disclosures in relation to the
January 2009 Regulation Z Rule.

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Participants in that consumer testing
reviewed periodic statement disclosures
with the warning statement, and they
indicated they understood from this
statement that paying only the
minimum payment would increase both
interest charges and the length of time
it would take to pay off a balance.
Minimum payment disclosures. TILA
Section 127(b)(11)(B)(i) and (ii), as
amended by the Credit Card Act,
requires that a creditor provide on each
periodic statement: (1) The number of
months that it would take to pay the
entire amount of the outstanding
balance, if the consumer pays only the
required minimum monthly payments
and if no further advances are made;
and (2) the total cost to the consumer,
including interest and principal
payments, of paying that balance in full,
if the consumer pays only the required
minimum monthly payments and if no
further advances are made. 15 U.S.C.
1637(b)(11)(B)(i) and (ii). In the October
2009 Regulation Z Proposal, the Board
proposed new § 226.7(b)(12)(i)(B) and
(C) to implement these statutory
provisions.
1. Minimum payment repayment
estimate. Under proposed
§ 226.7(b)(12)(i)(B), if amortization
occurs on the account, a credit card
issuer generally would have been
required to disclose on each periodic
statement the minimum payment
repayment estimate, as described in
proposed Appendix M1 to part 226. As
described in more detail in the sectionby-section analysis to Appendix M1 to
part 226, the minimum payment
repayment estimate would be an
estimate of the number of months that
it would take to pay the entire amount
of the outstanding balance shown on the
periodic statement, if the consumer pays
only the required minimum monthly
payments and if no further advances are
made.
Proposed § 226.7(b)(12)(i)(B) would
have provided that if the minimum
payment repayment estimate is less than
2 years, a credit card issuer must
disclose the estimate in months.
Otherwise, the estimate would be
disclosed in years. If the estimate is 2
years or more, the estimate would have
been rounded to the nearest whole year,
meaning that if the estimate contains a
fractional year less than 0.5, the
estimate would be rounded down to the
nearest whole year. The estimate would
have been rounded up to the nearest
whole year if the estimate contains a
fractional year equal to or greater than
0.5. In response to the October 2009
Regulation Z Proposal, several
consumer groups commented that the
minimum payment repayment estimate

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7679

should not be rounded to the nearest
year if the repayment period is 2 years
or more. Instead, the Board should
require in those cases that the minimum
payment repayment estimate be
disclosed in years and months. For
example, assume a minimum payment
repayment estimate of 209 months. The
consumer groups suggest that credit
card issuers should be required to
disclose the repayment estimate of 209
months as 17 years and 5 months,
instead of disclosing this repayment
estimate as 17 years which would be
required under the rounding rules set
forth in the proposal. The consumer
groups indicated that six months can be
a significant amount of time for some
consumers.
As proposed, the final rule in
§ 226.7(b)(12)(i)(B) provides that if the
minimum payment repayment estimate
is less than 2 years, a credit card issuer
must disclose the estimate in months.
Otherwise, the estimate would be
disclosed in years. If the estimate is 2
years or more, the estimate would have
been rounded to the nearest whole year.
The Board adopts this provision of the
final rule pursuant to the Board’s
authority to make adjustments to TILA’s
requirements to effectuate the statute’s
purposes, which include facilitating
consumers’ ability to compare credit
terms and helping consumers avoid the
uninformed use of credit. See 15 U.S.C.
1601(a), 1604(a). The Board believes
that disclosing the estimated minimum
payment repayment period in years (if
the estimated payoff period is 2 years or
more) allows consumers to better
comprehend longer repayment periods
without having to convert the
repayment periods themselves from
months to years. In consumer testing
conducted by the Board on credit card
disclosures in relation to the January
2009 Regulation Z Rule, participants
reviewed disclosures with estimated
minimum payment repayment periods
in years, and they indicated they
understood the length of time it would
take to repay the balance if only
minimum payments were made.
Thus, if the minimum payment
repayment estimate is 2 years or more,
the final rule does not require credit
card issuers to disclose the minimum
payment repayment estimate in years
and months, such as disclosing the
minimum payment repayment estimate
of 209 months as 17 years and 5 months,
instead of disclosing this repayment
estimate as 17 years (which is required
under the rounding rules set forth in the
final rule). The Board recognizes that
the minimum payment repayment
estimates, as calculated in Appendix M1
to part 226, are estimates, calculated

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using a number of assumptions about
current and future account terms. The
Board believes that disclosing minimum
payment repayment estimates that are 2
years or more in years and months
might cause consumers to believe that
the estimates are more accurate than
they really are, especially for longer
repayment periods. The Board believes
that rounding the minimum payment
repayment estimate to the nearest year
(if the repayment estimate is 2 years or
more) provides consumers with an
appropriate estimate of how long it
would take to repay the outstanding
balance if only minimum payments are
made.
2. Minimum payment total cost
estimate. Consistent with TILA Section
127(b)(11)(B)(ii), as revised by the Credit
Card Act, proposed § 226.7(b)(12)(i)(C)
provided that if amortization occurs on
the account, a credit card issuer
generally must disclose on each
periodic statement the minimum
payment total cost estimate, as
described in proposed Appendix M1 to
part 226. As described in more detail in
the section-by-section analysis to
proposed Appendix M1 to part 226, the
minimum payment total cost estimate
would have been an estimate of the total
dollar amount of the interest and
principal that the consumer would pay
if he or she made minimum payments
for the length of time calculated as the
minimum payment repayment estimate,
as described in proposed Appendix M1
to part 226. Under the proposal, the
minimum payment total cost estimate
must be rounded to the nearest whole
dollar. The final rule adopts this
provision as proposed.
3. Disclosure of assumptions used to
calculate the minimum payment
repayment estimate and the minimum
payment total cost estimate. Under
proposed § 226.7(b)(12)(i)(D), a creditor
would have been required to provide on
the periodic statement the following
statements: (1) A statement that the
minimum payment repayment estimate
and the minimum payment total cost
estimate are based on the current
outstanding balance shown on the
periodic statement; and (2) a statement
that the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
assumption that only minimum
payments are made and no other
amounts are added to the balance. The
final rule adopts this provision as
proposed. The Board believes that this
information is needed to help
consumers understand the minimum
payment repayment estimate and the
minimum payment total cost estimate.
The final rule does not require issuers

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to disclose other assumptions used to
calculate these estimates. The many
assumptions that are necessary to
calculate the minimum payment
repayment estimate and the minimum
payment total cost estimate are complex
and unlikely to be meaningful or useful
to most consumers.
Repayment disclosures based on
repayment in 36 months. TILA Section
127(b)(11)(B)(iii), as revised by the
Credit Card Act, requires that a creditor
disclose on each periodic statement: (1)
The monthly payment amount that
would be required for the consumer to
pay off the outstanding balance in 36
months, if no further advances are
made; and (2) the total costs to the
consumer, including interest and
principal payments, of paying that
balance in full if the consumer pays the
balance over 36 months. 15 U.S.C.
1637(b)(11)(B)(iii).
1. Estimated monthly payment for
repayment in 36 months and total cost
estimate for repayment in 36 months. In
implementing TILA Section
127(b)(11)(B)(iii), as revised by the
Credit Card Act, proposed
§ 226.7(b)(12)(i)(F) provided that except
when the minimum payment repayment
estimate disclosed under proposed
§ 226.7(b)(12)(i)(B) is 3 years or less, 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, as described in
proposed Appendix M1 to part 226. As
described in more detail in the sectionby-section analysis to Appendix M1 to
part 226, the proposed estimated
monthly payment for repayment in 36
months would have been an estimate of
the monthly payment amount that
would be required to pay off the
outstanding balance shown on the
statement within 36 months, assuming
the consumer paid the same amount
each month for 36 months. Also, as
described in Appendix M1 to part 226,
the proposed total cost estimate for
repayment in 36 months would have
been the total dollar amount of the
interest and principal that the consumer
would pay if he or she made the
estimated monthly payment each month
for 36 months. Under the proposal, the
estimated monthly payment for
repayment in 36 months and the total
cost estimate for repayment in 36
months would have been rounded to the
nearest whole dollar. The final rule
adopts these provisions as proposed,
except with several additional
exceptions to when the 36-month
disclosures must be disclosed as
discussed below.

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2. Savings estimate for repayment in
36 months. In addition to the disclosure
of the estimated monthly payment for
repayment in 36 months and the total
cost estimate for repayment in 36
months, proposed § 226.7(b)(12)(i)(F)
also would have required that a credit
card issuer generally must disclose on
each periodic statement the savings
estimate for repayment in 36 months, as
described in proposed Appendix M1 to
part 226. As described in proposed
Appendix M1 to part 226, the savings
estimate for repayment in 36 months
would have been calculated as the
difference between the minimum
payment total cost estimate and the total
cost estimate for repayment in 36
months. Thus, the savings estimate for
repayment in 36 months would have
represented an estimate of the amount
of interest that a consumer would ‘‘save’’
if the consumer repaid the balance
shown on the statement in 3 years by
making the estimated monthly payment
for repayment in 36 months each
month, rather than making minimum
payments each month. In response to
the October 2009 Regulation Z Proposal,
one commenter indicated that the Board
should not require the savings estimate
for repayment in 36 months because this
disclosure would not be helpful to
consumers. The final rule requires
credit card issuers generally to disclose
the savings estimate for repayment in 36
months on periodic statements, as
proposed. The Board adopts this
disclosure requirement pursuant to the
Board’s authority to make adjustments
to TILA’s requirements to effectuate the
statute’s purposes, which include
facilitating consumers’ ability to
compare credit terms and helping
consumers avoid the uninformed use of
credit. See 15 U.S.C. 1601(a), 1604(a).
The Board continues to believe that the
savings estimate for repayment in 36
months will allow consumers more
easily to understand the potential
savings of paying the balance shown on
the periodic statement in 3 years rather
than making minimum payments each
month. This potential savings appears to
be Congress’ purpose in requiring that
the total cost for making minimum
payments and the total cost for
repayment in 36 months be disclosed on
the periodic statement. The Board
believes that including the savings
estimate on the periodic statement
allows consumers to comprehend better
the potential savings without having to
compute this amount themselves from
the total cost estimates disclosed on the
periodic statement. In consumer testing
conducted by the Board on closed-end
mortgage disclosures in relation to the

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August 2009 Regulation Z Closed-End
Credit Proposal, some participants were
shown two offers for mortgage loans
with different APRs and different totals
of payments. In that consumer testing,
in comparing the two mortgage loans,
participants tended not to calculate for
themselves the difference between the
total of payments for the two loans (i.e.,
the potential savings in choosing one
loan over another), and use that amount
to compare the two loans. Instead,
participants tended to disregard the
total of payments for both loans,
because both totals were large numbers.
Given the results of that consumer
testing, the Board believes it is
important to disclose the savings
estimate on the periodic statement to
focus consumers’ attention explicitly on
the potential savings of repaying the
balance in 36 months.
3. Minimum payment repayment
estimate disclosed on the periodic
statement is three years or less. Under
proposed § 226.7(b)(12)(i)(F), a credit
card issuer would not have been
required to provide the disclosures
related to repayment in 36 months if the
minimum payment repayment estimate
disclosed under proposed
§ 226.7(b)(12)(i)(B) was 3 years or less.
The Board retains this exemption in the
final rule with several technical
revisions. The Board adopts this
exemption pursuant to the Board’s
authority exception and exemption
authorities under TILA Section 105(a)
and (f). The Board has considered the
statutory factors carefully, and based on
that review, believes that the exemption
is appropriate. The Board believes that
the estimated monthly payment for
repayment in 36 months, and the total
cost estimate for repayment in 36
months would not be useful and may be
misleading to consumers where based
on the minimum payments that would
be due on the account, a consumer
would be required to repay the
outstanding balance in three years or
less. For example, assume that based on
the minimum payments due on an
account, a consumer would repay his or
her outstanding balance in two years if
the consumer only makes minimum
payments and take no additional
advances. The consumer under the
account terms would not have the
option to repay the outstanding balance
in 36 months (i.e., 3 years). In this
example, disclosure of the estimated
monthly payment for repayment in 36
months and the total cost estimate for
repayment in 36 months would be
misleading, because under the account
terms the consumer does not have the
option to make the estimated monthly

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payment each month for 36 months.
Requiring that this information be
disclosed on the periodic statement
when it is might be misleading to
consumers would undermine TILA’s
goal of consumer protection, and could
make the credit process more expensive
by requiring card issuers to incur costs
to address customer confusion about
these disclosures.
In the final rule, the provision that
exempts credit card issuers from
disclosing on the periodic statement the
disclosures related to repayment in 36
months if the minimum payment
repayment estimate disclosed under
§ 226.7(b)(12)(i)(B) is 3 years or less has
been moved to § 226.7(b)(1)(i)(F)(2)(i). In
addition, the language of this exemption
has been revised to clarify that the
exemption applies if the minimum
payment repayment estimate disclosed
on the periodic statement under
§ 226.7(b)(12)(i)(B) after rounding is 3
years or less. For example, under the
final rule, if the minimum payment
repayment estimate is 2 years 6 month
to 3 years 5 months, issuers would be
required to disclose on the periodic
statement that it would take 3 years to
pay off the balance in full if making
only the minimum payment. In these
cases, an issuer would not be required
to disclose the 36-month disclosures on
the periodic statement because the
minimum payment repayment estimate
disclosed to the consumer on the
periodic statement (after rounding) is 3
years or less. Comment 7(b)(12)(i)(F)–1
has been added to clarify these
disclosure rules.
4. Estimated monthly payment for
repayment in 36 months is less than the
minimum payment for a particular
billing cycle. In response to the October
2009 Regulation Z Proposal, several
commenters suggested that 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

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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. The Board
shares these concerns, and thus, the
final 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, as described in
Appendix M1 to part 226, rounded to
the nearest whole dollar that is
calculated for a particular billing cycle
is less than the minimum payment
required for the plan for that billing
cycle. See § 226.7(b)(12)(i)(F)(2)(ii). The
Board adopts this exemption pursuant
to the Board’s authority exception and
exemption authorities under TILA
Section 105(a). The Board has
considered the statutory factors
carefully, and based on that review,
believes that the exemption is
appropriate. Requiring that the 36month disclosures be disclosed on the
periodic statement when they might be
misleading to consumers would
undermine TILA’s goal of consumer
protection, and could make the credit
process more expensive by requiring
card issuers to incur costs to address
customer confusion about these
disclosures.
5. A billing cycle where an account
has both a balance on a revolving
feature and on a fixed repayment
feature. In response to the October 2009
Regulation Z Proposal, several
commenters raised concerns that the 36month disclosures could be misleading
in a particular billing cycle where an
account has both a balance in a
revolving feature where the required
minimum payments for this feature will
not amortize that balance in a fixed
amount of time specified in the account
agreement and a balance in a fixed
repayment feature where the required
minimum payment for this fixed
repayment feature will amortize that
balance in a fixed amount of time
specified in the account agreement
which is less than 36 months. For
example, assume a retail card has
several features. One feature is a general
revolving feature, where the required
minimum payment for this feature does
not pay off the balance in a fixed period
of time. Another feature allows
consumers to make specific types of
purchases (such as furniture purchases,
or other large purchases), with a
required minimum payment that will

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pay off the purchase within a fixed
period of time as set forth in the account
agreement that is less than 36 months,
such as one year. Commenters indicated
that in many cases, where this type of
account has balances on both the
revolving feature and fixed repayment
feature for a particular billing cycle, the
required minimum due may initially be
higher than what 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, while under the account
agreement the balance in the fixed
repayment feature must be repaid in a
shorter timeframe. Based on these
concerns, the Board amends the final
rule to provide that a card issuer is not
required to provide the 36-month
disclosures on a periodic statement for
a billing cycle where an account has
both a balance in a revolving feature
where the required minimum payments
for this feature will not amortize that
balance in a fixed amount of time
specified in the account agreement and
a balance in a fixed repayment feature
where the required minimum payment
for this fixed repayment feature will
amortize that balance in a fixed amount
of time specified in the account
agreement which is less than 36 months.
See § 226.7(b)(12)(i)(F)(2)(iii). The Board
adopts this exemption pursuant to the
Board’s authority exception and
exemption authorities under TILA
Section 105(a). The Board has
considered the statutory factors
carefully, and based on that review,
believes that the exemption is
appropriate. Requiring that the 36month disclosures be disclosed on the
periodic statement when they might be
misleading to consumers would
undermine TILA’s goal of consumer
protection, and could make the credit
process more expensive by requiring
card issuers to incur costs to address
customer confusion about these
disclosures.
6. Disclosure of assumptions used to
calculate the 36-month disclosures. If a
card issuer is required to provide the 36month disclosures, proposed
§ 226.7(b)(12)(i)(F)(2) would have
provided that a credit card issuer must
disclose as part of those disclosures a
statement that the card issuer estimates
that the consumer will repay the
outstanding balance shown on the
periodic statement in 3 years if the
consumer pays the estimated monthly
payment each month for 3 years. The
final rule retains this provision as
proposed, except that this provision is

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moved to § 226.7(b)(12)(i)(F)(1)(ii). The
Board believes that this information is
needed to help consumers understand
the estimated monthly payment for
repayment in 36 months. The final rule
does not require issuers to disclose
assumptions used to calculate this
estimated monthly payment. The many
assumptions that are necessary to
calculate the estimated monthly
payment for repayment in 36 months
are complex and unlikely to be
meaningful or useful to most
consumers.
Disclosure of extremely long
repayment periods. In response to the
October 2009 Regulation Z Proposal,
one commenter indicated that it had
observed accounts that result in very
long repayment periods. This
commenter indicated that this situation
usually results when the minimum
payment requirements are very low in
proportion to the APRs on the account.
The commenter indicated that these
scenarios result most frequently when
issuers endeavor to provide temporary
relief to consumers during periods of
hardship, workout and disasters such as
floods. This commenter indicated that
requiring issuers to calculate and
disclose these long repayment periods
would cause compliance problems,
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.
With respect to these temporarily
reduced minimum payments, the
calculation of these long repayment
periods often result from assuming that
the temporary minimum payment will
apply indefinitely. The Board notes that
guidance provided in Appendix M1 to
part 226 for how to handle temporary
minimum payments may reduce the
situations in which the calculation of a
long repayment period would result. In
particular, as discussed in more detail
in the section-by-section analysis to
Appendix M1 to part 226, Appendix M1
provides that if any promotional terms
related to payments apply to a
cardholder’s account, such as a deferred
billing plan where minimum payments
are not required for 12 months, credit
card issuers may assume no
promotional terms apply to the account.
In Appendix M1 to part 226, the term
‘‘promotional terms’’ is defined as terms
of a cardholder’s account that will
expire in a fixed period of time, as set
forth by the card issuer. Appendix M1

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to part 226 clarifies that issuers have
two alternatives for handling
promotional minimum payments. Under
the first alternative, an issuer may
disregard the promotional minimum
payment during the promotional period,
and instead calculate the minimum
payment repayment estimate using the
standard minimum payment formula
that is applicable to the account. For
example, assume that a promotional
minimum payment of $10 applies to an
account for six months, and then after
the promotional period expires, the
minimum payment is calculated as 2
percent of the outstanding balance on
the account or $20 whichever is greater.
An issuer may assume during the
promotional period that the $10
promotional minimum payment does
not apply, and instead calculate the
minimum payment disclosures based on
the minimum payment formula of 2
percent of the outstanding balance or
$20, whichever is greater. The Board
notes that allowing issuers to disregard
promotional payment terms on accounts
where the promotional payment terms
apply only for a limited amount of time
eases the compliance burden on issuers,
without a significant impact on the
accuracy of the repayment estimates for
consumers.
Under the second alternative, an
issuer in calculating the minimum
payment repayment estimate during the
promotional period may choose not to
disregard the promotional minimum
payment but instead may calculate the
minimum payments as they will be
calculated over the duration of the
account. In the above example, an issuer
could calculate the minimum payment
repayment estimate during the
promotional period by assuming the $10
promotional minimum payment will
apply for the first six months and then
assuming the 2 percent or $20
(whichever is greater) minimum
payment formula will apply until the
balance is repaid. Appendix M1 to part
226 clarifies, however, that in
calculating the minimum payment
repayment estimate during a
promotional period, an issuer may not
assume that the promotional minimum
payment will apply until the
outstanding balance is paid off by
making only minimum payments
(assuming the repayment estimate is
longer than the promotional period). In
the above example, the issuer may not
calculate the minimum payment
repayment estimate during the
promotional period by assuming that
the $10 promotional minimum payment
will apply beyond the six months until
the outstanding balance is repaid.

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While the Board believes that the
above guidance for how to handle
temporary minimum payments may
reduce the situations in which the
calculation of a long repayment period
would result, the Board understands
that there may still be circumstances
where long repayment periods result,
because the standard minimum
payment is low in comparison to the
APR that applies to the account. The
final rule does not contain special rules
for disclosing extremely long repayment
periods, such as allowing credit card
issuers to disclose long repayment
periods as ‘‘over 100 years.’’ As
proposed, the final rule requires a credit
card issuer to disclose the minimum
payment repayment estimate, as
described in Appendix M1 to part 226,
on the periodic statement even if that
repayment period is extremely long,
such as over 100 years. The Board
believes that it was Congress’ intent to
require that estimates of the repayment
periods be disclosed on periodic
statements, even if the repayment
periods are extremely long.
Toll-free telephone number. TILA
Section 127(b)(11)(B)(iii), as revised by
the Credit Card Act, requires that a
creditor disclose on each periodic
statement a toll-free telephone number
at which the consumer may receive
information about credit counseling and
debt management services. 15 U.S.C.
1637(b)(11)(B)(iii). Proposed
§ 226.7(b)(12)(i)(E) provided that a
credit card issuer generally must
disclose on each periodic statement a
toll-free telephone number where the
consumer may obtain information about
credit counseling services consistent
with the requirements set forth in
proposed § 226.7(b)(12)(iv). The final
rule adopts this provision as proposed.
As discussed in more detail below,
§ 226.7(b)(12)(iv) sets forth the
information that a credit card issuer
must provide through the toll-free
telephone number.
7(b)(12)(ii) Negative or No Amortization
Negative or no amortization can occur
if the required minimum payment is the
same as or less than the total finance
charges and other fees imposed during
the billing cycle. Several major credit
card issuers have established minimum
payment requirements that prevent
prolonged negative or no amortization.
But some creditors may use a minimum
payment formula that allows negative or
no amortization (such as by requiring a
payment of 2 percent of the outstanding
balance, regardless of the finance
charges or fees incurred).
The Credit Card Act appears to
require the following disclosures even

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when negative or no amortization
occurs: (1) A ‘‘warning’’ statement
indicating that making only the
minimum payment will increase the
interest the consumer pays and the time
it takes to repay the consumer’s balance;
(2) the number of months that it would
take to repay the outstanding balance if
the consumer pays only the required
minimum monthly payments and if no
further advances are made; (3) the total
cost to the consumer, including interest
and principal payments, of paying that
balance in full, if the consumer pays
only the required minimum monthly
payments and if no further advances are
made; (4) the monthly payment amount
that would be required for the consumer
to pay off the outstanding balance in 36
months, if no further advances are
made, and the total cost to the
consumer, including interest and
principal payments, of paying that
balance in full if the consumer pays the
balance over 36 months; and (5) a tollfree telephone number at which the
consumer may receive information
about credit counseling and debt
management services.
Nonetheless, for the reasons discussed
in more detail below, in the October
2009 Regulation Z Proposal, the Board
proposed to make adjustments to the
above statutory requirements when
negative or no amortization occurs.
Specifically, when negative or no
amortization occurs, the Board proposed
in new § 226.7(b)(12)(ii) to require a
credit card issuer to disclose to the
consumer on the periodic statement the
following information: (1) the following
statement: ‘‘Minimum Payment
Warning: Even if you make no more
charges using this card, if you make
only the minimum payment each month
we estimate you will never pay off the
balance shown on this statement
because your payment will be less than
the interest charged each month;’’ (2) the
following statement: ‘‘If you make more
than the minimum payment each
period, you will pay less in interest and
pay off your balance sooner;’’ (3) the
estimated monthly payment for
repayment in 36 months; (4) the fact
that the card issuer estimates that the
consumer will repay the outstanding
balance shown on the periodic
statement in 3 years if the consumer
pays the estimated monthly payment
each month for 3 years; and (5) the tollfree telephone number for obtaining
information about credit counseling
services. The final rule adopts these
disclosures, as proposed, pursuant to
the Board’s authority under TILA
Section 105(a) to make adjustments or
exceptions to effectuate the purposes of

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TILA. 15 U.S.C. 1604(a). When negative
or no amortization occurs, the number
of months to repay the balance shown
on the statement if minimum payments
are made and the total cost in interest
and principal if the balance is repaid
making only minimum payments cannot
be calculated because the balance will
never be repaid if only minimum
payments are made. Under the final
rule, these statutory disclosures are
replaced with a warning that the
consumer will never repay the balance
if making minimum payments each
month.
In addition, under the final rule, if
negative or no amortization occurs, card
issuers would be required to disclose
the following statement: ‘‘If you make
more than the minimum payment each
period, you will pay less in interest and
pay off your balance sooner.’’ This
sentence is similar to, and accomplishes
the goals of, the statutory warning
statement, by informing consumers that
they can pay less interest and pay off
the balance sooner if the consumer pays
more than the minimum payment each
month.
In addition, consistent with TILA
Section 127(b)(11) as revised by the
Credit Card Act, if negative or no
amortization occurs, under the final
rule, a credit card issuer must disclose
to the consumer the estimated monthly
payment for repayment in 36 months
and a statement of the fact the card
issuer estimates that the consumer will
repay the outstanding balance shown on
the periodic statement in 3 years if the
consumer pays the estimated monthly
payment each month for 3 years.
Under the final rule, if negative or no
amortization occurs, a card issuer,
however, would not disclose the total
cost estimate for repayment in 36
months, as described in Appendix M1
to part 226. The Board adopts an
exception to TILA’s requirement to
disclose the total cost estimate for
repayment in 36 months pursuant to the
Board’s exception and exemption
authorities under TILA Section 105(f).
The Board has considered each of the
statutory factors carefully, and based on
that review, believes that the exemption
is appropriate. As discussed above,
when negative or no amortization
occurs, a minimum payment total cost
estimate cannot be calculated because
the balance shown on the statement will
never be repaid if only minimum
payments are made. Thus, under the
final rule, a credit card issuer would not
be required to disclose a minimum
payment total cost estimate as described
in proposed Appendix M1 to part 226.
Because the minimum payment total
cost estimate will not be disclosed when

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negative or no amortization occurs, the
Board does not believe that the total cost
estimate for repayment in 36 months
would be useful to consumers. The
Board believes that the total cost
estimate for repayment in 36 months is
useful when it can be compared to the
minimum payment total cost estimate.
Requiring that this information be
disclosed on the periodic statement
when it is not useful to consumers
could distract consumers from more
important information on the periodic
statement, which could undermine
TILA’s goal of consumer protection.
7(b)(12)(iii) Format Requirements
As discussed above, TILA Section
127(b)(11)(D), as revised by the Credit
Card Act, provides that the repayment
disclosures (except for the warning
statement) must be disclosed in the form
and manner which the Board prescribes
by regulation and in a manner that
avoids duplication and must be placed
in a conspicuous and prominent
location on the billing statement. 15
U.S.C. 1637(b)(11)(D). By regulation, the
Board must require that the disclosure
of the repayment information (except for
the warning statement) be in the form of
a table that contains clear and concise
headings for each item of information
and provides a clear and concise form
stating each item of information
required to be disclosed under each
such heading. In prescribing the table,
the Board must require that all the
information in the table, and not just a
reference to the table, be placed on the
billing statement. In addition, the items
required to be included in the table
must be listed in the following order: (1)
The minimum payment repayment
estimate; (2) the minimum payment
total cost estimate; (3) the estimated
monthly payment for repayment in 36
months; (4) the total cost estimate for
repayment in 36 months; and (5) the
toll-free telephone number. In
prescribing the table, the Board must
use terminology different from that used
in the statute, if such terminology is
more easily understood and conveys
substantially the same meaning.
Samples G–18(C)(1), G–18(C)(2) and
G–18(C)(3). Proposed § 226.7(b)(12)(iii)
provided that a credit card issuer must
provide the repayment disclosures in a
format substantially similar to proposed
Samples G 18(C)(1), G–18(C)(2) and G–
18(C)(3) in Appendix G to part 226, as
applicable.
Proposed Sample G–18(C)(1) would
have applied when amortization occurs
and the 36-month disclosures were
required to be disclosed under proposed
§ 226.7(b)(12)(i)(F). In this case, as
discussed above, a credit card issuer

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would have been required under
proposed § 226.7(b)(12) to disclose on
the periodic statement: (1) The warning
statement; (2) the minimum payment
repayment estimate; (3) the minimum
payment total cost estimate; (4) the fact
that the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
current outstanding balance shown on
the periodic statement, and the fact that
the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
assumption that only minimum
payments are made and no other
amounts are added to the balance; (5)
the estimated monthly payment for
repayment in 36 months; (6) the total
cost estimate for repayment in 36
months; (7) the savings estimate for
repayment in 36 months; (8) the fact
that the card issuer estimates that the
consumer will repay the outstanding
balance shown on the periodic
statement in 3 years if the consumer
pays the estimated monthly payment
each month for 3 years; and (9) the tollfree telephone number for obtaining
information about credit counseling
services. Sample G–18(C)(1) is adopted
as proposed, with technical edits to the
heading of the sample form.
As shown in Sample G–18(C)(1), card
issuers are required to provide the
following disclosures in the form of a
table with headings, content and format
substantially similar to Sample G–
18(C)(1): (1) The fact that the minimum
payment repayment estimate and the
minimum payment total cost estimate
are based on the assumption that only
minimum payments are made; (2) the
minimum payment repayment estimate;
(3) the minimum payment total cost
estimate, (4) the estimated monthly
payment for repayment in 36 months;
(5) the fact the card issuer estimates that
the consumer will repay the outstanding
balance shown on the periodic
statement in 3 years if the consumer
pays the estimated monthly payment
each month for 3 years; (6) total cost
estimate for repayment in 36 months;
and (7) the savings estimate for
repayment in 36 months. The following
information is incorporated into the
headings for the table: (1) The fact that
the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
current outstanding balance shown on
the periodic statement; and (2) the fact
that the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
assumption that no other amounts are
added to the balance. The warning

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statement must be disclosed above the
table and the toll-free telephone number
must be disclosed below the table.
Proposed Sample G–18(C)(2) would
have applied when amortization occurs
and the 36-month disclosures were not
required to be disclosed under proposed
§ 226.7(b)(12)(i)(F). In this case, as
discussed above, a credit card issuer
would have been required under
proposed § 226.7(b)(12) to disclose on
the periodic statement: (1) The warning
statement; (2) the minimum payment
repayment estimate; (3) the minimum
payment total cost estimate; (4) the fact
that the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
current outstanding balance shown on
the periodic statement, and the fact that
the minimum payment repayment
estimate and the minimum payment
total cost estimate are based on the
assumption that only minimum
payments are made and no other
amounts are added to the balance; and
(5) the toll-free telephone number for
obtaining information about credit
counseling services. Sample G–18(C)(2)
is adopted as proposed, with technical
edits to the heading of the sample form.
As shown in Sample G–18(C)(2),
disclosure of the above information is
similar in format to how this
information is disclosed in Sample G–
18(C)(1). Specifically, as shown in
Sample G–18(C)(2), card issuers are
required to disclose the following
disclosures in the form of a table with
headings, content and format
substantially similar to Sample G–
18(C)(2): (1) The fact that the minimum
payment repayment estimate and the
minimum payment total cost estimate
are based on the assumption that only
minimum payments are made; (2) the
minimum payment repayment estimate;
and (3) the minimum payment total cost
estimate. The following information is
incorporated into the headings for the
table: (1) The fact that the minimum
payment repayment estimate and the
minimum payment total cost estimate
are based on the current outstanding
balance shown on the periodic
statement; and (2) the fact that the
minimum payment repayment estimate
and the minimum payment total cost
estimate are based on the assumption
that no other amounts are added to the
balance. The warning statement must be
disclosed above the table and the tollfree telephone number must be
disclosed below the table.
Proposed Sample G–18(C)(3) would
have applied when negative or no
amortization occurs. In this case, as
discussed above, a credit card issuer
would have been required under

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proposed § 226.7(b)(12) to disclose on
the periodic statement: (1) The
following statement: ‘‘Minimum
Payment Warning: Even if you make no
more charges using this card, if you
make only the minimum payment each
month we estimate you will never pay
off the balance shown on this statement
because your payment will be less than
the interest charged each month;’’ (2) the
following statement: ‘‘If you make more
than the minimum payment each
period, you will pay less in interest and
pay off your balance sooner;’’ (3) the
estimated monthly payment for
repayment in 36 months; (4) the fact the
card issuer estimates that the consumer
will repay the outstanding balance
shown on the periodic statement in 3
years if the consumer pays the estimated
monthly payment each month for 3
years; and (5) the toll-free telephone
number for obtaining information about
credit counseling services. Sample G–
18(C)(3) is adopted as proposed.
As shown in Sample G–18(C)(3), none
of the above information would be
required to be in the form of a table,
notwithstanding TILA’s requirement
that the repayment information (except
the warning statement) be in the form of
a table. The Board adopts this
exemption to this TILA requirement
pursuant to the Board’s authority
exception and exemption authorities
under TILA Section 105(a). The Board
does not believe that the tabular format
is a useful format for disclosing that
negative or no amortization is occurring.
The Board believes that a narrative
format is better than a tabular format for
communicating to consumers that
making only minimum payments will
not repay the balance shown on the
periodic statement. For consistency,
Sample G–18(C)(3) also provides the
disclosures about repayment in 36
months in a narrative form as well. To
help ensure that consumers notice the
disclosures about negative or no
amortization and the disclosures about
repayment in 36 months, the Board
would require that card issuers disclose
certain key information in bold text, as
shown in Sample G–18(C)(3).
As discussed above, TILA Section
127(b)(11)(D), as revised by the Credit
Card Act, provides that the toll-free
telephone number for obtaining credit
counseling information must be
disclosed in the table with: (1) The
minimum payment repayment estimate;
(2) the minimum payment total cost
estimate; (3) the estimated monthly
payment for repayment in 36 months;
and (4) the total cost estimate for
repayment in 36 months. As proposed,
the final rule does not provide that the
toll-free telephone number must be in a

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tabular format. See Samples G–18(C)(1),
G–18(C)(2) and G–18(C)(3). The Board
adopts this exemption pursuant to the
Board’s exception and exemption
authorities under TILA Section 105(a),
as discussed above. The Board believes
that it might be confusing to consumers
to include the toll-free telephone
number in the table because it does not
logically flow from the other
information included in the table. To
help ensure that the toll-free telephone
number is noticeable to consumer, the
final rule requires that the toll-free
telephone number be grouped with the
other repayment information.
Format requirements set forth in
§ 226.7(b)(13). Proposed
§ 226.7(b)(12)(iii) provided that a credit
card issuer must provide the repayment
disclosures in accordance with the
format requirements of proposed
§ 226.7(b)(13). The final rule adopts this
provision as proposed. As discussed in
more detail in the section-by-section
analysis to § 226.7(b)(13), the final rule
in § 226.7(b)(13) requires that the
repayment disclosures required to be
disclosed under § 226.7(b)(12) must be
disclosed closely proximate to the
minimum payment due. In addition,
under the final rule, the repayment
disclosures must be grouped together
with the due date, late payment fee and
annual percentage rate, ending balance,
and minimum payment due, and this
information must be disclosed on the
front of the first page of the periodic
statement.
7(b)(12)(iv) Provision of Information
About Credit Counseling Services
Section 201(c) of the Credit Card Act
requires the Board to issue guidelines by
rule, in consultation with the Secretary
of the Treasury, for the establishment
and maintenance by creditors of the tollfree number disclosed on the periodic
statement from which consumers can
obtain information about accessing
credit counseling and debt management
services. The Credit Card Act requires
that these guidelines ensure that
consumers are referred ‘‘only [to] those
nonprofit and credit counseling
agencies approved by a United States
bankruptcy trustee pursuant to [11
U.S.C. 111(a)].’’ The Board proposed to
implement Section 201(c) of the Credit
Card Act in § 226.7(b)(12)(iv). In
developing this final rule, the Board
consulted with the Treasury Department
as well as the Executive Office for
United States Trustees.
Prior to filing a bankruptcy petition,
a consumer generally must have
received ‘‘an individual or group
briefing (including a briefing conducted
by telephone or on the Internet) that

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outlined the opportunities for available
credit counseling and assisted [the
consumer] in performing a related
budget analysis.’’ 11 U.S.C. 109(h). This
briefing can only be provided by
‘‘nonprofit budget and credit counseling
agencies that provide 1 or more [of
these] services * * * [and are] currently
approved by the United States trustee
(or the bankruptcy administrator, if
any).’’ 11 U.S.C. 111(a)(1); see also 11
U.S.C. 109(h). In order to be approved
to provide credit counseling services, an
agency must, among other things: be a
nonprofit entity; demonstrate that it will
provide qualified counselors, maintain
adequate provision for safekeeping and
payment of client funds, and provide
adequate counseling with respect to
client credit problems; charge only a
reasonable fee for counseling services
and make such services available
without regard to ability to pay the fee;
and provide trained counselors who
receive no commissions or bonuses
based on the outcome of the counseling
services. See 11 U.S.C. 111(c).
Proposed § 226.7(b)(12)(iv)(A)
required that a card issuer provide
through the toll-free telephone number
disclosed pursuant to proposed
§ 226.7(b)(12)(i)(E) or (ii)(E) the name,
street address, telephone number, and
Web site address 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 addition, proposed
§ 226.7(b)(12)(iv)(B) required that, upon
the request of the consumer and to the
extent available from the United States
Trustee or a bankruptcy administrator,
the card issuer must provide the
consumer with the name, street address,
telephone number, and Web site address
for at least one organization meeting the
above requirements that provides credit
counseling services in a language other
than English that is specified by the
consumer.
Several industry commenters stated
that requiring card issuers to provide
information regarding credit counseling
through a toll-free number would be
unduly burdensome, particularly for
small institutions that do not currently
have automated response systems for
providing consumers with information
about their accounts over the telephone.
These commenters requested that card
issuers instead be permitted to refer
consumers to the United States Trustee
or the Board. However, Section 201(c) of
the Credit Card Act explicitly requires
that card issuers establish and maintain

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a toll-free telephone number for
providing information regarding
approved credit counseling services.
Nevertheless, as discussed below, the
Board has made several revisions to
proposed § 226.7(b)(12)(iv) in order to
reduce the burden of compliance.
In particular, the Board has revised
§ 226.7(b)(12)(iv)(A) to clarify 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. The United
States Trustee collects the name, street
address, telephone number, and Web
site address for approved organizations
and provides that information to the
public through its Web site, organized
by state.25 For states where credit
counseling organizations are approved
by a bankruptcy administrator pursuant
to 11 U.S.C. 111(a)(1), a card issuer can
obtain this information from the
relevant administrator. Accordingly, as
discussed in the proposal, the
information that § 226.7(b)(12)(iv)
requires a card issuer to provide is
readily available to issuers.
The Board has also revised
§ 226.7(b)(12)(iv)(A) to clarify 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.
Furthermore, although the United States
Trustee’s Web site also organizes
information regarding approved
organizations by the language in which
the organization can provide credit
counseling services, the Board has
removed the requirement in proposed
§ 226.7(b)(12)(iv)(B) that card issuers
provide this information upon request.
Although consumer group commenters
supported the requirement, comments
from small institutions argued that
Section 201(c) does not expressly
require provision of this information
and that it would be particularly
burdensome for card issuers to do so.
Specifically, it would be difficult for a
card issuer to use an automated
response system to comply with a
consumer’s request for a particular
language without listing each of the
nearly thirty languages listed on the
United States Trustee’s Web site.
Instead, a card issuer would have to
train its customer service
representatives to respond to such
requests on an individualized basis.
Accordingly, although information
25 See U.S. Trustee Program, List of Credit
Counseling Agencies Approved Pursuant to 11
U.S.C. 111 (available at http://www.usdoj.gov/ust/
eo/bapcpa/ccde/cc_approved.htm).

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regarding approved organizations that
provide credit counseling services in
languages other than English can be
useful to consumers, it appears that the
costs associated with providing this
information through the toll-free
number outweigh the benefits. Instead,
as discussed below, the Board has
revised the proposed commentary to
provide guidance for card issuers on
how to handle requests for this type of
information (such as by referring the
consumer to the United States Trustee’s
Web site).
The Board has replaced proposed
§ 226.7(b)(12)(iv)(B) with a requirement
that card issuers update information
regarding approved organizations at
least annually for consistency with the
information provided by the United
States Trustee or a bankruptcy
administrator. This requirement was
previously proposed as guidance in
comment 7(b)(12)(iv)–2. In connection
with that proposed guidance, the Board
solicited comment on whether card
issuers should be required to update the
credit counseling information they
provide to consumers more or less
frequently. Commenters generally
supported an annual requirement,
which the Board has adopted. Although
one credit counseling organization
suggested that card issuers be required
to coordinate their verification process
with the United States Trustee’s review
of its approvals, the Board believes such
a requirement would unnecessarily
complicate the updating process.
Because different credit counseling
organizations may provide different
services and charge different fees, the
Board stated in the proposal that
providing information regarding at least
three approved organizations would
enable consumers to make a choice
about the organization that best suits
their needs. However, the Board
solicited comment on whether card
issuers should provide information
regarding a different number of
approved organizations. In response,
commenters generally agreed that the
provision of information regarding three
approved organizations was
appropriate, although some industry
commenters argued that card issuers
generally have an established
relationship with one credit counseling
organization and should not be required
to disclose information regarding
additional organizations. Because the
Board believes that consumers should
be provided with more than one option
for obtaining credit counseling services,
the final rule adopts the requirement
that card issuers provide information
regarding three approved organizations.

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In addition, some credit counseling
organizations and one city government
consumer protection agency requested
that the Board require card issuers to
disclose information regarding at least
one organization that operates in the
consumer’s local community. However,
Section 201(c) of the Credit Card Act
does not authorize the Board to impose
this type of requirement. In addition,
the Board believes that it would be
difficult to develop workable standards
for determining whether a particular
organization operated in a consumer’s
community. Nevertheless, the Board
emphasizes that nothing in
§ 226.7(b)(12)(iv) should be construed as
preventing card issuers from providing
information regarding organizations that
have been approved by the United
States Trustee or a bankruptcy
administrator to provide credit
counseling services in a consumer’s
community.
Proposed § 226.7(b)(12)(iv) relied in
two respects on the Board’s authority
under TILA Section 105(a) to make
adjustments or exceptions to effectuate
the purposes of TILA or to facilitate
compliance therewith. See 15 U.S.C.
1604(a). First, although revised TILA
Section 127(b)(11)(B)(iv) and Section
201(c)(1) of the Credit Card Act refer to
the creditors’ obligation to provide
information about accessing ‘‘credit
counseling and debt management
services,’’ proposed § 226.7(b)(12)(iv)
only required the creditor to provide
information about obtaining credit
counseling services.26 Although credit
counseling may include information
that assists the consumer in managing
his or her debts, 11 U.S.C. 109(h) and
111(a)(1) do not require the United
States Trustee or a bankruptcy
administrator to approve organizations
to provide debt management services.
Because Section 201(c) of the Credit
Card Act requires that creditors only
provide information about organizations
approved pursuant to 11 U.S.C. 111(a),
the Board does not believe that Congress
intended to require creditors to provide
information about services that are not
subject to that approval process.
Accordingly, proposed § 226.7(b)(12)(iv)
would not have required card issuers to
disclose information about debt
management services.
Second, although Section 201(c)(2) of
the Credit Card Act refers to credit
counseling organizations approved
pursuant to 11 U.S.C. 111(a), proposed
26 Similarly, proposed § 226.7(b)(12)(i)(E) and
(ii)(E) only required a card issuer to disclose on the
periodic statement a toll-free telephone number
where the consumer may acquire from the card
issuer information about obtaining credit
counseling services.

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§ 226.7(b)(12)(iv) clarified that creditors
may provide information only regarding
organizations approved pursuant to 11
U.S.C. 111(a)(1), which addresses the
approval process for credit counseling
organizations. In contrast, 11 U.S.C.
111(a)(2) addresses a different approval
process for instructional courses
concerning personal financial
management.
Commenters did not object to these
adjustments, which are adopted in the
final rule. However, the United States
Trustee and several credit counseling
organizations requested that the Board
clarify that the credit counseling
services subject to review by the United
States Trustee or a bankruptcy
administrator are designed for
consumers who are considering whether
to file for bankruptcy and may not be
helpful to consumers who are seeking
more general credit counseling services.
Based on these comments, the Board has
made several revisions to the
commentary for § 226.7(b)(12)(iv),
which are discussed below.
Proposed comment 7(b)(12)(iv)–1
clarified that, when providing the
information required by
§ 226.7(b)(12)(iv)(A), the card issuer
may use the billing address for the
account or, at its option, allow the
consumer to specify a state. The
comment also clarified that a card issuer
does not satisfy the requirement to
provide information regarding credit
counseling agencies approved pursuant
to 11 U.S.C. 111(a)(1) by providing
information regarding providers that
have been approved to offer personal
financial management courses pursuant
to 11 U.S.C. 111(a)(2). This comment
has been revised for consistency with
the revisions to § 226.7(b)(12)(iv)(A) but
is otherwise adopted as proposed.
Proposed comment 7(b)(12)(iv)–2
clarified that a card issuer complies
with the requirements of
§ 226.7(b)(12)(iv) if it provides the
consumer with the information
provided by the United States Trustee or
a bankruptcy administrator, such as
information provided on the Web site
operated by the United States Trustee.
If, for example, the Web site address for
an organization approved by the United
States Trustee is not available from the
Web site operated by the United States
Trustee, a card issuer is not required to
provide a Web site address for that
organization. However, at least
annually, the card issuer must verify
and update the information it provides
for consistency with the information
provided by the United States Trustee or
a bankruptcy administrator. These
aspects of the proposed comment have
been revised for consistency with the

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revisions to § 226.7(b)(12)(iv) but are
otherwise adopted as proposed.
However, because the Board
understands that many nonprofit
organizations provide credit counseling
services under a name that is different
than the legal name under which the
organization has been approved by the
United States Trustee or a bankruptcy
administrator, the Board has revised
comment 7(b)(12)(iv)–2 to clarify 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. This clarification will
reduce the possibility of consumer
confusion in these circumstances while
still ensuring that consumers can verify
that card issuers are referring them to
organizations approved by the United
States Trustee or a bankruptcy
administrator.
In addition, because the contact
information provided by the United
States Trustee or a bankruptcy
administrator relates to pre-bankruptcy
credit counseling, the Board has revised
comment 7(b)(12)(iv)–2 to clarify that, at
the request of an approved organization,
a card issuer may at its option provide
a street address, telephone number, or
Web site address for the organization
that is different than the street address,
telephone number, or Web site address
obtained from the United States Trustee
or a bankruptcy administrator. This will
enable card issuers to provide contact
information that directs consumers to
general credit counseling services rather
than pre-bankruptcy counseling
services. Furthermore, because some
approved organizations may not provide
general credit counseling services, the
Board has revised comment 7(b)(12)(iv)–
2 to clarify that, if requested by an
approved organization, a card issuer
must not provide information regarding
that organization through the toll-free
number.
As noted above, the Board has also
revised the commentary to
§ 226.7(b)(12)(iv) to provide guidance
regarding the handling of requests for
information about approved
organizations that provide credit
counseling services in languages other
than English. Specifically, comment
7(b)(12)(iv)–2 states that a card issuer
may at its option provide such
information through the toll-free
number or, in the alternative, may state
that such information is available from
the Web site operated by the United
States Trustee.
Finally, the Board has revised
comment 7(b)(12)(iv)–2 to clarify that
§ 226.7(b)(12)(iv) does not require a card
issuer to disclose that credit counseling
organizations have been approved by

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the United States Trustee or a
bankruptcy administrator. However, if a
card issuer chooses to make such a
disclosure, the revised comment
clarifies that the card issuer must
provide certain additional information
in order to prevent consumer confusion.
This revision responds to concerns
raised by the United States Trustee that,
if a consumer is informed that a credit
counseling organization has been
approved by the United States Trustee,
the consumer may incorrectly assume
that all credit counseling services
provided by that organization are
subject to approval by the United States
Trustee. Accordingly, the revised
comment clarifies that, in these
circumstances, a card issuer must
disclose the following additional
information: (1) The United States
Trustee or a bankruptcy administrator
has 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 have not been 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.
Proposed comment 7(b)(12)(iv)–3
clarified that, at their option, card
issuers may use toll-free telephone
numbers that connect consumers to
automated systems, such as an
interactive voice response system,
through which consumers may obtain
the information required by
§ 226.7(b)(12)(iv) by inputting
information using a touch-tone
telephone or similar device. This
comment is adopted as proposed.
Proposed comment 7(b)(12)(iv)–4
clarified that a card issuer may provide
a toll-free telephone number that is
designed to handle customer service
calls generally, so long as the option to
receive the information required by
§ 226.7(b)(12)(iv) is prominently
disclosed to the consumer. For
automated systems, the option to
receive the information required by
§ 226.7(b)(12)(iv) is prominently
disclosed to the consumer if it is listed
as one of the options in the first menu
of options given to the consumer, such
as ‘‘Press or say ‘3’ if you would like
information about credit counseling
services.’’ If the automated system
permits callers to select the language in
which the call is conducted and in
which information is provided, the
menu to select the language may
precede the menu with the option to
receive information about accessing

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credit counseling services. The Board
has adopted this comment as proposed.
Proposed comment 7(b)(12)(iv)–5
clarified that, at their option, card
issuers may use a third party to
establish and maintain a toll-free
telephone number for use by the issuer
to provide the information required by
§ 226.7(b)(12)(iv). This comment is
adopted as proposed.
Proposed comment 7(b)(12)(iv)–6
clarified that, when providing the tollfree telephone number on the periodic
statement pursuant to § 226.7(b)(12)(iv),
a card issuer at its option may also
include a reference to a Web site
address (in addition to the toll-free
telephone number) where its customers
may obtain the information required by
§ 226.7(b)(12)(iv), so long as the
information provided on the Web site
complies with § 226.7(b)(12)(iv). The
Web site address disclosed must take
consumers directly to the Web page
where information about accessing
credit counseling may be obtained. In
the alternative, the card issuer may
disclose the Web site address for the
Web page operated by the United States
Trustee where consumers may obtain
information about approved credit
counseling organizations. This guidance
is adopted as proposed. In addition, the
Board has revised this comment to
clarify 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 for purposes
of comment 7(b)(12)(iv)–2.
Finally, proposed comment
7(b)(12)(iv)–7 clarified that, if a
consumer requests information about
credit counseling services, the card
issuer may not provide advertisements
or marketing materials to the consumer
(except for providing the name of the
issuer) prior to providing the
information required by
§ 226.7(b)(12)(iv). However, educational
materials that do not solicit business are
not considered advertisements or
marketing materials for this purpose.
The comment also provides examples of
how the restriction on the provision of
advertisements and marketing materials
applies in the context of the toll-free
number and a Web page. This comment
is adopted as proposed.
7(b)(12)(v) Exemptions
As explained above, as proposed, the
final rule provides that the repayment
disclosures required under
§ 226.7(b)(12) be provided only for a
‘‘credit card account under an open-end
(not home-secured) consumer credit
plan,’’ as that term is defined in
§ 226.2(a)(15)(ii).

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In addition, as discussed below, the
final rule contains several additional
exemptions from the repayment
disclosure requirements pursuant to the
Board’s exception and exemption
authorities under TILA Section 105(a)
and (f).
As discussed in more detail below,
the Board has considered the statutory
factors carefully, and based on that
review, believes that following
exemptions are appropriate.
Exemption for charge cards. In the
October 2009 Regulation Z Proposal, the
Board proposed to exempt charge cards
from the repayment disclosure
requirements. Charge cards are used in
connection with an account on which
outstanding balances cannot be carried
from one billing cycle to another and are
payable when a periodic statement is
received. The Board adopts this
exemption as proposed. See
§ 226.7(b)(12)(v)(A). The Board believes
that the repayment disclosures would
not be useful for consumers with charge
card accounts.
Exemption where cardholders have
paid their accounts in full for two
consecutive billing cycles. In proposed
§ 226.7(b)(v)(B), the Board proposed to
provide 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.
In response to the October 2009
Regulation Z Proposal, several
consumer groups argued that this
exemption should be deleted. These
consumer groups believe that even
consumers that pay their credit card
accounts in full each month should be
provided repayment disclosures because
these disclosures will inform those
consumers of the disadvantages of
changing their payment behavior. These
consumer groups believe these
repayment disclosures would educate
these consumers on the magnitude of
the consequences of making only
minimum payments and may induce
these consumers to encourage their
friends and family members not to make
only the minimum payment each month
on their credit card accounts. On the
other hand, 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.
The final rule retains this exception as
proposed. The Board believes the two

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consecutive billing cycle approach
strikes an appropriate balance between
benefits to consumers of the repayment
disclosures, and compliance burdens on
issuers in providing the disclosures.
Consumers who might benefit from the
repayment disclosures would receive
them. Consumers who carry a balance
each month would always receive the
repayment disclosures, and consumers
who pay in full each month would not.
Consumers who sometimes pay their
bill in full and sometimes do not would
receive the repayment disclosures if
they do not pay in full two consecutive
months (cycles). Also, if a consumer’s
typical payment behavior changes from
paying in full to revolving, the
consumer would begin receiving the
repayment disclosures after not paying
in full one billing cycle, when the
disclosures would appear to be useful to
the consumer. In addition, credit card
issuers typically provide a grace period
on new purchases to consumers (that is,
creditors do not charge interest to
consumers on new purchases) if
consumers paid both the current
balance and the previous balance in full.
Thus, card issuers already currently
capture payment history for consumers
for two consecutive months (or cycles).
The Board notes that card issuers
would not be required to use this
exemption. A card issuer would be
allowed to provide the repayment
disclosures to all of its cardholders,
even to those cardholders that fall
within this exemption. If issuers choose
to provide voluntarily the repayment
disclosures to those cardholders that fall
within this exemption, the Board would
expect issuers to follow the disclosure
rules set forth in proposed
§ 226.7(b)(12), the accompanying
commentary, and Appendix M1 to part
226 for those cardholders.
Exemption where minimum payment
would pay off the entire balance for a
particular billing cycle. In proposed
§ 226.7(b)(12)(v)(C), the Board proposed
to exempt a card issuer from providing
the repayment disclosure requirements
for a particular billing cycle where
paying the minimum payment due for
that billing cycle will pay the
outstanding balance on the account for
that billing cycle. For example, if the
entire outstanding balance on an
account for a particular billing cycle is
$20 and the minimum payment is $20,
an issuer would not need to comply
with the repayment disclosure
requirements for that particular billing
cycle. The final rule retains this
exemption as proposed. The Board
believes that the repayment disclosures
would not be helpful to consumers in
this context.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
As discussed in more detail below,
the Board notes that this exemption also
would apply to a charged-off account
where payment of the entire account
balance is due immediately. Comment
7(b)(12)(v)–1 is added to provide
examples of when this exception would
apply.
Other exemptions. In response to the
October 2009 Regulation Z Proposal,
several commenters requested that the
Board include several additional
exemptions to the repayment
disclosures set forth in § 226.7(b)(12).
These suggested exemptions are
discussed below.
1. Fixed repayment periods. In the
January 2009 Regulation Z Rule, the
Board in § 226.7(b)(12)(v)(E) exempted a
credit card account from the minimum
payment disclosure requirements where
a fixed repayment period for the
account is specified in the account
agreement and the required minimum
payments will amortize the outstanding
balance within the fixed repayment
period. This exemption would be
applicable to, for example, accounts that
have been closed due to delinquency
and the required monthly payment has
been reduced or the balance decreased
to accommodate a fixed payment for a
fixed period of time designed to pay off
the outstanding balance. See comment
7(b)(12)(v)–1.
In addition, in the January 2009
Regulation Z Rule, the Board in
§ 226.7(b)(12)(v)(F) exempted credit
card issuers from providing the
minimum payment disclosures on
periodic statements in a billing cycle
where the entire outstanding balance
held by consumers in that billing cycle
is subject to a fixed repayment period
specified in the account agreement and
the required minimum payments
applicable to that balance will amortize
the outstanding balance within the fixed
repayment period. Some retail credit
cards have several credit features
associated with the account. One of the
features may be a general revolving
feature, where the required minimum
payment for this feature does not pay off
the balance in a specific period of time.
The card also may have another feature
that allows consumers to make specific
types of purchases (such as furniture
purchases, or other large purchases),
and the required minimum payments
for that feature will pay off the purchase
within a fixed period of time, such as
one year. This exemption was meant to
cover retail cards where the entire
outstanding balance held by a consumer
in a particular billing cycle is subject to
a fixed repayment period specified in
the account agreement. On the other
hand, this exemption would not have

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applied in those cases where all or part
of the consumer’s balance for a
particular billing cycle is held in a
general revolving feature, where the
required minimum payment for this
feature does not pay off the balance in
a specific period of time set forth in the
account agreement. See comment
7(b)(12)(v)–2.
In adopting these two exemptions to
the minimum payment disclosure
requirements in the January 2009
Regulation Z Rule, the Board stated that
in these two situations, the minimum
payment disclosure does not appear to
provide additional information to
consumers that they do not already have
in their account agreements.
In the October 2009 Regulation Z
Proposal, the Board proposed not to
include these two exemptions in
proposed § 226.7(b)(12)(v). In
implementing Section 201 of the Credit
Card Act, proposed § 226.7(b)(12) would
require additional repayment
information beyond the disclosure of
the estimated length of time it would
take to repay the outstanding balance if
only minimum payments are made,
which was the main type of information
that was required to be disclosed under
the January 2009 Regulation Z Rule. As
discussed above, under proposed
§ 226.7(b)(12)(i), a card issuer would be
required to disclose on the periodic
statement information about the total
costs in interest and principal to repay
the outstanding balance if only
minimum payments are made, and
information about repayment of the
outstanding balance in 36 months.
Consumers would not know from the
account agreements this additional
information about the total cost in
interest and principal of making
minimum payments, and information
about repayment of the outstanding
balance in 36 months. Thus, in the
proposal, the Board indicated that these
two exemptions may no longer be
appropriate given the additional
repayment information that must be
provided on the periodic statement
pursuant to proposed § 226.7(b)(12).
Nonetheless, the Board solicited
comment on whether these exemptions
should be retained. For example, the
Board solicited comment on whether
the repayment disclosures relating to
repayment in 36 months would be
helpful where a fixed repayment period
longer than 3 years is specified in the
account agreement and the required
minimum payments will amortize the
outstanding balance within the fixed
repayment period. For these types of
accounts, the Board solicited comment
on whether consumers tend to enter into
the agreement with the intent (and the

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ability) to repay the account balance
over the life of the account, such that
the disclosures for repayment of the
account in 36 months would not be
useful to consumers.
In response to the October 2009
Regulation Z Proposal, several
consumer groups supported the Board’s
proposal not to include these two
exemptions to the repayment disclosure
requirements. On the other hand,
several industry commenters indicated
that with respect to these fixed
repayment plans, consumers are quite
sensitive to the repayment term and
have selected the specific repayment
term for each balance. These
commenters suggest that in this context
the proposed repayment disclosures are
neither relevant nor helpful, and may be
confusing if they tend to suggest that the
selected repayment term is no longer
available.
The final rule does not contain these
two exemptions related to fixed
repayment periods. As discussed above,
when a fixed repayment period is set
forth in the account agreement, the
estimate of how long it would take to
repay the outstanding balance if only
minimum payments are made does not
appear to provide additional
information to consumers that they do
not already have in their account
agreements. Nonetheless, consumers
would not know from the account
agreements additional information
about the total cost in interest and
principal of making minimum
payments, and information about
repayment of the outstanding balance in
36 months, that is required to be
disclosed on the periodic statement
under the Credit Card Act. The Board
believes this additional information
would be helpful to consumers in
managing their accounts, even for
consumers that have previously selected
the fixed repayment period that applies
to the account. For example, assume the
fixed repayment period set forth in the
account agreement is 5 years. On the
periodic statement, the consumer would
be informed of the total cost of repaying
the outstanding balance in 5 years,
compared with the monthly payment
and the total cost of repaying the
outstanding balance in 3 years. In this
example, this additional information on
the periodic statement could be helpful
to the consumer in deciding whether to
repay the balance earlier than in 5 years.
2. Accounts in bankruptcy. In
response to the October 2009 Regulation
Z Proposal, one commenter requested
that the Board include in the final rule
an exemption from the repayment
disclosures set forth in § 226.7(b)(12) in
connection with sending monthly

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periodic statements or informational
statements to customers who have filed
for bankruptcy. This commenter
indicated that it is possible that a
debtor’s attorney could argue that
including the disclosures, such as the
minimum payment warning and the
minimum payment repayment estimate,
on a monthly bankruptcy informational
statement is an attempt to collect a debt
in violation of the automatic stay
imposed by Section 362 of the
Bankruptcy Code or the permanent
discharge injunction imposed under
Section 524 of the Bankruptcy Code.
The Board does not believe that an
exemption from the requirement to
provide the repayment disclosures with
respect to accounts in bankruptcy is
needed. The Board notes that under
§ 226.5(b)(2), a creditor is not required
to send a periodic statement under
Regulation Z if delinquency collection
proceedings have been instituted. Thus,
if a consumer files for bankruptcy,
creditors are not longer required to
provide periodic statements to that
consumer under Regulation Z. A
creditor could continue to send periodic
statements to consumers that have filed
for bankruptcy (if permitted by law)
without including the repayment
disclosures on the periodic statements,
because those periodic statements
would not be required under Regulation
Z and would not need to comply with
the requirements of § 226.7.
3. Charged-off accounts. In response
to the October 2009 Regulation Z
Proposal, one industry commenter
requested that the Board include in the
final rule an exemption from the
repayment disclosures for charged off
accounts where consumers are 180 days
late, the accounts have been placed in
charge-off status and full payment is
due immediately. The Board does not
believe that a specific exemption is
needed for charged-off accounts because
charged-off accounts would be
exempted from the repayment
disclosures under another exemption.
As discussed above, the final rule
contains an exemption under which a
card issuer is not required to provide
the repayment disclosure requirements
for a particular billing cycle where
paying the minimum payment due for
that billing cycle will pay the
outstanding balance on the account for
that billing cycle. Comment 7(b)(12)–1
clarifies that this exemption would
apply to a charged-off account where
payment of the entire account balance is
due immediately.
4. Lines of credit accessed solely by
account numbers. In response to the
October 2009 Regulation Z Proposal,
one commenter requested that the Board

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provide an exemption from the
repayment disclosures for lines of credit
accessed solely by account numbers.
This commenter believed that this
exemption would simplify compliance
issues, especially for smaller retailers
offering in-house revolving open-end
accounts, in view of some case law
indicating that a reusable account
number could constitute a ‘‘credit card.’’
The final rule does not contain a
specific exemption for lines of credit
accessed solely by account numbers.
The Board believes that consumers that
use these lines of credit (to the extent
they are considered credit card account)
would benefit from the repayment
disclosures.
7(b)(13) Format Requirements
Under the January 2009 Regulation Z
Rule, creditors offering open-end (not
home-secured) plans are required to
disclose the payment due date (if a late
payment fee or penalty rate may be
imposed) on the front side of the first
page of the periodic statement. The
amount of any late payment fee and
penalty APR that could be triggered by
a late payment is required to be
disclosed in close proximity to the due
date. In addition, the ending balance
and the minimum payment disclosures
must be disclosed closely proximate to
the minimum payment due. Also, the
due date, late payment fee, penalty APR,
ending balance, minimum payment due,
and the minimum payment disclosures
must be grouped together. See
§ 226.7(b)(13). In the supplementary
information to the January 2009
Regulation Z Rule, the Board stated that
these formatting requirements were
intended to fulfill Congress’ intent to
have the due date, late payment and
minimum payment disclosures enhance
consumers’ understanding of the
consequences of paying late or making
only minimum payments, and were
based on consumer testing conducted
for the Board in relation to the January
2009 Regulation Z Rule that indicated
improved understanding when related
information is grouped together. For the
reasons described below, the Board
proposed in October 2009 to retain these
format requirements, with several
revisions. Proposed Sample G–18(D) in
Appendix G to part 226 would have
illustrated the proposed requirements.
Due date and late payment
disclosures. As discussed above under
the section-by-section analysis to
§ 226.7(b)(11), Section 202 of the Credit
Card Act amends TILA Section
127(b)(12) to provide that for a ‘‘credit
card account under an open-end
consumer credit plan,’’ a creditor that
charges a late payment fee must disclose

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in a conspicuous location on the
periodic statement (1) the payment due
date, or, if the due date differs from
when a late payment fee would be
charged, the earliest date on which the
late payment fee may be charged, and
(2) the amount of the late payment fee.
In addition, if a late payment may result
in an increase in the APR applicable to
the credit card account, a creditor also
must provide on the periodic statement
a disclosure of this fact, along with the
applicable penalty APR. The disclosure
related to the penalty APR must be
placed in close proximity to the duedate disclosure discussed above.
Consistent with TILA Section
127(b)(12), as revised by the Credit Card
Act, in the October 2009 Regulation Z
Proposal, the Board proposed to retain
the requirement in § 226.7(b)(13) that
credit card issuers disclose the payment
due date on the front side of the first
page of the periodic statement. In
addition, credit card issuers would have
been required to disclose the amount of
any late payment fee and penalty APR
that could be triggered by a late
payment in close proximity to the due
date. Also, the due date, late payment
fee, penalty APR, ending balance,
minimum payment due, and the
repayment disclosures required by
proposed § 226.7(b)(12) must be
grouped together. See § 226.7(b)(13).
The final rule retains these formatting
requirements, as proposed. The Board
believes that these format requirements
fulfill Congress’ intent that the due date
and late payment disclosures be
grouped together and be disclosed in a
conspicuous location on the periodic
statement.
Repayment disclosures. As discussed
above under the section-by-section
analysis to § 226.7(b)(12), TILA Section
127(b)(11)(D), as revised by the Credit
Card Act, provides that the repayment
disclosures (except for the warning
statement) must be disclosed in the form
and manner which the Board prescribes
by regulation and in a manner that
avoids duplication and must be placed
in a conspicuous and prominent
location on the billing statement. 15
U.S.C. 1637(b)(11)(D).
Under proposed § 226.7(b)(13), the
ending balance and the repayment
disclosures required under proposed
§ 226.7(b)(12) must be disclosed closely
proximate to the minimum payment
due. In addition, proposed
§ 226.7(b)(13) provided that the
repayment disclosures must be grouped
together with the due date, late payment
fee, penalty APR, ending balance, and
minimum payment due, and this
information must appear on the front of
the first page of the periodic statement.

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The final rule retains these formatting
requirements, as proposed. The Board
believes that these format requirements
fulfill Congress’ intent that the
repayment disclosures be placed in a
conspicuous and prominent location on
the billing statement.
Samples G–18(D), 18(E), 18(F) and
18(G). As adopted in the January 2009
Regulation Z Rule, Samples G–18(D)
and G–18(E) in Appendix G to part 226
illustrate the requirement to group
together the due date, late payment fee,
penalty APR, ending balance, minimum
payment due, and the repayment
disclosures required by § 226.7(b)(12).
Sample G–18(D) applies to credit cards
and includes all of the above disclosures
grouped together. Sample G–18(E)
applies to non-credit card accounts, and
includes all of the above disclosures
except for the repayment disclosures
because the repayment disclosures only
apply to credit card accounts. Samples
G–18(F) and G–18(G) illustrate the front
side of sample periodic statements and
show the disclosures listed above.
In the October 2009 Regulation Z
Proposal, the Board proposed to revise
Sample G–18(D), G–18(F) and G–18(G)
to incorporate the new format
requirements for the repayment
disclosures, as shown in proposed
Sample G–18(C)(1) and G–18(C)(2). See
section-by-section analysis to
§ 226.7(b)(12) for a discussion of these
new format requirements. The final rule
adopts Sample G–18(D), G–18(F) and G–
18(G) as proposed. In addition, as
proposed, the final rule deletes Sample
G–18(E) (which applies to non-credit
card accounts) as unnecessary. The
formatting requirements in
§ 226.7(b)(13) generally are applicable
only to credit card issuers because the
due date, late payment fee, penalty APR,
and repayment disclosures would apply
only to a ‘‘credit card account under an
open-end (not home-secured) consumer
credit plan,’’ as that term is defined in
§ 226.2(a)(15)(ii).
7(b)(14) Deferred Interest or Similar
Transactions
In the October 2009 Regulation Z
Proposal, the Board republished
provisions and amendments related to
periodic statement disclosures for
deferred interest or similar transactions
that were initially proposed in the May
2009 Regulation Z Proposed
Clarifications. These included proposed
revisions to comment 7(b)–1 and
Sample G–18(H) as well as a proposed
new § 226.7(b)(14). In addition, a related
cross-reference in comment 5(b)(2)(ii)–1
was proposed to be updated.
Specifically, the Board proposed to
revise comment 7(b)–1 to require

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creditors to provide consumers with
information regarding deferred interest
or similar balances on which interest
may be imposed under a deferred
interest or similar program, as well as
the interest charges accruing during the
term of a deferred interest or similar
program. The Board also proposed to
add a new § 226.7(b)(14) to require
creditors to include on a consumer’s
periodic statement, for 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.
Moreover, proposed Sample G–18(H)
provided model language for making the
disclosure required by proposed
§ 226.7(b)(14), and the Board proposed
to require that the language used to
make the disclosure under § 226.7(b)(14)
be substantially similar to Sample G–
18(H).
In general, commenters supported the
Board’s proposals to require certain
periodic statement disclosures for
deferred interest and other similar
programs. 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. One
industry commenter also noted that the
Board already proposed such
clarification with respect to the
advertising requirements for deferred
interest and other similar programs. See
proposed comment 16(h)–1.
Accordingly, the Board has amended
comment 7(b)–1 to reference the
definition of ‘‘deferred interest’’ in
§ 226.16(h)(2) and associated
commentary. The Board has also made
technical amendments to comment
7(b)–1 to be consistent with the
requirement in § 226.55(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.
Some consumer group and industry
commenters also suggested amendments
to the model language in Sample G–
18(H). In particular, consumer group
commenters suggested that language be
added to clarify that minimum
payments will not pay off the deferred
interest balance. Industry commenters
suggested that additional language may
clarify for consumers how much they
should pay in order to avoid finance

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7691

charges when there are other balances
on the account in addition to the
deferred interest balance. The Board
believes that the language in Sample G–
18(H) sufficiently conveys the idea that
in order to avoid interest charges on the
deferred interest balance, consumers
must pay such balance in full. While the
additional language recommended by
commenters may provide further
information to consumers that may be
helpful, each of the clauses suggested by
commenters would not necessarily
apply to all consumers in all situations.
Therefore, the Board is opting not to
include such clauses in Sample G–
18(H). The Board notes, however, that
the regulation does not prohibit
creditors from providing these
additional disclosures. Indeed, the
Board encourages any additional
disclosure that may be useful to
consumers in avoiding finance charges.
In response to these comments,
however, the Board is amending
§ 226.7(b)(14) to require that language
used to make the disclosure be similar,
instead of substantially similar, to
Sample G–18(H) in order to provide
creditors with some flexibility.
Proposed § 226.7(b)(14) required the
warning language only for the last two
billing cycles preceding the billing cycle
in which the deferred interest period
ends. Consumer group commenters
recommended that the disclosure be
required on each periodic statement
during the deferred interest period.
Since § 226.53(b) permits issuers to
allow consumers to request that
payments in excess of the minimum
payment be allocated to deferred
interest balances any time during the
deferred interest period, as discussed
below, the Board believes that the
disclosure required under § 226.7(b)(14)
would be beneficial for consumers to
see on each periodic statement issued
during the deferred interest period from
the time the deferred interest or similar
transaction is reflected on a periodic
statement. Section 226.7(b)(14) and
comment 7(b)–1 have been amended
accordingly.
Section 226.9 Subsequent Disclosure
Requirements
9(c) Change in Terms
Section 226.9(c) sets forth the advance
notice requirements when a creditor
changes the terms applicable to a
consumer’s account. As discussed
below, the Board is adopting several
changes to § 226.9(c)(2) and the
associated staff commentary in order to
conform to the new requirements of the
Credit Card Act.

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9(c)(1) Rules Affecting Home-Equity
Plans
In the January 2009 Regulation Z
Rule, the Board preserved the existing
rules for changes in terms for homeequity lines of credit in a new
§ 226.9(c)(1), in order to clearly
delineate the requirements for HELOCs
from those applicable to other open-end
credit. The Board noted that possible
revisions to rules affecting HELOCs
would be considered in the Board’s
review of home-secured credit, which
was underway at the time that the
January 2009 Regulation Z rule was
published. On August 26, 2009, the
Board published proposed revisions to
those portions of Regulation Z affecting
HELOCs in the Federal Register. In
order to clarify that the October 2009
Regulation Z Proposal was not intended
to amend or otherwise affect the August
2009 Regulation Z HELOC Proposal, the
Board did not republish § 226.9(c)(1) in
October 2009.
However, this final rule is being
issued prior to completion of final rules
regarding HELOCs. Therefore, the Board
has incorporated § 226.9(c)(1), as
adopted in the January 2009 Regulation
Z Rule, in this final rule, to give HELOC
creditors guidance on how to comply
with change-in-terms requirements
between the effective date of this rule
and the effective date of the forthcoming
HELOC rules.
9(c)(2) Rules Affecting Open-End (Not
Home-Secured) Plans

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Credit Card Act 27
New TILA Section 127(i)(1) generally
requires creditors to provide consumers
with a written notice of an annual
percentage rate increase at least 45 days
prior to the effective date of the
increase, for credit card accounts under
an open-end consumer credit plan. 15
U.S.C. 1637(i)(1). The statute establishes
several exceptions to this general
requirement. 15 U.S.C. 1637(i)(1) and
(i)(2). The first exception applies when
the change is an increase in an annual
percentage rate upon expiration of a
27 For convenience, this section summarizes the
provisions of the Credit Card Act that apply both
to advance notices of changes in terms and rate
increases. Consistent with the approach it took in
the January 2009 Regulation Z Rule and the July
2009 Regulation Z Interim Final Rule, the Board is
implementing the advance notice requirements
applicable to contingent rate increases set forth in
the cardholder agreement in a separate section
(§ 226.9(g)) from those advance notice requirements
applicable to changes in the cardholder agreement
(§ 226.9(c)). The distinction between these types of
changes is that § 226.9(g) addresses changes in a
rate being applied to a consumer’s account
consistent with the existing terms of the cardholder
agreement, while § 226.9(c) addresses changes in
the underlying terms of the agreement.

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specified period of time, provided that
prior to commencement of that period,
the creditor clearly and conspicuously
disclosed to the consumer the length of
the period and the rate that would apply
after expiration of the period. The
second exception applies to increases in
variable annual percentage rates that
change according to operation of a
publicly available index that is not
under the control of the creditor.
Finally, a third exception applies to rate
increases due to the completion of, or
failure of a consumer to comply with,
the terms of a workout or temporary
hardship arrangement, provided that
prior to the commencement of such
arrangement the creditor clearly and
conspicuously disclosed to the
consumer the terms of the arrangement,
including any increases due to
completion or failure.
In addition to the rules in new TILA
Section 127(i)(1) regarding rate
increases, new TILA Section 127(i)(2)
establishes a 45-day advance notice
requirement for significant changes, as
determined by rule of the Board, in the
terms (including an increase in any fee
or finance charge) of the cardholder
agreement between the creditor and the
consumer. 15 U.S.C. 1637(i)(2).
New TILA Section 127(i)(3) also
establishes an additional content
requirement for notices of interest rate
increases or significant changes in terms
provided pursuant to new TILA Section
127(i). 15 U.S.C. 1637(i)(3). Such notices
are required to contain a brief statement
of the consumer’s right to cancel the
account, pursuant to rules established
by the Board, before the effective date of
the rate increase or other change
disclosed in the notice. In addition, new
TILA Section 127(i)(4) states that
closure or cancellation of an account
pursuant to the consumer’s right to
cancel does not constitute a default
under the existing cardholder
agreement, and does not trigger an
obligation to immediately repay the
obligation in full or through a method
less beneficial than those listed in
revised TILA Section 171(c)(2). 15
U.S.C. 1637(i)(4). The disclosure
associated with the right to cancel is
discussed in the section-by-section
analysis to § 226.9(c) and (g), while the
substantive rules regarding this new
right are discussed in the section-bysection analysis to § 226.9(h).
The Board implemented TILA Section
127(i), which was effective August 20,
2009, in the July 2009 Regulation Z
Interim Final Rule. However, the Board
is now implementing additional
provisions of the Credit Card Act that
are effective on February 22, 2010 that
have an impact on the content of

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change-in-terms notices and the types of
changes that are permissible upon
provision of a change-in-terms notice
pursuant to § 226.9(c) or (g). For
example, revised TILA Section 171(a),
which the Board is implementing in
new § 226.55, as discussed elsewhere in
this Federal Register notice generally
prohibits increases in annual percentage
rates, fees, and finance charges
applicable to outstanding balances,
subject to several exceptions. In
addition, revised TILA Section 171(b)
requires, for certain types of penalty rate
increases, that the advance notice state
the reason for a rate increase. Finally,
for penalty rate increases applied to
outstanding balances when the
consumer fails to make a minimum
payment within 60 days after the due
date, as permitted by revised TILA
Section 171(b)(4), a creditor is required
to disclose in the notice of the increase
that the increase will be terminated if
the consumer makes the subsequent six
minimum payments on time.
January 2009 Regulation Z Rule and
July 2009 Regulation Z Interim Final
Rule
As discussed in I. Background and
Implementation of the Credit Card Act,
the Board is implementing the changes
contained in the Credit Card Act in a
manner consistent with the January
2009 Regulation Z Rule, to the extent
permitted under the statute.
Accordingly, the Board is retaining
those requirements of the January 2009
Regulation Z Rule that are not directly
affected by the Credit Card Act
concurrently with the promulgation of
regulations implementing the provisions
of the Credit Card Act effective February
22, 2010.28 Consistent with this
approach, the Board has used
§ 226.9(c)(2) of the January 2009
Regulation Z Rule as the basis for its
regulations to implement the change-interms requirements of the Credit Card
Act. Section 226.9(c)(2) also is intended,
except where noted, to contain
requirements that are substantively
equivalent to the requirements of the
July 2009 Regulation Z Interim Final
Rule. Accordingly, the Board is
adopting a revised version of
§ 226.9(c)(2) of the January 2009
28 However, as discussed in I. Background and
Implementation of the Credit Card Act, the Board
intends to leave in place the mandatory compliance
date for certain aspects of proposed § 226.9(c)(2)
that are not directly required by the Credit Card
Act. These provisions would have a mandatory
compliance date of July 1, 2010, consistent with the
effective date that the Board adopted in the January
2009 Regulation Z Rule. For example, the Board is
not requiring a tabular format for certain change-interms notice requirements before the July 1, 2010
mandatory compliance date.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
Regulation Z Rule, with several
amendments necessary to conform to
the new Credit Card Act. This
supplementary information focuses on
highlighting those aspects in which
§ 226.9(c)(2) as adopted in this final rule
differs from § 226.9(c)(2) of the January
2009 Regulation Z Rule.

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May 2009 Regulation Z Proposed
Clarifications
On May 5, 2009, the Board published
for comment in the Federal Register
proposed clarifications to the January
2009 Regulation Z Rule. See 74 FR
20784. Several of these proposed
clarifications pertain to the advance
notice requirements in § 226.9(c). The
Board is adopting the May 2009
Regulation Z Proposed Clarifications
that affect proposed § 226.9(c)(2), with
revisions to the extent appropriate, as
discussed further in this supplementary
information.
9(c)(2)(i) Changes Where Written
Advance Notice is Required
Section 226.9(c)(2) sets forth the
change-in-terms notice requirements for
open-end consumer credit plans that are
not home-secured. Section 226.9(c)(2)(i)
as proposed in October 2009 stated that
a creditor must generally provide a
written notice at least 45 days prior to
the change, when any term required to
be disclosed under § 226.6(b)(3), (b)(4),
or (b)(5) is changed or the required
minimum periodic payment is
increased, unless an exception applies.
As noted in the supplementary
information to the proposal, this rule
was intended to be substantively
equivalent to § 226.9(c)(2) of the January
2009 Regulation Z Rule. The Board
proposed to set forth the exceptions to
this general rule in proposed paragraph
(c)(2)(v). In addition, proposed (c)(2)(iii)
provided that 45 days’ advance notice is
not required for those changes that the
Board is not designating as ‘‘significant
changes’’ in terms using its authority
under new TILA Section 127(i). Section
226.9(c)(2)(iii), which is discussed in
more detail elsewhere in this
supplementary information, also is
intended to be equivalent in substance
to the Board’s January 2009 Regulation
Z Rule.
Proposed § 226.9(c)(2)(i) set forth two
additional clarifications of the scope of
the change-in-terms notice
requirements, consistent with
§ 226.9(c)(2) of the January 2009
Regulation Z Rule. First, as proposed,
the 45-day advance notice requirement
would not apply if the consumer has
agreed to the particular change; in that
case, the notice need only be given
before the effective date of the change.

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Second, proposed § 226.9(c)(2)(i) also
noted that increases in the rate
applicable to a consumer’s account due
to delinquency, default, or as a penalty
described in § 226.9(g) that are not made
by means of a change in the contractual
terms of a consumer’s account must be
disclosed pursuant to that section.
Proposed § 226.9(c)(2) applied to all
open-end (not home-secured) credit,
consistent with the January 2009
Regulation Z Rule. TILA Section 127(i),
as implemented in the July 2009
Regulation Z Interim Final Rule for the
period between August 20, 2009 and
February 22, 2010, applies only to credit
card accounts under an open-end (not
home-secured) consumer credit plan.
However, the advance notice
requirements adopted by the Board in
January 2009 apply to all open-end (not
home-secured) credit. For consistency
with the January 2009 Regulation Z
Rule, the proposal accordingly would
have applied § 226.9(c)(2) to all openend (not home-secured) credit. The final
rule adopts this approach, which is
consistent with the approach the Board
adopted in the January 2009 Regulation
Z Rule. The Board notes that while the
general notice requirements are
consistent for credit card accounts and
other open-end credit that is not homesecured, there are certain content and
other requirements, such as a
consumer’s right to reject certain
changes in terms, that apply only to
credit card accounts under an open-end
(not home-secured) consumer credit
plan. As discussed in more detail in the
supplementary information to
§ 226.9(c)(2)(iv), the regulation applies
such requirements only to credit card
accounts under an open-end (not homesecured) consumer credit plan.
Section 226.9(c)(2)(i), as proposed and
under the January 2009 Regulation Z
Rule, provides that the 45-day advance
notice timing requirement does not
apply if the consumer has agreed to a
particular change. In this case, notice
must be given before the effective date
of the change. Comment 9(c)(2)(i)–3, as
adopted in the January 2009 Regulation
Z Rule, states that the provision is
intended for use in ‘‘unusual instances,’’
such as when a consumer substitutes
collateral or when the creditor may
advance additional credit only if a
change relatively unique to that
consumer is made. In the May 2009
Regulation Z Proposed Clarifications,
the Board proposed to amend the
comment to emphasize the limited
scope of the exception and provide that
the exception applies solely to the
unique circumstances specifically
identified in the comment. See 74 FR
20788. The proposed comment would

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also add an example of an occurrence
that would not be considered an
‘‘agreement’’ for purposes of relieving
the creditor of its responsibility to
provide an advance change-in-terms
notice. This proposed example stated
that an ‘‘agreement’’ does not include a
consumer’s request to reopen a closed
account or to upgrade an existing
account to another account offered by
the creditor with different credit or
other features. Thus, a creditor that
treats an upgrade of a consumer’s
account as a change in terms would be
required to provide the consumer 45
days’ advance notice before increasing
the rate for new transactions or
increasing the amount of any applicable
fees to the account in those
circumstances.
Commenters on the October 2009
Regulation Z Proposal and the May 2009
Regulation Z Proposed Clarifications
raised concerns about the 45-day notice
requirement causing an undue delay
when a consumer requests that his or
her account be changed to a different
product offered by the creditor, for
example to take advantage of a rewards
or other program. The Board has
addressed these concerns in comment
5(b)(1)(i)–6, discussed above. The Board
also believes that the proposed
clarification to comment 9(c)(2)(i)–3 is
appropriate for those circumstances in
which a creditor treats an upgrade of an
account as a change-in-terms in
accordance with proposed comment
5(b)(1)(i)–6. In addition, the Board
continues to believe that it would be
difficult to define by regulation the
circumstances under which a consumer
is deemed to have requested the account
upgrade, versus circumstances in which
the upgrade is suggested by the creditor.
For these reasons, the Board is adopting
the substantive guidance in proposed
9(c)(2)(i)–3. However, for clarity, the
Board has moved this guidance into a
new § 226.9(c)(2)(i)(B) of the regulation
rather than including it in the
commentary. Comment 9(c)(2)(i)–3, as
adopted, contains a cross-reference to
comment 5(b)(1)(i)–6.
The Board received a number of
additional comments on § 226.9(c)(2), as
are discussed below in further detail.
However, the Board received no
comments on the general approach in
§ 226.9(c)(2)(i), which is substantively
equivalent to the rule the Board adopted
in January 2009. Therefore, the Board is
adopting § 226.9(c)(2)(i) generally as
proposed (redesignated as
§ 226.9(c)(2)(i)(A)), with one technical
amendment to correct a scrivener’s error
in the proposal.

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9(c)(2)(ii) Significant Changes in
Account Terms
Pursuant to new TILA Section 127(i),
the Board has the authority to determine
by rule what are significant changes in
the terms of the cardholder agreement
between a creditor and a consumer. The
Board proposed § 226.9(c)(2)(ii) to
identify which changes are significant
changes in terms. Similar to the January
2009 Regulation Z Rule, proposed
§ 226.9(c)(2)(ii) stated that for the
purposes of § 226.9(c), a significant
change in account terms means changes
to terms required to be disclosed in the
table provided at account opening
pursuant to § 226.6(b)(1) and (b)(2) or an
increase in the required minimum
periodic payment. The terms included
in the account-opening table are those
that the Board determined, based on its
consumer testing, to be the most
important to consumers. In the July
2009 Regulation Z Interim Final Rule,
the Board had expressly listed these
terms in § 226.9(c)(2)(ii). Because
§ 226.6(b) was not in effect as of August
20, 2009, the Board could not identify
these terms by a cross-reference to
§ 226.6(b) in the proposal. However,
proposed § 226.9(c)(2)(ii) was intended
to be substantively equivalent to the list
of terms included in § 226.9(c)(2)(ii) of
the July 2009 Regulation Z Interim Final
Rule.
Industry commenters generally were
supportive of the Board’s proposed
definition of ‘‘significant change in
account terms.’’ These commenters
believed that the Board’s proposed
definition provided necessary clarity to
creditors in determining for which
changes 45 days’ advance notice is
required, and that it properly focused on
changes in those terms that are the most
important to consumers.
Consumer group commenters stated
that the Board’s proposed definition of
‘‘significant change in account terms’’
was overly restrictive, and that 45 days’
advance notice should also be required
for other types of fees and changes in
terms. These commenters specifically
noted the addition of security interests
or a binding mandatory arbitration
provision as changes for which advance
notice should be required. In addition,
they stated that fees should be permitted
to be disclosed orally and immediately
prior to their imposition only if they are
fees or one-time or time-sensitive
services. Consumer groups noted their
concerns that the Board’s list of
‘‘significant changes in account terms’’
could lead creditors to establish new
types of fees that for which 45 days’
advance disclosure would not be
required.

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The Board is adopting § 226.9(c)(2)(ii)
generally as proposed. The Board
continues to believe, based on its
consumer testing, that the list of fees,
categories of fees, and other terms
required to be disclosed in a tabular
format at account-opening includes
those terms that are the most important
to consumers. The Board notes that
consumers will receive notice of any
other types of charges imposed as part
of the plan prior to their imposition, as
required by § 226.5(b)(1)(ii). The Board
also believes that TILA Section 127(i)
does not require 45 days’ advance notice
for all changes in terms, because the
statute specifically mentions ‘‘significant
change[s],’’ and thus by its terms does
not apply to all changes.
However, in response to consumer
group comments, the Board has added
the acquisition of a security interest to
the list of significant changes for which
45 days’ advance notice is required. The
Board believes that if a creditor acquires
or will acquire a security interest that
was not previously disclosed under
§ 226.6(b)(5), this constitutes a change of
which a consumer should be aware in
advance. A consumer may wish to use
a different form of financing or to
otherwise adjust his or her use of the
open-end plan in consideration of such
a security interest. Under the final rule,
a consumer will receive 45 days’
advance notice of this change.
The Board is not adopting a
requirement that creditors provide 45
days’ advance notice of the addition of,
or changes in the terms of, a mandatory
arbitration clause. TILA does not
address or require disclosures regarding
arbitration for open-end credit plans,
and Regulation Z’s rules applicable to
open-end credit have accordingly never
addressed arbitration. Furthermore, the
Board’s regulations generally do not
address the remedies for violations of
Regulation Z and TILA; rather, the
procedures and remedies for violations
are addressed in the statute.
Accordingly, the Board does not believe
it is appropriate at this time to require
disclosures regarding mandatory
arbitration clauses under Regulation Z.
9(c)(2)(iii) Charges Not Covered by
§ 226.6(b)(1) and (b)(2)
Proposed § 226.9(c)(2)(iii) set forth the
disclosure requirements for changes in
terms required to be disclosed under
§ 226.6(b)(3) that are not significant
changes in account terms described in
§ 226.9(c)(2)(ii). The Board proposed a
45-day notice period only for changes in
the terms that are required to be
disclosed as a part of the accountopening table under proposed
§ 226.6(b)(1) and (b)(2) or for increases

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in the required minimum periodic
payment. A different disclosure
requirement would apply when a
creditor increases any component of a
charge, or introduces a new charge, that
is imposed as part of the plan under
proposed § 226.6(b)(3) but is not
required to be disclosed as part of the
account-opening summary table under
proposed § 226.6(b)(1) and (b)(2). Under
those circumstances, the proposal
required the creditor to either, at its
option (1) provide at least 45 days’
written advance notice before the
change becomes effective, or (2) provide
notice orally or in writing of the amount
of the charge to an affected consumer at
a relevant time before the consumer
agrees to or becomes obligated to pay
the charge. This is consistent with the
requirements of both the January 2009
Regulation Z Rule and the July 2009
Regulation Z Interim Final Rule.
One consumer group commenter
stated that if the 45-day advance notice
requirement does not apply to all
undisclosed charges, the Board should
require written disclosures of all charges
not required to be disclosed in the
account-opening table. The Board is not
adopting a requirement that notices
given pursuant to § 226.9(c)(2)(iii) be in
writing. The Board believes that oral
disclosure of certain charges on a
consumer’s open-end (not homesecured) account may, in some
circumstances, be more beneficial to a
consumer than a written disclosure,
because the oral disclosure can be
provided at the time that the consumer
is considering purchasing an incidental
service from the creditor that has an
associated charge. In such a case, it
would unnecessarily delay the
consumer’s access to that service to
require that a written disclosure be
provided.
For the reasons discussed above and
in the supplementary information to
§ 226.9(c)(2)(ii), the Board is adopting
§ 226.9(c)(2)(iii) as proposed. The Board
continues to believe that there are some
fees, such as fees for expedited delivery
of a replacement card, that it may not
be useful to disclose long in advance of
when they become relevant to the
consumer. For such fees, the Board
believes that a more flexible approach,
consistent with that adopted in the
January 2009 Regulation Z Rule and the
July 2009 Regulation Z Interim Final
Rule is appropriate. Thus, if a consumer
calls to request an expedited
replacement card, the consumer could
be informed of the amount of the fee in
the telephone call in which the
consumer requests the card. Otherwise,
the consumer would have to wait 45
days from receipt of a change-in-terms

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notice to be able to order an expedited
replacement card, which would likely
negate the benefit to the consumer of
receiving the expedited delivery service.

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9(c)(2)(iv) Disclosure Requirements
General Content Requirements
Proposed § 226.9(c)(2)(iv) set forth the
Board’s proposed content and
formatting requirements for change-interms notices required to be given for
significant changes in account terms
pursuant to proposed § 226.9(c)(2)(i).
Proposed § 226.9(c)(2)(iv)(A) required
such notices to include (1) a summary
of the changes made to terms required
by § 226.6(b)(1) and (b)(2) or of any
increase in the required minimum
periodic payment, (2) a statement that
changes are being made to the account,
(3) for accounts other than credit card
accounts under an open-end consumer
credit plan subject to
§ 226.9(c)(2)(iv)(B), a statement
indicating that the consumer has the
right to opt out of these changes, if
applicable, and a reference to additional
information describing the opt-out right
provided in the notice, if applicable, (4)
the date the changes will become
effective, (5) if applicable, a statement
that the consumer may find additional
information about the summarized
changes, and other changes to the
account, in the notice, (6) if the creditor
is changing a rate on the account other
than a penalty rate, a statement that if
a penalty rate currently applies to the
consumer’s account, the new rate
referenced in the notice does not apply
to the consumer’s account until the
consumer’s account balances are no
longer subject to the penalty rate, and
(7) if the change in terms being
disclosed is an increase in an annual
percentage rate, the balances to which
the increased rate will be applied and,
if applicable, a statement identifying the
balances to which the current rate will
continue to apply as of the effective date
of the change in terms.
Proposed § 226.9(c)(2)(iv)(A) generally
mirrored the content required under
§ 226.9(c)(2)(iii) of the January 2009
Regulation Z Rule, except that the Board
proposed to require a disclosure
regarding any applicable right to opt out
of changes under proposed
§ 226.9(c)(2)(iv)(A)(3) only if the change
is being made to an open-end (not
home-secured) credit plan that is not a
credit card account subject to
§ 226.9(c)(2)(iv)(B). For credit card
accounts, as discussed in the
supplementary information to
§§ 226.9(h) and 226.55, the Credit Card
Act imposes independent substantive
limitations on rate increases, and

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generally provides the consumer with a
right to reject other significant changes
being made to their accounts. A
disclosure of this right to reject, when
applicable, is required for credit card
accounts under proposed
§ 226.9(c)(2)(iv)(B). Therefore, the Board
believed a separate reference to other
applicable opt-out rights is unnecessary
and may be confusing to consumers,
when the notice is given in connection
with a change in terms applicable to a
credit card account.
The Board received few comments on
§ 226.9(c)(2)(iv)(A), and it is generally
adopted as proposed, except that
§ 226.9(c)(2)(iv)(A)(1) has been amended
to refer to security interests being
acquired by the creditor, for consistency
with § 226.9(c)(2)(ii). The Board is
amending comment 9(c)(2)(i)–5,
regarding the form of a change in terms
notice required for an additional
security interest. The comment notes
that a creditor must provide a
description of the change consistent
with § 226.9(c)(2)(iv), but that it may use
a copy of the security agreement as the
change-in-terms notice. The Board also
has made a technical amendment to
§ 226.9(c)(2)(iv)(A)(1) to note that a
description, rather than a summary, of
any increase in the required minimum
periodic payment be disclosed.
Several commenters noted that
proposed Sample G–20, which sets forth
a sample disclosure for an annual
percentage rate increase for a credit card
account, erroneously included a
reference to the consumer’s right to opt
out of the change, which is not required
by proposed § 226.9(c)(2)(iv)(A)(3) for
credit card accounts. The reference to
opt-out rights has been deleted from
Sample G–20 in the final rule.
Consumer groups commented that
notices provided in connection with
rate increases should set forth the
current rate as well as the increased rate
that will apply. For the reasons
discussed in the supplementary
information to the January 2009
Regulation Z Rule, the Board is not
adopting a requirement that a change-interms notice set forth the current rate or
rates. See 74 FR 5244, 5347. As noted
in that rulemaking, the main purpose of
the change-in-terms notice is to inform
consumers of the new rates that will
apply to their accounts. The Board is
concerned that disclosure of each
current rate in the change-in-terms
notice could contribute to information
overload, particularly in light of new
restrictions on repricing in § 226.55,
which may lead to a consumer’s account
having multiple protected balances to
which different rates apply.

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One exception to the repricing rules
set forth in § 226.55(b)(3) permits card
issuers to increase the rate on new
transactions for a credit card account
under an open-end (not home-secured)
consumer credit plan, provided that the
creditor complies with the notice
requirements in § 226.9(b), (c), or (g).
Under this exception, the increased rate
can apply only to transactions that
occurred more than 14 days after
provision of the applicable notice. One
federal banking agency suggested that
§ 226.9(c) should expressly repeat the
14-day requirement and reference the
advance notice exception set forth in
§ 226.55(b)(3), so that issuers do not
have to cross-reference two sections in
providing the notice required under
§ 226.9(c)(2). The Board believes that
including an express reference to the 14day requirement from § 226.55(b)(3) in
§ 226.9(c)(2) is not necessary. The Board
expects that card issuers will be familiar
with the substantive requirements
regarding rate increases set forth in
§ 226.55(b)(3), and that a second
detailed reference to those requirements
in § 226.9(c)(2) therefore would be
redundant.
Additional Content Requirements for
Credit Card Accounts
Proposed § 226.9(c)(2)(iv)(B) set forth
additional content requirements that are
applicable only to credit card accounts
under an open-end (not home-secured)
consumer credit plan. In addition to the
information required to be disclosed
pursuant to § 226.9(c)(2)(iv)(A), the
proposal required credit card issuers
making significant changes to terms to
disclose certain information regarding
the consumer’s right to reject the change
pursuant to § 226.9(h). The substantive
rule regarding the right to reject is
discussed in connection with proposed
§ 226.9(h); however, the associated
disclosure requirements are set forth in
§ 226.9(c)(2). In particular, the proposal
provided that a card issuer must
generally include in the notice (1) a
statement that the consumer has the
right to reject the change or changes
prior to the effective date, unless the
consumer fails to make a required
minimum periodic payment within 60
days after the due date for that payment,
(2) instructions for rejecting the change
or changes, and a toll-free telephone
number that the consumer may use to
notify the creditor of the rejection, and
(3) if applicable, a statement that if the
consumer rejects the change or changes,
the consumer’s ability to use the
account for further advances will be
terminated or suspended. Proposed
section 226.9(c)(2)(iv)(B) generally
mirrored requirements made applicable

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to credit card issuers in the July 2009
Regulation Z Interim Final Rule.
The Board did not receive any
significant comments on the content of
disclosures regarding a consumer’s right
to reject certain significant changes to
their account terms. Therefore, the
content requirements in
§ 226.9(c)(2)(iv)(B)(1)–(3) are adopted as
proposed.
The proposal provided that the right
to reject does not apply to increases in
the required minimum payment, an
increase in an annual percentage rate
applicable to a consumer’s account, a
change in the balance computation
method applicable to a consumer’s
account necessary to comply with the
new prohibition on use of ‘‘two-cycle’’
balance computation methods in
proposed § 226.54, or changes due to the
creditor not receiving the consumer’s
required minimum periodic payment
within 60 days after the due date for
that payment. The Board is adopting the
exceptions to the right to reject as
proposed, with one change. For the
reasons discussed in the supplementary
information to § 226.9(h), the proposed
exception for increases in annual
percentage rates has been adopted as an
exception for all changes in annual
percentage rates.
Rate Increases Resulting From
Delinquency of More Than 60 Days
As discussed in the supplementary
information to § 226.9(g), TILA Section
171(b)(4) requires several additional
disclosures to be provided 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.
In those circumstances, the notice must
state the reason for the increase and
disclose 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. The Board proposed in
§ 226.9(g)(3)(i)(B) to set forth this
additional content for rate increases
pursuant to the exercise of a penalty
pricing provision in the contract;
however, the proposal contained no
analogous disclosure requirements in
§ 226.9(c)(2) when the rate increase is
made pursuant to a change in terms
notice. One issuer commented that
§ 226.9(c)(2) also should set forth
guidance for disclosing the 6-month
cure right when a rate is increased via
a change-in-terms notice due to a
delinquency of more than 60 days. The

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final rule adopts new
§ 226.9(c)(2)(iv)(C), which implements
the notice requirements contained in
amended TILA Section 171(b)(4), as
adopted by the Credit Card Act; the
substantive requirements of TILA
Section 171(b)(4) are discussed in
proposed § 226.55(b)(4), as discussed
below.
New § 226.9(c)(2)(iv)(C) requires the
notice regarding the 6-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
§ 226.6(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.
This differs from § 226.9(g)(3)(i)(B), in
that it references fees of a type required
to be disclosed under § 226.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii). Section
226.9(c)(2) addresses changes in fees
and interest rates, while § 226.9(g)
applies only to interest rates; therefore,
the reference to fees in
§ 226.9(c)(2)(iv)(C) has been included
for conformity with the substantive
requirements of § 226.55. 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.
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 § 226.55. In
particular, proposed Samples G–17(B)
and G–17(C) state that a penalty rate
will apply until the consumer makes six
consecutive minimum payments when
due. In contrast, the substantive right
under § 226.55 applies only if the
consumer makes the first six
consecutive required minimum periodic
payments when due, following the
effective date of a rate increase due to
the consumer’s failure to make a
required minimum periodic payment
within 60 days of the due date. The
Board is adopting the disclosure of
penalty rates in Samples G–17(B) and
G–17(C) as proposed. The Board notes
that Samples G–17(B) and G–17(C) set
forth two examples of how the
disclosures required by § 226.6(b)(1) and
(b)(2) can be made, and those samples
can be adjusted as applicable to reflect
a creditor’s actual practices regarding
penalty rates. A creditor is still free,
under the final rule, to provide that the
penalty APR will cease to apply if the

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consumer makes any six consecutive
payments on time, although the
substantive right in § 226.55 does not
compel a creditor to do so. The Board
does not wish to discourage creditors
from providing more advantageous
penalty pricing triggers than those that
are required by the Credit Card Act and
§ 226.55.
Formatting Requirements
Proposed § 226.9(c)(2)(iv)(C) set forth
the formatting requirements that would
apply to notices required to be given
pursuant to § 226.9(c)(2)(i). The
proposed formatting requirements were
generally the same as those that the
Board adopted in § 226.9(c)(2)(iii) of the
January 2009 Regulation Z Rule, except
that the reference to the content of the
notice included, when applicable, the
information about the right to reject that
credit card issuers must disclose
pursuant to § 226.9(c)(2)(iv)(B). These
formatting requirements are not affected
by the Credit Card Act, and therefore the
Board proposed to adopt them generally
as adopted in January 2009. The Board
received no significant comment on the
formatting requirements, and
§ 226.9(c)(2)(iv)(D) (renumbered from
proposed § 226.9(c)(2)(iv)(C)) is adopted
as proposed.
As proposed, the Board is amending
Sample G–20 and adding a new Sample
G–21 to illustrate how a card issuer may
comply with the requirements of
§ 226.9(c)(2)(iv). The Board is amending
references to these samples in
§ 226.9(c)(2)(iv) and comment
9(c)(2)(iv)–8 accordingly. 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.
9(c)(2)(v) Notice Not Required
The Board proposed § 226.9(c)(2)(v) to
set forth the exceptions to the general
change-in-terms notice requirements for
open-end (not home-secured) credit.
With several exceptions, proposed
§ 226.9(c)(2)(v) was intended to be
substantively equivalent to
§ 226.9(c)(2)(v) of the July 2009
Regulation Z Interim Final Rule, except
that the Board proposed an additional
express exception for the extension of a
grace period. Proposed
§ 226.9(c)(2)(v)(A) set forth several
exceptions that are in current § 226.9(c),
including charges for documentary

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evidence, reductions of finance charges,
suspension of future credit privileges
(except as provided in § 226.9(c)(vi),
discussed below), termination of an
account or plan, or when the change
results from an agreement involving a
court proceeding. The Board did not
include these changes in the set of
‘‘significant changes’’ giving rise to
notice requirements pursuant to new
TILA Section 127(i)(2). The Board stated
that it believes 45 days’ advance notice
is not necessary for these changes,
which are not of the type that generally
result in the imposition of a fee or other
charge on a consumer’s account that
could come as a costly surprise.
The Board received several comments
on the exceptions in proposed
§ 226.9(c)(2)(v)(A) for termination of an
account or plan and the suspension of
future credit privileges. Consumer
groups stated that notice should be
required of credit limit decreases or
account termination, either
contemporaneously with or subsequent
to those actions. In addition, one
member of Congress stated that 45 days’
advance notice should be required prior
to account termination.
The Board is retaining the exceptions
for account termination and suspension
of credit privileges in the final rule. As
stated in the proposal, the Board
believes that for safety and soundness
reasons, issuers generally have a
legitimate interest in suspending credit
privileges or terminating an account or
plan when a consumer’s
creditworthiness deteriorates, and that
45 days’ advance notice of these types
of changes therefore would not be
appropriate. With regard to the
suspension of credit privileges, the
Board notes that § 226.9(c)(vi) requires
creditors to provide 45 days’ advance
notice that a consumer’s credit limit has
been decreased before an over-the-limit
fee or penalty rate can be imposed
solely for exceeding that newly
decreased credit limit. The Board
believes that § 226.9(c)(vi) will
adequately ensure that consumers
receive notice of a decrease in their
credit limit prior to any adverse
consequences as a result of the
consumer exceeding the new credit
limit.
Similarly, the Board does not believe
that it is necessary to require notices of
the termination of an account or the
suspension of credit privileges
contemporaneously with or
immediately following such a
termination or suspension. In many
cases, consumers will receive
subsequent notification of the
termination of an account or the
suspension of credit privileges pursuant

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to Regulation B. See 12 CFR part 202.
The Board acknowledges that
Regulation B does not require
subsequent notification of the
termination of an account or suspension
of credit privileges in all cases, for
example, when the action affects all or
substantially all of a class of the
creditor’s accounts or is an action
relating to an account taken in
connection with inactivity, default, or
delinquency as to that account.
However, the Board believes that the
benefit to consumers of requiring such
a subsequent notice in all cases would
be limited. If a consumer’s account is
terminated or suspended and the
consumer attempts to use the account
for new transactions, those transactions
will be denied. The Board expects that
in such circumstances most consumers
would call the card issuer and be
notified at that time of the suspension
or termination of their account.
Increase in Annual Percentage Rate
Upon Expiration of Specified Period of
Time
Proposed § 226.9(c)(2)(v)(B) set forth
an exception contained in the Credit
Card Act for increases in annual
percentage rates upon the expiration of
a specified period of time, 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. The proposal required
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. In
addition, in order to fall within this
exception, the annual percentage rate
that applies after the period ends may
not exceed the rate previously
disclosed.
The proposed exception generally
mirrored the statutory language, except
for two additional requirements. First,
the Board’s proposal provided,
consistent with July 2009 Regulation Z
Interim Final Rule and the standard for
Regulation Z disclosures under Subpart
B, that the disclosure of the period and
annual percentage rate that will apply
after the period is generally required to
be in writing. See § 226.5(a)(1). Second,
pursuant to its authority under TILA
Section 105(a) to prescribe regulations
to effectuate the purposes of TILA, the
Board proposed to require that the
disclosure of the length of the period
and the annual percentage rate that
would apply upon expiration of the
period be set forth in close proximity

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and equal prominence to the disclosure
of the rate that applies during the
specified period of time. 15 U.S.C.
1604(a). The Board stated that it
believes both of these requirements are
appropriate in order to ensure that
consumers receive, comprehend, and
are able to retain the disclosures
regarding the rates that will apply to
their transactions.
Proposed comment 9(c)(2)(v)–5
clarified the timing of the disclosure
requirements for telephone purchases
financed by a merchant or private label
credit card issuer. The Board is aware
that the general requirement in the July
2009 Regulation Z Interim Final Rule
that written disclosures be provided
prior to commencement of the period
during which a temporary rate will be
in effect has caused some confusion for
merchants who offer a promotional rate
on the telephone to finance the
purchase of goods. In order to clarify the
application of the rule to such
merchants, proposed comment
9(c)(2)(v)–5 stated that the timing
requirements of § 226.9(c)(2)(v)(B) are
deemed to have been met, and written
disclosures required by
§ 226.9(c)(2)(v)(B) 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
§ 226.9(c)(2)(v)(B); and (3) the
disclosures required by
§ 226.9(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. This clarification mirrored
a timing rule for account-opening
disclosures provided by merchants
financing the purchase of goods by
telephone under § 226.5(b)(1)(iii) of the
January 2009 Regulation Z Rule.
The Board received a large number of
comments from retailers and private
label card issuers raising concerns about
the proposal and regarding the
operational difficulties associated with
providing the disclosures required by
proposed § 226.9(c)(2)(v)(B).
Specifically, these commenters stated
that issuers should be permitted to
provide consumers with a disclosure of
an ‘‘up to’’ annual percentage rate, and

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not the specific rate that will apply to
a consumer’s account upon expiration
of the promotion. The Board is not
adopting this suggestion, for several
reasons. First, the Board believes that
the appropriate interpretation is that
amended TILA Section 127(i)(1) (which
cross-references new TILA Section
171(a)(1)) requires disclosure of the
actual rate that will apply upon
expiration of a temporary rate. Second,
the Board believes that a disclosure of
a range of rates or ‘‘up to’’ rate will not
be as useful for consumers as a
disclosure of the specific rate that will
apply. The Board is aware that some
private label card issuers and retailers
permit consumers to make transactions
at a promotional rate, even if the
consumer’s account is currently subject
to a penalty rate. In this case, an ‘‘up to’’
rate disclosure would disclose the
penalty rate, which would be much
higher than the actual rate that will
apply upon expiration of the promotion
for most consumers. Thus, the
disclosure would convey little useful
information to a consumer whose
account is not subject to the penalty
rate.
Other retailers and private label card
issuers suggested that the Board permit
issuers to provide the required
disclosures or a portion of the required
disclosures with a receipt or other
document. One such commenter stated
that these disclosures should be
permitted to be given at the conclusion
of a transaction. The Board believes that
amended TILA Section 127(i)(1) (which
cross-references new TILA Section
171(a)(1)) clearly contemplates that the
disclosures will be provided prior to
commencement of the period during
which the temporary rate will be in
effect. Therefore, the final rule would
not permit a creditor to provide the
disclosures after conclusion of a
transaction at point of sale.
However, the Board believes that it is
appropriate to provide some flexibility
for the formatting of notices of
temporary rates provided at point of
sale. The Board understands that private
label and retail card issuers may offer
different rates to different consumers
based on their creditworthiness and
other factors. In addition, some
consumers’ accounts may be at a
penalty rate that differs from the
standard rates on the portfolio.
Commenters have indicated that there
can be significant operational issues
associated with ensuring that sales
associates provide the correct
disclosures to each consumer at point of
sale when those consumers’ rates vary.
In order to address an analogous issue
for the disclosures required to be given

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at account opening, the Board
understands that card issuers disclose
the rate that will apply to the
consumer’s account on a separate page
which can be printed directly from the
receipt terminal, as permitted by
§ 226.6(b)(2)(i)(E). The Board believes
that a similar formatting rule is
appropriate for disclosures of temporary
rate offers. Accordingly, the Board is
adopting a new comment 9(c)(2)(v)–7
which states that card issuers providing
the disclosures required by
§ 226.9(c)(2)(v)(B) in person in
connection with financing the purchase
of goods or services may, at the
creditor’s option, disclose the annual
percentage 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
annual percentage 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.
The Board believes that this will ensure
that consumers receive the disclosures
required for a temporary rate offer, and
will be aware of the rate that will apply
after the temporary rate expires, while
alleviating burden on retail and private
label credit card issuers.
One industry commenter urged the
Board to provide flexibility in the
formatting of the promotional rate
disclosures under § 226.9(c)(2)(v)(B),
noting that any requirement that these
disclosures be presented in a tabular
format would present significant
operational challenges. The Board notes
that the proposal did not require that
these disclosures be provided in a
tabular format, and the final rule
similarly does not require that the
disclosures under § 226.9(c)(2)(v)(B) be
presented in a table.
In the October 2009 Regulation Z
Proposal, the Board stated, that for a
brief period necessary to update their
systems to disclose a single rate, issuers
offering a deferred interest or other
promotional rate program at point of
sale could disclose a range of rates or an
‘‘up to’’ rate rather than a single rate. The
Board noted that stating a range of rates
or ‘‘up to’’ rate would only be
permissible for a brief transition period
and that it expected that merchants and
creditors would disclose a single rate
that will apply when a deferred interest
or other promotional rate expires in
accordance with § 226.9(c)(2)(v)(B) as
soon as possible. The Board expects that
all issuers will disclose a single rate by
the February 22, 2010 effective date of
this final rule. The Board notes that in
addition to the exception to

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§ 226.9(c)(2)’s advance notice
requirements, provision of the notice
pursuant to § 226.9(c)(2)(v)(B) now also
is a condition of an exception to the
substantive repricing rules in
§ 226.55(b)(1). Accordingly, the Board
believes that it is particularly important
that consumers receive notice of the
specific rate that will apply upon
expiration of a promotion, since the
ability to raise the rate upon termination
of the program is conditioned on the
consumer’s receipt of that disclosure.
Several industry commenters stated
that the alternative timing rule for
telephone purchases in proposed
comment 9(c)(2)(v)–5 should apply to
all telephone offers of temporary rate
reductions. These commenters argued
that consumers should not have to wait
for written disclosures to be delivered
prior to commencement of a temporary
reduced rate, because that rate
constitutes a beneficial change to the
consumer. Several of these commenters
indicated that a consumer who accepts
a temporary rate offer by telephone
should have a subsequent right to reject
the offer for 45 days after provision of
the written disclosures.
In response to these comments, the
Board is adopting a revised comment
9(c)(2)(v)–5, which provides that the
timing requirements of
§ 226.9(c)(2)(v)(B) are deemed to have
been met, and written disclosures
required by § 226.9(c)(2)(v)(B) may be
provided as soon as reasonably
practicable after the first transaction
subject to a temporary rate, if: (i) The
consumer accepts the offer of the
temporary rate by telephone; (ii) the
creditor permits the consumer to reject
the temporary rate offer and have the
rate or rates that previously applied to
the consumer’s balances reinstated for
45 days after the creditor mails or
delivers the written disclosures required
by § 226.9(c)(2)(v)(B); and (iii) the
disclosures required by
§ 226.9(c)(2)(v)(B) and the consumer’s
right to reject the offer and have the rate
or rates that previously applied to the
consumer’s account reinstated are
disclosed to the consumer as part of the
temporary rate offer. The Board believes
that consumers who accept a
promotional rate offer by telephone
expect that the promotional rate will
apply immediately upon their
acceptance. The Board believes that
requiring written disclosures prior to
commencement of a temporary rate
when offer is made by telephone and
the required disclosures are provided
orally would unnecessarily delay, in
many cases, a benefit to the consumer.
However, the Board believes that a
consumer should have a right,

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subsequent to receiving written
disclosures, to change his or her mind
and reject the temporary rate offer. The
Board believes that comment 9(c)(2)(v)–
5, as adopted, ensures that consumers
may take immediate advantage of
promotions that they believe to be a
benefit, while protecting consumers by
allowing them to terminate the
promotion, with no adverse
consequences, upon receipt of written
disclosures.
In addition to requesting that the
disclosures under § 226.9(c)(2)(v)(B) be
permitted to be provided by telephone,
other industry commenters stated that
these disclosures should 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) (15
U.S.C. 7001 et seq.). The Board is not
providing an exception to the consumer
consent requirements under the E-Sign
Act at this time. The requirements of the
E-Sign Act are implemented in
Regulation Z in § 226.36, which states
that a creditor is required to obtain a
consumer’s affirmative consent when
providing disclosures related to a
transaction. The Board believes that
disclosure of a promotional or other
temporary rate is a disclosure related to
a transaction, and that consumers
should only receive the disclosures
under § 226.9(c)(2)(v)(B) electronically if
they have affirmatively consented to
receive disclosures in that form.
Several commenters asked the Board
to provide additional clarification
regarding the proposed requirement that
the disclosures of the length of the
period and the rate that will apply after
the expiration of the period be disclosed
in close proximity and equal
prominence to the disclosure of the
temporary rate. One card issuer
indicated that the Board should require
only that the disclosures required by
§ 226.9(c)(2)(v)(B) be provided in close
proximity and equal prominence to the
first listing of the promotional rate,
analogous to what § 226.16(g) requires
for disclosures of promotional rates in
advertisements. The Board believes that
this clarification is appropriate, and is
adopting a new comment 9(c)(2)(v)–6,
which states 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 states that for
purposes of § 226.9(c)(2)(v)(B), the first
statement of the temporary rate is the
most prominent listing on the front side

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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. The Board believes that this
rule will ensure that consumers notice
the disclosure of the rate that will apply
after the temporary rate expires, by
requiring that it be closely proximate
and equally prominent to the most
prominent disclosure of the temporary
rate, while mitigating burden on issuers
to present this disclosure multiple times
in the materials provided to the
consumer.
One industry commenter stated that
there should be an exception analogous
to § 226.9(c)(2)(v)(B) for promotional fee
offerings. The Board is not adopting
such an exception at this time. The
Board notes that the exception in
amended TILA Section 127(i)(1) (which
cross-references new TILA Section
171(a)(1)) refers only to annual
percentage rates and not to fees. The
Board does not think a similar exception
for fees is appropriate or necessary. Fees
generally do not apply to a specific
balance on the consumer’s account, but
rather, apply prospectively. Therefore, a
creditor could reduce a fee pursuant to
the exception in § 226.9(c)(2)(v) for
reductions in finance or other charges,
without having to provide advance
notice of that reduction. The creditor
could then increase the fee with
prospective application after providing
45 days’ advance notice pursuant to
§ 226.9(c). Nothing in the rule prohibits
a creditor from providing notice of the
increase in a fee at the same time it
temporarily reduces the fee; a creditor
could provide information regarding the
temporary reduction in the same notice,
provided that it is not interspersed with
the content required to be disclosed
pursuant to § 226.9(c)(2)(iv).
The Board proposed to retain
comment 9(c)(2)(v)–6 from the July 2009
Regulation Z Interim Final Rule
(redesignated as comment 9(c)(2)(v)–7)
to clarify that an issuer offering a
deferred interest or similar program may
utilize the exception in
§ 226.9(c)(2)(v)(B). The proposed
comment also provides examples of
how the required disclosures can be
made for deferred interest or similar
programs. The Board did not receive
any significant comment on the
applicability of § 226.9(c)(2)(v)(B) to
deferred interest plans, and continues to
believe that the application of
§ 226.9(c)(2)(v)(B) to deferred interest
arrangements is consistent with the
Credit Card Act. The Board is adopting

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proposed comment 9(c)(2)(v)–7
(redesignated as comment 9(c)(2)(v)–9),
in order to ensure that the final rule
does not have unintended adverse
consequences for deferred interest
promotions. In order to ensure
consistent treatment of deferred interest
programs, the Board has added a crossreference to comment 9(c)(2)(v)–9
indicating that for purposes of
§ 226.9(c)(2)(v)(B) and comment
9(c)(2)(v)–9, ‘‘deferred interest’’ has the
same meaning as in § 226.16(h)(2) and
associated commentary.
In October 2009, the Board proposed
to retain comment 9(c)(2)(v)–5 from the
July 2009 Regulation Z Interim Final
Rule (redesignated as comment
9(c)(2)(v)–6), which is applicable to the
exceptions in both § 226.9(c)(2)(v)(B)
and (c)(2)(v)(D), and provides additional
clarification regarding the disclosure of
variable annual percentage rates. The
comment provides that if the creditor is
disclosing a variable rate, the notice
must also state that the rate may vary
and how the rate is determined. The
comment sets forth an example of how
a creditor may make this disclosure. The
Board believes that the fact that a rate
is variable is an important piece of
information of which consumers should
be aware prior to commencement of a
deferred interest promotion, a
promotional rate, or a stepped rate
program. The Board received no
comments on proposed comment
9(c)(2)(v)–6 and it is adopted as
redesignated comment 9(c)(2)(v)–8.
Increases in Variable Rates
The Board proposed
§ 226.9(c)(2)(v)(C) to implement an
exception in the Credit Card Act for
increases in variable annual percentage
rates in accordance with a credit card or
other account agreement that provides
for a change in the rate according to
operation of an index that is not under
the control of the creditor and is
available to the general public. The
Board proposed a minor amendment to
the text of § 226.9(c)(2)(v)(C) as adopted
in the July 2009 Regulation Z Interim
Final Rule to reflect the fact that this
exception would apply to all open-end
(not home-secured) credit. The Board
believes that even absent this express
exception, such a rate increase would
not generally be a change in the terms
of the cardholder or other account
agreement that gives rise to the
requirement to provide 45 days’
advance notice, because the index,
margin, and frequency with which the
annual percentage rate will vary will all
be specified in the cardholder or other
account agreement in advance.
However, in order to clarify that 45

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days’ advance notice is not required for
a rate increase that occurs due to
adjustments in a variable rate tied to an
index beyond the creditor’s control, the
Board proposed to retain
§ 226.9(c)(2)(v)(C) of the July 2009
Regulation Z Interim Final Rule.
The Board received no significant
comment on § 226.9(c)(2)(v)(C), which is
adopted as proposed. The Board notes
that, as discussed in the supplementary
information to § 226.55(b)(2), it is
adopting additional commentary
clarifying when an index is deemed to
be outside of an issuer’s control, in
order to address certain practices
regarding variable rate ‘‘floors’’ and the
adjustment or resetting of variable rates
to account for changes in the index. The
Board is adopting a new comment
9(c)(2)(v)–11, which cross-references the
guidance in comment 55(b)(2)–2.

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Exception for Workout or Temporary
Hardship Arrangements
In the October 2009 Regulation Z
Proposal, the Board proposed to retain
§ 226.9(c)(2)(v)(D) to implement a
statutory exception in amended TILA
Section 127(i)(1) (which crossreferences new TILA Section 171(b)(3)),
for increases in rates or fees or charges
due to the completion of, or a
consumer’s failure to comply with the
terms of, a workout or temporary
hardship arrangement provided that the
annual percentage rate or fee or charge
applicable to a category of transactions
following the increase does not exceed
the rate that applied prior to the
commencement of the workout or
temporary hardship arrangement.
Proposed § 226.9(c)(2)(v)(D) was
substantively equivalent to the
analogous provision included in the
July 2009 Regulation Z Interim Final
Rule.
The exception in proposed
§ 226.9(c)(2)(v)(D) applied both to
completion of or failure to comply with
a workout arrangement. The proposed
exception was conditioned on the
creditor’s having clearly and
conspicuously disclosed, prior to the
commencement of the arrangement, the
terms of the arrangement (including any
such increases due to such completion).
The Board notes that the statutory
exception applies in the event of either
completion of, or failure to comply
with, the terms of such a workout or
temporary hardship arrangement. This
proposed exception generally mirrored
the statutory language, except that the
Board proposed to require that the
disclosures regarding the workout or
temporary hardship arrangement be in
writing.

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The Board also proposed to retain
comment 9(c)(2)(v)–7 of the July 2009
Regulation Z Interim Final Rule
(redesignated as comment 9(c)(2)(v)–8),
which provides clarification as to what
terms must be disclosed in connection
with a workout or temporary hardship
arrangement. The comment stated that
in order for the exception to apply, the
creditor must disclose to the consumer
the rate that will apply to balances
subject to the workout or temporary
hardship arrangement, as well as the
rate that will apply if the consumer
completes or fails to comply with the
terms of, the workout or temporary
hardship arrangement. For consistency
with proposed § 226.55(b)(5)(i), the
Board proposed to revise the comment
to also state that the creditor must
disclose the amount of any reduced fee
or charge of a type required to be
disclosed under § 226.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii) that will apply to
balances subject to the arrangement, as
well as the fee or charge that will apply
if the consumer completes or fails to
comply with the terms of the
arrangement. The proposal also required
the notice to state, if applicable, that the
consumer must make timely minimum
payments in order to remain eligible for
the workout or temporary hardship
arrangement. The Board noted its belief
that it is important for a consumer to be
notified of his or her payment
obligations pursuant to a workout or
similar arrangement, and that the rate,
fee or charge may be increased if he or
she fails to make timely payments.
Several industry commenters stated
that creditors should be permitted to
provide the disclosures pursuant to
§ 226.9(c)(2)(v)(D) for workout or
temporary hardship arrangements 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, but
that a requirement that written
disclosures be provided in advance
could unnecessarily delay
commencement of the arrangement.
These commenters noted that workout
arrangements unequivocally benefit
consumers, so there is no consumer
protection rationale for delaying relief
until a creditor can provide written
disclosures. Commenters further noted
that the consumers who enter such
arrangements are having trouble making
the payments on their accounts, and
that any delay can be detrimental to the
consumer.
The Board notes that amended TILA
Section 127(i) (which cross-references
TILA Section 171(b)(3)) requires clear

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and conspicuous disclosure of the terms
of a workout or temporary hardship
arrangement prior to its commencement,
but the statute does not contain an
express requirement that these
disclosures be in writing. The Board
further understands that a delay in
commencement of a workout or
temporary hardship arrangement can
have adverse consequences for a
consumer. Therefore, § 226.9(c)(2)(v)(D)
of the final rule provides that creditors
may 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. The Board notes that a
consumer’s rate can only be raised,
upon completion or failure to comply
with the terms of, a workout or
temporary hardship arrangement, to the
rate that applied prior to
commencement of the arrangement.
Therefore, the Board believes that
consumers will be adequately protected
by receiving written disclosures as soon
as practicable after oral disclosures are
provided.
In addition to requesting that the
disclosures under § 226.9(c)(2)(v)(D) be
permitted to be provided by telephone,
other industry commenters stated that
these disclosures should 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) (15
U.S.C. 7001 et seq.). The Board is not
providing an exception to the consumer
consent requirements under the E-Sign
Act at this time. The Board believes that
disclosure of the terms of a workout or
other temporary hardship arrangement
is a disclosure related to a transaction,
and that consumers should only receive
the disclosures under § 226.9(c)(2)(v)(D)
electronically if they have affirmatively
consented to receive disclosures in that
form.
Several industry commenters
requested that the Board extend the
exception in § 226.9(c)(2)(v)(D) to
address the reduction of the consumer’s
minimum periodic payment as part of a
workout or temporary hardship
arrangement. The Board understands
that a requirement that 45 days’ advance
notice be given prior to reinstating the
prior minimum payment requirements
could lead to negative amortization for
a period of 45 days or more, when the
consumer’s rate or rates are increased as
a result of the completion of or failure
to comply with the terms of, the

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workout or temporary hardship
arrangement. Therefore, the Board has
amended § 226.9(c)(2)(v)(D) and
comment 9(c)(2)(v)–10 (proposed as
comment 9(c)(2)(v)–8) to provide that
increases in the required minimum
periodic payment are covered by the
exception in § 226.9(c)(2)(v)(D), but that
such increases in the minimum
payment must be disclosed as part of
the terms of the workout or temporary
hardship arrangement. As with rate
increases, a consumer’s required
minimum periodic payment can only be
increased to the required minimum
periodic payment prior to
commencement of the workout or
temporary hardship arrangement in
order to qualify for the exception.
One industry commenter asked the
Board to simplify the content
requirements for the notice required to
be given prior to commencement of a
workout or temporary hardship
arrangement. The issuer stated that the
notice could be confusing for consumers
because they may have different annual
percentage rates applicable to different
categories of transactions, promotional
rates in effect, and protected balances
under § 226.55. While the Board
acknowledges that the disclosure of the
various annual percentage rates
applicable to a consumer’s account
could be complex, the Board believes
that a consumer should be aware of all
of the annual percentage rates and fees
that would be applicable upon
completion of, or failure to comply
with, the workout or temporary
hardship arrangement. Therefore, the
Board is adopting comment 9(c)(2)(v)–
10 (proposed as comment 9(c)(2)(v)–8)
generally as proposed, except for the
addition of a reference to changes in the
required minimum periodic payment,
discussed above.
Additional Exceptions
A number of commenters urged the
Board to adopt additional exceptions to
the requirement to provide 45 days’
advance notice of significant changes in
account terms. Several industry
commenters stated that the Board
should provide an exception to the
advance notice requirements for rate
increases made when the provisions of
the Servicemembers Civil Relief Act
(SCRA), 50 U.S.C. app. 501 et seq.,
which in some circumstances requires
reductions in consumers’ interest rates
when they are engaged in military
service, cease to apply. These
commenters noted that proposed
§ 226.55 provided an exception to the
substantive repricing requirements in
these circumstances. However, the
Board is not adopting an analogous

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exception to the notice requirements in
§ 226.9. The Board believes that
consumers formerly engaged in military
service should receive advance notice
when a higher rate will begin to apply
to their accounts. A consumer may not
be aware of exactly when the SCRA’s
protections cease to apply and may
choose, in reliance on the notice, to
change his or her account usage or
utilize another source of financing in
order to mitigate the impact of the rate
increase.
One industry trade association
requested an exception to the 45-day
advance notice requirement for
termination of a preferential rate for
employees. The Board notes that it
expressly removed such an exception
historically set forth in comment 9(c)–
1 in the January 2009 Regulation Z Rule.
For the reasons discussed in the
supplementary information to the
January 2009 Regulation Z Rule, the
Board is not restoring that exception in
this final rule. See 74 FR 5244, 5346.
Finally, one industry commenter
requested an exception to the advance
notice requirements when a change in
terms is favorable to a consumer, such
as the extension of a grace period, even
if it does not involve a reduction in a
finance charge. The commenter noted
that, for such changes, an issuer also
may not want to provide a right to reject
under § 226.9(h), because rejecting the
change would be unfavorable to the
consumer. While the Board notes that,
consistent with the proposal, the final
rule creates an exception to the advance
notice requirements for extensions of
the grace period, the Board is not
adopting a more general exception to
the advance notice requirements for
favorable changes at this time. With the
exception of reductions in finance or
other charges, the Board believes that it
is difficult to articulate criteria for when
other types of changes are beneficial to
a consumer.
9(c)(2)(vi) Reduction of the Credit Limit
Consistent with the January 2009
Regulation Z Rule and the July 2009
Regulation Z Interim Final Rule, the
Board proposed to retain
§ 226.9(c)(2)(vi) to address notices of
changes in a consumer’s credit limit.
Section 226.9(c)(2)(vi) requires an issuer
to provide a consumer with 45 days’
advance notice that a credit limit is
being decreased or will be decreased
prior to the imposition of any over-thelimit fee or penalty rate imposed solely
as the result of the balance exceeding
the newly decreased credit limit. The
Board did not propose to include a
decrease in a consumer’s credit limit
itself as a significant change in a term

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that requires 45 days’ advance notice,
for several reasons. First, the Board
recognizes that creditors have a
legitimate interest in mitigating the risk
of a loss when a consumer’s
creditworthiness deteriorates, and
believes there would be safety and
soundness concerns with requiring
creditors to wait 45 days to reduce a
credit limit. Second, the consumer’s
credit limit is not a term generally
required to be disclosed under
Regulation Z or TILA. Finally, the Board
stated its belief that § 226.9(c)(2)(vi)
adequately protects consumers against
the two most costly surprises potentially
associated with a reduction in the credit
limit, namely, fees and rate increases,
while giving a consumer adequate time
to mitigate the effect of the credit line
reduction.
The Board received no significant
comment on § 226.9(c)(2)(vi), which is
adopted as proposed. The Board notes
that consumer group commenters stated
that the final rule should also require
disclosure of a credit line decrease
either contemporaneously with the
decrease or shortly thereafter; for the
reasons discussed above in the sectionby-section analysis to § 226.9(c)(2)(v),
the Board is not adopting such a
requirement at this time.
The Board notes that the final rule
contains additional protections against a
credit line decrease. First, § 226.55
prohibits a card issuer from applying an
increased rate, fee, or charge to an
existing balance as a result of
transactions that exceeded the credit
limit. In addition, § 226.56 allows a card
issuer to charge a fee for transactions
that exceed the credit limit only when
the consumer has consented to such
transactions.
Additional Changes to Commentary to
§ 226.9(c)(2)
The commentary to § 226.9(c)(2)
generally is consistent with the
commentary to § 226.9(c)(2) of the
January 2009 Regulation Z Rule, except
for technical changes or changes
discussed below. In addition, as
discussed above, the Board is adopting
several new comments to
§ 226.9(c)(2)(v) and has renumbered the
remaining commentary accordingly.
In October 2009, the Board proposed
to amend comment 9(c)(2)(i)–6 to
reference examples in § 226.55 that
illustrate how the advance notice
requirements in § 226.9(c) relate to the
substantive rule regarding rate increases
in proposed § 226.55. In the January
2009 Regulation Z Rule, comment
9(c)(2)(i)–6 referred to the commentary
to § 226.9(g). Because, as discussed in
the supplementary information to

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§ 226.55, the Credit Card Act moved the
substantive rule regarding rate increases
into Regulation Z, the Board believed
that it is not necessary to repeat the
examples under § 226.9. The Board
received no comments on the proposed
amendments to comment 9(c)(2)(i)–6,
which are adopted as proposed.
The Board also proposed to amend
comment 9(c)(2)(v)–2 (adopted in the
January 2009 Regulation Z Rule as
comment 9(c)(2)(iv)–2) in order to
conform with the new substantive and
notice requirements of the Credit Card
Act. This comment addresses the
disclosures that must be given when a
credit program allows consumers to skip
or reduce one or more payments during
the year or involves temporary
reductions in finance charges. However,
new § 226.9(c)(2)(v)(B) requires a
creditor to provide a notice of the period
for which a temporarily reduced rate
will be in effect, as well as a disclosure
of the rate that will apply after that
period, in order for a creditor to be
permitted to increase the rate at the end
of the period without providing 45 days’
advance notice. Similarly, § 226.55,
discussed elsewhere in this
supplementary information, requires a
creditor to provide advance notice of a
temporarily reduced rate if a creditor
wants to preserve the ability to raise the
rate on balances subject to that
temporarily reduced rate. Accordingly,
the Board is proposing amendments to
clarify that if a credit program involves
temporary reductions in an interest rate,
no notice of the change in terms is
required either prior to the reduction or
upon resumption of the higher rates if
these features are disclosed in advance
in accordance with the requirements of
§ 226.9(c)(2)(v)(B). See proposed
comment 55(b)–3. The proposed
comment further clarifies that if a
creditor does not provide advance
notice in accordance with
§ 226.9(c)(2)(v)(B), that it must provide
a notice that complies with the timing
requirements of § 226.9(c)(2)(i) and the
content and format requirements of
§ 226.9(c)(2)(iv)(A), (B) (if applicable),
(C) (if applicable), and (D). The
proposed comment notes that creditors
should refer to § 226.55 for additional
restrictions on resuming the original
rate that is applicable to credit card
accounts under an open-end (not homesecured) plan.
Relationship Between § 226.9(c)(2)
and (b)
In the October 2009 Regulation Z
Proposal, the Board republished
proposed amendments to
§ 226.9(c)(2)(v) and comments 9(c)(2)–4
and 9(c)(2)(i)–3 that were part of the

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May 2009 Regulation Z Proposed
Clarifications. Several of the Board’s
proposed revisions to § 226.9(c)(2)(v)
(proposed in May 2009 as
§ 226.9(c)(2)(iv)) and proposed comment
9(c)(2)–4 were to clarify the relationship
between the change-in-terms
requirements of § 226.9(c) and the
notice provisions of § 226.9(b) that
apply when a creditor adds a credit
feature or delivers a credit access device
for an existing open-end plan. See 74 FR
20787 for further discussion of these
proposed amendments. Commenters
that addressed this aspect of the
proposal generally supported these
proposed clarifications, which are
adopted as proposed.
9(e) Disclosures Upon Renewal of Credit
or Charge Card
The Credit Card Act amended TILA
Section 127(d), which sets forth the
disclosures that card issuers must
provide in connection with renewal of
a consumer’s credit or charge card
account. 15 U.S.C. 1637(d). TILA
Section 127(d) is implemented in
§ 226.9(e), which has historically
required card issuers that assess an
annual or other fee based on inactivity
or activity, on a credit card account of
the type subject to § 226.5a, to provide
a renewal notice before the fee is
imposed. The creditor must provide
disclosures required for credit card
applications and solicitations (although
not in a tabular format) and must inform
the consumer that the renewal fee can
be avoided by terminating the account
by a certain date. The notice must
generally be provided at least 30 days or
one billing cycle, whichever is less,
before the renewal fee is assessed on the
account. Under current § 226.9(e), there
is an alternative delayed notice
procedure where the fee can be assessed
provided the fee is reversed if the
consumer is given notice and chooses to
terminate the account.
Alternative Delayed Notice
The Credit Card Act amended TILA
Section 127(d) to eliminate the
provision permitting creditors to
provide an alternative delayed notice.
Thus, the statute requires card issuers to
provide the renewal notice described in
§ 226.9(e)(1) prior to imposition of any
annual or other periodic fee to renew a
credit or charge card account of the type
subject to § 226.5a, including any fee
based on account activity or inactivity.
Card issuers may no longer assess the
fee and provide a delayed notice
offering the consumer the opportunity
to terminate the account and have the
fee reversed. Accordingly, the Board
proposed to delete § 226.9(e)(2) and to

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renumber § 226.9(e)(3) as § 226.9(e)(2).
The Board proposed technical
conforming changes to comments 9(e)–
7, 9(e)(2)–1 (currently comment 9(e)(3)–
1), and 9(e)(2)–2 (currently comment
9(e)(3)–2).
Consumer groups commented that the
Board’s final rule should permit the
alternative delayed disclosure. These
commenters believe that the deletion of
TILA Section 127(d)(2) was a drafting
error, and that the Board should use its
authority under TILA Section 105(a) to
restore the alternative delayed notice
procedure. These commenters stated
that restoring § 226.9(e)(2) would benefit
both consumers and issuers, because
consumers are in their opinion more
likely to notice the fee and exercise their
right to cancel the card if the fee appears
on the periodic statement.
The Board believes that the language
of Section 203 of the Credit Card Act,
which amended TILA Section 127(d),
clearly deletes the statutory basis for the
alternative delayed notice. Therefore,
the Board does not believe that use of
its TILA Section 105(a) authority is
appropriate at this time to override this
express statutory provision. The final
rule deletes § 226.9(e)(2) and renumbers
§ 226.9(e)(3) as § 226.9(e)(2), as
proposed. Similarly, the Board is
adopting the technical conforming
changes to comments 9(e)–7, 9(e)(2)–1
(currently comment 9(e)(3)–1), and
9(e)(2)–2 (currently comment 9(e)(3)–2),
as proposed.
Terms Amended Since Last Renewal
As amended by the Credit Card Act,
TILA Section 127(d) provides that a
card issuer that has changed or
amended any term of the account since
the last renewal that has not been
previously disclosed must provide the
renewal disclosure, even if that card
issuer does not charge an annual fee,
periodic fee, or other fee for renewal of
the credit or charge card account. The
Board proposed to implement amended
TILA Section 127(d) by making
corresponding amendments to
§ 226.9(e)(1). Proposed § 226.9(e)(1)
stated, in part, that any card issuer that
has changed or amended any term of a
cardholder’s account required to be
disclosed under § 226.6(b)(1) and (b)(2)
that has not previously been disclosed
to the consumer, shall mail or deliver
written notice of the renewal to the
cardholder. The Board proposed to use
its authority pursuant to TILA Section
105(a) to clarify that the requirement to
provide the renewal disclosures due to
a change in account terms applies only
if the change has not been previously
disclosed and is a change of the type

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required to be disclosed in the table
provided at account opening.
Several industry commenters stated
that renewal disclosures should be
required only if an annual or other
renewal fee is assessed on a consumer’s
account. However, the Credit Card Act
specifically amended TILA Section
127(d) to require renewal disclosures
when creditors have changed or
amended terms of the account since the
last renewal that have not been
previously disclosed. The Board
therefore believes that a rule requiring
renewal disclosures to be given only if
an annual or other renewal fee is
charged would not effectuate the
statutory amendment.
Consumer groups stated that renewal
disclosures should be required if any
undisclosed change has been made to
the account terms since the last renewal,
not only if undisclosed changes have
been made to terms required to be
disclosed pursuant to § 226.6(b)(1) and
(b)(2). Consumer groups argued that the
language ‘‘any term of the account’’ in
amended TILA Section 127(d)
contemplates that renewal disclosures
will be given if any term has been
changed and not previously disclosed,
regardless of the type of term. As
discussed in the supplementary
information to the proposal, the Board
considered an interpretation of
amended TILA Section 127(d),
consistent with consumer group
comments, that would have required
that the renewal disclosures be provided
for all changes in account terms that
have not been previously disclosed,
including changes that are not required
to be disclosed pursuant to § 226.6(b)(1)
and (b)(2). Such an interpretation of the
statute would require that the renewal
disclosures be given even when
creditors have made relatively minor
changes to the account terms, such as by
increasing the amount of a fee to
expedite delivery of a credit card. The
Board noted that it believes providing a
renewal notice in these circumstances
would not provide a meaningful benefit
to consumers.
The Board also noted that under such
an interpretation, the renewal notice
would in many cases not disclose the
changed term, which would render it of
little value to consumers. Amended
TILA Section 127(d) requires only that
the renewal disclosure contain the
information set forth in TILA Sections
127(c)(1)(A) and (c)(4)(A), which are
implemented in § 226.5a(b)(1) through
(b)(7). These sections require disclosure
of key terms of a credit card account
including the annual percentage rates
applicable to the account, annual or
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minimum finance charges, transaction
charges on purchases, the grace period,
balance computation method, and
disclosure of similar terms for charge
card accounts. The Board notes that the
required disclosures all address terms
required to be disclosed pursuant to
§ 226.6(b)(1) and (b)(2). Therefore, if the
rule required that the renewal
disclosures be provided for any change
in terms, such as a change in a fee for
expediting delivery of a credit card, the
renewal disclosures would not disclose
the amount of the changed fee. The
Board also notes that charges imposed
as part of an open-end (not homesecured) plan that are not required to be
disclosed pursuant to § 226.6(b)(1) and
(b)(2) are required to be disclosed to
consumers prior to their imposition
pursuant to § 226.5(b)(1)(ii). Therefore,
if a card issuer changed a charge
imposed as part of an open-end (not
home-secured) plan but had not
previously disclosed that change, a
consumer would receive disclosure
prior to imposition of the charge.
For these reasons, the Board is
adopting § 226.9(e)(1) as proposed. The
Board believes that § 226.9(e)(1) as
adopted strikes the appropriate balance
between ensuring that consumers
receive notice of important changes to
their account terms that have not been
previously disclosed and avoiding
burden on issuers with little or no
corresponding benefit to consumers. In
most cases, changes to terms required to
be disclosed pursuant to § 226.6(b)(1)
and (b)(2) will be required to be
disclosed 45 days in advance in
accordance with § 226.9(c)(2). However,
there are several types of changes to
terms required to be disclosed under
§ 226.6(b)(1) and (b)(2) for which
advance notice is not required under
§ 226.9(c)(2)(v)(1), including reductions
in finance and other charges and the
extension of a grace period. The Board
believes that such changes are generally
beneficial to the consumer, and
therefore a 45-day advance notice
requirement is not appropriate for these
changes. However, the Board believes
that requiring creditors to send
consumers subject to such changes a
notice prior to renewal disclosing key
terms of their accounts will promote the
informed use of credit by consumers.
The notice will remind consumers of
the key terms of their accounts,
including any reduced rates or extended
grace periods that apply, when
consumers are making a decision as to
whether to renew their account and how
to use the account in the future.
One industry commenter requested
that the Board clarify that disclosing a
change in terms on a periodic statement

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is sufficient to constitute prior
disclosure of that change for purposes of
§ 226.9(e). The Board believes that this
generally is appropriate, and has
adopted a new comment 9(e)–10 .
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
§ 226.9(e)(1). The comment contains a
cross-reference to § 226.9(c)(2) for
additional timing, content, and
formatting requirements that apply to
certain changes in terms under that
paragraph.
Consumer group commenters urged
the Board to require that renewal
disclosures be tabular, prominently
located, and retainable. The Board is not
imposing such a requirement at this
time. The Board believes that the
general requirements of § 226.5(a),
which require that renewal disclosures
be clear and conspicuous and in
writing, are sufficient to ensure that
renewal disclosures are noticeable to
consumers.
Section 226.9(e)(1), consistent with
the proposal, further clarifies the timing
of the notice requirement when a card
issuer has changed a term on the
account but does not impose an annual
or other periodic fee for renewal, by
stating that if the card issuer has
changed or amended any term required
to be disclosed under § 226.6(b)(1) and
(b)(2) and such changed or amended
term has not previously been disclosed
to the consumer, the notice shall be
provided at least 30 days prior to the
scheduled renewal date of the
consumer’s credit or charge card.
Accordingly, card issuers that do not
charge periodic or other fees for renewal
of the credit or charge card account, and
who have previously disclosed any
changed terms pursuant to § 226.9(c)(2)
are not required to provide renewal
disclosures pursuant to proposed
§ 226.9(e).
9(g) Increase in Rates Due to
Delinquency or Default or as a Penalty
9(g)(1) Increases Subject to This Section
The Board proposed to adopt
§ 226.9(g) substantially as adopted in
the January 2009 Regulation Z Rule,
except as required to be amended for
conformity with the Credit Card Act.
Proposed § 226.9(g), in combination
with amendments to § 226.9(c),
implemented the 45-day advance notice
requirements for rate increases in new
TILA Section 127(i). This approach is
consistent with the Board’s January
2009 Regulation Z Rule and the July

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2009 Regulation Z Interim Final Rule,
each of which included change-in-terms
notice requirements in § 226.9(c) and
increases in rates due to the consumer’s
default or delinquency or as a penalty
for events specified in the account
agreement in § 226.9(g). Proposed
§ 226.9(g)(1) set forth the general rule
and stated that for open-end plans other
than home-equity plans subject to the
requirements of § 226.5b, a creditor
must provide a written notice to each
consumer who may be affected when a
rate is increased due to a delinquency
or default or as a penalty for one or
more events specified in the account
agreement. The Board received no
significant comment on the general rule
in § 226.9(g)(1), which is adopted as
proposed.
9(g)(2) Timing of Written Notice
Proposed paragraph (g)(2) set forth the
timing requirements for the notice
described in paragraph (g)(1), and stated
that the notice must be provided at least
45 days prior to the effective date of the
increase. The notice must, however, be
provided after the occurrence of the
event that gave rise to the rate increase.
That is, a creditor must provide the
notice after the occurrence of the event
or events that trigger a specific
impending rate increase and may not
send a general notice reminding the
consumer of the conditions that may
give rise to penalty pricing. For
example, a creditor may send a
consumer a notice pursuant to § 226.9(g)
if the consumer makes a payment that
is one day late disclosing a rate increase
applicable to new transactions, in
accordance with § 226.55. However, a
more general notice reminding a
consumer who makes timely payments
that paying late may trigger imposition
of a penalty rate would not be sufficient
to meet the requirements of § 226.9(g) if
the consumer subsequently makes a late
payment. The Board received no
significant comment on § 226.9(g)(2),
which is adopted as proposed.

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9(g)(3) Disclosure Requirements for Rate
Increases
Proposed paragraph (g)(3) set forth the
content and formatting requirements for
notices provided pursuant to § 226.9(g).
Proposed § 226.9(g)(3)(i)(A) set forth the
content requirements applicable to all
open-end (not home-secured) credit
plans. Similar to the approach discussed
above with regard to § 226.9(c)(2)(iv),
the Board proposed a separate
§ 226.9(g)(3)(i)(B) that contained
additional content requirements
required under the Credit Card Act that
are applicable only to credit card

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accounts under an open-end (not homesecured) consumer credit plan.
Proposed § 226.9(g)(3)(i)(A) provided
that the notice must state that the
delinquency, default, or penalty rate has
been triggered, and the date on which
the increased rate will apply. The notice
also must state the circumstances under
which the increased rate will cease to
apply to the consumer’s account or, if
applicable, that the increased rate will
remain in effect for a potentially
indefinite time period. In addition, the
notice must include a statement
indicating to which balances the
delinquency or default rate or penalty
rate will be applied, and, if applicable,
a description of any balances to which
the current rate will continue to apply
as of the effective date of the rate
increase, unless a consumer fails to
make a minimum periodic payment
within 60 days from the due date for
that payment.
Proposed § 226.9(g)(3)(i)(B) set forth
additional content that credit card
issuers must disclose if the rate increase
is due to the consumer’s failure to make
a minimum periodic payment within 60
days from the due date for that payment.
In those circumstances, the proposal
required that the notice state the reason
for the increase and disclose 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. Proposed § 226.9(g)(3)(i)(B)
implemented notice requirements
contained in amended TILA Section
171(b)(4), as adopted by the Credit Card
Act, and implemented in proposed
§ 226.55(b)(4), as discussed below.
Unlike § 226.9(g)(3) of the July 2009
Regulation Z Interim Final Rule, the
notice proposed under § 226.9(g)(3)
would not have required disclose the
consumer’s right to reject the
application of the penalty rate. For the
reasons discussed in the supplementary
information to § 226.9(h), the Board is
not providing a right to reject penalty
rate increases in light of the new
substantive rule on rate increases in
proposed § 226.55. Accordingly, the
proposal would not have required
disclosure of a right to reject for penalty
rate increases.
Proposed paragraph (g)(3)(ii) set forth
the formatting requirements for a rate
increase due to default, delinquency, or
as a penalty. These requirements were
substantively equivalent to the
formatting rule adopted in
§ 226.9(g)(3)(ii) of the January 2009
Regulation Z Rule and would require
the disclosures required under

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§ 226.9(g)(3)(i) to be set forth in the form
of a table. As discussed elsewhere in
this Federal Register, the formatting
requirements are not directly compelled
by the Credit Card Act, and
consequently the Board is retaining the
original July 1, 2010 effective date of the
January 2009 Regulation Z Rule for the
tabular formatting requirements.
The Board proposed to amend Sample
G–21 from the January 2009 Regulation
Z Rule (redesignated as Sample G–22)
and to add a new sample G–23 to
illustrate how a card issuer may comply
with the requirements of proposed
§ 226.9(g)(3)(i). The proposal would
have amended references to these
samples in comment 9(g)–8 accordingly.
Proposed Sample G–22 is a disclosure of
a rate increase applicable to a
consumer’s credit card account based on
a late payment that is fewer than 60
days late. 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–23
discloses a rate increase based on a
delinquency of more than 60 days, and
includes the required content regarding
the consumer’s ability to cure the
penalty pricing by making the next six
consecutive minimum payments on
time.
One industry commenter stated that
§ 226.9(g)(3) and Model Form G–23
should be revised to more accurately
reflect the balances to which the
consumer’s cure right applies, when the
consumer’s rate is increased due to a
delinquency of greater than 60 days. As
discussed in the supplementary
information to § 226.55(b)(4)(ii), the rule
requires only that the rate be reduced on
transactions that occurred prior to or
within 14 days of the notice provided
pursuant to § 226.9(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. The Board believes that
consumers could be confused by a
notice, as proposed, that states only that
the rate increase will cease to apply if
the consumer, but does not distinguish
between outstanding balances and new
transactions. Accordingly, the Board has
revised § 226.9(g)(3)(i)(B)(2) to require
disclosure that the increase 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. The Board
has made a conforming change to Model
Form G–23.

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The Board received no other
significant comment on the disclosure
requirements in § 226.9(g)(3) and is
otherwise is adopting § 226.9(g)(3) as
proposed.
9(g)(4) Exceptions
Proposed § 226.9(g)(4) set forth an
exception to the advance notice
requirements of § 226.9(g), which is
consistent with an analogous exception
contained in the January 2009
Regulation Z Rule and July 2009
Regulation Z Interim Final Rule.
Proposed § 226.9(g)(4) clarified the
relationship between the notice
requirements in § 226.9(c)(vi) and (g)(1)
when the creditor decreases a
consumer’s credit limit and under the
terms of the credit agreement a penalty
rate may be imposed for extensions of
credit that exceed the newly decreased
credit limit. This exception is
substantively equivalent to
§ 226.9(g)(4)(ii) of the January 2009
Regulation Z Rule. In addition, it is
generally equivalent to § 226.9(g)(4)(ii)
of the July 2009 Regulation Z Interim
Final Rule, except that the proposed
exception implemented content
requirements analogous to those in
proposed § 226.9(g)(3)(i) that pertain to
whether the rate applies to outstanding
balances or only to new transactions.
See 74 FR 5355 for additional
discussion of this exception. The Board
received no comments on this
exception, which is adopted as
proposed.
As discussed in the supplementary
information to the October 2009
Regulation Z Proposal, a second
exception for an increase in an annual
percentage rate due to the failure of a
consumer to comply with a workout or
temporary hardship arrangement
contained in the July 2009 Regulation Z
Interim Final Rule has been moved to
§ 226.9(c)(2)(v)(D).
The Board noted in the
supplementary information to the
proposal that one respect in which
proposed § 226.9(g)(4) differs from the
January 2009 Regulation Z Rule is that
it did not contain an exception to the
45-day advance notice requirement for
penalty rate increases if the consumer’s
account becomes more than 60 days
delinquent prior to the effective date of
a rate increase applicable to new
transactions, for which a notice
pursuant to § 226.9(g) has already been
provided.
Industry commenters urged the Board
to provide an exception that would
permit creditors to send a notice
disclosing a rate increase applicable to
both a consumer’s outstanding balances
and new transactions, prior to the

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consumer’s account becoming more
than 60 days delinquent. These
commenters stated that, as proposed,
the rule would require issuers to wait at
least 105 days prior to imposing rate
increases as a result of the consumer
paying more than 60 days late. These
commenters also stated that a notice
disclosing the consequences that would
occur if a consumer paid more than 60
days late would give the consumer the
opportunity to avoid the rate increase.
The Board is not adopting an
exception that would permit a creditor
to send a notice disclosing a rate
increase applicable to both a consumer’s
outstanding balances and new
transactions, prior to the consumer’s
failure to make a minimum payment
within 60 days of the due date for that
payment. As discussed in the
supplementary information to
§ 226.9(g)(3)(i), amended TILA Section
171(b)(4)(A) requires that specific
content be disclosed when a consumer’s
rate is increased based on a failure to
make a minimum payment within 60
days of the due date for that payment.
Specifically, TILA Section 171(b)(4)(A)
requires the notice to state the reasons
for the increase and that the increase
will terminate no later than six months
from the effective date of the change,
provided that the consumer makes the
minimum payments on time during that
period. The Board believes that the
intent of this provision is to create a
right for consumers whose rate is
increased based on a payment that is
more than 60 days late to cure that
penalty pricing in order to return to a
lower interest rate.
The Board believes that the
disclosures associated with this ability
to cure will be the most useful to
consumers if they receive them after
they have already triggered such penalty
pricing based on a delinquency of more
than 60 days. Under the Board’s
proposed rule, creditors will be required
to provide consumers with a notice
specifically disclosing a rate increase
based on a delinquency of more than 60
days, at least 45 days prior to the
effective date of that increase. The
notice will state the effective date of the
rate increase, which will give
consumers certainty as to the applicable
6-month period during which they must
make timely payments in order to return
to the lower rate. If creditors were
permitted to raise the rate applicable to
all of a consumer’s balances without
providing an additional notice,
consumers may be unsure exactly when
their account became more than 60 days
delinquent and therefore may not know
the period in which they need to make

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7705

timely payments in order to return to a
lower rate.
The Board believes that many
creditors will impose rate increases
applicable to new transactions for
consumers who make late payments that
are 60 or fewer days late. For notices of
such rate increases provided pursuant to
§ 226.9(g), § 226.9(g)(3)(i)(A)(5) requires
that the notice describe the balances to
which the current rate will continue to
apply unless the consumer fails to make
a minimum periodic payment within 60
days of the due date for that payment.
The Board believes that this will result
in consumers receiving a notice of the
consequences of paying more than 60
days late and, thus, will give consumers
an opportunity to avoid a rate increase
applicable to outstanding balances.
In addition, the Board notes that the
Credit Card Act, as implemented in
§ 226.55(b)(4), does not permit a creditor
to raise the interest rate applicable to a
consumer’s existing balances unless that
consumer fails to make a minimum
payment within 60 days from the due
date. This differs from the Board’s
January 2009 FTC Act Rule, which
permitted such a rate increase based on
a failure to make a minimum payment
within 30 days from the due date. The
exception in § 226.9(g)(4)(iii) of the
January 2009 Regulation Z Rule
reflected the Board’s understanding that
some creditors might impose penalty
pricing on new transactions based on a
payment that is one or several days late,
and therefore it might be a relatively
common occurrence for consumers’
accounts to become 30 days delinquent
within the 45-day notice period
provided for a rate increase applicable
to new transactions. The Board believes
that, given the 60-day period imposed
by the Credit Card Act and
§ 226.55(b)(4), it will be less common
for consumers’ accounts to become
delinquent within the original 45-day
notice period provided for new
transactions.
Proposed Changes to Commentary to
§ 226.9(g)
The commentary to § 226.9(g)
generally is consistent with the
commentary to § 226.9(g) of the January
2009 Regulation Z Rule, except for
technical changes. In addition, the
Board has amended comment 9(g)–1 to
reference examples in § 226.55 that
illustrate how the advance notice
requirements in § 226.9(g) relate to the
substantive rule regarding rate increases
applicable to existing balances. Because,
as discussed in the supplementary
information to § 226.55, the Credit Card
Act placed the substantive rule
regarding rate increases into TILA and

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Regulation Z, the Board believes that it
is not necessary to repeat the examples
under § 226.9.

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9(h) Consumer Rejection of Certain
Significant Changes in Terms
In the July 2009 Regulation Z Interim
Final Rule, the Board adopted
§ 226.9(h), which provided that, in
certain circumstances, a consumer may
reject significant changes to account
terms and increases in annual
percentage rates. See 74 FR 36087–
36091, 36096, 36099–36101. Section
226.9(h) implemented new TILA
Section 127(i)(3) and (4), which—like
the other provisions of the Credit Card
Act implemented in the July 2009
Regulation Z Interim Final Rule—went
into effect on August 20, 2009. See
Credit Card Act § 101(a) (new TILA
Section 127(i)(3)–(4)). However, several
aspects of § 226.9(h) were based on
revised TILA Section 171, which—like
the other statutory provisions addressed
in this final rule—goes into effect on
February 22, 2010. Accordingly, because
the Board is now implementing revised
TILA Section 171 in § 226.55, the Board
has modified § 226.9(h) for clarity and
consistency.
Application of Right To Reject to
Increases in Annual Percentage Rate
Because revised TILA Section 171
renders the right to reject redundant in
the context of rate increases, the Board
has amended § 226.9(h) to apply that
right only to other significant changes to
an account term. Currently, § 226.9(h)
provides that, if a consumer rejects an
increase in an annual percentage rate
prior to the effective date stated in the
§ 226.9(c) or (g) notice, the creditor
cannot apply the increased rate to
transactions that occurred within
fourteen days after provision of the
notice. See § 226.9(h)(2)(i), (h)(3)(ii).
However, under revised TILA Section
171 (as implemented in proposed
§ 226.55), a creditor is generally
prohibited from applying an increased
rate to transactions that occurred within
fourteen days after provision of a
§ 226.9(c) or (g) notice regardless of
whether the consumer rejects that
increase. Similarly, although the
exceptions in § 226.9(h)(3)(i) and
revised TILA Section 171(b)(4) permit a
creditor to apply an increased rate to an
existing balance when an account
becomes more than 60 days delinquent,
revised TILA Section 171(b)(4)(B) (as
implemented in proposed
§ 226.55(b)(4)(ii)) provides that the
creditor must terminate the increase if
the consumer makes the next six
payments on or before the payment due
date. Thus, with respect to rate

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increases, the right to reject does not
provide consumers with any meaningful
protections beyond those provided by
revised TILA Section 171 and § 226.55.
Accordingly, the Board believes that, on
or after February 22, 2010, the right to
reject will be unnecessary for rate
increases. Indeed, once revised TILA
Section 171 becomes effective, notifying
consumers that they have a right to
reject a rate increase could be
misleading insofar as it could imply that
a consumer who does so will receive
some additional degree of protection
(such as protection against increases in
the rate that applies to future
transactions).
Industry commenters strongly
opposed the Board’s establishment of a
right to reject in the July 2009
Regulation Z Interim Final Rule but
supported the revisions in the October
2009 Regulation Z Proposal. Consumer
group commenters took the opposite
position. In particular, along with a
federal banking regulator, consumer
group commenters argued that the
Board should interpret the ‘‘right to
cancel’’ in revised TILA Section
127(i)(3) as providing consumers with
the right to reject increases in rates that
apply to new transactions. However, the
Board does not believe this
interpretation would be consistent with
the Credit Card Act’s provisions
regarding rate increases. As discussed in
detail below with respect to § 226.55,
the Credit Card Act generally prohibits
card issuers from applying increased
rates to existing balances while
generally permitting card issuers to
increase the rates that apply to new
transactions after providing 45 days’
advance notice. Furthermore, by
prohibiting card issuers from applying
an increased rate to transactions that
occur during a 14-day period following
provision of the notice of the increase,
the Credit Card Act ensures that
consumers can generally avoid
application of increased rates to new
transactions by ceasing to use their
accounts after receiving the notice of the
increase.
Accordingly, the final rule removes
references to rate increases from
§ 226.9(h) and its commentary.
Similarly, because the exception in
§ 226.9(h)(3)(ii) for transactions that
occurred more than fourteen days after
provision of the notice was based on
revised TILA Section 171(d),29 that
exception has been removed from
§ 226.9(h) and incorporated into
§ 226.55. Finally, the Board has
redesignated comment 9(h)(3)–1 as
comment 9(h)–1 and amended it to
29 See

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clarify that § 226.9(h) does not apply to
increases in an annual percentage rate.
As noted above, the Board has also
revised § 226.9(c)(2)(iv)(B) to clarify that
the right to reject does not apply to
changes in an annual percentage rate
that do not result in an immediate
increase in rate (such as changes in the
method used to calculate a variable rate
or conversion of a variable rate to an
equivalent fixed rate). As discussed
below, consistent with the requirements
in the Credit Card Act, § 226.55
generally prohibits a card issuer from
applying any change in an annual
percentage rate to an existing balance if
that change could result in an increase
in rate. See commentary to
§ 226.55(b)(2). However, because the
Credit Card Act generally permits card
issuers to change the rates that apply to
new transactions, it would be
inconsistent with the Act to apply the
right to reject to such changes.
Nevertheless, as with rate increases that
apply to new transactions, the consumer
will receive 45 days’ advance notice of
the change and thus can decide whether
to continue using the account.
Industry and consumer group
commenters also requested that the
Board add or remove several exceptions
to the right to reject. However, the Board
does not believe that further revisions
are warranted at this time. In particular,
industry commenters argued that the
right to reject should not apply when
the consumer has consented to the
change in terms, when the change is
unambiguously in the consumer’s favor,
or in similar circumstances. As
discussed elsewhere in this final rule,
the Board believes that it would be
difficult to develop workable standards
for determining when a change has been
requested by the consumer (rather than
suggested by the issuer), when a change
is unambiguously beneficial to the
consumer, and so forth. Furthermore, an
exception to the right to reject generally
should not be necessary if the consumer
has actually requested a change or if a
change is clearly advantageous to the
consumer.
Industry commenters also argued that
the Board should exempt increases in
fees from the right to reject if the fee is
increased to a pre-disclosed amount
after a specified period of time, similar
to the exception for temporary rates in
§ 226.9(c)(2)(v)(B). However, as
discussed above, § 226.9(c)(2)(v)(B)
implements revised TILA Section
171(b)(1), which applies only to
increases in annual percentage rates.
The fact that the exceptions in Section
171(b)(3) and (b)(4) expressly apply to
increases in rates and fees indicates that
Congress intentionally excluded fees

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from Section 171(b)(1). Accordingly, the
Board does not believe it would be
appropriate to exclude increases in fees
from the right to reject.
Consumer groups argued that the
Board should remove the exception in
§ 226.9(h)(3) for accounts that are more
than 60 days’ delinquent. However, this
exception is based on revised TILA
Section 171(b)(4), which provides that
the Credit Card Act’s limitations on rate
increases do not apply when an account
is more than 60 days’ past due.
Accordingly, the Board believes that it
is consistent with the intent of the
Credit Card Act to provide card issuers
with greater flexibility to adjust the
account terms in these circumstances.
Consumer groups also argued that the
Board should remove the exception in
§ 226.9(c)(2)(iv) for increases in the
required minimum periodic payment.
However, the Board believes that, as a
general matter, increases in the required
minimum payment can be advantageous
for consumers insofar as they can
increase repayment of the outstanding
balance, which can reduce the cost of
borrowing. Indeed, although the Credit
Card Act limits issuers’ ability to
accelerate repayment in circumstances
where the issuer cannot apply an
increased rate to an existing balance
(revised TILA Section 171(c)), the Act
also encourages consumers to increase
the repayment of credit card balances by
requiring card issuers to disclose on the
periodic statement the costs associated
with making only the minimum
payment (revised TILA Section
127(b)(11)). Furthermore, although
consumer groups argued that card
issuers could raise minimum payments
to unaffordable levels in order to force
accounts to become more than 60 days’
past due (which would allow issuers to
apply increased rates to existing
balances), it seems unlikely that it
would be in card issuers’ interests to do
so, given the high loss rates associated
with accounts that become more than 60
days’ delinquent.30 Thus, the Board
does not believe application of the right
to reject to increases in the minimum
payment is warranted at this time.
30 For example, data submitted to the Board
during the comment period for the January 2009
FTC Act Rule indicated that approximately half of
all accounts that become two billing cycles’ past
due (which is roughly equivalent to 60 days’
delinquent) charge off during the subsequent twelve
months. See Federal Reserve Board Docket No. R–
1314: Exhibit 5, Table 1a to Comment from Oliver
I. Ireland, Morrison Foerster LLP (Aug 7, 2008)
(Argus Analysis) (presenting results of analysis by
Argus Information & Advisory Services, LLC of
historical data for consumer credit card accounts
believed to represent approximately 70% of all
outstanding consumer credit card balances).

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Repayment Restrictions
Because the repayment restrictions in
§ 226.9(h)(2)(iii) are based on revised
TILA Section 171(c), the Board believes
that those restrictions should be
implemented with the rest of revised
Section 171 in § 226.55. Section
226.9(h)(2)(iii) implemented new TILA
Section 127(i)(4), which expressly
incorporated the repayment methods in
revised TILA Section 171(c)(2). Because
the rest of revised Section 171 would
not be effective until February 22, 2010,
the July 2009 Regulation Z Interim Final
Rule implemented new TILA Section
127(i)(4) by incorporating the repayment
restrictions in Section 171(c)(2) into
§ 226.9(h)(2)(iii). See 74 FR 36089.
However, the Board believes that—once
revised TILA Section 171 becomes
effective on February 22, 2010—these
repayment restrictions should be moved
to § 226.55(c). In addition to being
duplicative, implementing revised TILA
Section 171(c)’s repayment methods in
both § 226.9(h) and § 226.55(c) would
create the risk of inconsistency.
Furthermore, because these restrictions
will generally be of greater importance
in the context of rate increases than
other significant changes in terms, the
Board believes they should be located in
proposed § 226.55.
The Board did not receive significant
comment on this aspect of the proposal.
Accordingly, the final rule moves the
provisions and commentary regarding
repayment to § 226.55(c)(2) and amends
§ 226.9(h)(2)(iii) to include a crossreference to § 226.55(c)(2).
Furthermore, the Board has amended
comment 9(h)(2)(iii)–1 to clarify the
application of the repayment methods
listed in proposed § 226.55(c)(2) in the
context of a rejection of a significant
change in terms. As revised, this
comment clarifies that, when applying
the methods listed in § 226.55(c)(2)
pursuant to § 226.9(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). For example,
when a creditor increases an annual
percentage rate pursuant to
§ 226.55(b)(3), § 226.55(c)(2)(ii) permits
the creditor to establish an amortization
period for a protected balance of not less
than five years, beginning no earlier
than the effective date of the increase.
Accordingly, when a consumer rejects a
significant change in terms pursuant to
§ 226.9(h)(1), § 226.9(h)(2)(iii) permits
the creditor to establish an amortization
period for the balance on the account of
not less than five years, beginning no
earlier than the date on which the

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creditor was notified of the rejection.
The comment provides an illustrative
example.
In addition, comment 9(h)(2)(iii)–2
has been revised to clarify the meaning
of ‘‘the balance on the account’’ that is
subject to the repayment restrictions in
§ 226.55(c)(2). The revised comment
would clarify that, when applying the
methods listed in § 226.55(c)(2)
pursuant to § 226.9(h)(2)(iii), the
provisions in § 226.55(c)(2) and the
guidance in the commentary to
§ 226.55(c)(2) regarding protected
balances also apply to a balance on the
account subject to § 226.9(h)(2)(iii).
Furthermore, the revised comment
clarifies 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 § 226.9(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
for purposes of § 226.9(h)(2)(iii) is the
balance on a date that is not earlier than
the date on which the creditor was
notified of the rejection. An example is
provided.
Additional Revisions to Commentary
Consistent with the revisions
discussed above, the Board has made
non-substantive, technical amendments
to the commentary to § 226.9(h). In
addition, for organizational reasons, the
Board has renumbered comments
9(h)(2)(ii)–1 and –2. Finally, the Board
has amended comment 9(h)(2)(ii)–2 to
clarify the application of the prohibition
in § 226.9(h)(2)(ii) on imposing a fee or
charge solely as a result of the
consumer’s rejection of a significant
change in terms. In particular, the
revised comment clarifies 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).
Section 226.10 Payments
Section 226.10, which implements
TILA Section 164, currently contains
rules regarding the prompt crediting of
payments and is entitled ‘‘Prompt
crediting of payments.’’ 15 U.S.C. 1666c.
In October 2009, the Board proposed to
implement several new provisions of
the Credit Card Act regarding payments
in § 226.10, such as requirements
regarding the permissibility of certain
fees to make expedited payments.
Several of these rules do not pertain
directly to the prompt crediting of

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payments, but more generally to the
conditions that may be imposed upon
payments. Accordingly, the Board
proposed to amend the title of § 226.10
to ‘‘Payments’’ to more accurately reflect
the content of amended § 226.10. The
Board received no comments on this
change, which is adopted as proposed.
226.10(b) Specific Requirements for
Payments

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Cut-Off Times for Payments
TILA Section 164 states that payments
received by the creditor from a
consumer for an open-end consumer
credit plan shall be posted promptly to
the account as specified in regulations
of the Board. The Credit Card Act
amended TILA Section 164 to state that
the Board’s regulations shall prevent a
finance charge from being imposed on
any consumer if the creditor has
received the consumer’s payment in
readily identifiable form, by 5 p.m. on
the date on which such payment is due,
in the amount, manner, and location
indicated by the creditor to avoid the
imposition of such a finance charge.
While amended TILA Section 164
generally mirrors current TILA Section
164, the Credit Card Act added the
reference to a 5 p.m. cut-off time for
payments received on the due date.
TILA Section 164 is implemented in
§ 226.10. The Board’s January 2009
Regulation Z Rule addressed cut-off
times by providing that a creditor may
specify reasonable requirements for
payments that enable most consumers to
make conforming payments. Section
226.10(b)(2)(ii) of the January 2009
Regulation Z Rule 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. Amended § 226.10(b)(2)(ii)
provided a safe harbor for the
reasonable cut-off time requirement,
stating that it would be reasonable for a
creditor to set a cut-off time for
payments by mail of 5 p.m. on the
payment due date at the location
specified by the creditor for the receipt
of such payments. While this safe
harbor referred only to payments
received by mail, the Board noted in the
supplementary information to the
January 2009 Regulation Z Rule that it
would continue to monitor other
methods of payment in order to
determine whether similar guidance
was necessary. See 74 FR 5357.
As amended by the Credit Card Act,
TILA Section 164 differs from § 226.10
of the January 2009 Regulation Z Rule
in two respects. First, amended TILA
Section 164 applies the requirement that
a creditor treat a payment received by 5

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p.m. on the due date as timely to all
forms of payment, not only payments
received by mail. In contrast, the safe
harbor regarding cut-off times that the
Board provided in § 226.10(b)(2)(ii) of
the January 2009 Regulation Z Rule
directly addressed only mailed
payments. Second, while the Board’s
January 2009 Regulation Z Rule left
open the possibility that in some
circumstances, cut-off times earlier than
5 p.m. might be considered reasonable,
amended TILA Section 164 prohibits
cut-off times earlier than 5 p.m. on the
due date in all circumstances.
In the October 2009 Regulation Z
Proposal, the Board proposed to
implement amended TILA Section 164
in a revised § 226.10(b)(2)(ii). Proposed
§ 226.10(b)(2)(ii) 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. Creditors would be
free to set later cut-off times; however,
no cut-off time would be permitted to be
earlier than 5 p.m. This paragraph, in
accordance with amended TILA Section
164, would apply to payments received
by mail, electronic means, telephone, or
in person, not only payments received
by mail. The Board is adopting
§ 226.10(b)(2)(ii) generally as proposed.
Consistent with the January 2009
Regulation Z Rule, proposed
§ 226.10(b)(2)(ii) referred to the time
zone of the location specified by the
creditor for the receipt of payments. The
Board believed that this clarification
was necessary to provide creditors with
certainty regarding how to comply with
the proposed rule, given that consumers
may reside in different time zones from
the creditor. The Board noted that a rule
requiring a creditor to process payments
differently based on the time zone at
each consumer’s billing address could
impose significant operational burdens
on creditors. The Board solicited
comment on whether this clarification is
appropriate for payments made by
methods other than mail.
Consumer group commenters
indicated that the cut-off time rule for
electronic and telephone payments
should refer to the consumer’s time
zone. These commenters believe that it
is unfair for consumers to be penalized
for making what they believe to be a
timely payment based on their own time
zone. In contrast, 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,

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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.
The final rule, consistent with the
proposal, refers to the time zone of the
location specified by the creditor for
making payments. The Board believes
that the benefit to consumers of a rule
that refers to the time zone of the
consumer’s billing address would not
outweigh the operational burden to
creditors. As amended by the Credit
Card Act, TILA contains a number of
protections, including new periodic
statement mailing requirements for
credit card accounts implemented in
§ 226.5(b)(2)(ii), to ensure that
consumers receive a sufficient period of
time to make payments. The Board also
notes that there may be consumers who
are United States residents, such that
Regulation Z would apply pursuant to
comment 1(c)–1, but who have billing
addresses that are outside of the United
States. Thus, if the rule referred to the
time zone of the consumer’s billing
address, a creditor might need to have
many different payment processing
procedures, including procedures for
time zones outside of the United States.
Section 226.10(b)(2)(ii), consistent
with the proposal, generally applies to
payments made in person. However, as
discussed below, the Credit Card Act
amends TILA Section 127(b)(12) to
establish a special rule for payments on
credit card accounts made in person at
branches of financial institutions, which
the Board is implementing in a new
§ 226.10(b)(3). Notwithstanding the
general rule in proposed
§ 226.10(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. The Board notes
that this rule refers only to payments
made in person at the branch or office.
Payments made by other means such as
by telephone, electronically, or by mail
are subject to the general rule
prohibiting cut-off times prior to 5 p.m.,
regardless of when a financial
institution’s branches or offices close.
The Board notes that there may be
creditors that are not financial
institutions that accept payments in
person, such as at a retail location, and
thus is adopting a reference in
§ 226.10(b)(2)(ii) to payments made in
person in order to address cut-off times
for such creditors that are not also
subject to proposed § 226.10(b)(3).

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The Board notes that the Credit Card
Act applies the 5 p.m. cut-off time
requirement to all open-end credit
plans, including open-end (homesecured) credit. Accordingly,
§ 226.10(b)(2)(ii), consistent with the
proposal, applies to all open-end credit.
This is consistent with current § 226.10,
which applies to all open-end credit.

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Other Requirements for Conforming
Payments
One industry commenter asked the
Board to clarify that an issuer can
specify a single address for receiving
conforming payments. The Board notes
that § 226.10(b)(2)(v) provides
‘‘[s]pecifying one particular address for
receiving payments’’ such as a post
office box’’ as an example of a
reasonable requirement for payments.
Accordingly, the Board believes that no
additional clarification is necessary.
However, a creditor that specifies a
single address for the receipt of
conforming payments is still subject to
the general requirement in § 226.10(b)
that the requirement enable most
consumers to make conforming
payments.
The commenter further urged the
Board to adopt a clarification to
comment 10(b)–2, which states 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
§ 226.10(b). The commenter asked the
Board to clarify that a creditor may set
a cut-off time for payments via its Web
site, consistent with the general rule in
§ 226.10(b). The Board agrees that this
clarification is appropriate and has
included a reference to the creditor’s
cut-off time in comment 10(b)–2.
Finally, the Board is adopting a
technical revision to § 226.10(b)(4),
which addresses nonconforming
payments. Section 226.10(b)(4) states
that if a creditor specifies, on or with
the periodic statement, requirements for
the consumer to follow in making
payments, but accepts a payment that
does not conform to the requirements,
the creditor shall credit the payment
within five days of receipt. The Board
has amended § 226.10(b)(4) to clarify
that a creditor may only specify such
requirements as are permitted under
§ 226.10. For example, a creditor may
not specify requirements for making
payments that would be unreasonable
under § 226.10(b)(2), such as a cut-off
time for mailed payments of 4:00 p.m.,
and treat payments received by mail
between 4:00 p.m. and 5:00 p.m. as nonconforming payments.

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Payments Made at Financial Institution
Branches
The Credit Card Act amends TILA
Section 127(b)(12) to provide that, for
creditors that are financial institutions
which maintain branches or offices at
which payments on credit card accounts
are accepted in person, the date on
which a consumer makes a payment on
the account at the branch or office is the
date on which the payment is
considered to have been made for
purposes of determining whether a late
fee or charge may be imposed. 15 U.S.C.
1637(b)(12). The Board proposed to
implement the requirements of
amended TILA Section 127(b)(12) that
pertain to payments made at branches or
offices of a financial institution in new
§ 226.10(b)(3).
Proposed § 226.10(b)(3)(i) stated that a
card issuer that is a financial institution
shall not impose a cut-off time earlier
than the close of business for payments
made in person on a credit card account
under an open-end (not home-secured)
consumer credit plan at any branch or
office of the card issuer at which such
payments are accepted. The proposal
further provided that payments made in
person at a branch or office of the
financial institution during the business
hours of that branch or office shall be
considered received on the date on
which the consumer makes the
payment. Proposed § 226.10(b)(3)
interpreted amended TILA Section
127(b)(12) as requiring card issuers that
are financial institutions to treat inperson payments they receive at
branches or offices during business
hours as conforming payments that
must be credited as of the day the
consumer makes the in-person payment.
The Board believes that this is the
appropriate reading of amended TILA
Section 127(b)(12) because it is
consistent with consumer expectations
that in-person payments made at a
branch of the financial institution will
be credited on the same day that they
are made.
Several industry commenters stated
that the Board should clarify the
relationship between § 226.10(b)(3) and
the general rule in § 226.10(b)(2)
regarding cut-off times. These
commenters indicated that it was
unclear whether the Board intended to
require that bank branches remain open
until 5 p.m. if a card issuer accepts inperson payments at a branch location.
The Board did not intend to require
branches or offices of financial
institutions to remain open until 5 p.m.
if in-person credit card payments are
accepted at that location. The Board
believes that such a rule might

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discourage financial institutions from
accepting in-person payments, to the
detriment of consumers. The Board
therefore is adopting § 226.10(b)(3)(i)
generally as proposed, but has clarified
that, notwithstanding § 226.10(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.
For example, if a branch or office of the
card issuer closes at 3 p.m., the card
issuer must treat in-person payments
received at that branch prior to 3 p.m.
as received on that date.
Several industry commenters stated
that a card issuer should not be required
to treat an in-person payment received
at a branch or office as conforming, if
the issuer does not promote payment at
the branch. The Board believes that
TILA Section 127(b)(12)(C) requires all
card issuers that are financial
institutions that accept payments in
person at a branch or office to treat
those payments as received on the date
on which the consumer makes the
payment. The Credit Card Act does not
distinguish between circumstances
where a card issuer promotes in-person
payments at branches and
circumstances where a card issuer
accepts, but does not promote, such
payments. The Board believes that the
intent of TILA Section 127(b)(12)(C) is
to require in-person payments to be
treated as received on the same day,
which is consistent with consumer
expectations. Accordingly,
§ 226.10(b)(3) does not distinguish
between financial institutions that
promote in-person payments at a branch
and financial institutions that accept,
but do not promote, such payments.
Neither the Credit Card Act nor TILA
defines ‘‘financial institution.’’ In order
to give clarity to card issuers, the Board
proposed to adopt a definition of
‘‘financial institution,’’ for purposes of
§ 226.10(b)(3), in a new
§ 226.10(b)(3)(ii). Proposed
§ 226.10(b)(3)(ii) stated that ‘‘financial
institution’’ has the same meaning as
‘‘depository institution’’ as defined in
the Federal Deposit Insurance Act (12
U.S.C. 1813(c)).
Industry commenters noted that the
Board’s proposed definition of
‘‘financial institution’’ excluded credit
unions. Consumer groups stated that a
broader definition of ‘‘financial
institution’’ including entities other than
depository institutions, such as retail
locations that accept payments on store
credit cards for that retailer, would be

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appropriate in light of consumer
expectations. The Board has revised
§ 226.10(b)(3)(ii) in the final rule to
cover credit unions, because omission of
credit unions in the proposal was an
unintentional oversight. Section
226.10(b)(3)(ii) of the final rule states
that a ‘‘financial institution’’ means a
bank, savings association, or credit
union. The Board believes that a broader
definition of ‘‘financial institution’’ that
includes non-depository institutions,
such as retail locations, would not be
appropriate, because the primary
business of such entities is not the
provision of financial services. The
Board believes that the statute’s
reference to ‘‘financial institutions’’
contemplates that not all card issuers
will be covered by this rule. The Board
believes that the definition it is adopting
effectuates the purposes of amended
TILA Section 127(b)(12) by including all
banks, savings associations, and credit
unions, while excluding entities such as
retailers that should not be considered
‘‘financial institutions’’ for purposes of
proposed § 226.10(b)(3).
In October, 2009, the Board proposed
a new comment 10(b)–5 to clarify the
application of proposed § 226.10(b)(3)
for payments made at point of sale.
Proposed comment 10(b)–5 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, 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 § 226.10(b)(3).
One industry commenter commented
in support of proposed comment 10(b)–
5, but asked that it be expanded to cover
co-branded cards in addition to private
label credit cards. This commenter
pointed out that as proposed, comment
10(b)–5 applied only to private label
credit cards, but the Board’s
supplementary information referenced
co-branded credit cards. Consumer
groups indicated that they believe
proposed comment 10(b)–5 is contrary
to consumer expectations. These
commenters further stated that if a bank
branch must credit payments as of the
date of in-person payment, consumers
will come to expect and assume that
retail locations that accept credit card
payments should do the same. The
Board is adopting comment 10(b)–5
generally as proposed, but has expanded
the comment to address co-branded
credit cards. The Board believes that the
intent of TILA Section 127(b)(12) is to
apply only to payments made at a
branch or office of the creditor, not to

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payments made at a location maintained
by a third party that is not the creditor.
TILA Section 127(b)(12) is limited to
branches or offices of a card issuer that
is a financial institution, and
accordingly the Board believes that the
statute was not intended to address
other types of locations where an inperson payment on a credit card
account may be accepted.
Finally, the Board also proposed a
new comment 10(b)–6 to clarify what
constitutes a payment made ‘‘in person’’
at a branch or office of a financial
institution. Proposed comment 10(b)–6
would state that for purposes of
§ 226.10(b)(3), payments made in person
at a branch or office of a financial
institution include payments made with
the direct assistance of, or to, a branch
or office employee, for example a teller
at a bank branch. In contrast, the
comment would provide that a payment
made at the bank branch without the
direct assistance of a branch or office
employee, for example a payment
placed in a branch or office mail slot, is
not a payment made in person for
purposes of § 226.10(b)(3). The Board
believes that this is consistent with
consumer expectations that payments
made with the assistance of a financial
institution employee will be credited
immediately, while payments that are
placed in a mail slot or other receptacle
at the branch or office may require
additional processing time. The Board
received no significant comment on
proposed comment 10(b)–6, and it is
adopted as proposed.
One issuer asked the Board to clarify
that in-person payments made at a
branch or location of a card issuer’s
affiliate should not be treated as
conforming payments, even if the
affiliate shares the same logo or
trademark as the card issuer. The Board
understands that for many large
financial institutions, the card issuing
entity may be a separate legal entity
from the affiliated depository institution
or other affiliated entity. In such cases,
the card issuing entity is not likely to
have branches or offices at which a
consumer can make a payment, while
the affiliated depository institution or
other affiliated entity may have such
branches or offices. Therefore, as a
practical matter, in many cases a
consumer will only be able to make inperson payments on his or her credit
card account at an affiliate of the card
issuer, not at a branch of the card issuer
itself. The Board believes that in such
cases, it may not be apparent to
consumers that they are in fact making
payment at a legal entity different than
their card issuer, especially when the
affiliates share a logo or have similar

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names. Therefore, the Board believes
that the clarification requested by the
commenter is inappropriate. The Board
is adopting a new comment 10(b)–7
which states that if an affiliate of a card
issuer that is a financial institution
shares a name with the card issuer, such
as ‘‘ABC,’’ and accepts in-person
payments on the card issuer’s credit
card accounts, those payments are
subject to the requirements of
§ 226.10(b)(3).
10(d) Crediting of Payments When
Creditor Does Not Receive or Accept
Payments on Due Date
The Credit Card Act adopted a new
TILA Section 127(o) that provides, in
part, that if the payment due date for a
credit card account under an open-end
consumer credit plan is a day on which
the creditor does not receive or accept
payments by mail (including weekends
and holidays), the creditor may not treat
a payment received on the next business
day as late for any purpose. 15 U.S.C.
1637(o). New TILA Section 127(o) is
similar to § 226.10(d) of the Board’s
January 2009 Regulation Z Rule, with
two notable differences. Amended
§ 226.10(d) of the January 2009
Regulation Z Rule stated 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 not
treat a payment received by mail the
next business day as late for any
purpose. In contrast, new TILA Section
127(o) provides that if the due date is a
day on which the creditor does not
receive or accept payments by mail, the
creditor may not treat a payment
received the next business day as late
for any purpose. TILA Section 127(o)
applies to payments made by any
method on a due date which is a day on
which the creditor does not receive or
accept mailed payments, and is not
limited to payments received the next
business day by mail. Second, new
TILA Section 127(o) applies only to
credit card accounts under an open-end
consumer plan, while § 226.10(d) of the
January 2009 rule applies to all openend consumer credit.
The Board proposed to implement
new TILA Section 127(o) in an amended
§ 226.10(d). The general rule in
proposed § 226.10(d) would track the
statutory language of new TILA Section
127(o) to state 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. The Board proposed, however,
to provide that if the creditor accepts or
receives payments made by a method

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other than mail, such as electronic or
telephone payments, a due date on
which the creditor does not receive or
accept payments by mail, it is not
required to treat a payment made by that
method on the next business day as
timely. The Board proposed this
clarification using its authority under
TILA Section 105(a) to make
adjustments necessary to effectuate the
purposes of TILA. 15 U.S.C. 1604(a).
Consumer group commenters stated
that electronic and telephone payments
should not be exempted from the rule
for payments made on a due date which
is a day on which the creditor does not
receive or accept payments by mail. The
Board notes that proposed § 226.10(d)
did not create a general exemption for
electronic or telephone payments,
except when the creditor receives or
accepts payments by those methods on
a day on which it does not accept
payments by mail. Under these
circumstances, § 226.10(d) requires a
creditor to credit a conforming
electronic or telephone payment as of
the day of receipt, and accordingly the
fact that the creditor does not accept
mailed payments on that day does not
result in any detriment to a consumer
who makes his or her payment
electronically or by telephone.
The Board believes that it is not the
intent of new TILA Section 127(o) to
permit consumers who can make timely
payments by methods other than mail,
such as payments by phone, to have an
extra day after the due date to make
payments using those methods without
those payments being treated as late.
Rather, the Board believes that new
TILA Section 127(o) was intended to
address those limited circumstances in
which a consumer cannot make a timely
payment on the due date, for example
if it falls on a weekend or holiday and
the creditor does not accept or receive
payments on that date. In those
circumstances, without the protections
of new TILA Section 127(o), the
consumer would have to make a
payment one or more days in advance
of the due date in order to have that
payment treated as timely. The Credit
Card Act provides other protections
designed to ensure that consumers have
adequate time to make payments, such
as amended TILA Section 163, which
was implemented in § 226.5(b) in the
July 2009 Regulation Z Interim Final
Rule, which generally requires that
creditors mail or deliver periodic
statements to consumers at least 21 days
in advance of the due date. For these
reasons, the Board is adopting
§ 226.10(d) as proposed, except that the
Board has restructured the paragraph for
clarity.

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An industry trade association asked
the Board to clarify that § 226.10(d),
which prohibits the treatment of a
payment as late for any purpose, does
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.
The Board believes, consistent with the
approach it took in § 226.5(b)(2)(ii), that
charging interest for the period between
the due date and the following business
day does not constitute treating a
payment as late for any purpose, unless
the delay results in the loss of a grace
period. Accordingly, the Board is
adopting new comment 10(d)–2, which
cross-references the guidance on
‘‘treating a payment as late for any
purpose’’ in comment 5(b)(2)(ii)–2. The
comment also expressly 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.
One industry commenter asked the
Board to clarify the operation of
§ 226.10(d) if a holiday on which an
issuer does not accept payments is on a
Friday, but the bank does accept
payments by mail on the following
Saturday. The Board believes that in
this case, Saturday is the next business
day for purposes of § 226.10(d).
Accordingly, the Board has included a
statement in § 226.10(d)(1) indicating
that for the purposes of § 226.10(d), the
‘‘next business day’’ means the next day
on which the creditor accepts or
receives payments by mail.
Another industry commenter stated
that the rule should provide that if a
creditor 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. The
Board believes that such a comment
would not be appropriate, because if the
creditor received or accepted mailed
payments on the due date, payments in
every mail delivery on that day would
be timely, not just those payments
received in the first mail delivery. The
Board believes that consumers should
accordingly have a full business day
after a due date on which the creditor
does not accept payments by mail in
order to make a timely payment.
Finally, as proposed, amended
§ 226.10(d) applies to all open-end
consumer credit plans, not just credit
card accounts, even though new TILA
Section 127(o) applies only to credit
card accounts. The Board received no
comments on the applicability of
§ 226.10(d) to open-end credit plans that
are not credit card accounts. The Board

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believes that it is appropriate to have
one consistent rule regarding the
treatment of payments when the due
date falls on a date on which the
creditor does not receive or accept
payments by mail. The Board believes
that that Regulation Z should treat
payments on an open-end plan that is
not a credit card account the same as
payments on a credit card account.
Regardless of the type of open-end plan,
if the payment due date is a day on
which the creditor does not accept or
receive payments by mail, a consumer
should not be required to make
payments prior to the due date in order
for them to be treated as timely. This is
consistent with § 226.10(d) of the
January 2009 Regulation Z Rule, which
set forth one consistent rule for all openend credit.
10(e) Limitations on Fees Related to
Method of Payment
The Credit Card Act adopted new
TILA Section 127(l) which generally
prohibits creditors, in connection with a
credit card account under an open-end
consumer credit plan, from imposing a
separate fee to allow a consumer to
repay an extension of credit or pay a
finance charge, unless the payment
involves an expedited service by a
customer service representative. 15
U.S.C. 1637(l). In the October 2009
Regulation Z Proposal, the Board
proposed to implement TILA Section
127(l) in § 226.10(e), which 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 final
rule adopts new § 226.10(e) as proposed.
Separate fee. Proposed comment
10(e)–1 defined ‘‘separate fee’’ as a fee
imposed on a consumer for making a
single payment to the account.
Consumer group commenters suggested
that the definition of the term ‘‘separate
fee’’ was too narrow and could create a
loophole for periodic fees, such as a
monthly fee, to allow consumers to
make a payment. Consistent with the
statutory provision in TILA Section
127(l), the Board believes a separate fee
for any payment made to an account is
prohibited, with the exception of a
payment involving expedited service by
a customer service representative. See
15 U.S.C. 1604(a). The Board revises
proposed comment 10(e)–1 by removing
the word ‘‘single’’ in order to clarify that
the prohibition on a ‘‘separate fee’’

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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. Therefore, the term
separate fee includes any fee which may
be imposed periodically to allow
consumers to make payments. The
Board also notes that periodic fees may
be prohibited because they do not
involve expedited service or a customer
service representative. The term
separate fee also includes any fee
imposed to allow a consumer to make
multiple payments to an account, such
as automatic monthly payments, if the
payments do not involve expedited
service by a customer service
representative. Accordingly, comment
10(e)–1 is adopted with the clarifying
revision.
Expedited. The Board proposed
comment 10(e)–2 to clarify that the term
‘‘expedited’’ means crediting a payment
to the account the same day or, if the
payment is received after the creditor’s
cut-off time, the next business day. In
response to the October 2009 Regulation
Z Proposal, industry commenters asked
the Board to revise guidance on the term
‘‘expedited’’ to include representativeassisted 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. The Board has not included this
interpretation of expedited in the final
rule because the Board believes it would
be inconsistent with the intent of TILA
Section 127(l). Comment 10(e)–2 is
adopted as proposed.
Customer service representative.
Proposed comment 10(e)–3 clarified 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 requested that the Board
clarify that a creditor’s customer service
representative includes the creditor’s
agents or service bureau. The Board
notes that proposed comment 10(e)–3
already stated that payment service may
be provided by an agent of the creditor.
Consumer group commenters strongly
supported the Board’s guidance that a
customer service representative does not
include automated payment systems,
such as a voice response unit or
interactive voice response system.
Another commenter, however, asked the
Board to clarify guidance for payment
transactions which involve both an
automated system and the assistance of
a live customer service representative.

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Specifically, the commenter noted that
some payments systems require an
initial consumer contact through an
automated system but the payment is
ultimately handled by a live customer
service representative. The Board
acknowledges that some payments
transactions may require the use of an
automated system for a portion of the
transaction, even if a live customer
service representative provides
assistance. For example, a customer’s
telephone call may be answered by an
automated system before the customer is
directed to a live customer service
representative, or a customer service
representative may direct a customer to
an automated system to complete the
payment transaction, such as entering
personal identification numbers (PINs).
The Board notes 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. The Board is
amending comment 10(e)–3 in the final
rule accordingly.
Section 226.10(f) Changes by Card
Issuer
The Credit Card Act adopted new
TILA Section 164(c), which provides
that a card issuer may not impose 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 mailing address, office, or
procedures for handling cardholder
payments, and such change causes a
material delay in the crediting of a
cardholder payment made during the
60-day period following the date on
which the change took effect.’’ 15 U.S.C.
1666c(c). The Board is implementing
new TILA Section 164(c) in § 226.10(f).
Proposed § 226.10(f) 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. As discussed in the October
2009 Regulation Z Proposal, the Board
modified the language of new TILA
Section 164(c) to clarify that the
meaning of the term ‘‘office’’ applies
only to changes in the address of a
branch or office at which payments on
a credit card account are accepted. To
avoid potential confusion, the Board
revises § 226.10(f) to clarify that the
prohibition on imposing a late fee or

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finance charge applies only during the
60-day period following the date on
which a material change took effect. The
Board adopts § 226.10(f) as proposed
with the clarifying revision.
Comment 10(f)–1 clarified that
‘‘address for receiving payment’’ means
a mailing address for receiving payment,
such as a post office box, or the address
of a branch or office at which payments
on credit card accounts are accepted. No
comments were received on proposed
comment 10(f)–1 in particular; however,
as discussed below, industry
commenters opposed including the
closing of a bank branch as an example
of a material change in address. See
comment 10(f)–4.iv. The final rule
adopts comment 10(f)–1 as proposed.
The Board also proposed comment
10(f)–2 to provide guidance to creditors
in determining whether a change or
delay is material. Proposed comment
10(f)–2 clarified that ‘‘material change’’
means any change in address for
receiving payment or procedures for
handling cardholder payments which
causes a material delay in the crediting
of a payment. Proposed comment 10(f)–
2 further clarified that a ‘‘material delay’’
means any delay in crediting a payment
to a consumer’s account which would
result in a late payment and the
imposition of a late fee or finance
charge. The final rule adopts comment
10(f)–2 as proposed.
In the October 2009 Regulation Z
Proposal, the Board acknowledged that
a card issuer may face operational
challenges in order to ascertain, for any
given change in the address for
receiving payment or procedures for
handling payments, whether that
change did in fact cause a material delay
in the crediting of a consumer’s
payment. Accordingly, proposed
comment 10(f)–3 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
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 may use in complying
with proposed § 226.10(f). The Board
did not receive any significant
comments on the proposed safe harbor
or suggestions for alternative reasonable
methods which would assist card
issuers in compliance.
Despite the lack of comments, the
Board believes that a safe harbor based
on a ‘‘reasonably expected’’ standard is

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appropriate. The safe harbor recognizes
the operational difficulty in determining
in advance the number of customer
accounts affected by a particular change
in payment address or procedure and
whether that change will cause a late
payment. However, upon further
consideration, the Board notes that in
certain circumstances, a late fee or
finance charge may have been
improperly imposed because the late
payment was subsequently determined
to have been caused by a material
change in the payment address or
procedures. Accordingly, the final rule
revises comment 10(f)–3, which is
renumbered comment 10(f)–3.i, to
clarify that for purposes of § 226.10(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.
Furthermore, the Board amends
proposed comment 10(f)–3 by adopting
comment 10(f)–3.ii, which provides a
safe harbor specifically for card issuers
with a retail location which accepts
payment.
The final rule permits a card issuer to
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 60day period following the date on which
the change took effect. In response to
concerns raised by commenters, the
Board believes a safe harbor for card
issuers which accept payment at retail
locations addresses the operational
difficulty of determining which
consumers are affected by a material
change in a retail location or procedures
for handling payment at a retail
location. Accordingly, the final rule
adopts comment 10(f)–3(ii) and
provides an example as guidance in new
comment 10(f)–4.vi, as discussed below.
Proposed comment 10(f)–4 provided
illustrative examples consistent with
proposed § 226.10(f), in order to provide
additional guidance to creditors.
Proposed comment 10(f)–4.i illustrated
an example of a change in mailing
address which is immaterial. No
comments were received on this
example, and the final rule adopts

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comment 10(f)–4.i as proposed.
Proposed comment 10(f)–4.ii illustrated
an example of a material change in
mailing address which would not cause
a material delay in crediting a payment.
No comments were received on this
example, and the final rule adopts
comment 10(f)–4.ii as proposed.
Proposed comment 10(f)–4.iii illustrated
an example of a material change in
mailing address which could cause a
material delay in crediting a payment.
No comments were received on this
example, and the final rule adopts
comment 10(f)–4.iii as proposed.
Proposed comment 10(f)–4.iv
illustrated an example of a permanent
closure of a local branch office of a card
issuer as 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. One industry
commenter suggested that a bank branch
closing should not be considered as a
factor in determining the cause of a late
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. See 12 U.S.C. 1831r–1; 12 CFR
5.30(j). Commenters argued that these
advance notice requirements provide
adequate notice for customers to make
alternative arrangements for payment.
Furthermore, industry commenters
stated that interpreting a branch closing
as a material change, as proposed in
comment 10(f)–4.iv, would impose
significant operational challenges and
costs on banks in order to comply with
this provision. Specifically, 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
addition, commenters asserted that they
would be unable to identify customers
who are outside the ‘‘footprint’’ of a
branch and unsuccessfully attempt to
make a payment at the closed branch,
such as if the customer is traveling in a
different city. Furthermore, one
commenter noted that banks can
respond to a one-time complaint from a
customer impacted by a branch closing.
The Board is adopting comment 10(f)–
4.iv, but with clarification and
additional guidance based on the
comments and the Board’s further
consideration. In order to ease
compliance burden, the final comment
clarifies that a card issuer is not

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7713

required to determine whether a
customer ‘‘regularly makes payments’’ at
a particular branch. As noted by
commenters, certain banks and card
issuers may have other regulatory
obligations which require the
identification of and notification to
customers of a local bank branch. The
final comment is revised to provide an
example of a card issuer which chooses
to rely on the safe harbor for the late
payments on customer accounts which
it reasonably believes may be affected
by the branch closure.
Proposed comment 10(f)–4.v
illustrated an example of a material
change in the procedures for handling
cardholder payments. The Board did not
receive comments on this example, and
the final rule adopts comment 10(f)–4.v
as proposed.
The final rule includes new comment
10(f)–4.vi to address circumstances
when a card issuer which accepts
payment at a retail location makes a
material change in procedures for
handling cardholder payments 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.
Proposed comment 10(f)–5 clarified
that when an account is not eligible for
a grace period, imposing a finance
charge due to a periodic interest rate
does not constitute imposition of a
finance charge for a late payment for
purposes of § 226.10(f). Notwithstanding
the proposed rule, a card issuer may
impose a finance charge due to a
periodic interest rate in those
circumstances. The Board received no
significant comment addressing
comment 10(f)–5, which is adopted as
proposed.
Section 226.11 Treatment of Credit
Balances; Account Termination
11(c) Timely Settlement of Estate Debts
The Credit Card Act adds new TILA
Section 140A and requires that the
Board, in consultation with the Federal
Trade Commission and each other
agency referred to in TILA Section
108(a), to prescribe regulations requiring
creditors, with respect to credit card
accounts under an open-end consumer
credit plan, to establish procedures to
ensure that any administrator of an
estate can resolve the outstanding credit

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balance of a deceased accountholder in
a timely manner. 15 U.S.C. 1651. The
Board proposed to implement TILA
Section 140A in new § 226.11(c).
The final rule generally requires that
a card issuer adopt reasonable written
procedures designed to ensure that an
administrator of an estate of a deceased
accountholder can determine the
amount of and pay any balance on the
account. The final rule also has two
specific requirements which effectuate
the statute’s purpose. First, the final rule
requires a card issuer to disclose the
amount of the balance on the account in
a timely manner upon request by an
administrator. The final rule provides a
safe harbor of 30 days. Second, the final
rule places certain limitations on card
issuers regarding fees, annual
percentage rates, and interest.
Specifically, upon request by an
administrator for the balance amount, a
card issuer must not impose fees on the
account or increase any annual
percentage rate, except as provided by
the rule. In addition, a card issuer must
waive or rebate interest, including
trailing or residual interest, for any
payment in full received within 30 days
of disclosing a timely statement of
balance.
Proposed § 226.11(c)(1) set forth the
general rule requiring card issuers to
adopt reasonable procedures designed
to ensure that any administrator of an
estate of a deceased accountholder can
determine the amount of and pay any
balance on the decedent’s credit card
account in a timely manner. For clarity,
the Board proposed to interpret the term
‘‘resolve’’ for purposes of § 226.11(c) to
mean determine the amount of and pay
any balance on a deceased consumer’s
account. In addition, in order to ensure
that the rule applies consistently to any
personal representative of an estate who
has the duty to settle any estate debt, the
Board proposed to include ‘‘executor’’ in
proposed § 226.11(c). The Board stated
that TILA Section 140A is intended to
apply to any deceased accountholder’s
estate, regardless of whether an
administrator or executor is responsible
for the estate. In order to provide further
guidance, the Board clarifies that for
purposes of § 226.11(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.
Accordingly, the final rule removes the
reference to ‘‘executor’’ in § 226.11(c),
renumbers proposed comment 11(c)–1
as comment 11(c)–2, and adopts the
guidance on ‘‘administrator’’ in new
comment 11(c)–1.
As the Board discussed in the October
2009 Regulation Z Proposal, the Board

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recognized that some card issuers may
already have established procedures for
the resolution of a deceased
accountholder’s balance. The Board
believes a ‘‘reasonable procedures’’
standard would permit card issuers to
retain, to the extent appropriate,
procedures which may already be in
place, in complying with proposed
§ 226.11(c), as well as applicable state
and federal laws governing probate.
Consumer group commenters suggested
that the language of the general rule be
modified to require that card issuers
‘‘have and follow reasonable written
procedures’’ designed to ensure that an
administrator of an estate of a deceased
accountholder can determine the
amount of and pay any balance on the
account in a timely manner. The Board
is amending proposed § 226.11(c)(1) to
require that the reasonable policies and
procedures be written. The Board
believes that the suggested change to
add the word ‘‘follow’’ is unnecessary
because there are references throughout
Regulation Z and the Board’s other
regulations that require reasonable
policies and procedures without an
explicit instruction that they be
followed. In each of these instances, the
Board has expected and continues to
expect that these policies and
procedures will be followed. The final
rule adopts § 226.11(c)(1), which has
been renumbered § 226.11(c)(1)(i), as
amended.
The Board is renumbering proposed
§ 226.11(c)(2)(ii) as § 226.11(c)(1)(ii) in
order to clarify that § 226.11(c) does not
apply to the account of a deceased
consumer if a joint accountholder
remains on the account. Proposed
§ 226.11(c)(2)(ii) (renumbered as
§ 226.11(c)(1)(ii)) provided that a card
issuer may impose fees and charges on
a deceased consumer’s account if a joint
accountholder remains on the account.
Proposed comment 11(c)–3 clarified that
a card issuer may impose fees and
charges on a deceased consumer’s
account if a joint accountholder remains
on the account but may not impose fees
and charges on a deceased consumer’s
account if only an authorized user
remains on the account. Consumer
groups argued that the Board should
require card issuers to provide
documentary proof that another party to
the account is a joint accountholder,
and not just an authorized user, before
continuing to impose fees and charges
on a deceased consumer’s account.
Specifically, consumer groups raised the
concern that card issuers may attempt to
hold authorized users liable for account
balances. The Board notes, however,
that authorized users are not liable for

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the debts of a deceased accountholder or
the estate. The final rule adopts
proposed § 226.11(c)(2)(ii), which has
been renumbered § 226.11(c)(1)(ii), and
proposed comment 11(c)–3, which has
been renumbered as comment 11(c)–6
for organizational purposes.
Proposed comment 11(c)–1 provided
examples of reasonable procedures
consistent with proposed § 226.11(c).
The final rule adopts proposed
comments 11(c)–1.i–iv, which have
been renumbered as comments 11(c)–
2.i–iv, as proposed. 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. Commenters
raised privacy concerns of disclosing
financial information to third parties.
The Board believes a reasonable
procedure for verifying an
administrator’s status or authority is
consistent with § 226.11(c), without
significantly increasing administrative
burden on an administrator. The Board
also believes the benefit of greater
privacy protection outweighs the
additional burden. Two commenters
also requested that the Board permit
card issuers to require verification of a
customer’s death. The Board believes,
however, that this requirement is
unnecessary. Therefore, in response to
comments received, the Board adopts
new comment 11(c)–2.v to clarify that
card issuers are permitted to establish
reasonable procedures requiring
verification of an administrator’s
authority to act on behalf of an estate.
Commenters requested that the Board
provide 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 that the Board consider
additional methods for providing an
easily accessible point of contact for
estate administrators or family members
of deceased accountholders. For
example, a card issuer could include
contact information regarding deceased
accountholders on a dedicated link on
a creditor’s Web site or on the periodic
statement. One commenter suggested a
standardized form or format which an
administrator may use to register an
accountholder as deceased at multiple
card issuers. Another commenter argued

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that the examples for reasonable
procedures should address practical
procedures, and not ‘‘debt forgiveness.’’
Consumer groups believed the examples
in proposed comment 11(c)–1 did not
address the failure of creditors to
respond to an administrator’s inquiries
or correspondence. Consumer groups
recommended that the Board consider
additional procedures, such as
acknowledging receipt of an
administrator’s inquiry, providing
details regarding payoff, and providing
a payoff receipt. In response to
comments received, the Board adopts
new comment 11(c)–2.vi and 11(c)–2.vii
to provide additional guidance. New
comment 11(c)–2.vi clarifies that a card
issuer may designate a department,
business unit, or communication
channel for administrators in order to
expedite handling estate matters. New
comment 11(c)–2.vii clarifies 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.
For organizational purposes, the
Board has renumbered proposed
§ 226.11(c)(3) as § 226.11(c)(2) in the
final rule. Proposed § 226.11(c)(3)(i)
required a card issuer to disclose the
amount of the balance on the account in
a timely manner, upon request by the
administrator of the estate. The Board
believed a timely statement reflecting
the deceased accountholder’s balance is
necessary to assist administrators with
the settlement of estate debts. Consumer
groups urged the Board not to require a
formal request for a statement balance.
Instead, card issuers should be required
to act in good faith whenever informed
of a consumer’s death and the presence
of an estate administrator. One
commenter asked the Board to clarify
that the rule does not supplant state
probate laws and timelines for the
resolution of estates. Specifically, the
commenter argued that state probate law
accomplishes the goals of the statutory
provision and that compliance with
state probate requirements should be
explicitly stated as a reasonable
procedure for the timely settlement of
estates. The Board understands that
state probate procedures are wellestablished, and this final rule does not
relieve the card issuer of its obligations,
such as filing a claim, nor affect a
creditor’s rights, such as contesting a
claim rejection, under state probate
laws. The final rule adopts
§ 226.11(c)(3)(i), which has been

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renumbered as § 226.11(c)(2)(i), as
proposed with technical revisions.
Proposed § 226.11(c)(3)(ii) provided
card issuers with a safe harbor for
disclosing the balance amount in a
timely manner, stating that it would be
reasonable for a card issuer to provide
the balance on the account within 30
days of receiving a request by the
administrator of an estate. The Board
believes that 30 days is reasonable to
ensure that transactions and charges
have been accounted for and calculated
and to provide a written statement or
confirmation. The Board solicited
comment as to whether 30 days
provides creditors with sufficient time
to provide a statement of the balance on
the deceased consumer’s account.
Industry commenters and consumer
groups generally agreed that 30 days is
sufficient time to provide a timely
statement of balance on an account. One
industry commenter, however,
expressed concern that 30 days would
be insufficient and requested 45–60
days instead to ensure all charges were
processed. Based on the comments
received, the Board believes 30 days is
sufficient for a card issuer to provide a
timely statement of the balance amount.
The final rule adopts § 226.11(c)(3)(ii),
which has been renumbered as
§ 226.11(c)(2)(ii), as proposed with
technical revisions.
Proposed comment 11(c)–4
(renumbered as comment 11(c)–2)
clarified that a card issuer may receive
a request for the amount of the balance
on the account in writing or by
telephone call from the administrator of
an estate. If a request is made in writing,
such as by mail, the request is received
when the card issuer receives the
correspondence. No significant
comments were received on proposed
comment 11(c)–4, and it is adopted as
proposed with technical revisions and
renumbered as comment 11(c)–2 for
organizational purposes.
Proposed comment 11(c)–5
(renumbered as comment 11(c)–3)
provided guidance to card issuers in
complying with the requirement to
provide a timely statement of balance.
Card issuers may provide the amount of
the balance, if any, by a written
statement or by telephone. Proposed
comment 11(c)–5 also clarified that
proposed § 226.11(c)(3) (renumbered as
§ 226.11(c)(2)) would not preclude a
card issuer from providing the balance
amount to appropriate persons, other
than the administrator of an estate. For
example, the Board noted that the
proposed rule would not preclude a
card issuer, subject to applicable federal
and state laws, from providing a spouse
or family members who indicate that

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they will pay the decedent’s debts from
obtaining a balance amount for that
purpose. Proposed comment 11(c)–5
further clarified that proposed
§ 226.11(c)(3) (renumbered as
§ 226.11(c)(2)) does not relieve card
issuers of the requirements to provide a
periodic statement, under § 226.5(b)(2).
A periodic statement, under
§ 226.5(b)(2), may satisfy the
requirements of proposed § 226.11(c)(3)
(renumbered as § 226.11(c)(2)), 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 accountholder’s death.
The final rule revises proposed
comment 11(c)–5 to reference the date
of the balance request with regard to
using a periodic statement to satisfy the
requirements of new § 226.11(c)(2) and
renumbers proposed comment 11(c)–5
as comment 11(c)–3 for organizational
purposes.
Proposed § 226.11(c)(2)(i)
(renumbered as § 226.11(c)(3)(i))
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. As
stated in the October 2009 Regulation Z
Proposal, the Board believed that this
prohibition is necessary to provide
certainty for all parties as to the balance
amount and to ensure the timely
settlement of estate debts. 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 has not paid
the account balance within a specified
period of time. Consumer group
commenters opposed resuming fees and
charges because settling estates can be
time-consuming and an administrator
may not have authority to pay the
balance for some 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
has settled. Most industry commenters,
however, requested that card issuer 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 has
been 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

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could be required to provide an updated
statement upon subsequent request by
an administrator. One government
agency suggested that the Board
simplify the final rule by determining
the amount which can be collected from
an estate as the balance on the periodic
statement for the billing cycle during
which the accountholder died.
The Board is revising proposed
§ 226.11(c)(2), which has been
renumbered as § 226.11(c)(3), based on
the comments received and the Board’s
further consideration. New
§ 226.11(c)(3)(i) 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. The Board
believes that in order to best effectuate
the statute’s intent, it is appropriate to
limit fees or penalties on a deceased
consumer’s account which is closed or
frozen. For the purposes of § 226.11(c),
new § 226.11(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 § 226.55(b)(2).
New § 226.11(c)(3)(ii) requires card
issuers to waive or rebate trailing or
residual interest if the balance disclosed
pursuant to § 226.11(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, that 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. For
example, on March 1, a card issuer
receives a request from an administrator
for the amount of the balance on a
deceased consumer’s account. On
March 25, the card issuer provides an
administrator with a timely statement of
balance in response to the
administrator’s request. If the
administrator makes payment in full on
April 24, a card issuer must waive or
rebate any additional interest that
accrued on the balance between March
25 and April 24. However, if a card
issuer receives only a partial payment
on or before April 24 or receives
payment in full after April 24, a card
issuer is not required to waive or rebate
interest that accrued between March 25
and April 24. The Board believes the
requirement to waive or rebate trailing
or residual interest, when payment is
received within the 30-day period
following disclosure of the balance,
provides an administrator with certainty

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as to the amount required to pay the
entire account balance and assists
administrators in settling the estate. The
Board believes a 30-day period is
generally sufficient for an administrator
to arrange for payment.. The Board
notes that if an administrator is unable
to pay the card issuer before the 30-day
period following the timely statement of
balance has elapsed, an administrator is
permitted to make subsequent requests
for an updated statement of balance. In
order to provide additional guidance,
the Board is adopting new comment
11(c)–5, which provides an illustrative
example.
Proposed comment 11(c)–2 clarified
that a card issuer may impose finance
charges based on balances for days that
precede the date on which the creditor
receives a request pursuant to proposed
§ 226.11(c)(3). No comments were
received on proposed comment 11(c)–2,
and it is adopted as proposed with
technical revision and renumbered as
comment 11(c)–4 for organizational
purposes.
Section 226.12
Provisions

Special Credit Card

Section 226.13

Billing Error Resolution

Comment 12(b)–3 states that a card
issuer must investigate claims in a
reasonable manner before imposing
liability for an unauthorized use, and
sets forth guidance on conducting an
investigation of a claim. Comment 13(f)–
3 contains similar guidance for a
creditor investigating a billing effort.
The January 2009 Regulation Z Rule
amended both comments to specifically
provide that a card issuer (or creditor)
may not require a consumer to submit
an affidavit or to file a police report as
a condition of investigating a claim. In
the May 2009 Regulation Z Proposed
Clarifications, the Board proposed to
clarify that the card issuer (or creditor)
could, however, require a consumer’s
signed statement supporting the alleged
claim. Such a signed statement may be
necessary to enable the card issuer to
provide some form of certification
indicating that the cardholder’s claim is
legitimate, for example, to obtain
documentation from a merchant
relevant to a claim or to pursue
chargeback rights. Accordingly, the
Proposed Clarifications would have
amended comments 12(b)–3 and 13(f)–
3 to reflect the ability of the card issuer
(or creditor) to require a consumer
signed statement for these types of
circumstances.
The Board received one comment in
support of the proposed clarification.
This industry commenter stated that
expressly permitting a signature

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requirement would facilitate expedited
resolutions of error claims. The final
rule adopts the clarifications in
comments 12(b)–3 and 13(f)–3, as
proposed.
Section 226.16 Advertising
Although § 226.16 was republished in
its entirety, the Board only solicited
comment on proposed §§ 226.16(f) and
(h), as the other sections of § 226.16
were previously finalized in the January
2009 Regulation Z Rule. Therefore, the
Board is only addressing comments
received on §§ 226.16(f) and (h).
16(f) Misleading Terms
As discussed in the section-by-section
analysis for § 226.5(a)(2)(iii), the Board
did not receive any comments regarding
§ 226.16(f), which is adopted as
proposed.
16(h) Deferred Interest or Similar Offers
In the May 2009 Regulation Z
Proposed Clarifications, the Board
proposed to use its authority under
TILA Section 143(3) to add a new
§ 226.16(h) to address the Board’s
concern that the disclosures currently
required under Regulation Z may not
adequately inform consumers of the
terms of deferred interest offers. 15
U.S.C. 1663(3). The Board republished
this proposal in the October 2009
Regulation Z Proposal. The proposed
rules regarding deferred interest would
have incorporated many of the same
formatting concepts that were
previously adopted for promotional
rates under § 226.16(g). Specifically, the
Board proposed to require that the
deferred interest period be disclosed in
immediate proximity to each statement
regarding interest or payments during
the deferred interest period. The Board
also proposed that certain information
about the terms of the deferred interest
offer be disclosed in a prominent
location closely proximate to the first
statement regarding interest or
payments during the deferred interest
period. These proposals are discussed in
more detail below.
The Board received broad support
from both consumer group and industry
commenters for its proposal to
implement disclosure requirements for
advertisements of deferred interest
offers. Consumer group commenters,
however, believed that the Board should
go further and ban ‘‘no interest’’
advertising as deceptive when used in
conjunction with an offer that could
potentially result in the consumer being
charged interest reaching back to the
date of purchase. The Board believes
that deferred interest plans can provide
benefits to consumers who properly

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understand how the product is
structured. Therefore, the Board
believes the appropriate approach to
addressing deferred interest offers is to
ensure that important information about
these offers is provided to consumers
through the disclosure requirements
proposed in § 226.16(h) instead of
banning the term ‘‘no interest’’ in
advertisements of deferred interest
plans.

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16(h)(1) Scope
Similar to the rules applicable to
promotional rates under § 226.16(g), the
Board proposed that the rules related to
deferred interest offers under proposed
§ 226.16(h) be applicable to any
advertisement of such offers for openend (not home-secured) plans. In
addition, the proposed rules applied to
promotional materials accompanying
applications or solicitations made
available by direct mail or
electronically, as well as applications or
solicitations that are publicly available.
The Board did not receive any
significant comments to § 226.16(h)(1),
which is adopted as proposed.
16(h)(2) Definitions
In the May 2009 Regulation Z
Proposed Clarifications, the Board
proposed to define ‘‘deferred interest’’ in
new § 226.16(h)(2) as finance charges on
balances or transactions that a consumer
is not obligated to pay if those balances
or transactions are paid in full by a
specified date. The term would not,
however, include finance charges the
creditor allows a consumer to avoid in
connection with a recurring grace
period. Therefore, an advertisement
including information on a recurring
grace period that could potentially
apply each billing period, would not be
subject to the additional disclosure
requirements under § 226.16(h).
The Board also proposed in comment
16(h)–1 to clarify that deferred interest
offers would not include offers that
allow a consumer to defer payments
during a specified time period, but
where the consumer is not obligated
under any circumstances for any
interest or other finance charges that
could be attributable to that period.
Furthermore, proposed comment 16(h)–
1 specified that deferred interest offers
would not include zero percent APR
offers where a consumer is not obligated
under any circumstances for interest
attributable to the time period the zero
percent APR was in effect, although
such offers may be considered
promotional rates under
§ 226.16(g)(2)(i).
Moreover, the Board proposed to
define the ‘‘deferred interest period’’ for

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purposes of proposed § 226.16(h) as the
maximum period from the date the
consumer becomes obligated for the
balance or transaction until the
specified date that the consumer must
pay the balance or transaction in full in
order to avoid finance charges on such
balance or transaction. To clarify the
meaning of deferred interest period, the
Board proposed comment 16(h)–2 to
state that the advertisement need not
include the end of an informal ‘‘courtesy
period’’ in disclosing the deferred
interest period. The Board did not
receive any significant comments on the
proposed definitions under
§ 226.16(h)(2) and associated
commentary. Consequently,
§ 226.16(h)(2) and comment 16(h)–2 are
adopted as proposed. Comment 16(h)–1
is adopted as proposed with one
technical amendment.
16(h)(3) Stating the Deferred Interest
Period
General rule. The Board proposed
§ 226.16(h)(3) to require that
advertisements of deferred interest or
similar plans disclose the deferred
interest period clearly and
conspicuously in immediate proximity
to each statement of a deferred interest
triggering term. Proposed § 226.16(h)(3)
also required advertisements that use
the phrase ‘‘no interest’’ or similar term
to describe the possible avoidance of
interest obligations under the deferred
interest or similar program to state ‘‘if
paid in full’’ in a clear and conspicuous
manner preceding the disclosure of the
deferred interest period. For example, as
described in proposed comment 16(h)–
7, an advertisement may state ‘‘no
interest if paid in full within 6 months’’
or ‘‘no interest if paid in full by
December 31, 2010.’’ The Board
proposed to require these disclosures
because of concerns that the statement
‘‘no interest,’’ in the absence of
additional details about the applicable
conditions of the offer may confuse
consumers who might not understand
that they need to pay their balances in
full by a certain date in order to avoid
the obligation to pay interest.
Commenters supported the Board’s
proposal, and § 226.16(h)(3) and
comment 16(h)–7 are adopted as
proposed.
Immediate proximity. Proposed
comment 16(h)–3 provided guidance on
the meaning of ‘‘immediate proximity’’
by establishing a safe harbor for
disclosures made in the same phrase.
The guidance was identical to the safe
harbor adopted previously for
promotional rates. See comment 16(g)–
2. Therefore, if the deferred interest
period is disclosed in the same phrase

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7717

as each statement of a deferred interest
triggering term (for example, ‘‘no interest
if paid in full within 12 months’’ or ‘‘no
interest if paid in full by December 1,
2010’’ the deferred interest period would
be deemed to be in immediate proximity
to the statement.
Industry commenters were supportive
of the Board’s approach. Consumer
group commenters suggested that the
safe harbor require that the deferred
interest period be adjacent to or
immediately before or after the
triggering term instead of in the same
phrase. As the Board discussed in
adopting a similar safe harbor for
promotional rates, the Board believes
that advertisers should be provided with
some flexibility to make this disclosure.
For example, if the deferred interest
offer related to the purchase of a specific
item, the advertisement might state, ‘‘no
interest on this refrigerator if paid in full
within 6 months.’’ Therefore, the Board
is adopting comment 16(h)–3 as
proposed.
Clear and conspicuous standard. The
Board proposed to amend comment 16–
2.ii to provide that advertisements
clearly and conspicuously disclose the
deferred interest period only if the
information is equally prominent to
each statement of a deferred interest
triggering term. Under proposed
comment 16–2.ii, if the disclosure of the
deferred interest period is the same type
size as the statement of the deferred
interest triggering term, it would be
deemed to be equally prominent.
The Board also proposed to clarify in
comment 16–2.ii that the equally
prominent standard applies only to
written and electronic advertisements.
This approach is consistent with the
treatment of written and electronic
advertisements of promotional rates.
The Board also noted that disclosure of
the deferred interest period under
§ 226.16(h)(3) for non-written, nonelectronic advertisements, while not
required to meet the specific clear and
conspicuous standard in comment 16–
2.ii would nonetheless be subject to the
general clear and conspicuous standard
set forth in comment 16–1.
Consumer group commenters
recommended that the Board apply the
equally prominent standard to all
advertisements instead of only to
written and electronic advertisements.
As the Board discussed in its proposal,
because equal prominence is a difficult
standard to measure outside the context
of written and electronic
advertisements, the Board believes that
the guidance on clear and conspicuous
disclosures set forth in proposed
comment 16–2.ii, should apply solely to
written and electronic advertisements.

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16(h)(4) Stating the Terms of the
Deferred Interest Offer
In order to ensure that consumers
notice and fully understand certain
terms related to a deferred interest offer,
the Board proposed that certain
disclosures be required to be in a
prominent location closely proximate to
the first listing of a statement of ‘‘no
interest,’’ ‘‘no payments,’’ or ‘‘deferred
interest’’ or similar term regarding
interest or payments during the deferred
interest period. In particular, the Board
proposed to require a statement that if
the balance or transaction is not paid
within the deferred interest period,
interest will be charged from the date
the consumer became obligated for the
balance or transaction. The Board also
proposed to require a statement, if
applicable, that interest can also be
charged from the date the consumer
became obligated for the balance or
transaction if the consumer’s account is
in default prior to the end of the
deferred interest period. To facilitate
compliance with this provision, the
Board proposed model language in
Sample G–24 in Appendix G.
Prominent location closely prominent.
To be consistent with the requirement
in § 226.16(g)(4) that terms be in a
‘‘prominent location closely proximate
to the first listing,’’ the Board proposed
guidance in comments 16(h)–4 and
16(h)–5 similar to comments 16(g)–3
and 16(g)–4. As a result, proposed
comment 16(h)–4 provided that the
information required under proposed
§ 226.16(h)(4) that is in the same
paragraph as the first listing of a
statement of ‘‘no interest,’’ ‘‘no
payments, ‘‘deferred interest’’ or similar
term regarding interest or payments
during the deferred interest period
would have been deemed to be in a
prominent location closely proximate to
the statement. Similar to comment
16(g)–3 for promotional rates,
information appearing in a footnote
would not be deemed to be in a
prominent location closely proximate to
the statement.
Some consumer group commenters
expressed opposition to the safe harbor
for ‘‘prominent location closely
proximate,’’ and suggested that a
disclosure be deemed closely proximate
only if it is side-by-side with or
immediately under or above the
triggering phrase. The Board believes
that the safe harbor under proposed
comment 16(h)–4 strikes the appropriate
balance of ensuring that certain
information concerning deferred interest
or similar programs is located near the
triggering phrase but also providing
sufficient flexibility for advertisers. For

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this reason, and for consistency with a
similar safe harbor in comment 16(g)–3
for promotional rates, comment 16(h)–4
is adopted as proposed.
First listing. Proposed comment
16(h)–5 further provided that the first
listing of a statement of ‘‘no interest,’’
‘‘no payments,’’ or deferred interest or
similar term regarding interest or
payments during the deferred interest
period is the most prominent listing of
one of these statements on the front side
of the first page of the principal
promotional document. The proposed
comment borrowed the concept of
‘‘principal promotional document’’ from
the Federal Trade Commission’s
definition of the term under its
regulations promulgated under the Fair
Credit Reporting Act. 16 CFR 642.2(b).
Under the proposal, if one of these
statements is not listed on the principal
promotional document or there is no
principal promotional document, the
first listing of one of these statements
would be deemed to be the most
prominent listing of the statement on
the front side of the first page of each
document containing one of these
statements. The Board also proposed
that the listing with the largest type size
be a safe harbor for determining which
listing is the most prominent. In the
proposed comment, the Board also
noted that consistent with comment
16(c)–1, a catalog or other multiple-page
advertisement would have been
considered one document for these
purposes.
Consumer group commenters
suggested that instead of requiring the
disclosures required under
§ 226.16(h)(4) to be closely proximate to
the first listing of the triggering term on
the principal promotional document,
the disclosures should be closely
proximate to the first listing of the
triggering term on every document in a
mailing. The Board believes that the
guidance on what constitutes the ‘‘first
listing’’ should be the same as the
approach taken for comment 16(g)–4 for
promotional rates. Therefore, comment
16(h)–5 is adopted as proposed.
Segregation. The Board also proposed
comment 16(h)–6 to clarify that the
information the Board proposed to
require under § 226.16(h)(4) would not
need to be segregated from other
information the advertisement discloses
about the deferred interest offer. This
may include triggered terms that the
advertisement is required to disclose
under § 226.16(b). The comment is
consistent with the Board’s approach on
many other required disclosures under
Regulation Z. See comment 5(a)–2.
Moreover, the Board believes flexibility
is warranted to allow advertisers to

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provide other information that may be
essential for the consumer to evaluate
the offer, such as a minimum purchase
amount to qualify for the deferred
interest offer. The Board received no
comments on proposed comment 16(h)–
6, and the comment is adopted as
proposed.
Clear and conspicuous disclosure.
The Board proposed to amend comment
16–2.ii to require equal prominence
only for the disclosure of the
information required under
§ 226.16(h)(3). Therefore, disclosures
under proposed § 226.16(h)(4) are not
required to be equally prominent to the
first listing of the deferred interest
triggering statement. Consumer group
commenters, however, recommended
that these disclosures also be required to
be equally prominent to the triggering
statement. As the Board discussed in the
May 2009 Regulation Z Proposed
Clarifications, the Board believes that
requiring equal prominence to the
triggering statement for this information
would render an advertisement difficult
to read and confusing to consumers due
to the amount of information the Board
is requiring under § 226.16(h)(4).
Therefore, the Board declines to make
these suggested amendments to
comment 16–2.ii.
Non-written, non-electronic
advertisements. As discussed above in
the section-by-section analysis to
§ 226.16(h)(1), the requirements of
§ 226.16(h) apply to all advertisements,
including non-written, non-electronic
advertisements. To provide advertisers
with flexibility, the Board proposed that
only written or electronic
advertisements be subject to the
requirement to place the terms of the
offer in a prominent location closely
proximate to the first listing of a
statement of ‘‘no interest,’’ ‘‘no
payments,’’ or ‘‘deferred interest’’ or
similar term regarding interest or
payments during the deferred interest
period.
As with their comments regarding
clear and conspicuous disclosures
under § 226.16(h)(3), consumer group
commenters suggested that the specific
formatting rules under § 226.16(h)(4)
should apply to non-written, nonelectronic advertisements. Given the
difficulty of applying these standards to
non-written, non-electronic
advertisements and the time and space
constraints of such media, the Board
believes this exclusion is appropriate.
Consequently, for non-written, nonelectronic advertisements, the
information required under
§ 226.16(h)(4) must be included in the
advertisement, but is not subject to any
proximity or formatting requirements

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other than the general requirement that
information be clear and conspicuous,
as contemplated under comment 16–1.

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16(h)(5) Envelope Excluded
The Board proposed to exclude
envelopes or other enclosures in which
an application or solicitation is mailed,
or banner advertisements or pop-up
advertisements linked to an electronic
application or solicitation from the
requirements of § 226.16(h)(4).
Consumer group commenters objected
to the Board’s proposal to exempt
envelopes, banner advertisements, and
pop-up advertisements from these
requirements. One industry commenter
recommended that the exception in
§ 226.16(h)(5) should be amended to
include the requirements of
§ 226.16(h)(3).
Given the limited space that
envelopes, banner advertisements, and
pop-up advertisements have to convey
information, the Board believes the
burden of providing the information
proposed under § 226.16(h)(4) on these
types of communications exceeds any
benefit. It is the Board’s understanding
that interested consumers generally look
at the contents of an envelope or click
on the link in a banner advertisement or
pop-up advertisement in order to learn
more about the specific terms of an offer
instead of relying solely on the
information on an envelope, banner
advertisement, or pop-up advertisement
to become informed about an offer. The
Board, however, does not believe the
disclosures required by § 226.16(h)(3)
are as burdensome as those required by
§ 226.16(h)(4) and that the exception,
should not, therefore, be extended to the
disclosures required under
§ 226.16(h)(3). Thus, § 226.16(h)(5) is
adopted as proposed.
Appendix G
As discussed in the supplementary
information to §§ 226.7(b)(14) and
226.16(h), the Board proposed to adopt
model language for the disclosures
required to be given in connection with
deferred interest or similar programs in
Samples G–18(H) and G–24. Proposed
Sample G–24 contained two model
clauses, one for use in connection with
credit card accounts under an open-end
(not home-secured) consumer credit
plan, and one for use in connection with
other open-end (not home-secured)
consumer credit plans. The model
clause for credit card issuers reflects the
fact that, under those rules, an issuer
may only revoke a deferred or waived
interest program if the consumer’s
payment is more than 60 days late. The
Board also proposed to add a new
comment App. G–12 to clarify which

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creditors should use each of the model
clauses in proposed Sample G–24.
As discussed in the section-by-section
analysis to § 226.7(b)(14), the Board is
adopting Sample G–18(H) as proposed.
Furthermore, the Board did not receive
comment on the model language in
Sample G–24. Therefore, comment App.
G–12 and Sample G–24 are also adopted
as proposed.
Section 226.51

Ability To Pay

51(a) General Ability To Pay
In the October 2009 Regulation Z
Proposal the Board proposed to
implement new TILA Section 150, as
added by Section 109 of the Credit Card
Act, prohibiting a card issuer from
opening a credit card account for a
consumer, or increasing the credit limit
applicable to a credit card account,
unless the card issuer considers the
consumer’s ability to make the required
payments under the terms of such
account, in new § 226.51(a). 15 U.S.C.
1665e. Proposed § 226.51(a)(1)
contained the substance of the rule in
TILA Section 150. Proposed
§ 226.51(a)(2) required card issuers to
use a reasonable method for estimating
the required payments under
§ 226.51(a)(1) and provided a safe
harbor for such estimation.
51(a)(1) Consideration of Ability To Pay
Proposed § 226.51(a)(1) generally
followed the language provided in TILA
Section 150 with two clarifying
modifications. As detailed in the
October 2009 Regulation Z Proposal, the
Board proposed to interpret the term
‘‘required payments’’ to mean the
required minimum periodic payment
since the minimum periodic payment is
the amount that a consumer is required
to pay each billing cycle under the
terms of the contract with the card
issuer. In addition, proposed
§ 226.51(a)(1) provided 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. Proposed § 226.51(a)(1) also
required card issuers to have reasonable
policies and procedures in place to
consider this information.
While consumer group commenters
and some industry commenters agreed
that a consideration of ability to pay
should include a review of a consumer’s
income or assets and current
obligations, many industry commenters
asserted that the Credit Card Act did not
compel this interpretation. These
commenters stated that there are other
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predictive of a consumer’s ability to pay
than information on a consumer’s
income or assets, such as payment
history and credit scores. The Board
believes that there indeed may be other
factors that are useful for card issuers in
evaluating a consumer’s ability to pay,
and for this reason, the Board had
proposed comment 51(a)–1 to clarify
that card issuers may also consider
other factors that are consistent with the
Board’s Regulation B (12 CFR Part 202).
However, the Board still believes a
proper evaluation of a consumer’s
ability to pay must include a review of
a consumer’s income or assets and
obligations in order to give card issuers
a more complete picture of a consumer’s
current financial state. As a result, the
Board is adopting § 226.51(a)(1) as
§ 226.51(a)(1)(i), largely as proposed.
Industry group commenters also
detailed challenges with respect to
collecting income or asset information
directly from consumers in certain
contexts. Several commenters expressed
concern regarding the lack of privacy for
consumers in supplying income or asset
information if a consumer applies for a
credit card at point-of-sale. These
commenters also suggested that
requesting consumers to update income
or asset information when increasing
credit lines also presented several
issues, especially at point-of-sale.
Unlike a new account opening, there is
generally no formal application for a
credit line increase. Therefore, card
issuers and retailers may need to
develop new procedures to obtain this
information. For point-of-sale credit line
increases, card issuers and retailers
believe this will negatively impact the
consumer’s experience because a
consumer may need to take extra steps
to complete a sale, which may lead
consumers to abandon the purchase.
Other commenters noted that requesting
consumers to update income or asset
information for credit line increases
may foster an environment that
encourages phishing scams as
consumers may be required to
distinguish between legitimate requests
for updated information from fraudulent
requests. Some industry commenters
also suggested that the Board provide a
de minimis exception for which a card
issuer need not consider income or asset
information.
Given these concerns, the Board is
clarifying in comment 51(a)–4, which
the Board is renumbering as comment
51(a)(1)–4 for organizational purposes,
that card issuers may obtain income or
asset information from several sources,
similar to comment 51(a)–5
(renumbered as 51(a)(1)–5) regarding
obligations. In addition to collecting this

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information from the consumer directly,
in connection with either this credit
card account or any other financial
relationship the card issuer or its
affiliates has with the consumer, card
issuers may also rely on information
from third parties, subject to any
applicable restrictions on information
sharing. Furthermore, the Board is
aware of various models developed to
estimate income or assets. The Board
believes that empirically derived,
demonstrably and statistically sound
models that reasonably estimate a
consumer’s income or assets may
provide information as valid as a
consumer’s statement of income or
assets. Therefore, comment 51(a)(1)–4
states that card issuers may use
empirically derived, demonstrably and
statistically sound models that
reasonably estimate a consumer’s
income or assets.
Moreover, the Board is not providing
a de minimis exception for considering
a consumer’s income or assets. The
Board is concerned that any de minimis
amount chosen could still have a
significant impact on a particular
consumer, depending on the consumer’s
financial state. For example, subprime
credit card accounts with relatively
‘‘small’’ credit lines may still be difficult
for certain consumers to afford.
Suggesting that these card issuers may
simply avoid consideration of a
consumer’s income or assets may be
especially harmful for consumers in this
market segment.
Consumer group commenters
suggested that the Board include more
guidance on how card issuers must
evaluate a consumer’s income or assets
and obligations. While consumer group
commenters did not recommend a
specific debt-to-income ratio or any
other particular quantitative measures,
they suggested that card issuers be
required to consider a debt-to-income
ratio and a consumer’s disposable
income. The Board’s proposal required
card issuers to have reasonable policies
and procedures in place to consider this
information. To provide further
guidance for card issuers, the Board is
adopting a new § 226.51(a)(1)(ii) to state
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, § 226.51(a)(1)(ii) provides
that it would be unreasonable for a card
issuer to not review any information
about a consumer’s income, assets, or
current obligations, or to issue a credit

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card to a consumer who does not have
any income or assets.
Consumer group commenters further
suggested that the language be modified
to require that card issuers ‘‘have and
follow reasonable written policies and
procedures’’ to consider a consumer’s
ability to pay. The Board is moving the
requirement that card issuers establish
and maintain reasonable policies and
procedures to new § 226.51(a)(1)(ii) and
amending the provision to require that
the reasonable policies and procedures
be written. The Board believes that the
suggested change to add the word
‘‘follow,’’ however, is unnecessary.
There are references throughout
Regulation Z and the Board’s other
regulations that require reasonable
policies and procedures without an
explicit instruction that they be
followed. In each of these instances, the
Board has expected and continues to
expect that these policies and
procedures will be followed. Similarly,
the Board has the same expectation with
§ 226.51(a)(1)(ii).
As noted above, proposed comment
51(a)–1 clarified 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.
One industry commenter suggested that
the Board amend the comment to
include a reference to consumer reports,
which include credit reports. The Board
is adopting proposed comment 51(a)–1
as comment 51(a)(1)–1 with this
suggested change.
Proposed comment 51(a)–2 clarified
that in considering a consumer’s ability
to pay, a card issuer must base the
consideration on facts and
circumstances known to the card issuer
at the time the consumer applies to
open the credit card account or when
the card issuer considers increasing the
credit line on an existing account. This
guidance is similar to comment
34(a)(4)–5 addressing a creditor’s
requirement to consider a consumer’s
repayment ability for certain closed-end
mortgage loans based on facts and
circumstances known to the creditor at
loan consummation. Several industry
commenters asked whether this
comment required card issuers to
update any income or asset information
the card issuer may have on a consumer
prior to a credit line increase on an
existing account. The Board believes
that card issuers should be required to
update a consumer’s income or asset
information, similar to how card issuers
generally update information on a
consumer’s obligations, prior to
considering whether to increase a
consumer’s credit line. This will

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prevent the card issuer from making an
evaluation of a consumer’s ability to
make the required payments based on
stale information. Consistent with the
Board’s changes to comment 51(a)–4
(adopted as 51(a)(1)–4), as discussed
below, card issuers have several options
to obtain updated income or asset
information. Proposed comment 51(a)–2
is adopted as comment 51(a)(1)–2.
Furthermore, since credit line
increases can occur at the request of a
consumer or through a unilateral
decision by the card issuer, proposed
comment 51(a)–3 clarified that
§ 226.51(a) applies in both situations.
Consumer group commenters suggested
that credit line increases should only be
granted upon the request of a consumer.
The Board believes that if a card issuer
conducts the proper evaluation prior to
a credit line increase, such increases
should not be prohibited simply
because the consumer did not request
the increase. The consumer is still in
control as to how much of the credit
line to ultimately use. Proposed
comment 51(a)–3 is adopted as
comment 51(a)(1)–3, with a minor nonsubstantive wording change.
Proposed comment 51(a)–4 provided
examples of assets and income the card
issuer may consider in evaluating a
consumer’s ability to pay. As discussed
above, in response to comments on
issues related to collecting income or
asset information directly from
consumers, the Board is amending
comment 51(a)–4 (renumbered as
51(a)(1)–4) to provide a parallel
comment to comment 51(a)–5
(renumbered as 51(a)(1)–5) regarding
obligations. Specifically, the Board is
clarifying that card issuers are not
obligated to obtain income or asset
information directly from a consumer.
Card issuers may also obtain this
information through third parties as
well as empirically derived,
demonstrably and statistically sound
models that reasonably estimates a
consumer’s income or assets. The Board
believes that, to the extent that card
issuers are able to obtain information on
a consumer’s income or assets through
means other than directly from the
consumer, card issuers should be
provided with flexibility.
The Board also proposed comment
51(a)–5 to clarify 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. Commenters were
supportive of this comment, and the
comment is adopted as proposed, with
one addition. Industry commenters
requested that the Board clarify that in
evaluating a consumer’s current open-

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end obligations, card issuers should not
be required to assume such obligations
are fully utilized. The Board agrees. In
contrast to the Board’s safe harbor in
estimating the minimum payments for
the credit account for which the
consumer is applying, the card issuer
will have information on the consumer’s
historic utilization rates for other
obligations. With respect to the credit
account for which the consumer is
applying, the card issuer has no
information as to how the consumer
plans to use the account, and
assumption of full utilization is thus
appropriate in that context. Moreover,
while credit limit information is widely
reported in consumer reports, there are
still instances where such information is
not reported. Furthermore, the Board is
concerned that assuming full utilization
of all open-end credit lines could result
in an anticompetitive environment
wherein card issuers raise credit limits
on existing accounts in order to prevent
a consumer from obtaining any new
credit cards. For these reasons,
proposed comment 51(a)–5 is amended
to provide that in evaluating a
consumer’s current obligations to
determine the consumer’s ability to
make the required payments, the card
issuer need not assume that any credit
line is fully utilized. In addition, the
comment has been renumbered as
comment 51(a)(1)–5.
Several industry commenters
requested that the Board clarify that for
joint accounts, a card issuer may
consider the ability of both applicants or
accountholders to make the required
payments, instead of considering the
ability of each consumer individually.
In response, the Board is adopting new
comment 51(a)(1)–6 to permit card
issuers to consider joint applicants or
joint accountholders collectively.
Moreover, as discussed in the October
2009 Regulation Z Proposal, the Board
did not propose to require card issuers
to verify information before an account
is opened or credit line is increased for
several reasons. The Board noted that
TILA Section 150 does not require
verification of a consumer’s ability to
make required payments and that
verification can be burdensome for both
consumers and card issuers, especially
when accounts are opened at point of
sale or by telephone. Furthermore, as
discussed in the October 2009
Regulation Z Proposal, the Board stated
its belief that because credit card
accounts are generally unsecured, card
issuers will be motivated to verify
information when either the information
supplied by the applicant is
inconsistent with the data the card
issuers already have or obtain on the

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consumer or when the risk in the
amount of the credit line warrants such
verification.
Many industry commenters expressed
support for the Board’s approach to
provide card issuers with flexibility to
determine instances when verification
might be necessary and to refrain from
strictly requiring verification or
documentation in all instances. In
contrast, consumer group commenters
opposed this approach, stating that
while there is no widespread evidence
of income inflation in the credit card
market, such problems do occur. One
federal financial regulator commenter
suggested that verification could be
required in certain instances, such as
when a consumer does not have a large
credit file or when the credit line is
large. The Board believes that given the
inconvenience to consumers detailed in
the October 2009 Regulation Z Proposal
in providing documentation and the
lack of evidence currently that
consumers’ incomes have been inflated
in the credit card market on a
widespread basis, a strict verification
should not be required at this time.
51(a)(2) Minimum Periodic Payments
Under proposed § 226.51(a)(2)(i), card
issuers would be required to use a
reasonable method for estimating the
required minimum periodic payments.
Proposed § 226.51(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.
Consumer group commenters and
many industry commenters generally
agreed with the Board’s approach and
proposed safe harbor. A federal
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commenter stated that the Board’s
emphasis on the minimum periodic
payments was misplaced. The federal
financial regulator commenter suggested
that instead of considering a consumer’s
ability to make the minimum periodic
payments based on full utilization of the
credit line, the commenter
recommended that card issuers be
required to consider a consumer’s
ability to pay the entire credit line over
a reasonable period of time, such as a
year. The Credit Card Act requires
evaluation of a consumer’s ability to
make the ‘‘required payments.’’ Unless
the terms of the contract provide
otherwise, repayment of the balance on
a credit card account over one year is
not required. As discussed in the
October 2009 Regulation Z Proposal, the
minimum periodic payment is generally
the amount that a consumer is required
to pay each billing cycle under the
terms of the contract. As a result, the
Board believes that requiring card
issuers to consider the consumer’s
ability to make the minimum periodic
payment is the most appropriate
interpretation of the requirements of the
Credit Card Act.
With respect to the Board’s proposed
safe harbor approach, some industry
commenters suggested that the Board
permit card issuers to estimate
minimum periodic payments based on
an average utilization rate for the
product offered to the consumer. In the
October 2009 Regulation Z Proposal, the
Board acknowledged that requiring card
issuers to estimate minimum periodic
payments based on full utilization of the
credit line could have the effect of
overstating the consumer’s likely
required payments. The Board believes,
however, that since card issuers may not
know how a particular consumer may
use the account, and the issuer is
qualifying the consumer for a certain
credit line, of which the consumer will
have full use, an assumption that the
entire credit line will be used is a
proper way to estimate the consumer’s
payments under the safe harbor.
Furthermore, the Board notes that the
regulation requires that a card issuer use
a reasonable method to estimate
payments, and that § 226.51(a)(2)(ii)
merely provides a safe harbor for card
issuers to comply with this standard,
but that it may not be the only
permissible way to comply with
§ 226.51(a)(2)(i). Section 226.51(a)(2)(ii)
is therefore adopted as proposed with
one minor clarifying change.
As noted above, the proposed safe
harbor under § 226.51(a)(2)(ii) required
an issuer to use a minimum payment
formula employed by the issuer for the
product the issuer is considering

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offering to the consumer or, in the case
of an existing account, the minimum
payment formula that currently applies
to that account. The Board is adding
new comment 51(a)(2)–1 to clarify 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.
Proposed § 226.51(a)(2)(ii) 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. The Board is adopting a new
comment to clarify this provision. 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 postpromotional rate to estimate interest
charges.
As discussed in the October 2009
Regulation Z Proposal, the Board’s
proposed safe harbor further provided
that if the minimum payment formula
includes fees, the card issuer could
assume that no fees have been charged
because the Board believed that
estimating the amount of fees that a
typical consumer might incur could be
speculative. Consumer group
commenters suggested that the Board
amend the safe harbor to require the
addition of mandatory fees as such fees
are not speculative. The Board agrees.
As a result, § 226.51(a)(2)(ii) requires
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. In addition, the Board is
adopting a new comment 51(a)(2)–3 to
provide guidance as to what types of
fees are considered mandatory fees.
Specifically, the comment 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.
51(b) Rules Affecting Young Consumers
The Board proposed in the October
2009 Regulation Z Proposal to
implement new TILA Sections 127(c)(8)
and 127(p), as added by Sections 301
and 303 of the Credit Card Act,

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respectively, in § 226.51(b). Specifically,
proposed § 226.51(b)(1) provided that a
card issuer may not open a credit card
account under an open-end (not homesecured) consumer credit plan for a
consumer less than 21 years old, unless
the consumer submits a written
application and provides either a signed
agreement of a cosigner, guarantor, or
joint applicant pursuant to
§ 226.51(b)(1)(i) or financial information
consistent with § 226.51(b)(1)(ii). The
Board proposed § 226.51(b)(2) to state
that no increase may be made in the
amount of credit authorized to be
extended under a credit card account for
which an individual has assumed joint
liability pursuant to proposed
§ 226.51(b)(1)(i) for debts incurred by
the consumer in connection with the
account before the consumer attains the
age of 21, unless that individual
approves in writing, and assumes joint
liability for, such increase.
As discussed in the October 2009
Regulation Z Proposal, proposed
§ 226.51(b) generally followed the
statutory language with modifications to
resolve ambiguities in the statute and to
improve readability and consistency
with § 226.51(a). While many of these
proposed changes did not generate
much comment, certain of the Board’s
proposed modifications did prompt
suggestions from commenters. First,
consumer group commenters
maintained that the Board’s proposed
language to limit the scope of
§ 226.51(b)(1) to credit card accounts
only was not consistent with the
language in TILA Section 127(c)(8)(A).
For all the reasons set forth in the
October 2009 Regulation Z Proposal,
however, the Board believes that the
intent of TILA Section 127(c)(8), read as
a whole, was to apply these
requirements only to credit card
accounts. Furthermore, as discussed in
the October 2009 Regulation Z Proposal,
limiting the scope of § 226.51(b)(1) to
credit card accounts only is consistent
with the treatment of the related
provision in TILA Section 127(p)
regarding credit line increases, which
applies solely to credit card accounts.
Therefore, § 226.51(b)(1) will apply only
to credit card accounts as proposed.
The Board also received comment
regarding its proposal to make
§ 226.51(b) consistent with § 226.51(a)
by requiring card issuers to determine
whether a consumer under the age of 21,
or any cosigner, guarantor, or joint
applicant of a consumer under the age
of 21, has the means to repay debts
incurred by the consumer by evaluating
a consumer’s ability to make the
required payments under § 226.51(a).
Therefore, proposed § 226.51(b)(1)(i)

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and (ii) both referenced § 226.51(a) in
discussing the ability of a cosigner,
guarantor, or joint applicant to make the
minimum payments on the consumer’s
debts and the consumer’s independent
ability to make the minimum payments
on any obligations arising under the
account.
Industry commenters were supportive
of the Board’s approach. Consumer
group commenters, however,
recommended that the Board require a
more stringent evaluation of a
consumer’s ability to make the required
payments for consumers under the age
of 21 than the one required in
§ 226.51(a). In particular, consumer
group commenters suggested, for
example, that card issuers be required to
only consider income earned from
wages or require a higher residual
income or lower debt-to-income ratio for
consumers less than 21 years old. A
state regulatory agency commenter
suggested that the Board require card
issuers to verify income or asset
information stated on an application
submitted by a consumer under the age
of 21. The Board declines to make the
suggested changes. The Board believes
that the heightened procedures already
set forth in TILA Sections 127(c)(8) and
127(p), as adopted by the Board in
§ 226.51(b), will provide sufficient
protection for consumers less than 21
years old without unnecessarily
impinging on their ability to obtain
credit and build a credit history.
Furthermore, the Board is concerned
that the suggested changes could be
inconsistent with the Board’s Regulation
B (12 CFR Part 202). For example,
excluding certain income from
consideration, such as alimony or child
support, could conflict with 12 CFR
§ 202.6(b)(5).
The Board, however, is amending
§ 226.51(b)(1) to clarify that, consistent
with comments 51(a)(1)–4 and 51(a)(1)–
5, card issuers need not obtain financial
information directly from the consumer
to evaluate the ability of the consumer,
cosigner, guarantor, or joint applicant to
make the required payments. The Board
is also making organizational and other
non-substantive changes to
§ 226.51(b)(1) to improve readability
and consistency. Section 226.51(b)(2) is
adopted as proposed. The Board notes
that for any credit line increase on an
account of a consumer under the age of
21, the requirements of § 226.51(b)(2)
are in addition to those in § 226.51(a).
In the October 2009 Regulation Z
Proposal, the Board also proposed
several comments to provide guidance
to card issuers in complying with
§ 226.51(b). Proposed comment 51(b)–1
clarified that § 226.51(b)(1) and (b)(2)

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apply only to a consumer who has not
attained the age of 21 as of the date of
submission of the application under
§ 226.51(b)(1) or the date the credit line
increase is requested by the consumer
under § 226.51(b)(2). If no request has
been made (for example, for unilateral
credit line increases by the card issuer),
the provision would apply only to a
consumer who has not attained the age
of 21 as of the date the credit line
increase is considered by the card
issuer. Some industry commenters
suggested that the Board’s final rule
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.
The Board notes that TILA Section
127(c)(8)(B) applies to consumers who
are under the age of 21 as of the date
of submission of the application.
Therefore, in compliance with the
statutory provision, the Board is
adopting comment 51(b)–1 as proposed.
Proposed comment 51(b)–2 addressed
the ability of a card issuer to require a
cosigner, guarantor, or joint
accountholder to assume liability for
debts incurred after the consumer has
attained the age of 21. Consumer group
commenters recommended that the
Board require that card issuers obtain
separate consent of a cosigner,
guarantor, or joint accountholder to
assume liability for debts incurred after
the consumer has attained the age of 21.
The Board believes that requiring
separate consent is unnecessary and
duplicative as card issuers requiring
cosigners, guarantors, or joint
accountholders to assume such liability
will likely obtain a single consent at the
time the account is opened for the
cosigner, guarantor, or joint
accountholder to assume liability on
debt that is incurred before and after the
consumer has turned 21. Proposed
comment 51(b)–2 is adopted in final.
The Board proposed comment 51(b)–
3 to clarify that § 226.51(b)(1) and (b)(2)
do not apply to a consumer under the
age of 21 who is being added to another
person’s account as an authorized user
and has no liability for debts incurred
on the account. The Board did not
receive any comment on this provision,
and the comment is adopted as
proposed.
Proposed comment 51(b)–4 explained
how the Electronic Signatures in Global
and National Commerce Act (E-Sign
Act) (15 U.S.C. 7001 et seq.) would
govern the submission of electronic
applications. TILA Section 127(c)(8)
requires a consumer who has not
attained the age of 21 to submit a
written application, and TILA Section
127(p) requires a cosigner, guarantor, or

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joint accountholder to consent to a
credit line increase in writing. As noted
in the October 2009 Regulation Z
Proposal, the Board believes that,
consistent with the purposes of the ESign Act, applications submitted under
TILA Section 127(c)(8) and consents
under TILA Section 127(p), which must
be provided in writing, may also be
submitted electronically. See 15 U.S.C.
7001(a). Furthermore, since the
submission of an application by a
consumer or consent to a credit line
increase by a cosigner, guarantor, or
joint accountholder is not a disclosure
to a consumer, the Board believes the
consumer consent and other
requirements necessary to provide
consumer disclosures electronically
pursuant to the E-Sign Act would not
apply. The Board notes, however, that
under the E-Sign Act, an electronic
record of a contract or other record
required to be in writing may be denied
legal effect, validity or enforceability if
such record is not in a form that is
capable of being retained and accurately
reproduced for later reference by all
parties or persons who are entitled to
retain the contract or other record. 15
U.S.C. 7001(e). Consumer group
commenters recommended that the
Board include this reference in the
comment. The Board believes this is
unnecessary, and comment 51(b)–4 is
adopted as proposed with minor
wording changes.
Under proposed comment 51(b)(1)–1,
creditors must comply with applicable
rules in Regulation B (12 CFR Part 202)
in evaluating an application to open a
credit card account or credit line
increase for a consumer under the age
of 21. In the October 2009 Regulation Z
Proposal, the Board noted that because
age is generally a prohibited basis for
any creditor to take into account in any
system evaluating the creditworthiness
of applicants under Regulation B, the
Board believes that Regulation B
prohibits card issuers from refusing to
consider the application of a consumer
solely because the applicant has not
attained the age of 21 (assuming the
consumer has the legal ability to enter
into a contract).
TILA Section 127(c)(8) permits card
issuers to open a credit card account for
a consumer who has not attained the age
of 21 if either of the conditions under
TILA Section 127(c)(8)(B) are met.
Therefore, the Board believes that a card
issuer may choose to evaluate an
application of a consumer who is less
than 21 years old solely on the basis of
the information provided under
§ 226.51(b)(1)(i). Consequently, the
Board believes, a card issuer is not
required to accept an application from

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a consumer less than 21 years old with
the signature of a cosigner, guarantor, or
joint applicant pursuant to
§ 226.51(b)(1)(ii), unless refusing such
applications would violate Regulation
B. For example, if the card issuer
permits other applicants of nonbusiness credit card accounts who have
attained the age of 21 to provide the
signature of a cosigner, guarantor, or
joint applicant, the card issuer must
provide this option to applicants of nonbusiness credit card accounts who have
not attained the age of 21 (assuming the
consumer has the legal ability to enter
into a contract).
Several industry commenters
requested the Board further clarify the
interaction between Regulation B and
§ 226.51(b). Some commenters
suggested the Board state that certain
provisions of § 226.51(b) override
provisions of Regulation B. The Board
notes that issuers would not violate
Regulation B by virtue of complying
with § 226.51(b). Therefore, the Board
does not believe it is necessary to state
that § 226.51(b) overrides provisions of
Regulation B.
Furthermore, many industry
commenters asked the Board to 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. The Board believes
that neither Regulation B nor § 226.51(b)
compels this interpretation. Pursuant to
TILA Section 127(c)(8)(B), card issuers
evaluating a consumer under the age of
21 under § 226.51(b)(1)(ii), who is
applying as an individual, must
consider the consumer’s independent
ability. The Board notes, however, that
in evaluating joint accounts, the card
issuer may consider the collective
ability of the joint applicants or joint
accountholders to make the required
payments under new comment 51(a)(1)–
6, as discussed above. Comment
51(b)(1)–1 is adopted as proposed.
Proposed comment 51(b)(2)–1
provided that the requirement under
§ 226.51(b)(2) that a cosigner, guarantor,
or joint accountholder for a credit card
account opened pursuant to
§ 226.51(b)(1)(ii) must agree in writing
to assume liability for a credit line
increase does not apply if the cosigner,
guarantor or joint accountholder who is
at least 21 years old requests the
increase. Because the party that must
approve the increase is the one that is
requesting the increase in this situation,
the Board believed that § 226.51(b)(2)
would be redundant. An industry
commenter requested the Board clarify
situations in which this applies. For
example, the commenter requested

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whether comment 51(b)(2)–1 would
apply if a consumer under the age of 21
requests the credit line increase over the
telephone, but subsequently passes the
telephone to the cosigner, guarantor, or
joint accountholder who is at least 21
years old to make the request after being
told that they are not sufficiently old
enough to do so. The Board believes this
approach will be tantamount to an oral
approval and would circumvent the
protections of § 226.51(b)(2).
Consequently, the Board is modifying
the proposed comment to clarify that it
must be the cosigner, guarantor, or joint
accountholder who is at least 21 years
old who initiates the request to increase
the credit line.

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Section 226.52

Limitations on Fees

52(a) Limitations During First Year After
Account Opening
New TILA Section 127(n)(1) applies
‘‘[i]f the terms of a credit card account
under an open end consumer credit
plan require the payment of any fees
(other than any late fee, over-the-limit
fee, or fee for a payment returned for
insufficient funds) by the consumer in
the first year during which the account
is opened in an aggregate amount in
excess of 25 percent of the total amount
of credit authorized under the account
when the account is opened.’’ 15 U.S.C.
1637(n)(1). If the 25 percent threshold is
met, then ‘‘no payment of any fees (other
than any late fee, over-the-limit fee, or
fee for a payment returned for
insufficient funds) may be made from
the credit made available under the
terms of the account.’’ However, new
TILA Section 127(n)(2) provides that
Section 127(n) may not be construed as
authorizing any imposition or payment
of advance fees prohibited by any other
provision of law. The Board proposed to
implement new TILA Section 127(n) in
§ 226.52(a).31
Subprime credit cards often charge
substantial fees at account opening and
during the first year after the account is
opened. For example, these cards may
impose multiple one-time fees when the
consumer opens the account (such as an
application fee, a program fee, and an
annual fee) as well as a monthly
maintenance fee, fees for using the
account for certain types of transactions,
and fees for increasing the credit limit.
The account-opening fees are often
billed to the consumer on the first
periodic statement, substantially
31 In a separate rulemaking, the Board will
implement new TILA Section 149 in § 226.52(b).
New TILA Section 149, which is effective August
22, 2010, requires that credit card penalty fees and
charges be reasonable and proportional to the
consumer’s violation of the cardholder agreement.

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reducing from the outset the amount of
credit that the consumer has available to
make purchases or other transactions on
the account. For example, some
subprime credit card issuers assess $250
in fees at account opening on accounts
with credit limits of $300, leaving the
consumer with only $50 of available
credit with which to make purchases or
other transactions. In addition, the
consumer may pay interest on the fees
until they are paid in full.
Because of concerns that some
consumers were not aware of how fees
would affect their ability to use the card
for its intended purpose of engaging in
transactions, the Board’s January 2009
Regulation Z Rule enhanced the
disclosure requirements for these types
of fees and clarified the circumstances
under which a consumer who has been
notified of the fees in the accountopening disclosures (but has not yet
used the account or paid a fee) may
reject the plan and not be obligated to
pay the fees. See § 226.5(b)(1)(iv), 74 FR
5402; § 226.5a(b)(14), 74 FR 5404;
§ 226.6(b)(1)(xiii), 74 FR 5408. In
addition, because the Board and the
other Agencies were concerned that
disclosure alone was insufficient to
protect consumers from unfair practices
regarding high-fee subprime credit
cards, the January 2009 FTC Act Rule
prohibited institutions from charging
certain types of fees during the first year
after account opening that, in the
aggregate, constituted the majority of the
credit limit. In addition, these fees were
limited to 25 percent of the initial credit
limit in the first billing cycle with any
additional amount (up to 50 percent)
spread equally over the next five billing
cycles. Finally, institutions were
prohibited from circumventing these
restrictions by providing the consumer
with a separate credit account for the
payment of additional fees. See 12 CFR
227.26, 74 FR 5561, 5566; see also 74 FR
5538–5543.
In the October 2009 Regulation Z
Proposal, the Board discussed two
issues of statutory interpretation related
to the implementation of new TILA
Section 127(n). First, as noted above,
new TILA Section 127(n)(1) applies
when ‘‘the terms of a credit card account
* * * require the payment of any fees
(other than any late fee, over-the-limit
fee, or fee for a payment returned for
insufficient funds) by the consumer in
the first year during which the account
is opened in an aggregate amount in
excess of 25 percent of the total amount
of credit authorized under the account
when the account is opened.’’ (Emphasis
added.) In the proposal, the Board
acknowledged that Congress’s use of
‘‘require’’ could be construed to mean

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that Section 127(n)(1) applies only to
fees that are unconditional requirements
of the account—in other words, fees that
all consumers are required to pay
regardless of how the account is used
(such as account-opening fees, annual
fees, and monthly maintenance fees).
However, the Board stated that such a
narrow reading would be inconsistent
with the words ‘‘any fees,’’ which
indicate that Congress intended the
provision to apply to a broader range of
fees. Furthermore, the Board expressed
concern that categorically excluding
fees that are conditional (in other words,
fees that consumers are only required to
pay in certain circumstances) would
enable card issuers to circumvent the 25
percent limit by, for example, requiring
consumers to pay fees in order to
receive a particular credit limit or to use
the account for purchases or other
transactions. Finally, the Board noted
that new TILA Section 127(n)(1)
specifically excludes three fees that are
conditional (late payment fees, over-thelimit fees, and fees for a payment
returned for insufficient funds), which
suggests that Congress otherwise
intended Section 127(n)(1) to apply to
fees that a consumer is required to pay
only in certain circumstances (such as
fees for other violations of the account
terms or fees for using the account for
transactions). In other words, if
Congress had intended Section 127(n)(1)
to apply only to fees that are
unconditional requirements of the
account, there would have been no need
to specifically exclude conditional fees
such as late payment fees. For these
reasons, the Board concluded that the
best interpretation of new TILA Section
127(n)(1) was to apply the 25 percent
limitation to any fee that a consumer is
required to pay with respect to the
account (unless expressly excluded),
even if the requirement only applies in
certain circumstances.
Consumer group commenters strongly
supported this interpretation of new
TILA Section 127(n)(1), while industry
commenters strongly disagreed. In
particular, institutions that do not issue
subprime cards argued that Congress
intended Section 127(n) to apply only to
fees imposed on subprime cards with
low credit limits and that it would be
unduly burdensome to require issuers of
credit card products with higher limits
to comply. However, while new TILA
Section 127(n) is titled ‘‘Standards
Applicable to Initial Issuance of
Subprime or ‘Fee Harvester’ Cards,’’
nothing in the statutory text limits its
application to a particular type of credit
card. Instead, for the reasons discussed
above, it appears that Congress intended

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Section 127(n) to apply to a broad range
of fees regardless of the type of credit
card account. Although the practice of
charging fees that represent a high
percentage of the credit limit is
generally limited to subprime cards at
present, it appears that Congress
intended Section 127(n) to prevent this
practice from spreading to other types of
credit card products. Accordingly,
although the Board understands that
complying with Section 127(n) may
impose a significant burden on card
issuers, the Board does not believe that
this burden warrants a different
interpretation of Section 127(n).
Second, in the proposal, the Board
interpreted new TILA Section 127(n)(1),
which provides that, if the 25 percent
threshold is met, ‘‘no payment of any
fees (other than any late fee, over-thelimit fee, or fee for a payment returned
for insufficient funds) may be made
from the credit made available under
the terms of the account.’’ The Board
stated that, although this language could
be read to require card issuers to
determine at account opening the total
amount of fees that will be charged
during the first year, this did not appear
to be Congress’s intent because the total
amount of fees charged during the first
year will depend on how the account is
used. For example, most card issuers
currently require consumers who use a
credit card account for cash advances,
balance transfers, or foreign transactions
to pay a fee that is equal to a percentage
of the transaction. Thus, the total
amount of fees charged during the first
year will depend on, among other
things, the number and amount of cash
advances, balance transfers, or foreign
transactions. Accordingly, the Board
interpreted Section 127(n)(1) to limit the
fees charged to a credit card account
during the first year to 25 percent of the
initial credit limit and to prevent card
issuers from collecting additional fees
by other means (such as directly from
the consumer or by providing a separate
credit account). The Board did not
receive significant comment on this
interpretation, which is adopted in the
final rule.
Accordingly, in order to effectuate
this purpose and to facilitate
compliance, the Board uses its authority
under TILA Section 105(a) to implement
new TILA Section 127(n) as set forth
below.
52(a)(1) General Rule
Proposed § 226.52(a)(1)(i) provided
that, 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 account
opening, those fees must not in total

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constitute more than 25 percent of the
credit limit in effect when the account
is opened. Furthermore, in order to
prevent card issuers from circumventing
proposed § 226.52(a)(1)(i), proposed
§ 226.52(a)(1)(ii) provided that a card
issuer that charges fees to the account
during the first year after account
opening must not require the consumer
to pay any fees in excess of the 25
percent limit with respect to the account
during the first year.
Commenters generally supported the
proposed rule. However, a federal
banking agency requested that the Board
clarify the proposed rule, expressing
concern that, as proposed, § 226.52(a)(1)
could be construed to authorize card
issuers to require consumers to pay an
unlimited amount of fees so long as the
total amount of fees charged to the
account did not equal the 25 percent
limit. This was not the Board’s intent,
nor does the Board believe that the
proposed rule supports such an
interpretation. Nevertheless, in order to
avoid any potential uncertainty, the
Board has revised § 226.52(a)(1) to
provide that, 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
is opened.
The Board has also reorganized and
revised the proposed commentary for
consistency with the revisions to
§ 226.52(a)(1). Comment 52(a)(1)–1
clarifies that § 226.52(a)(1) applies if a
card issuer charges any fees to a credit
card account during the first year after
the account is opened (unless the fees
are specifically exempted by
§ 226.52(a)(2)). Thus, if a card issuer
charges a non-exempt fee to the account
during the first year after account
opening, § 226.52(a)(1) provides that the
total amount of non-exempt fees the
consumer is required to pay with
respect to the account during the first
year cannot exceed 25 percent of the
credit limit in effect when the account
is opened. The comment further
clarifies that this 25 percent limit
applies to fees that the card issuer
charges to the account as well as to fees
that the card issuer requires the
consumer to pay with respect to the
account through other means (such as
through a payment from the consumer
to the card issuer or from another credit
account provided by the card issuer).
The comment also provides illustrative
examples of the application of
§ 226.52(a), including the examples

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previously provided in proposed
comments 52(a)(1)(i)–1 and
52(a)(1)(ii)–1.
Proposed comment 52(a)(1)(i)–2
clarified that a card issuer that charges
a fee to a credit card account that
exceeds the 25 percent limit could
comply with § 226.52(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. Thus, if a card issuer’s
systems automatically assess a fee based
on certain account activity (such as
automatically assessing a cash advance
fee when the account is used for a cash
advance) and, as a result, the total
amount of fees subject to § 226.52(a) that
have been charged to the account during
the first year exceeds the 25 percent
limit, the card issuer could comply with
§ 226.52(a)(1) by removing the fee and
any interest charged on that fee at the
end of the billing cycle.
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). The Board is
concerned that providing additional
time will result in fees that exceed the
25 percent limit appearing on
consumer’s periodic statements.
However, in order to facilitate
compliance, the Board has revised the
proposed comment to require 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. For organizational
purposes, the Board has also
redesignated this comment as
52(a)(1)–2.
Proposed comment 52(a)(1)(i)–3
clarified that, because the limitation in
§ 226.52(a)(1) is based on the credit
limit in effect when the account is
opened, a subsequent increase in the
credit limit during the first year does
not permit the card issuer to charge to
the account additional fees that would
otherwise be prohibited (such as a fee
for increasing the credit limit). An
illustrative example was provided. For
organizational purposes, this comment
has been redesignated as 52(a)(1)–3.
In addition, in response to comments
from consumer groups, the Board has
also provided guidance regarding
decreases in credit limits during the first
year after account opening. Consumer

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groups expressed concern that card
issuers could evade the 25 percent
limitation by, for example, providing a
$500 credit limit and charging $125 in
fees for the issuance or availability of
credit at account opening and then
quickly reducing the limit to $200,
leaving the consumer with only $75 of
available credit. Although there are
legitimate reasons for reducing a credit
limit during the first year after account
opening (such as concerns about fraud),
the Board believes that, in these
circumstances, it would be inconsistent
with the intent of new TILA Section
127(n) to require the consumer to pay
(or to allow the issuer to retain) any fees
that exceed 25 percent of the reduced
limit. Accordingly, proposed comment
52(a)(1)–3 clarifies that, if a card issuer
decreases the credit limit during the
first year after the account is opened,
§ 226.52(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. An example is
provided.
52(a)(2) Fees Not Subject to Limitations
Section 226.52(a)(2)(i) implements the
exception in new TILA Section
127(n)(1) for late payment fees, over-thelimit fees, and fees for payments
returned for insufficient funds.
However, pursuant to the Board’s
authority under TILA Section 105(a),
§ 226.52(a)(2)(i) applies to all fees for
returned payments because a payment
may be returned for reasons other than
insufficient funds (such as because the
account on which the payment is drawn
has been closed or because the
consumer has instructed the institution
holding that account not to honor the
payment). The Board did not receive
significant comment on § 226.52(a)(2)(i),
which is adopted as proposed.
As discussed above, new TILA
Section 127(n)(1) applies to fees that a
consumer is required to pay with
respect to a credit card account.
Accordingly, proposed § 226.52(a)(2)(ii)
would have created an exception to
§ 226.52(a) for fees that a consumer is
not required to pay with respect to the
account. The proposed commentary to
§ 226.52(a) illustrated the distinction
between fees the consumer is required
to pay and those the consumer is not
required to pay. Proposed comment
52(a)(2)–1 clarified that, except as

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provided in § 226.52(a)(2), the
limitations in § 226.52(a)(1) apply to any
fees that a card issuer will or may
require the consumer to pay with
respect to a credit card account during
the first year after account opening. The
proposed comment listed several types
of fees as examples of fees covered by
§ 226.52(a). First, fees that the consumer
is required to pay for the issuance or
availability of credit described in
§ 226.5a(b)(2), including any fee based
on account activity or inactivity and any
fee that a consumer is required to pay
in order to receive a particular credit
limit. Second, fees for insurance
described in § 226.4(b)(7) or debt
cancellation or debt suspension
coverage described in § 226.4(b)(10)
written in connection with a credit
transaction, if the insurance or debt
cancellation or debt suspension
coverage is required by the terms of the
account. Third, fees that the consumer
is required to pay in order to engage in
transactions using the account (such as
cash advance fees, balance transfer fees,
foreign transaction fees, and other fees
for using the account for purchases).
And fourth, fees that the consumer is
required to pay for violating the terms
of the account (except to the extent
specifically excluded by
§ 226.52(a)(2)(i)).
Proposed comment 52(a)(2)–2
provided as examples of fees that
generally fall within the exception in
§ 226.52(a)(2)(ii) fees for making an
expedited payment (to the extent
permitted by § 226.10(e)), fees for
optional services (such as travel
insurance), fees for reissuing a lost or
stolen card, and statement reproduction
fees.
Commenters generally supported
proposed § 226.52(a)(2)(ii) and proposed
comments 52(a)(2)–1 and –2. Although
one industry commenter suggested that
the Board take a broader approach to
identifying the fees that fall within the
exception in § 226.52(a)(2)(ii), the Board
believes that such an approach would
be inconsistent with the purposes of
TILA Section 127(n). Accordingly, the
Board adopts these aspects of the
proposal.
Finally, proposed comment 52(a)(2)–3
clarified that a security deposit that is
charged to a credit card account is a fee
for purposes of § 226.52(a). However,
the comment also clarified that
§ 226.52(a) would not prohibit a card
issuer from providing a secured credit
card that requires a consumer to provide
a cash collateral deposit that is equal to
the credit line for the account.
Consumer group commenters strongly
supported this commentary. However, a
federal banking agency requested that

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the Board clarify that a security deposit
is an amount of funds transferred by a
consumer to a card issuer at account
opening that is pledged as security on
the account. The Board has revised the
proposed comment to include similar
language. Otherwise, comment 52(a)(2)–
3 is adopted as proposed.
52(a)(3) Rule of Construction
New TILA Section 127(n)(2) states
that ‘‘[n]o provision of this subsection
may be construed as authorizing any
imposition or payment of advance fees
otherwise prohibited by any provision
of law.’’ 15 U.S.C. 1637(n)(2). The Board
proposed to implement this provision in
§ 226.52(a)(3). As an example of a
provision of law limiting the payment of
advance fees, proposed comment
52(a)(3)–1 cited 16 CFR 310.4(a)(4),
which prohibits any telemarketer or
seller from ‘‘[r]equesting or receiving
payment of any fee or consideration in
advance of obtaining a loan or other
extension of credit when the seller or
telemarketer has guaranteed or
represented a high likelihood of success
in obtaining or arranging a loan or other
extension of credit for a person.’’ The
Board did not receive significant
comment on either the proposed
regulation or the proposed commentary,
both of which have been adopted as
proposed.
Section 226.53 Allocation of Payments
As amended by the Credit Card Act,
TILA Section 164(b)(1) provides that,
‘‘[u]pon receipt of a payment from a
cardholder, the card issuer shall apply
amounts in excess of the minimum
payment amount first to the card
balance bearing the highest rate of
interest, and then to each successive
balance bearing the next highest rate of
interest, until the payment is
exhausted.’’ 15 U.S.C. 1666c(b)(1).
However, amended Section 164(b)(2)
provides the following exception to this
general rule: ‘‘A creditor shall allocate
the entire amount paid by the consumer
in excess of the minimum payment
amount to a balance on which interest
is deferred during the last 2 billing
cycles immediately preceding
expiration of the period during which
interest is deferred.’’ As discussed in
detail below, the Board has
implemented amended TILA Section
164(b) in new § 226.53.
As an initial matter, however, the
Board interprets amended TILA Section
164(b) to apply to credit card accounts
under an open-end (not home-secured)
consumer credit plan rather than to all
open-end consumer credit plans.
Although the requirements in amended
TILA Section 164(a) regarding the

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
prompt crediting of payments apply to
‘‘[p]ayments received from [a consumer]
under an open end consumer credit
plan,’’ the general payment allocation
rule in amended TILA Section 164(b)(1)
applies ‘‘[u]pon receipt of a payment
from a cardholder.’’ Furthermore, the
exception for deferred interest plans in
amended Section 164(b)(1) requires ‘‘the
card issuer [to] apply amounts in excess
of the minimum payment amount first
to the card balance bearing the highest
rate of interest. * * *’’ Based on this
language, it appears that Congress
intended to apply the payment
allocation requirements in amended
Section 164(b) only to credit card
accounts. This is consistent with the
approach taken by the Board and the
other Agencies in the January 2009 FTC
Act Rule. See 74 FR 5560. Furthermore,
the Board is not aware of concerns
regarding payment allocation with
respect to other open-end credit
products, likely because such products
generally do not apply different annual
percentage rates to different balances.
Commenters generally supported this
aspect of the proposal.

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53(a) General Rule
The Board proposed to implement
amended TILA Section 164(b)(1) in
§ 226.53(a), which stated that, except as
provided in § 226.53(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. The
Board and the other Agencies adopted a
similar provision in the January 2009
FTC Act Rule in response to concerns
that card issuers were applying
consumers’ payments in a manner that
inappropriately maximized interest
charges on credit card accounts with
balances at different annual percentage
rates. See 12 CFR 227.23, 74 FR 5512–
5520, 5560. Specifically, most card
issuers currently allocate consumers’
payments first to the balance with the
lowest annual percentage rate, resulting
in the accrual of interest at higher rates
on other balances (unless all balances
are paid in full). Because many card
issuers offer different rates for
purchases, cash advances, and balance
transfers, this practice can result in
consumers who do not pay the balance
in full each month incurring higher
finance charges than they would under

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any other allocation method.32
Commenters generally supported
§ 226.53(a), which is adopted as
proposed.
The Board also proposed comment
53–1, which clarified that § 226.53 does
not limit or otherwise address the card
issuer’s ability to determine, consistent
with applicable law and regulatory
guidance, the amount of the required
minimum periodic payment or how that
payment is allocated. It further clarified
that a card issuer may, but is not
required to, allocate the required
minimum periodic payment consistent
with the requirements in proposed
§ 226.53 to the extent consistent with
other applicable law or regulatory
guidance. The Board did not receive any
significant comment on this guidance,
which is adopted as proposed.
Comment 53–2 clarified that § 226.53
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. Because the rates and
balances on an account affect how
excess payments will be applied, this
comment was intended to provide
flexibility regarding the point in time at
which payment allocation
determinations required by proposed
§ 226.53 can be made. For example, it is
possible that, in certain circumstances,
the annual percentage rates may have
changed between the close of a billing
cycle and the date on which payment
for that billing cycle is received.
Industry commenters generally
supported this guidance. However,
consumer groups opposed it on the
grounds that card issuers could misuse
the flexibility to systematically vary the
dates on which payments are allocated
at the account level in order to generate
higher interest charges. The Board
agrees that such a practice would be
inconsistent with the intent of comment
53–2. Accordingly, the Board has
revised this comment to clarify that the
day used by the card issuer to determine
the applicable annual percentage rates
32 For example, assume that a credit card account
charges annual percentage rates of 12% on
purchases and 20% on cash advances. Assume also
that, in the same billing cycle, the consumer uses
the account for purchases totaling $3,000 and cash
advances totaling $300. If the consumer pays $800
in excess of the required minimum periodic
payment, most card issuers would apply the entire
excess payment to the purchase balance and the
consumer would incur interest charges on the more
costly cash advance balance. Under these
circumstances, the consumer is effectively
prevented from paying off the balance with the
higher interest rate (cash advances) unless the
consumer pays the total balance (purchases and
cash advances) in full.

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7727

and balances for purposes of § 226.53
generally must be consistent from
billing cycle to billing cycle, although
the card issuer may adjust this day from
time to time.
Proposed comment 53–3 addressed
the relationship between the dispute
rights in § 226.12(c) and the payment
allocation requirements in proposed
§ 226.53. This comment clarified that,
when a consumer has asserted a claim
or defense against the card issuer
pursuant to § 226.12(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. See comment 12(c)–4. Based on
comments from industry, the Board has
revised the proposed comment to clarify
that the same requirements apply with
respect to amounts subject to billing
error disputes under § 226.13. The
Board has also added illustrative
examples.
Proposed comment 53–4 addressed
circumstances in which the same
annual percentage rate applies to more
than one balance on a credit card
account but a different rate applies to at
least one other balance on that account.
For example, an account could have a
$500 cash advance balance at 20%, a
$1,000 purchase balance at 15%, and a
$2,000 balance also at 15% that was
previously at a 5% promotional rate.
The comment clarified that, in these
circumstances, § 226.53 generally does
not require that any particular method
be used when allocating among the
balances with the same rate and that the
card issuer may treat the balances with
the same rate as a single balance or
separate balances.33 The Board did not
receive any significant comment on this
aspect of the guidance, which is
adopted as proposed.
However, proposed comment 53–4
also clarified that, when a balance on a
credit card account is subject to a
deferred interest or similar program that
provides that a consumer will not be
obligated to pay interest that accrues on
the balance if the balance is paid in full
prior to the expiration of a specified
period of time, that balance must be
treated as a balance with an annual
percentage rate of zero for purposes of
§ 226.53 during that period of time
rather than a balance with the rate at
which interest accrues (the accrual
rate).34 In the proposal, the Board noted
33 An example of how excess payments could be
applied in these circumstances is provided in
comment 53–5.iv.
34 For example, if an account has a $1,000
purchase balance and a $2,000 balance that is
subject to a deferred interest program that expires
on July 1 and a 15% annual percentage rate applies

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that treating the rate as zero is
consistent with the nature of deferred
interest and similar programs insofar as
the consumer will not be obligated to
pay any accrued interest if the balance
is paid in full prior to expiration. The
Board further noted that this approach
ensures that excess payments will
generally be applied first to balances on
which interest is being charged, which
will generally result in lower interest
charges if the consumer pays the
balance in full prior to expiration.
However, the Board also
acknowledged that treating the rate on
this type of balance as zero could be
disadvantageous for consumers in
certain circumstances. Specifically, the
Board noted that, if the rate for a
deferred interest balance is treated as
zero during the deferred interest period,
consumers who wish to pay off that
balance in installments over the course
of the program would be prevented from
doing so.
In response to the proposal, the Board
received a number of comments from
industry and consumer groups raising
concerns about prohibiting consumers
from paying off a deferred interest or
similar balance in monthly installments.
Accordingly, as discussed below, the
Board has revised § 226.53(b) to address
those concerns.
Finally, proposed comment 53(a)–1
provided examples of allocating excess
payments consistent with proposed
§ 226.53. The Board has redesignated
this comment as 53–5 for organizational
purposes and revised the examples for
consistency with the revisions to
§ 226.53(b).35

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53(b) Special Rule for Accounts With
Balances Subject to Deferred Interest or
Similar Programs
The Board proposed to implement
amended TILA Section 164(b)(2) in
§ 226.53(b), which provided that, when
a balance on a credit card account under
an open-end (not home-secured)
consumer credit plan is subject to a
deferred interest or similar program, the
card issuer must allocate any amount
paid by the consumer in excess of the
to both, the balances must be treated as balances
with different rates for purposes of § 226.53 until
July 1. In addition, for purposes of allocating
pursuant to § 226.53, any amount paid by the
consumer in excess of the required minimum
periodic payment must be applied first to the
$1,000 purchase balance except during the last two
billing cycles of the deferred interest period (when
it must be applied first to any remaining portion of
the $2,000 balance). See comment 53–5.v.
35 The commentary discussed above is similar to
commentary adopted by the Board and the other
Agencies in the January 2009 FTC Act Rule as well
as to amendments to that commentary proposed in
May 2009. See 74 FR 5561–5562; 74 FR 20815–
20816.

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required minimum periodic payment
first to that balance during the two
billing cycles immediately preceding
expiration of the deferred interest
period and any remaining portion to any
other balances consistent with proposed
§ 226.53(a). See 15 U.S.C. 1666c(b)(2).
The Board and the other Agencies
proposed a similar exception to the
January 2009 FTC Act Rule’s payment
allocation provision in the May 2009
proposed clarifications and
amendments. See proposed 12 CFR
227.23(b), 74 FR 20814. This exception
was based on the Agencies’ concern
that, if the deferred interest balance was
not the only balance on the account, the
general payment allocation rule could
prevent consumers from paying off the
deferred interest balance prior to
expiration of the deferred interest
period unless they also paid off all other
balances on the account.36 If the
consumer is unaware of the need to pay
off the entire balance, the consumer
would be charged interest on the
deferred interest balance and thus
would not obtain the benefits of the
deferred interest program. See 74 FR
20807–20808.
As noted above, comments from
industry and consumer groups raised
concerns that the proposed rule would
prohibit consumers who may lack the
resources to pay off a deferred interest
balance in one of the last two billing
cycles of the deferred interest period
from paying that balance off in monthly
installments over the course of the
period. These commenters generally
urged the Board to permit card issuers
to allocate payments consistent with a
consumer’s request when an account
has a deferred interest or similar
balance.
Because the consumer testing
conducted by the Board for the January
2009 Regulation Z Rule indicated that
disclosures do not enable consumers to
understand sufficiently the effects of
payment allocation on interest charges,
the Board is concerned that permitting
card issuers to allocate payments based
on a consumer’s request could create a
loophole that would undermine the
purposes of revised TILA Section
164(b). For example, consumers who do
not understand the effects of payment
allocation could be misled into selecting
an allocation method that will generally
36 For example, assume that a credit card account
has a $2,000 purchase balance with a 20% annual
percentage rate and a $1,000 balance on which
interest accrues at a 15% annual percentage rate,
but the consumer will not be obligated to pay that
interest if that balance is paid in full by a specified
date. If the general rule in § 226.53(a) applied, the
consumer would be required to pay $3,000 in order
to avoid interest charges on the $1,000 balance.

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result in higher interest charges than
applying payments first to the balance
with the highest rate (such as a method
under which payments are applied first
to the oldest unpaid transactions on the
account). For this reason, the Board
does not believe that a general exception
to § 226.53(a) based on a consumer’s
request is warranted.
However, in the narrow context of
accounts with balances subject to
deferred interest or similar programs,
the Board is persuaded that the benefits
of providing flexibility for consumers
who are able to avoid deferred interest
charges by paying off a deferred interest
balance in installments over the course
of the deferred interest period outweigh
the risk that some consumers could
make choices that result in higher
interest charges than would occur under
the proposed rule.
Accordingly, pursuant to its authority
under TILA § 105(a) to make
adjustments and exceptions in order to
effectuate the purposes of TILA, the
Board has revised proposed § 226.53(b)
to permit card issuers 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.37 Specifically, § 226.52(b)(1)
provides that, when a balance on a
credit card account under an open-end
(not home-secured) consumer credit
plan 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 § 226.53(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
§ 226.53(a). In the alternative,
§ 226.53(b)(2) provides that the card
issuer may at its option allocate any
37 Although consumer group commenters urged
the Board to require (rather than permit) card
issuers to allocate consistent with a consumer’s
request, the Board understands that—while some
card issuers currently have the systems in place to
accommodate such requests—many do not. The
Board further understands that card issuers without
the ability to allocate payments based on a
consumer request could not develop the systems to
do so prior to February 22, 2010. Although these
issuers could presumably develop the necessary
systems by some later date, the Board believes that
the difficulties associated with making informed
decisions regarding payment allocation are such
that a requirement that all issuers develop the
systems to accommodate consumer requests is not
warranted. Instead, the Board has revised
§ 226.53(b) to ensure that card issuers that currently
accommodate consumer requests can continue to do
so.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
amount paid by the consumer in excess
of the required minimum periodic
payment among the balances on the
account in the manner requested by the
consumer.
The Board has revised the proposed
commentary to § 226.53(b) for
consistency with the amendments to
§ 226.53(b) and for organizational
purposes. As an initial matter, the Board
has redesignated proposed comment
53(b)–2 as comment 53(b)–1. Proposed
comment 53(b)–2 clarified that
§ 226.53(b) applies to deferred interest
or similar programs under which the
consumer is not obligated to pay interest
that accrues on a balance if that balance
is paid in full prior to the expiration of
a specified period of time. The proposed
comment further clarified that a grace
period during which any credit
extended may be repaid without
incurring a finance charge due to a
periodic interest rate is not a deferred
interest or similar program for purposes
of § 226.53(b).38 In response to requests
for guidance from commenters, the
Board has revised this comment to
clarify that § 226.53(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. In addition, the Board
has revised the comment to clarify that
a temporary annual percentage rate of
zero percent that applies for a specified
period of time consistent with
§ 226.55(b)(1) is not a deferred interest
or similar program for purposes of
§ 226.53(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. Finally, in order to ensure
consistent treatment of deferred interest
programs in Regulation Z, the Board has
clarified that, for purposes of § 226.53,
‘‘deferred interest’’ has the same
meaning as in § 226.16(h)(2) and
associated commentary.
For organizational purposes, the
Board has redesignated proposed
comment 53(b)–1 as comment 53(b)–2.
Proposed comment 53(b)–1 clarified the
application of § 226.53(b) in
circumstances where the deferred
interest or similar program expires
during a billing cycle (rather than at the
end of a billing cycle). The comment
clarified that, for purposes of
§ 226.53(b), a billing cycle does not
constitute one of the two billing cycles
immediately preceding expiration of a
deferred interest or similar program if
38 The

Board and the other Agencies proposed a
similar comment in May 2009. See 12 CFR 227.23
proposed comment 23(b)–1, 74 FR 20816.

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the expiration date for the program
precedes the payment due date in that
billing cycle. An example is provided.
The Board believes that this
interpretation is consistent with the
purpose of amended TILA Section
164(b)(2) insofar as it ensures that, at a
minimum, the consumer will receive
two complete billing cycles to avoid
accrued interest charges by paying off a
balance subject to a deferred interest or
similar program. The Board did not
receive any significant comment on this
guidance, which has been revised for
consistency with the revisions to
§ 226.53(b).
The Board has also adopted a new
comment 53(b)–3 in order to clarify that
§ 226.53(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
§ 226.53(b)(1). For example, a card
issuer may decline consumer requests
regarding payment allocation as a
general matter or may decline such
requests when a consumer does not
comply with requirements set by the
card issuer (such as submitting the
request in writing or submitting the
request prior to or contemporaneously
with submission of the payment),
provided that amounts paid by the
consumer in excess of the required
minimum periodic payment are
allocated consistent with § 226.53(b)(1).
Similarly, a card issuer that accepts
requests pursuant to § 226.53(b)(2)
generally must allocate amounts paid by
a consumer in excess of the required
minimum periodic payment consistent
with § 226.53(b)(1) if the consumer does
not submit a request or submits a
request with which the card issuer
cannot comply (such as a request that
contains a mathematical error).
Comment 53(b)–3 also provides
illustrative examples of what does and
does not constitute a consumer request
for purposes of § 226.53(b)(2). In
particular, the comment clarifies that a
consumer has made a request for
purposes of § 226.53(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.
Similarly, a consumer has made a
request for purposes of § 226.53(b)(2) if
the consumer completes a form or
payment coupon provided by the card
issuer for the purpose of requesting that
a payment or payments be allocated in
a particular manner and submits that

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7729

form to the card issuer. Finally, a
consumer has made a request for
purposes of § 226.53(b)(2) if the
consumer contacts a card issuer and
specifically requests that a payment that
the card issuer has previously allocated
consistent with § 226.53(b)(1) instead be
allocated in a different manner.
In contrast, the comment clarifies that
a consumer has not made a request for
purposes of § 226.53(b)(2) if the terms
and conditions of the account agreement
contain preprinted language stating that
by applying to open an account or by
using that account for transactions
subject to a deferred interest or similar
program the consumer requests that
payments be allocated in a particular
manner. Similarly, a consumer has not
made a request for purposes of
§ 226.53(b)(2) if the card issuer’s on-line
application contains a preselected check
box indicating that the consumer
requests that payments be allocated in a
particular manner and the consumer
does not deselect the box.39
In addition, a consumer has not made
a request for purposes of § 226.53(b)(2)
if the payment coupon provided by the
card issuer contains preprinted language
or a preselected check box stating that
by submitting a payment the consumer
requests that the payment be allocated
in a particular manner. Furthermore, a
consumer has not made a request for
purposes of § 226.53(b)(2) if the card
issuer requires a consumer to accept a
particular payment allocation method as
a condition of using a deferred interest
or similar program, making a payment,
or receiving account services or features.
Section 226.54 Limitations on the
Imposition of Finance Charges
The Credit Card Act creates a new
TILA Section 127(j), which applies
when a consumer loses any time period
provided by the creditor with respect to
a credit card account within which the
consumer may repay any portion of the
credit extended without incurring a
finance charge (i.e., a grace period). 15
U.S.C. 1637(j). In these circumstances,
new TILA Section 127(j)(1)(A) prohibits
the creditor from imposing a finance
charge with respect to any balances for
days in billing cycles that precede the
most recent billing cycle (a practice that
is sometimes referred to as ‘‘two-cycle’’
or ‘‘double-cycle’’ billing). Furthermore,
in these circumstances, Section
127(j)(1)(B) prohibits the creditor from
imposing a finance charge with respect
to any balances or portions thereof in
39 These examples are similar to examples
adopted by the Board with respect to the affiliate
marketing provisions of the Fair Credit Reporting
Act. See 12 CFR 222.21(d)(4)(iii) and (iv).

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the current billing cycle that were
repaid within the grace period.
However, Section 127(j)(2) provides that
these prohibitions do not apply to any
adjustment to a finance charge as a
result of the resolution of a dispute or
the return of a payment for insufficient
funds. As discussed below, the Board is
implementing new TILA Section 127(j)
in § 226.54.
54(a) Limitations on Imposing Finance
Charges as a Result of the Loss of a
Grace Period

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54(a)(1) General Rule
Prohibition on Two-Cycle Billing
As noted above, new TILA Section
127(j)(1)(A) prohibits the balance
computation method sometimes referred
to as ‘‘two-cycle billing’’ or ‘‘doublecycle billing.’’ The January 2009 FTC
Act Rule contained a similar
prohibition. See 12 CFR 227.25, 74 FR
5560–5561; see also 74 FR 5535–5538.
The two-cycle balance computation
method has several permutations but,
generally speaking, a card issuer using
the two-cycle method assesses interest
not only on the balance for the current
billing cycle but also on balances on
days in the preceding billing cycle. This
method generally does not result in
additional finance charges for a
consumer who consistently carries a
balance from month to month (and
therefore does not receive a grace
period) because interest is always
accruing on the balance. Nor does the
two-cycle method affect consumers who
pay their balance in full within the
grace period every month because
interest is not imposed on their
balances. The two-cycle method does,
however, result in greater interest
charges for consumers who pay their
balance in full one month (and therefore
generally qualify for a grace period) but
not the next month (and therefore
generally lose the grace period).
The following example illustrates
how the two-cycle method results in
higher costs for these consumers than
other balance computation methods:
Assume that the billing cycle on a credit
card account starts on the first day of
the month and ends on the last day of
the month. The payment due date for
the account is the twenty-fifth day of the
month. Under the terms of the account,
the consumer will not be charged
interest on purchases if the balance at
the end of a billing cycle is paid in full
by the following payment due date (in
other words, the consumer receives a
grace period). The consumer uses the
credit card to make a $500 purchase on
March 15. The consumer pays the
balance for the February billing cycle in

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full on March 25. At the end of the
March billing cycle (March 31), the
consumer’s balance consists only of the
$500 purchase and the consumer will
not be charged interest on that balance
if it is paid in full by the following due
date (April 25). The consumer pays
$400 on April 25, leaving a $100
balance. Because the consumer did not
pay the balance for the March billing
cycle in full on April 25, the consumer
would lose the grace period and most
card issuers would charge interest on
the $500 purchase from the start of the
April billing cycle (April 1) through
April 24 and interest on the remaining
$100 from April 25 through the end of
the April billing cycle (April 30). Card
issuers using the two-cycle method,
however, would also charge interest on
the $500 purchase from the date of
purchase (March 15) to the end of the
March billing cycle (March 31).
In the October 2009 Regulation Z
Proposal, the Board proposed to
implement new TILA Section
127(j)(1)(A)’s prohibition on two-cycle
billing in § 226.54(a)(1)(i), which states
that, except as provided in proposed
§ 226.54(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 balances for days in billing
cycles that precede the most recent
billing cycle. The Board also proposed
to adopt § 226.54(a)(2), which would
define ‘‘grace period’’ for purposes of
§ 226.54(a)(1) as having the same
meaning as in § 226.5(b)(2)(ii).40 Finally,
proposed comment 54(a)(1)–4 explained
that § 226.54(a)(1)(i) prohibits use of the
two-cycle average daily balance
computation method.
The Board did not receive significant
comment on this proposed regulation
and commentary. Accordingly, they are
adopted as proposed.
Partial Grace Period Requirement
As discussed above, many credit card
issuers that provide a grace period
currently require the consumer to pay
off the entire balance on the account or
the entire balance subject to the grace
period before the period expires.
However, new TILA Section 127(j)(1)(B)
limits this practice. Specifically, Section
127(j)(1)(B) provides that a creditor may
not impose any finance charge on a
40 Section 226.5(b)(2)(ii) was amended by the July
2009 Regulation Z Interim Final Rule to define
‘‘grace period’’ as a period within which any credit
extended may be repaid without incurring a finance
charge due to a periodic interest rate. 74 FR 36094.
As discussed above, the Board has revised
§ 226.5(b)(2)(ii) by, among other things, moving the
definition of grace period to § 226.5(b)(2)(ii)(B).
Accordingly, the Board has also made a
corresponding revision to § 226.54(a)(2).

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credit card account as a result of the loss
of any time period provided by the
creditor within which the consumer
may repay any portion of the credit
extended without incurring a finance
charge with respect to any balances or
portions thereof in the current billing
cycle that were repaid within such time
period. The Board proposed to
implement this prohibition in
§ 226.54(a)(1)(ii), which states that,
except as provided in § 226.54(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. The Board did not receive
significant comment on
§ 226.54(a)(1)(ii), which is adopted as
proposed.
The Board also proposed comment
54(a)(1)–5, which clarified that card
issuers are not required to use a
particular method to comply with
§ 226.54(a)(1)(ii) but provided an
example of a method that is consistent
with the requirements of
§ 226.54(a)(1)(ii). Specifically, it stated
that a card issuer can comply with the
requirements of § 226.54(a)(1)(ii) by
applying the consumer’s payment to the
balance subject to the grace period at the
end of the prior billing cycle (in a
manner consistent with the payment
allocation requirements in § 226.53) and
then calculating interest charges based
on the amount of that balance that
remains unpaid. An example of the
application of this method is provided
in comment 54(a)(1)–6 along with other
examples of the application of
§ 226.54(a)(1)(i) and (ii). For the reasons
discussed below, the Board has revised
comments 54(a)(1)–5 and –6 to clarify
the circumstances in which § 226.54
applies. Otherwise, these comments are
adopted as proposed.
In addition to the commentary
clarifying the specific prohibitions in
§ 226.54(a)(1)(i) and (ii), the Board also
proposed to adopt three comments
clarifying the general scope and
applicability of § 226.54. First, proposed
comment 54(a)(1)–1 clarified that
§ 226.54 does not require the card issuer
to provide a grace period or prohibit a
card issuer from placing limitations and
conditions on a grace period to the
extent consistent with § 226.54.
Currently, neither TILA nor Regulation
Z requires a card issuer to provide a
grace period. Nevertheless, for
competitive and other reasons, many
credit card issuers choose to do so,
subject to certain limitations and
conditions. For example, credit card
grace periods generally apply to

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
purchases but not to other types of
transactions (such as cash advances). In
addition, as noted above, card issuers
that provide a grace period generally
require the consumer to pay off all
balances on the account or the entire
balance subject to the grace period
before the period expires.
Although new TILA Section 127(j)
prohibits the imposition of finance
charges as a result of the loss of a grace
period in certain circumstances, the
Board does not interpret this provision
to mandate that card issuers provide
such a period or to limit card issuers’
ability to place limitations and
conditions on a grace period to the
extent consistent with the statute.
Instead, Section 127(j)(1) refers to ‘‘any
time provided by the creditor within
which the [consumer] may repay any
portion of the credit extended without
incurring a finance charge.’’ This
language indicates that card issuers
retain the ability to determine when and
under what conditions to provide a
grace period on a credit card account so
long as card issuers that choose to
provide a grace period do so consistent
with the requirements of new TILA
Section 127(j). Commenters generally
supported this interpretation, which the
Board has adopted in this final rule.
The Board also proposed to adopt
comment 54(a)(1)–2, which clarified
that § 226.54 does not prohibit the card
issuer from charging accrued interest at
the expiration of a deferred interest or
similar promotional program.
Specifically, the comment stated that,
when a card issuer offers a deferred
interest or similar promotional program,
§ 226.54 does not prohibit the card
issuer from charging accrued interest to
the account if the balance is not paid in
full prior to expiration of the period
(consistent with § 226.55 and other
applicable law and regulatory
guidance). A contrary interpretation of
proposed § 226.54 (and new TILA
Section 127(j)) would effectively
eliminate deferred interest and similar
programs as they are currently
constituted by prohibiting the card
issuer from charging any interest based
on any portion of the deferred interest
balance that is paid during the deferred
interest period. However, as discussed
above with respect to proposed § 226.53,
the Credit Card Act’s revisions to TILA
Section 164 specifically create an
exception to the general rule governing
payment allocation for deferred interest
programs, which indicates that Congress
did not intend to ban such programs.
See Credit Card Act § 104(1) (revised
TILA Section 164(b)(2)).
Comments from credit card issuers,
retailers, and industry groups strongly

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supported this interpretation. However,
consumer group commenters argued
that new TILA Section 127(j) should be
interpreted to prohibit the interest
charges on amounts paid within a
deferred interest and similar period. For
the reasons discussed above, the Board
believes that such a prohibition would
be inconsistent with Congress’ intent.
Accordingly, the Board adopts the
interpretation in proposed comment
54(a)(1)–2.
In response to requests for
clarification from industry commenters,
the Board has also made a number of
revisions to comments 54(a)(1)–1 and –2
in order to clarify the circumstances in
which § 226.54 applies. As discussed
below, these clarifications are intended
to preserve current industry practices
with respect to grace periods and the
waiver of trailing or residual interest
that are generally beneficial to
consumers. First, the Board has
generally revised the commentary to
clarify that 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. The
Board understands that, for example,
some card issuers permit a consumer to
retain a grace period on purchases by
paying the purchase balance in full,
even if other balances (such as balances
subject to promotional rates or deferred
interest programs) are not paid in full.
Insofar as this practice enables
consumers to avoid interest charges on
purchases without paying the entire
account balance in full, it appears to be
advantageous for consumers.
Second, the Board has revised
comment 54(a)(1)–1 to clarify that
§ 226.54 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.
This clarification is intended to preserve
a grace period eligibility requirement
used by some card issuers that is more
favorable to consumers than the
requirement used by other issuers.
Specifically, the Board understands
that, while most credit card issuers only
require consumers to pay the relevant
balance in full in one billing cycle in
order to be eligible for the grace period,
some issuers require consumers to pay
in full for two consecutive cycles. While
either requirement is permissible under
§ 226.54,41 the less restrictive
41 Consumer group commenters argued that the
Board should prohibit the more restrictive

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requirement appears to be more
beneficial to consumers.
However, many industry commenters
expressed concern that, under the less
restrictive requirement, a consumer
could be considered eligible for a grace
period in every billing cycle—and
therefore § 226.54 would apply—
regardless of whether the consumer had
ever paid the relevant balance in full in
a previous cycle. Because new TILA
Section 127(j) does not mandate
provision of a grace period, the Board
believes that interpreting § 226.54 as
applying in every billing cycle
regardless of whether the consumer paid
the previous cycle’s balance in full
would be inconsistent with Congress’
intent. Furthermore, although this
interpretation could be advantageous for
consumers if card issuers retained the
less restrictive eligibility requirement,
the Board is concerned that card issuers
would instead convert to the more
restrictive approach, which would
ultimately harm consumers.
Accordingly, the Board has revised the
commentary to clarify that a card issuer
that employs the less restrictive
eligibility requirement is not subject to
§ 226.54 unless the relevant balance for
the prior billing cycle has been paid in
full before the beginning of the current
cycle. The Board has also added
illustrative examples to comment
54(a)(1)–1.
Third, the Board has revised comment
54(a)(1)–2 to clarify that 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 § 226.54. The Board
believes that these practices are
generally beneficial to consumers. In
particular, the Board understands that,
when a consumer is not eligible for a
grace period at the start of a billing
cycle, many card issuers waive interest
that accrues during that billing cycle if
the consumer pays the relevant balance
in full by the payment due date. For
reasons similar to those discussed
above, industry commenters expressed
concern that waiving interest in these
circumstances could be construed as
providing a grace period regardless of
whether the relevant balance for the
prior cycle was paid in full.
Accordingly, the revisions to comment
54(a)(1)–2 are intended to encourage
issuers to continue waiving or rebating
eligibility requirement. However, as discussed
above, it does not appear that Congress intended to
limit card issuers’ ability to place conditions on
grace period eligibility.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations

interest charges in these circumstances.
Illustrative examples are provided.
However, consumer group
commenters also raised concerns about
an emerging practice of establishing
interest waiver or rebate programs that
are similar in many respects to grace
periods. Under these programs, all
interest accrued on purchases will be
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. The Board is concerned that
these programs may be structured to
avoid the requirements of new TILA
Section 127(j) and § 226.54 (particularly
the prohibition on imposing finance
charges on amounts paid during a grace
period). Accordingly, pursuant to its
authority under TILA Section 105(a) to
prevent evasion, the Board clarifies in
comment 54(a)(1)–2 that this type of
program is subject to the requirements
of § 226.54. An illustrative example is
provided.
Finally, proposed comment 54(a)(1)–3
clarified that card issuers must comply
with the payment allocation
requirements in § 226.53 even if doing
so will result in the loss of a grace
period. For example, as illustrated in
comment 54(a)(1)–6.ii, a card issuer
must generally allocate a payment in
excess of the required minimum
periodic payment to a cash advance
balance with a 25% rate before a
purchase balance with a 15% rate even
if this will result in the loss of a grace
period on the purchase balance.
Although there could be a narrow set of
circumstances in which—depending on
the size of the balances and the amount
of the difference between the rates—this
allocation would result in higher
interest charges than if the excess
payment were applied in a way that
preserved the grace period, Congress did
not create an exception for these
circumstances in the provisions of the
Credit Card Act specifically addressing
payment allocation.
Consumer group commenters argued
that credit card issuers should be
required to allocate payments in a
manner that preserves the grace period.
However, the Board is not persuaded
that, as a general matter, this approach
would necessarily be more
advantageous for consumers than
paying down the balance with the
highest annual percentage rate.
Furthermore, the payment allocation
requirements in revised TILA Section
164(b) are mandatory in all
circumstances, whereas the limitations
on the imposition of finance charges in
new TILA Section 127(j) apply only
when the card issuer chooses to provide

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a grace period. Therefore, in
circumstances where, for example, a
card issuer must choose between
allocating a payment to the balance with
the highest rate (which the Credit Card
Act requires) or preserving a grace
period (which the Credit Card Act does
not require), the Board believes it is
appropriate that the payment allocation
requirements control. Accordingly,
comment 54(a)(1)–3 is adopted as
proposed.
54(b) Exceptions
New TILA Section 127(j)(2) provides
that the prohibitions in Section 127(j)(1)
do not apply to any adjustment to a
finance charge as a result of resolution
of a dispute or as a result of the return
of a payment for insufficient funds. The
Board proposed to implement these
exceptions in § 226.54(b).
The Board interpreted the exception
for the ‘‘resolution of a dispute’’ in new
TILA Section 127(j)(2)(A) to apply when
the dispute is resolved pursuant to
TILA’s dispute resolution procedures.
Accordingly, proposed § 226.54(b)(1)
permitted adjustments to finance
charges when a dispute is resolved
under § 226.12 (which governs the right
of a cardholder to assert claims or
defenses against the card issuer) or
§ 226.13 (which governs resolution of
billing errors).
In addition, because a payment may
be returned for reasons other than
insufficient funds (such as because the
account on which the payment is drawn
has been closed or because the
consumer has instructed the institution
holding that account not to honor the
payment), the Board proposed to use its
authority under TILA Section 105(a) to
apply the exception in new TILA
Section 127(j)(2)(B) to all circumstances
in which adjustments to finance charges
are made as a result of the return of a
payment.
The Board did not receive significant
comment on this aspect of the proposal.
Accordingly, § 226.54(b) is adopted as
proposed.
Section 226.55 Limitations on
Increasing Annual Percentage Rates,
Fees, and Charges
As revised by the Credit Card Act,
TILA Section 171(a) generally prohibits
creditors from increasing any annual
percentage rate, fee, or finance charge
applicable to any outstanding balance
on a credit card account under an openend consumer credit plan. See 15 U.S.C.
1666i–1. Revised TILA Section 171(b),
however, provides exceptions to this
rule for temporary rates that expire after
a specified period of time and rates that
vary with an index. Revised TILA

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Section 171(b) also provides exceptions
in circumstances where the creditor has
not received the required minimum
periodic payment within 60 days after
the due date and where the consumer
completes or fails to comply with the
terms of a workout or temporary
hardship arrangement. Revised TILA
Section 171(c) limits a creditor’s ability
to change the terms governing
repayment of an outstanding balance.
The Credit Card Act also creates a new
TILA Section 172, which provides that
a creditor generally cannot increase a
rate, fee, or finance charge during the
first year after account opening and that
a promotional rate (as defined by the
Board) generally cannot expire earlier
than six months after it takes effect. As
discussed in detail below, the Board is
implementing both revised TILA
Section 171 and new TILA Section 172
in § 226.55.
55(a) General Rule
As noted above, revised TILA Section
171(a) generally prohibits increases in
annual percentage rates, fees, and
finance charges on outstanding
balances. Revised TILA Section 171(d)
defines ‘‘outstanding balance’’ as the
amount owed as of the end of the
fourteenth day after the date on which
the creditor provides notice of an
increase in the annual percentage rate,
fee, or finance charge in accordance
with TILA Section 127(i).42 TILA
Section 127(i)(1) and (2), which went
into effect on August 20, 2009, generally
require creditors to notify consumers 45
days before an increase in an annual
percentage rate or any other significant
change in the terms of a credit card
account (as determined by rule of the
Board).
In the July 2009 Regulation Z Interim
Final Rule, the Board implemented new
TILA Section 127(i)(1) and (2) in
§ 226.9(c) and (g). In addition to
increases in annual percentage rates,
§ 226.9(c)(2)(ii) lists the fees and other
charges for which an increase
constitutes a significant change to the
account terms necessitating 45 days’
advance notice, including annual or
other periodic fees, fixed finance
42 As discussed in the July 2009 Regulation Z
Interim Final Rule (at 74 FR 36090), the Board
believes that this fourteen-day period is intended to
balance the interests of consumers and creditors.
On the one hand, the fourteen-day period ensures
that the increased rate, fee, or charge will not apply
to transactions that occur before the consumer has
received the notice and had a reasonable amount of
time to review it and decide whether to use the
account for additional transactions. On the other
hand, the fourteen-day period reduces the potential
that a consumer—having been notified of an
increase for new transactions—will use the 45-day
notice period to engage in transactions to which the
increased rate, fee, or charge cannot be applied.

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charges, minimum interest charges,
transaction charges, cash advance fees,
late payment fees, over-the-limit fees,
balance transfer fees, returned-payment
fees, and fees for required insurance,
debt cancellation, or debt suspension
coverage. As discussed above, however,
the Board has amended § 226.9(c)(2)(ii)
to identify these significant account
terms by a cross-reference to the
account-opening disclosure
requirements in § 226.6(b). Because the
definition of outstanding balance in
revised TILA Section 171(d) is expressly
conditioned on the provision of the 45day advance notice, the Board believes
that it is consistent with the purposes of
the Credit Card Act to limit the general
prohibition in revised TILA Section
171(a) on increasing fees and finance
charges to increases in fees and charges
for which a 45-day notice is required
under § 226.9.
Furthermore, because revised TILA
Section 171(a) prohibits the application
of increased fees and charges to
outstanding balances rather than to new
transactions or to the account as a
whole, the Board believes that it is
appropriate to apply that prohibition
only to fees and charges that could be
applied to an outstanding balance. For
example, increased cash advance or
balance transfer fees would apply only
to new cash advances or balance
transfers, not to existing balances.
Similarly, increased penalty fees such as
late payment fees, over-the-limit fees,
and returned payment fees would apply
to the account as a whole rather than
any specific balance.43
Accordingly, the Board proposed to
use its authority under TILA Section
105(a) to limit the general prohibition in
revised TILA Section 171(a) to increases
in annual percentage rates and in fees
and charges required to be disclosed
under § 226.6(b)(2)(ii) (fees for the
issuance or availability of credit),
§ 226.6(b)(2)(iii) (fixed finance charges
and minimum interest charges), or
§ 226.6(b)(2)(xii) (fees for required
insurance, debt cancellation, or debt
suspension coverage).44 Although
consumer groups expressed concern
that card issuers might develop new fees
in order to evade the prohibition on
applying increased fees to existing
balances, the Board believes that these
categories of fees are sufficiently broad
43 However, the Board notes that a consumer that
does not want to accept an increase in these types
of fees may reject the increase pursuant to
§ 226.9(h).
44 As discussed below with respect to
§ 226.55(b)(3), a card issuer may still increase these
types of fees and charges so long as the increased
fee or charge is not applied to the outstanding
balance.

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to address any attempts at
circumvention.
In addition, for clarity and
organizational purposes, proposed
§ 226.55(a) generally prohibited
increases in annual percentage rates and
fees and charges required to be
disclosed under § 226.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii) with respect to
all transactions, rather than just
increases on existing balances. As
explained in the proposal, the Board
does not intend to alter the substantive
requirements in revised TILA Section
171. Instead, the Board believes that
revised TILA Section 171 can be more
clearly and effectively implemented if
increases in rates, fees, and charges that
apply to transactions that occur more
than fourteen days after provision of a
§ 226.9(c) or (g) notice are addressed in
an exception to the general prohibition
rather than placed outside that
prohibition. The Board and the other
Agencies adopted a similar approach in
the January 2009 FTC Act Rule. See 12
CFR 227.24, 74 FR 5560. The Board did
not receive significant comment on this
aspect of the proposal. Accordingly,
§ 226.55(a) states that, except as
provided in § 226.55(b), a card issuer
must not increase an annual percentage
rate or a fee or charge required to be
disclosed under § 226.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii).
Proposed comment 55(a)–1 provided
examples of the general application of
§ 226.55(a) and the exceptions in
§ 226.55(b). The Board has clarified
these examples but no substantive
change is intended. Additional
examples illustrating specific aspects of
the exceptions in § 226.55(b) are
provided in the commentary to those
exceptions.
Proposed comment 55(a)–2 clarified
that nothing in § 226.55 prohibits a card
issuer from assessing interest due to the
loss of a grace period to the extent
consistent with § 226.54. In addition,
the comment states that a card issuer
has not reduced an annual percentage
rate on a credit account for purposes of
§ 226.55 if the card issuer does not
charge interest on a balance or a portion
thereof based on a payment received
prior to the expiration of a grace period.
For example, if the annual percentage
rate for purchases on an account is 15%
but the card issuer does not charge any
interest on a $500 purchase balance
because that balance was paid in full
prior to the expiration of the grace
period, the card issuer has not reduced
the 15% purchase rate to 0% for
purposes of § 226.55. The Board has
revised this comment to clarify that any
loss of a grace period must also be
consistent with the requirements for

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mailing or delivering periodic
statements in § 226.5(b)(2)(ii)(B).
Otherwise, it is adopted as proposed.
55(b) Exceptions
Revised TILA Section 171(b) lists the
exceptions to the general prohibition in
revised Section 171(a). Similarly,
§ 226.55(b) lists the exceptions to the
general prohibition in § 226.55(a). In
addition, § 226.55(b) clarifies that the
listed exceptions are not mutually
exclusive. In other words, a card issuer
may increase an annual percentage rate
or a fee or charge required to be
disclosed under § 226.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii) pursuant to an
exception set forth in § 226.55(b) even if
that increase would not be permitted
under a different exception. Comment
55(b)–1 clarifies that, for example,
although a card issuer cannot increase
an annual percentage rate pursuant to
§ 226.55(b)(1) unless that rate is
provided for a specified period of at
least six months, the card issuer may
increase an annual percentage rate
during a specified period due to an
increase in an index consistent with
§ 226.55(b)(2). Similarly, although
§ 226.55(b)(3) does not permit a card
issuer to increase an annual percentage
rate during the first year after account
opening, the card issuer may increase
the rate during the first year after
account opening pursuant to
§ 226.55(b)(4) if the required minimum
periodic payment is not received within
60 days after the due date. The Board
did not receive significant comment on
the prefatory language in § 226.55(b) or
on comment 55(b)–1, which are adopted
as proposed. Similarly, except as noted
below, comments 55(b)–2 through –6
are adopted as proposed.
Proposed comment 55(b)–2 addressed
circumstances where the date on which
a rate, fee, or charge may be increased
pursuant to an exception in § 226.55(b)
does not fall on the first day of a billing
cycle. Because it may be operationally
difficult for some card issuers to apply
an increased rate, fee, or charge in the
middle of a billing cycle, the comment
clarifies that, in these circumstances,
the card issuer may delay application of
the increased rate, fee, or charge until
the first day of the following billing
cycle without relinquishing the ability
to apply that rate, fee, or charge.
Commenters generally supported this
guidance, but requested additional
clarification regarding mid-cycle
increases. Because these increases can
occur as a result of the interaction
between the exceptions in § 226.55(b)
and the 45-day notice requirements in
§ 226.9(c) and (g), the Board has
incorporated into comment 55(b)–2 the

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guidance provided in proposed
comment 55(b)–6 regarding that
interaction.45 Specifically, proposed
comment 55(b)–6 stated that nothing in
§ 226.55 alters the requirements in
§ 226.9(c) and (g) that creditors provide
written notice at least 45 days prior to
the effective date of certain increases in
annual percentage rates, fees, and
charges. For example, although
§ 226.55(b)(3)(ii) permits a card issuer
that discloses an increased rate pursuant
to § 226.9(c) or (g) to apply that rate to
transactions that occurred more than
fourteen days after provision of the
notice, the card issuer cannot begin to
accrue interest at the increased rate
until that increase goes into effect,
consistent with § 226.9(c) or (g). The
final rule adopts this guidance—with
illustrative examples—in comment
55(b)–2.
In addition, proposed comment 55(b)–
6 clarified that, on or after the effective
date, the card issuer cannot calculate
interest charges for days before the
effective date based on the increased
rate. In response to requests from
commenters for further clarification, the
Board has added this guidance to
comment 55(b)–2 and adopted
additional guidance addressing the
application of different balance
computation methods when an
increased rate goes into effect in the
middle of a billing cycle.
Comment 55(b)–3 clarifies that,
although nothing in § 226.55 prohibits a
card issuer from lowering an annual
percentage rate or a fee or charge
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii),
a card issuer that does so cannot
subsequently increase the rate, fee, or
charge unless permitted by one of the
exceptions in § 226.55(b). The Board
believes that this interpretation is
consistent with the intent of revised
TILA Section 171 insofar as it ensures
that consumers are informed of the key
terms and conditions associated with a
lowered rate, fee, or charge before
relying on that rate, fee, or charge. For
example, revised Section 171(b)(1)(A)
requires creditors to disclose how long
a temporary rate will apply and the rate
that will apply after the temporary rate
expires before the consumer engages in
transactions in reliance on the
temporary rate. Similarly, revised
Section 171(b)(3)(B) requires the
creditor to disclose the terms of a
workout or temporary hardship
arrangement before the consumer agrees
to the arrangement. The comment
provides examples illustrating the
45 As

a result, proposed comment 55(b)–6 is not
adopted in this final rule.

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application of § 226.55 when an annual
percentage rate is lowered. Comment
55(b)–3 is adopted as proposed,
although the Board has made nonsubstantive clarifications and added
additional examples in response to
comments regarding the application of
§ 226.55 when an existing temporary
rate is extended and when a default
occurs before a temporary rate expires.
As discussed below, several of the
exceptions in proposed § 226.55 require
the creditor to determine when a
transaction occurred. For example,
consistent with revised TILA Section
171(d)’s definition of ‘‘outstanding
balance,’’ § 226.55(b)(3)(ii) provides that
a card issuer that discloses an increased
rate pursuant to § 226.9(c) or (g) may not
apply that increased rate to transactions
that occurred prior to or within fourteen
days after provision of the notice.
Accordingly, comment 55(b)–4 clarifies
that when a transaction occurred for
purposes of § 226.55 is generally
determined by the date of the
transaction.46 The Board understands
that, in certain circumstances, a short
delay can occur between the date of the
transaction and the date on which the
merchant charges that transaction to the
account. As a general matter, the Board
believes that these delays should not
affect the application of § 226.55.
However, to address the operational
difficulty for card issuers in the rare
circumstance where a transaction that
occurred within fourteen days after
provision of a § 226.9(c) or (g) notice is
not charged to the account prior to the
effective date of the increase or change,
this comment clarifies that the card
issuer may treat the transaction as
occurring more than fourteen days after
provision of the notice for purposes of
§ 226.55. In addition, the comment
clarifies that, when a merchant places a
‘‘hold’’ on the available credit on an
account for an estimated transaction
amount because the actual transaction
amount will not be known until a later
date, the date of the transaction for
purposes of § 226.55 is the date on
which the card issuer receives the actual
transaction amount from the merchant.
Illustrative examples are provided in
comment 55(b)(3)–4.iii.
Comment 55(b)–5 clarifies the
meaning of the term ‘‘category of
transactions,’’ which is used in some of
the exceptions in § 226.55(b). This
comment states that, for purposes of
§ 226.55, a ‘‘category of transactions’’ is
a type or group of transactions to which
an annual percentage rate applies that is
46 This comment is based on comment 9(h)(3)(ii)–
2, which was adopted in the July 2009 Regulation
Z Interim Final Rule. See 74 FR 36101.

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different than the annual percentage rate
that applies to other transactions.47 For
example, purchase transactions, cash
advance transactions, and balance
transfer transactions are separate
categories of transactions for purposes
of § 226.55 if a card issuer applies
different annual percentage rates to
each. Furthermore, if, for example, the
card issuer applies different annual
percentage rates to different types of
purchase transactions (such as one rate
for purchases of gasoline or purchases
over $100 and a different rate for all
other purchases), each type constitutes
a separate category of transactions for
purposes of § 226.55.
55(b)(1) Temporary Rate Exception
Revised TILA Section 171(b)(1)
provides that a creditor may increase an
annual percentage rate upon the
expiration of a specified period of time,
subject to three conditions. First, prior
to commencement of the period, the
creditor must have disclosed to the
consumer, in a clear and conspicuous
manner, the length of the period and the
increased annual percentage rate that
will apply after expiration of the period.
Second, at the end of the period, the
creditor must not apply a rate that
exceeds the increased rate that was
disclosed prior to commencement of the
period. Third, at the end of the period,
the creditor must not apply the
previously-disclosed increased rate to
transactions that occurred prior to
commencement of the period. Thus,
under this exception, a creditor that, for
example, discloses at account opening
that a 5% rate will apply to purchases
for six months and that a 15% rate will
apply thereafter is permitted to increase
the rate on the purchase balance to 15%
after six months.
The Board proposed to implement the
exception in revised TILA Section
171(b)(1) regarding temporary rates as
well as the requirements in new TILA
Section 172(b) regarding promotional
rates in § 226.55(b)(1). As a general
matter, commenters supported or did
not address proposed § 226.55(b)(1) and
its commentary. Accordingly, except as
discussed below, they are adopted as
proposed.48
47 Similarly, a type or group of transactions is a
‘‘category of transactions’’ for purposes of § 226.55
if a fee or charge required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) applies to
those transactions that is different than the fee or
charge that applies to other transactions.
48 Some industry commenters requested that the
Board expand § 226.55(b)(1) to apply to increases in
fees to a pre-disclosed amount after a specified
period of time. However, as discussed above with
respect to § 226.9(c) and (h), the Board believes that
such an exception would be inconsistent with the
Credit Card Act. In addition, some industry

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New TILA Section 172(b) provides
that ‘‘[n]o increase in any * * *
promotional rate (as that term is defined
by the Board) shall be effective before
the end of the 6-month period beginning
on the date on which the promotional
rate takes effect, subject to such
reasonable exceptions as the Board may
establish by rule.’’ Pursuant to this
authority, the Board believes that
promotional rates should be subject to
the same requirements and exceptions
as other temporary rates that expire after
a specified period of time. In particular,
the Board believes that consumers who
rely on promotional rates should receive
the disclosures and protections set forth
in revised TILA Section 171(b)(1) and
§ 226.55(b)(1). This will ensure that a
consumer will receive disclosure of the
terms of the promotional rate before
engaging in transactions in reliance on
that rate and that, at the expiration of
the promotion, the rate will only be
increased consistent with those terms.
Accordingly, the Board has incorporated
the requirement that promotional rates
last at least six months into
§ 226.55(b)(1), which would permit a
card issuer to increase a temporary
annual percentage rate upon the
expiration of a specified period that is
six months or longer.
Furthermore, pursuant to its authority
under new TILA Section 172(b) to
establish reasonable exceptions to the
six-month requirement for promotional
rates, the Board believes that it is
appropriate to apply the other
exceptions in revised TILA Section
171(b) and § 226.55(b) to promotional
rate offers. For example, the Board
believes that a card issuer should be
permitted to offer a consumer a
promotional rate that varies with an
index consistent with revised TILA
Section 171(b)(2) and § 226.55(b)(2)
(such as a rate that is one percentage
point over a prime rate that is not under
the card issuer’s control). Similarly, the
Board believes that a card issuer should
be permitted to increase a promotional
rate if the account becomes more than
60 days delinquent during the
promotional period consistent with
revised TILA Section 171(b)(4) and
§ 226.55(b)(4). Thus, the Board has
applied to promotional rates the general
proposition in proposed § 226.55(b) that
a rate may be increased pursuant to an
exception in § 226.55(b) even if that
commenters requested that the Board exclude
promotional programs under which no interest is
charged for a specified period of time. However, the
Board believes that, for purposes of § 226.55, these
programs do not differ in any material way from
programs that offer annual percentage rate of 0% for
a specified period of time.

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increase would not be permitted under
a different exception.
Section 226.55(b)(1)(i) implements the
requirement in revised TILA Section
171(b)(1)(A) that creditors disclose the
length of the period and the annual
percentage rate that will apply after the
expiration of that period. This language
tracks § 226.9(c)(2)(v)(B)(1), which the
Board adopted in the July 2009
Regulation Z Interim Final Rule as part
of an exception to the general
requirement that creditors provide 45
days’ notice before an increase in
annual percentage rate. Because the
disclosure requirements in
§ 226.9(c)(2)(v)(B)(1) and
§ 226.55(b)(1)(i) implement the same
statutory provision (revised TILA
Section 171(b)(1)(A)), the Board believes
a single set of disclosures should satisfy
both requirements. Accordingly,
comment 55(b)(1)–1 clarifies that a card
issuer that has complied with the
disclosure requirements in
§ 226.9(c)(2)(v)(B) has also complied
with the disclosure requirements in
§ 226.55(b)(2)(i).
Section 226.55(b)(1)(ii) implements
the limitations in revised TILA Section
171(b)(1)(B) and (C) on the application
of increased rates following expiration
of the specified period. First,
§ 226.55(b)(1)(ii)(A) states that, upon
expiration of the specified period, a card
issuer must not apply an annual
percentage rate to transactions that
occurred prior to the period that
exceeds the rate that applied to those
transactions prior to the period. In other
words, the expiration of a temporary
rate cannot be used as a reason to apply
an increased rate to a balance that
preceded application of the temporary
rate. For example, assume that a credit
card account has a $5,000 purchase
balance at a 15% rate and that the card
issuer reduces the rate that applies to all
purchases (including the $5,000
balance) to 10% for six months with a
22% rate applying thereafter. Under
§ 226.55(b)(1)(ii)(A), the card issuer
cannot apply the 22% rate to the $5,000
balance upon expiration of the sixmonth period (although the card issuer
could apply the original 15% rate to that
balance).
Second, § 226.55(b)(1)(ii)(B) states
that, if the disclosures required by
§ 226.55(b)(1)(i) are provided pursuant
to § 226.9(c), the card issuer must not—
upon expiration of the specified
period—apply an annual percentage rate
to transactions that occurred within
fourteen days after provision of the
notice that exceeds the rate that applied
to that category of transactions prior to
provision of the notice. The Board
believes that this clarification is

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necessary to ensure that card issuers do
not apply an increased rate to an
outstanding balance (as defined in
revised TILA Section 171(d)) upon
expiration of the specified period.
Accordingly, consistent with the
purpose of revised TILA Section 171(d),
§ 226.55(b)(1)(ii)(B) ensures that a
consumer will have fourteen days to
receive the § 226.9(c) notice and review
the terms of the temporary rate
(including the increased rate that will
apply upon expiration of the specified
period) before engaging in transactions
to which that increased rate may
eventually apply.
Third, § 226.55(b)(1)(ii)(C) states that,
upon expiration of the specified period,
the card issuer must not apply an
annual percentage rate to transactions
that occurred during the specified
period that exceeds the increased rate
disclosed pursuant to § 226.55(b)(1)(i).
In other words, the card issuer can only
increase the rate consistent with the
previously-disclosed terms. Examples
illustrating the application of
§ 226.55(b)(1)(ii)(A), (B), and (C) are
provided in comments 55(a)–1 and
55(b)–3.
Comment 55(b)(1)–2 clarifies when
the specified period begins for purposes
of the six-month requirement in
§ 226.55(b)(1). As a general matter,
comment 55(b)(1)–2 states that the
specified period must expire no less
than six months after the date on which
the creditor discloses to the consumer
the length of the period and rate that
will apply thereafter (as required by
§ 226.55(b)(1)(i)). However, if the card
issuer provides these disclosures before
the consumer can use the account for
transactions to which the temporary rate
will apply, the temporary rate must
expire no less than six months from the
date on which it becomes available.
For example, assume that on January
1 a card issuer offers a 5% annual
percentage rate for six months on
purchases (with a 15% rate applying
thereafter). If a consumer may begin
making purchases at the 5% rate on
January 1, § 226.55(b)(1) permits the
issuer to begin accruing interest at the
15% rate on July 1. However, if a
consumer may not begin making
purchases at the 5% rate until February
1, § 226.55(b)(1) does not permit the
issuer to begin accruing interest at the
15% rate until August 1.
The Board understands that card
issuers often limit the application of a
promotional rate to particular categories
of transactions (such as balance
transfers or purchases over $100). The
Board does not believe that the sixmonth requirement in new TILA
Section 172(b) was intended to prohibit

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this practice so long as the consumer
receives the benefit of the promotional
rate for at least six months. Accordingly,
proposed comment 55(b)(1)–2 clarifies
that § 226.55(b)(1) does not prohibit
these types of limitations. However, the
comment also clarifies that, in
circumstances where the card issuer
limits application of the temporary rate
to a particular transaction, the
temporary rate must expire no less than
six months after the date on which that
transaction occurred. For example, if on
January 1 a card issuer offers a 0%
temporary rate on the purchase of an
appliance and the consumer uses the
account to purchase a $1,000 appliance
on March 1, the card issuer cannot
increase the rate on that $1,000
purchase until September 1.
The Board believes that this
application of the six-month
requirement is consistent with the
intent of new TILA Section 172(b).
Although the six-month requirement
could be interpreted as requiring a
separate six-month period for every
transaction to which the temporary rate
applies, the Board believes this
interpretation would create a level of
complexity that would be not only
confusing for consumers but also
operationally burdensome for card
issuers, potentially leading to a
reduction in promotional rate offers that
provide significant consumer benefit.
As a general matter, commenters
supported the guidance in comment
55(b)(1)–2. Some industry commenters
argued that the six-month requirement
should not apply when the temporary
rate is limited to a particular
transaction, but the Board finds no
support for such an exclusion in new
TILA Section 172(b). Other industry
commenters argued that, even if a
temporary rate is limited to a particular
transaction, the six-month period
required by § 226.55(b)(1) should always
begin once the terms have been
disclosed and the rate is available to
consumers. However, because
temporary rates that are limited to
particular transactions are frequently
offered in retail settings, the Board is
concerned that many consumers would
not receive the benefit of the six-month
period mandated by Section 172(b) if
that period began when the rate was
available.
For example, assume that a temporary
rate of 0% is available on the purchase
of a television from a particular retailer
beginning on January 1. If the six-month
period begins on January 1, a consumer
who purchases a television on January
1 will receive the benefit of 0% rate for
six months. However, a consumer who
purchases a television on June 1 will

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only receive the benefit of the 0% rate
for one month. As discussed above, the
Board believes that, as a general matter,
the benefits of temporary rates that can
be used for multiple transactions
sufficiently outweigh the fact that a
consumer will not receive the temporary
rate for the full six months on every
transaction and therefore justify
interpreting the six-month period in
new TILA Section 172(b) as beginning
when the rate becomes available.
However, when the temporary rate
applies only to a single transaction, the
Board believes that Section 172(b)
requires the card issuer to apply the
temporary rate to that transaction for at
least six months.
Although some industry commenters
cited the operational difficulty of
tracking transaction-specific expiration
dates for temporary rates, the Board
notes that several card issuers do so
today. Furthermore, as discussed in
comment 55(b)–2, a card issuer is not
required to increase the rate precisely
six months after the date of the
transaction. Instead, assuming monthly
billing cycles, a card issuer could, for
example, use a single expiration date of
July 31 for all temporary rate
transactions that occur during the
month of January (although this would
require the card issuer to extend the
temporary rate for up to a month).
Accordingly, in this respect, comment
55(b)(1)–2 is adopted as proposed.49
Comment 55(b)(1)–3 clarifies that the
general prohibition in § 226.55(a)
applies to the imposition of accrued
interest upon the expiration of a
deferred interest or similar promotional
program under which the consumer is
not obligated to pay interest that accrues
on a balance if that balance is paid in
full prior to the expiration of a specified
period of time. As discussed in the
January 2009 FTC Act Rule, the
assessment of deferred interest is
effectively an increase in rate on an
existing balance. See 74 FR 5527–5528.
However, if properly disclosed, deferred
interest programs can provide
substantial benefits to consumers. See
74 FR 20812–20813. Furthermore, as
discussed above with respect to
§ 226.54, the Board does not believe that
the Credit Card Act was intended to ban
properly-disclosed deferred interest
programs. Accordingly, comment
49 However,

in order to address confusion
regarding the application of comment 55(b)(1)–2 to
balance transfer offers, the Board has added an
example clarifying that the six-month period for
temporary rates that apply to multiple balance
transfers begins once the terms have been disclosed
and the rate is available to consumers. The Board
has also made non-substantive clarifications to the
examples in comment 55(b)(1)–2.

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55(b)(1)–3 further clarifies that card
issuers may continue to offer such
programs consistent with the
requirements of § 226.55(b)(1). In
particular, § 226.55(b)(1) requires that
the deferred interest or similar period be
at least six months. Furthermore, prior
to the commencement of the period,
§ 226.55(b)(1)(i) requires the card issuer
to disclose the length of the period and
the rate that will apply to the balance
subject to the deferred interest program
if that balance is not paid in full prior
to expiration of the period. The
comment provides examples illustrating
the application of § 226.55 to deferred
interest and similar programs.
Some industry commenters requested
that the Board exclude deferred interest
and similar programs from the sixmonth requirement in § 226.55(b)(1).
However, because the Board has
concluded that these programs should
be treated as promotional programs for
purposes of revised TILA Section 171,
the Board does believe there is a basis
for excluding these programs from the
six-month requirement in new TILA
Section 172(b). However, in order to
ensure consistent treatment of deferred
interest programs across Regulation Z,
the Board has revised comment
55(b)(1)–3 to clarify that ‘‘deferred
interest’’ has the same meaning as in
§ 226.16(h)(2) and associated
commentary. In addition, the Board has
added an example clarifying the
application of the exception in
§ 226.55(b)(4) for accounts that are more
than 60 days delinquent to deferred
interest and similar programs.
Comment 55(b)(1)–4 clarifies that
§ 226.55(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. The comment
provides examples of rate increases that
are not permitted by § 226.55. 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. However, the Board believes that
such an exception would be
inconsistent with revised TILA Section
171(b)(1) because it is based on a
contingent event rather than a specified
period of time.
55(b)(2) Variable Rate Exception
Revised TILA Section 171(b)(2)
provides that a card issuer may increase
‘‘a variable annual percentage rate in
accordance with a credit card agreement
that provides for changes in the rate
according to operation of an index that
is not under the card issuer’s control

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and is available to the general public.’’
The Board proposed to implement this
exception in § 226.55(b)(2), which states
that a creditor may increase an annual
percentage rate that varies according to
an index that is not under the creditor’s
control and is available to the general
public when the increase in rate is due
to an increase in the index. Section
226.55(b)(2) is adopted as proposed.
The proposed commentary to
§ 226.55(b)(2) was modeled on
commentary adopted by the Board and
the other Agencies in the January 2009
FTC Act Rule as well as § 226.5b(f) and
its commentary. See 12 CFR 227.24
comments 24(b)(2)–1 through 6, 74 FR
5531, 5564; § 226.5b(f)(1), (3)(ii);
comment 5b(f)(1)–1 and –2; comment
5b(f)(3)(ii)–1. Proposed comment
55(b)(2)–1 clarified that § 226.55(b)(2)
does not permit a card issuer to increase
a variable annual percentage rate by
changing the method used to determine
that rate (such as by increasing the
margin), even if that change will not
result in an immediate increase.
However, consistent with existing
comment 5b(f)(3)(v)–2, the comment
also clarifies that a card issuer may
change the day of the month on which
index values are measured to determine
changes to the rate. This comment is
generally adopted as proposed, although
the Board has clarified that that changes
to the day on which index values are
measured are permitted from time to
time. As discussed below, systematic
changes in the date to capture the
highest possible index value would be
inconsistent with § 226.55(b)(2).
Proposed comment 55(b)(1)–2 further
clarified that a card issuer may not
increase a variable rate based on its own
prime rate or cost of funds. A card
issuer is permitted, however, to use a
published prime rate, such as that in the
Wall Street Journal, even if the card
issuer’s own prime rate is one of several
rates used to establish the published
rate. In addition, proposed comment
55(b)(2)–3 clarified that a publiclyavailable index need not be published
in a newspaper, but it must be one the
consumer can independently obtain (by
telephone, for example) and use to
verify the annual percentage rate
applied to the credit card account.
These comments are adopted as
proposed, except that, as discussed
below, the Board has provided
additional clarification in comment
55(b)(2)–2 regarding what constitutes
exercising control over the operation of
an index for purposes of § 226.55(b)(2).
Consumer groups and a member of
Congress raised concerns about two
industry practices that, in their view,
exercise control over the variable rate in

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a manner that is inconsistent with
revised TILA Section 171(b)(2). First,
they noted that many card issuers set
minimum rates or ‘‘floors’’ below which
a variable rate cannot fall even if a
decrease would be consistent with a
change in the applicable index. For
example, assume that a card issuer
offers a variable rate of 17%, which is
calculated by adding a margin of 12
percentage points to an index with a
current value of 5%. However, the terms
of the account provide that the variable
rate will not decrease below 17%. As a
result, the variable rate can only
increase, and the consumer will not
benefit if the value of the index falls
below 5%. The Board agrees that this
practice is inconsistent with
§ 226.55(b)(2). Accordingly, the Board
has revised comment 55(b)(2)–2 to
clarify 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.50
The second practice raised by
consumer groups and a member of
Congress relates to adjusting or resetting
variable rates to account for changes in
the index. Typically, card issuers do not
reset variable rates on a daily basis.
Instead, card issuers may reset variable
rates monthly, every two months, or
quarterly. When the rate is reset, some
card issuers calculate the new rate by
adding the margin to the value of the
index on a particular day (such as the
last day of a month or billing cycle).
However, some issuers calculate the
variable rate based on the highest index
value during a period of time (such as
the 90 days preceding the last day of a
month or billing cycle). Consumer
groups and a member of Congress
argued that the latter practice is
inconsistent with § 226.55(b)(2) insofar
as the consumer can be prevented from
receiving the benefit of decreases in the
index.
The Board agrees that a card issuer
exercises control over the operation of
the index if the variable rate can be
calculated based on any index value
during a period of time. Accordingly,
the Board has revised comment
55(b)(2)–2 to clarify that, if the terms of
the account contain such a provision,
the card issuer cannot apply increases
in the variable rate to existing balances
pursuant to § 226.55(b)(2). However, the
comment also clarifies that a card issuer
50 However, because there is no disadvantage to
consumers, comment 55(b)(2)–2 clarifies that card
issuers are permitted to set fixed maximum rates or
‘‘ceilings’’ that do not permit the variable rate to
increase consistent with increases in an index.

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can 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.
Because the conversion of a nonvariable rate to a variable rate could lead
to future increases in the rate that
applies to an existing balance, comment
55(b)(2)–4 clarifies that a non-variable
rate may be converted to a variable rate
only when specifically permitted by one
of the exceptions in § 226.55(b). For
example, under § 226.55(b)(1), a card
issuer may convert a non-variable rate to
a variable rate at the expiration of a
specified period if this change was
disclosed prior to commencement of the
period. This comment is adopted as
proposed.
Because § 226.55 applies only to
increases in annual percentage rates,
proposed comment 55(b)(2)–5 clarifies
that nothing in § 226.55 prohibits a card
issuer from changing a variable rate to
an equal or lower non-variable rate.
Whether the non-variable rate is equal
to or lower than the variable rate is
determined at the time the card issuer
provides the notice required by
§ 226.9(c). An illustrative example is
provided. Consumer group commenters
argued that the Board should prohibit
issuers from converting a variable rate to
a non-variable rate when the index used
to calculate the variable rate has reached
its peak value. However, it would be
difficult or impossible to develop
workable standards for determining
when a variable rate has reached its
peak value or for distinguishing
between conversions that are done for
legitimate reasons and those that are
not. Furthermore, as the consumer
group commenters acknowledged, nonvariable rates can be beneficial to
consumers insofar as they provide
increased predictability regarding the
cost of credit. Accordingly, this
comment is adopted as proposed.
Proposed comment 55(b)(2)–6
clarified that a card issuer may change
the index and margin used to determine
a variable rate if the original index
becomes unavailable, so long as
historical fluctuations in the original
and replacement indices were
substantially similar and the
replacement index and margin will
produce a rate similar to the rate that
was in effect at the time the original
index became unavailable. This
comment further clarified that, if the
replacement index is newly established
and therefore does not have any rate
history, it may be used if it produces a
rate substantially similar to the rate in
effect when the original index became
unavailable.

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Consumer group commenters raised
concerns that card issuers could
substitute indices in a manner that
circumvents the requirements of
§ 226.55(b)(2). Because comment
55(b)(2)–6 addresses the narrow
circumstance in which an index
becomes unavailable, the Board does
not believe there is a significant risk of
abuse. Indeed, this comment is
substantively similar to long-standing
guidance provided by the Board with
respect to HELOCs (comment
5b(f)(3)(ii)–1), and the Board is not
aware of any abuse in that context.
Accordingly, the Board does not believe
that revisions to comment 55(b)(2)–6 are
warranted at this time.
55(b)(3) Advance Notice Exception
Section 226.55(a) prohibits increases
in annual percentage rates and fees and
charges required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
with respect to both existing balances
and new transactions. However, as
discussed above, the prohibition on
increases in rates, fees, and finance
charges in revised TILA Section 171
applies only to ‘‘outstanding balances’’
as defined in Section 171(d).
Accordingly, § 226.55(b)(3) provides
that a card issuer may generally increase
an annual percentage rate or a fee or
charge required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
with respect to new transactions after
complying with the notice requirements
in § 226.9(b), (c), or (g).
Because § 226.9 applies different
notice requirements in different
circumstances, § 226.55(b)(3) clarifies
that the transactions to which an
increased rate, fee, or charge may be
applied depend on the type of notice
required. As a general matter, when an
annual percentage rate, fee, or charge is
increased pursuant to § 226.9(c) or (g),
§ 226.55(b)(3)(ii) provides that the card
issuer must not apply the increased rate,
fee, or charge to transactions that
occurred within fourteen days after
provision of the notice. This is
consistent with revised TILA Section
171(d), which defines the outstanding
balance to which an increased rate, fee,
or finance charge may not be applied as
the amount due at the end of the
fourteenth day after notice of the
increase is provided.
However, pursuant to its authority
under TILA Section 105(a), the Board
has adopted a different approach for
increased rates, fees, and charges
disclosed pursuant to § 226.9(b). As
discussed in the July 2009 Regulation Z
Interim Final Rule, the Board believes
that the fourteen-day period is intended,
in part, to ensure that an increased rate,

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fee, or charge will not apply to
transactions that occur before the
consumer has received the notice of the
increase and had a reasonable amount of
time to review it and decide whether to
engage in transactions to which the
increased rate, fee, or charge will apply.
See 74 FR 36090. The Board does not
believe that a fourteen-day period is
necessary for increases disclosed
pursuant to § 226.9(b), which requires
card issuers to disclose any new finance
charge terms applicable to supplemental
access devices (such as convenience
checks) and additional features added to
the account after account opening before
the consumer uses the device or feature
for the first time. For example,
§ 226.9(b)(3)(i)(A) requires that card
issuers providing checks that access a
credit card account to which a
temporary promotional rate applies
disclose key terms on the front of the
page containing the checks, including
the promotional rate, the period during
which the promotional rate will be in
effect, and the rate that will apply after
the promotional rate expires. Thus,
unlike increased rates, fees, and charges
disclosed pursuant to a § 226.9(c) and
(g) notice, the fourteen-day period is not
necessary for increases disclosed
pursuant to § 226.9(b) because the
device or feature will not be used before
the consumer has received notice of the
applicable terms. Accordingly,
§ 226.55(b)(3)(i) provides that, if a card
issuer discloses an increased annual
percentage rate, fee, or charge pursuant
to § 226.9(b), the card issuer must not
apply that rate, fee, or charge to
transactions that occurred prior to
provision of the notice.
Finally, § 226.55(b)(3)(iii) provides
that the exception in § 226.55(b)(3) does
not permit a card issuer to increase an
annual percentage rate or a fee or charge
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
during the first year after the credit card
account is opened. This provision
implements new TILA Section 172(a),
which generally prohibits increases in
annual percentage rates, fees, and
finance charges during the one-year
period beginning on the date the
account is opened.
The Board did not receive significant
comment regarding § 226.55(b)(3). Thus,
the final rules adopt § 226.55(b)(3) as
proposed. Similarly, except as discussed
below, the Board has generally adopted
the commentary to § 226.55(b)(3) as
proposed, although the Board has made
some non-substantive clarifications.
Comment 55(b)(3)–1 clarifies that a
card issuer may not increase a fee or
charge required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)

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pursuant to § 226.55(b)(3) if the
consumer has rejected the increased fee
or charge pursuant to § 226.9(h). In
addition, comment 55(b)(3)–2 clarifies
that, if an increased annual percentage
rate, fee, or charge is disclosed pursuant
to both § 226.9(b) and (c), the
requirements in § 226.55(b)(3)(ii) control
and the rate, fee, or charge may only be
applied to transactions that occur more
than fourteen days after provision of the
§ 226.9(c) notice.
Comment 55(b)(3)–3 clarifies whether
certain changes to a credit card account
constitute an ‘‘account opening’’ for
purposes of the prohibition in
§ 226.55(b)(3)(iii) on increasing annual
percentage rates and fees and charges
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
during the first year after account
opening. In particular, the comment
distinguishes between circumstances in
which a card issuer opens multiple
accounts for the same consumer and
circumstances in which a card issuer
substitutes, replaces, or consolidates
one account with another. As an initial
matter, this comment clarifies that,
when a consumer has a credit card
account with a card issuer and the
consumer opens a new credit card
account with the same card issuer (or its
affiliate or subsidiary), the opening of
the new account constitutes the opening
of a credit card account for purposes of
§ 226.55(b)(3)(iii) if, more than 30 days
after the new account is opened, the
consumer has the option to obtain
additional extensions of credit on each
account. Thus, for example, if a
consumer opens a credit card account
with a card issuer on January 1 of year
one and opens a second credit card
account with that card issuer on July 1
of year one, the opening of the second
account constitutes an account opening
for purposes of § 226.55(b)(3)(iii) so long
as, on August 1, the consumer has the
option to engage in transactions using
either account. This is the case even if
the consumer transfers a balance from
the first account to the second. Thus,
because the card issuer has two separate
account relationships with the
consumer, the prohibition in
§ 226.55(b)(3)(iii) on increasing annual
percentage rates and fees and charges
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
during the first year after account
opening applies to the opening of the
second account.51
51 This comment is based on commentary to the
January 2009 FTC Act Rule proposed by the Board
and the other Agencies in May 2009. See 12 CFR
227.24, proposed comment 24–4, 74 FR 20816; see
also 74 FR 20809. In that proposal, the Board
recognized that the process of replacing one

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In contrast, the comment clarifies that
an account has not been opened for
purposes of § 226.55(b)(3)(iii) when a
card issuer substitutes or replaces one
credit card account with another credit
card account (such as when a retail
credit card is replaced with a cobranded
general purpose card that can be used at
a wider number of merchants) or when
a card issuer consolidates or combines
a credit card account with one or more
other credit card accounts into a single
credit card account. As discussed below
with respect to proposed § 226.55(d)(2),
the Board believes that these transfers
should be treated as a continuation of
the existing account relationship rather
than the creation of a new account
relationship. Similarly, the comment
also clarifies that the substitution or
replacement of an acquired credit card
account does not constitute an ‘‘account
opening’’ for purposes of
§ 226.55(b)(3)(iii). Thus, in these
circumstances, the prohibition in
§ 226.55(b)(3)(iii) does not apply.
However, when a substitution,
replacement or consolidation occurs
during the first year after account
opening, comment 55(b)(3)–3.ii.B
clarifies that the card issuer may not
increase an annual percentage rate, fee,
or charge in a manner otherwise
prohibited by § 226.55.52
Comment 55(b)(3)–4 provides
illustrative examples of the application
of the exception in proposed
§ 226.55(b)(3). Comment 55(b)(3)–5
contains a cross-reference to comment
55(c)(1)–3, which clarifies the
circumstances in which increased fees
and charges required to be disclosed
under § 226.6(b)(2)(ii), (b)(2)(iii), or
(b)(2)(xii) may be imposed consistent
with § 226.55.
account with another generally is not
instantaneous. If, for example, a consumer requests
that a credit card account with a $1,000 balance be
upgraded to a credit card account that offers
rewards on purchases, the second account may be
opened immediately or within a few days but, for
operational reasons, there may be a delay before the
$1,000 balance can be transferred and the first
account can be closed. For this reason, the Board
sought comment on whether 15 or 30 days was the
appropriate amount of time to complete this
process. In response, industry commenters
generally stated that at least 30 days was required.
Accordingly, the Board proposed a 30-day period in
comment 55(b)(3)–3. The Board did not receive
additional comment on this issue. Accordingly, the
30-day period is adopted in the final rule.
52 For example, assume that, on January 1 of year
one, a consumer opens a credit card account with
a purchase rate of 15%. On July 1 of year one, the
account is replaced with a credit card account
issued by the same card issuer, which offers
different features (such as rewards on purchases).
Under these circumstances, the card issuer could
not increase the annual percentage rate for
purchases to a rate that is higher than 15% pursuant
to § 226.55(b)(3) until January 1 of year two (which
is one year after the first account was opened).

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55(b)(4) Delinquency Exception
Revised TILA Section 171(b)(4)
permits a creditor to increase an annual
percentage rate, fee, or finance charge
‘‘due solely to the fact that a minimum
payment by the [consumer] has not been
received by the creditor within 60 days
after the due date for such payment.’’
However, this exception is subject to
two conditions. First, revised Section
171(b)(4)(A) provides that the notice of
the increase must include ‘‘a clear and
conspicuous written statement of the
reason for the increase and that the
increase will terminate not later than 6
months after the date on which it is
imposed, if the creditor receives the
required minimum payments on time
from the [consumer] during that period.’’
Second, revised Section 171(b)(4)(B)
provides that the creditor must
‘‘terminate [the] increase not later than
6 months after the date on which it is
imposed, if the creditor receives the
required minimum payments on time
during that period.’’
The Board has implemented this
exception in § 226.55(b)(4). The
additional notice requirements in
revised TILA Section 171(b)(4)(A) are
set forth in § 226.55(b)(4)(i). The
requirement in revised Section
171(b)(4)(B) that the increase be
terminated if the card issuer receives
timely payments during the six months
following the increase is implemented
in § 226.55(b)(4)(ii), although the Board
proposed to make four adjustments to
the statutory requirement pursuant to its
authority under TILA Section 105(a) to
make adjustments to effectuate the
purposes of TILA and to facilitate
compliance therewith.
First, proposed § 226.55(b)(4)(ii)
interpreted the requirement that the
creditor ‘‘terminate’’ the increase as a
requirement that the card issuer reduce
the annual percentage rate, fee, or
charge to the rate, fee, or charge that
applied prior to the increase. The Board
believes that this interpretation is
consistent with the intent of revised
TILA Section 171(b)(4)(B) insofar as the
increased rate, fee, or charge will cease
to apply once the consumer has met the
statutory requirements. The Board does
not interpret revised TILA Section
171(b)(4)(B) to require the card issuer to
refund or credit the account for amounts
charged as a result of the increase prior
to the termination or cessation. The
Board did not receive significant
comment on this aspect of the proposal,
which is adopted in the final rule.
Second, proposed § 226.55(b)(4)(ii)
provided that the card issuer must
reduce the annual percentage rate, fee,
or charge after receiving six consecutive

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7739

required minimum periodic payments
on or before the payment due date. The
Board believes that shifting the focus
from the number of months to the
number of on-time payments provides
more specificity and clarity for both
consumers and card issuers as to what
is required to obtain the reduction.
Because credit card accounts typically
require payment on a monthly basis,53
a consumer who makes six consecutive
on-time payments will also generally
have paid on time for six months.
However, card issuers are permitted to
adjust their due dates and billing cycles
from time to time,54 which could create
uncertainty regarding whether a
consumer has complied with the
statutory requirement to make on-time
payments during the six-month period.
The Board did not receive significant
comment on this proposed adjustment.
Accordingly, because the Board believes
that this adjustment to TILA Section
171(b)(4) will facilitate compliance with
that provision, it is adopted in the final
rule.
Third, proposed § 226.55(b)(4)(ii)
applied to the six consecutive required
minimum periodic payments received
on or before the payment due date
beginning with the first payment due
following the effective date of the
increase. The Board believes that
limiting this requirement to the period
immediately following the increase is
consistent with revised TILA Section
171(b)(4)(B), which requires a creditor
to terminate an increase ‘‘6 months after
the date on which it is imposed, if the
creditor receives the required minimum
payments on time during that period.’’
Thus, as clarified in comment 55(b)(4)–
3 (which is discussed below),
§ 226.55(b)(4)(ii) does not require a card
issuer to terminate an increase if, at
some later point in time, the card issuer
receives six consecutive required
minimum periodic payments on or
before the payment due date. The Board
did not receive significant comment on
this interpretation, which is adopted in
the final rule.
Fourth, proposed § 226.55(b)(4)(ii)
provided that the card issuer must also
reduce the annual percentage rate, fee,
or charge with respect to transactions
that occurred within fourteen days after
provision of the § 226.9(c) or (g) notice.
This requirement is consistent with the
definition of ‘‘outstanding balance’’ in
revised TILA Section 171(d), as applied
in § 226.55(b)(1)(ii)(B) and
53 Although some creditors use quarterly billing
cycles for other open-end products, the Board is not
aware of any creditor that does so with respect to
credit card accounts under open-end (not homesecured) consumer credit plans.
54 See, e.g., comments 2(a)(4)–3 and 7(b)(11)–7.

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§ 226.55(b)(3)(ii). As above, the Board
did not receive significant comment on
this aspect of the proposal, which is
adopted in the final rule.
Accordingly, for the reasons
discussed above, § 226.55(b)(4) is
adopted as proposed. Similarly, except
as discussed below, the Board has
adopted the commentary to
§ 226.55(b)(4) as proposed (with certain
non-substantive clarifications).
Comment 55(b)(4)–1 clarifies that, in
order to satisfy the condition in
§ 226.55(b)(4) that the card issuer has
not received the consumer’s required
minimum periodic payment within 60
days after the payment due date, a card
issuer that requires monthly minimum
payments generally must not have
received two consecutive minimum
payments. The comment further
clarifies that whether a required
minimum periodic payment has been
received for purposes of § 226.55(b)(4)
depends on whether the amount
received is equal to or more than the
first outstanding required minimum
periodic payment. The comment
provides the following example:
Assume that the required minimum
periodic payments for a credit card
account are due on the fifteenth day of
the month. On May 13, the card issuer
has not received the $50 required
minimum periodic payment due on
March 15 or the $150 required
minimum periodic payment due on
April 15. If the card issuer receives a
$50 payment on May 14, § 226.55(b)(4)
does not apply because the payment is
equal to the required minimum periodic
payment due on March 15 and therefore
the account is not more than 60 days
delinquent. However, if the card issuer
instead received a $40 payment on May
14, § 226.55(b)(4) does apply because
the payment is less than the required
minimum periodic payment due on
March 15. Furthermore, if the card
issuer received the $50 payment on May
15, § 226.55(b)(4) applies because the
card issuer did not receive the required
minimum periodic payment due on
March 15 within 60 days after the due
date for that payment.
As discussed above, § 226.9(g)(3)(i)(B)
requires that the written notice provided
to consumers 45 days before an increase
in rate due to delinquency or default or
as a penalty include the information
required by revised Section
171(b)(4)(A). Accordingly, comment
55(b)(4)–2 clarifies that a card issuer
that has complied with the disclosure
requirements in § 226.9(g)(3)(i)(B) has
also complied with the disclosure
requirements in § 226.55(b)(4)(i).
Comment 55(b)(4)–3 clarifies the
requirements in § 226.55(b)(4)(ii)

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regarding the reduction of annual
percentage rates, fees, or charges that
have been increased pursuant to
§ 226.55(b)(4). First, as discussed above,
the comment clarifies that
§ 226.55(b)(4)(ii) does not apply if the
card issuer does not receive six
consecutive required minimum periodic
payments on or before the payment due
date beginning with the payment due
immediately following the effective date
of the increase, even if, at some later
point in time, the card issuer receives
six consecutive required minimum
periodic payments on or before the
payment due date.
Second, the comment states that,
although § 226.55(b)(4)(ii) requires the
card issuer to reduce an annual
percentage rate, fee, or charge increased
pursuant to § 226.55(b)(4) to the annual
percentage rate, fee, or charge that
applied prior to the increase, this
provision does not prohibit the card
issuer from applying an increased
annual percentage rate, fee, or charge
consistent with any of the other
exceptions in § 226.55(b). For example,
if a temporary rate applied prior to the
§ 226.55(b)(4) increase and the
temporary rate expired before a
reduction in rate pursuant to
§ 226.55(b)(4), the card issuer may apply
an increased rate to the extent
consistent with § 226.55(b)(1). Similarly,
if a variable rate applied prior to the
§ 226.55(b)(4) increase, the card issuer
may apply any increase in that variable
rate to the extent consistent with
§ 226.55(b)(2). This is consistent with
§ 226.55(b), which provides that a card
issuer may increase an annual
percentage rate or a fee or charge
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
pursuant to one of the exceptions in
§ 226.55(b) even if that increase would
not be permitted under a different
exception.
Third, the comment states that, if
§ 226.55(b)(4)(ii) requires a card issuer
to reduce an annual percentage rate, fee,
or charge on a date that is not the first
day of a billing cycle, the card issuer
may delay application of the reduced
rate, fee, or charge until the first day of
the following billing cycle. As discussed
above with respect to comment 55(b)–2,
the Board understands that it may be
operationally difficult for some card
issuers to reduce a rate, fee, or charge
in the middle of a billing cycle.
Accordingly, this comment is consistent
with comment 55(b)–2, which clarifies
that a card issuer may delay application
of an increase in a rate, fee, or charge
until the start of the next billing cycle
without relinquishing its ability to
apply that rate, fee, or charge. Finally,

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the comment provides examples
illustrating the application of
§ 226.55(b)(4)(ii).55
55(b)(5) Workout and Temporary
Hardship Arrangement Exception
Revised TILA Section 171(b)(3)
permits a creditor to increase an annual
percentage rate, fee, or finance charge
‘‘due to the completion of a workout or
temporary hardship arrangement by the
[consumer] or the failure of a
[consumer] to comply with the terms of
a workout or temporary hardship
arrangement.’’ However, like the
exception for delinquencies of more
than 60 days in revised TILA Section
171(b)(4), this exception is subject to
two conditions. First, revised Section
171(b)(3)(A) provides that ‘‘the annual
percentage rate, fee, or finance charge
applicable to a category of transactions
following any such increase does not
exceed the rate, fee, or finance charge
that applied to that category of
transactions prior to commencement of
the arrangement.’’ Second, revised
Section 171(b)(3)(B) provides that the
creditor must have ‘‘provided the
[consumer], prior to the commencement
of such arrangement, with clear and
conspicuous disclosure of the terms of
the arrangement (including any
increases due to such completion or
failure).’’
The Board proposed to implement
this exception in § 226.55(b)(5). The
notice requirements in revised Section
171(b)(3)(B) were set forth in proposed
§ 226.55(b)(5)(i). The limitation on
increases following completion or
failure of a workout or temporary
hardship arrangement was set forth in
proposed § 226.55(b)(5)(ii). Section
226.55(b)(5) is generally adopted as
proposed, although—as discussed
below—the Board has revised
§ 226.55(b)(5)(i) and comment 55(b)(5)–
2 for consistency with the revisions to
the notice requirements for workout and
temporary hardship arrangements in
§ 226.9(c)(2)(v)(D). Otherwise, the
commentary to § 226.55(b)(5) is adopted
as proposed.
Comment 55(b)(5)–1 clarifies that
nothing in § 226.55(b)(5) permits a card
issuer to alter the requirements of
§ 226.55 pursuant to a workout or
temporary hardship arrangement. For
example, a card issuer cannot increase
55 In response to requests for clarification, the
Board has added an example to comment 55(b)(4)–
3 illustrating the application of § 226.55(b)(4)(ii)
when a consumer qualifies for a reduction in rate
while a temporary rate is still in effect. In addition,
the Board has added a cross-reference to comment
55(b)(1)–3, which provides an illustrative example
of the application of § 226.55(b)(4) to deferred
interest or similar programs.

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an annual percentage rate or a fee or
charge required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
pursuant to a workout or temporary
hardship arrangement unless otherwise
permitted by § 226.55. In addition, a
card issuer cannot require the consumer
to make payments with respect to a
protected balance that exceed the
payments permitted under § 226.55(c).56
Comment 55(b)(5)–2 clarifies that a
card issuer that has complied with the
disclosure requirements in
§ 226.9(c)(2)(v)(D) has also complied
with the disclosure requirements in
§ 226.55(b)(5)(i). The comment also
contains a cross-reference to proposed
comment 9(c)(2)(v)–10 (formerly
comment 9(c)(2)(v)–8), which the Board
adopted in the July 2009 Regulation Z
Interim Final Rule to clarify the terms
a creditor is required to disclose prior to
commencement of a workout or
temporary hardship arrangement for
purposes of § 226.9(c)(2)(v)(D), which is
an exception to the general requirement
that a creditor provide 45 days advance
notice of an increase in annual
percentage rate. See 74 FR 36099.
Because the disclosure requirements in
§ 226.9(c)(2)(v)(D) and § 226.55(b)(5)(i)
implement the same statutory provision
(revised TILA Section 171(b)(3)(B)), the
Board believes a single set of disclosures
should satisfy the requirements of all
three provisions. The Board has revised
the disclosure requirement in
§ 226.55(b)(5)(i) and the guidance in
comment 55(b)(5)–2 for consistency
with the revisions to § 226.9(c)(2)(v)(D),
which permit creditors to disclose 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 as soon as reasonably
practicable after the oral disclosure is
provided.
Similar to the commentary to
§ 226.55(b)(4), comment 55(b)(5)–3
states that, although the card issuer may
not apply an annual percentage rate, fee,
or charge to transactions that occurred
prior to commencement of the
arrangement that exceeds the rate, fee,
or charge that applied to those
transactions prior to commencement of
the arrangement, § 226.55(b)(5)(ii) does
not prohibit the card issuer from
applying an increased rate, fee, or
charge upon completion or failure of the
arrangement to the extent consistent
with any of the other exceptions in
§ 226.55(b) (such as an increase in a
56 The definition of ‘‘protected balance’’ and the
permissible repayment methods for such a balance
are discussed in detail below with respect to
§ 226.55(c).

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variable rate consistent with
§ 226.55(b)(2)). Finally, comment
55(b)(5)–4 provides illustrative
examples of the application of this
exception.57
55(b)(6) Servicemembers Civil Relief
Act Exception
In the October 2009 Regulation Z
Proposal, the Board proposed to use its
authority under TILA Section 105(a) to
clarify the relationship between the
general prohibition on increasing
annual percentage rates in revised TILA
Section 171 and certain provisions of
the Servicemembers Civil Relief Act
(SCRA), 50 U.S.C. app. 501 et seq.
Specifically, 50 U.S.C. app. 527(a)(1)
provides that ‘‘[a]n obligation or liability
bearing interest at a rate in excess of 6
percent per year that is incurred by a
servicemember, or the servicemember
and the servicemember’s spouse jointly,
before the servicemember enters
military service shall not bear interest at
a rate in excess of 6 percent. * * *’’
With respect to credit card accounts,
this restriction applies during the period
of military service. See 50 U.S.C. app.
527(a)(1)(B).58
Under revised TILA Section 171, a
creditor that complies with the SCRA by
lowering the annual percentage rate that
applies to an existing balance on a
credit card account when the consumer
enters military service arguably would
not be permitted to increase the rate for
that balance once the period of military
service ends and the protections of the
SCRA no longer apply. In May 2009, the
Board and the other Agencies proposed
to create an exception to the general
prohibition in the January 2009 FTC Act
Rule on applying increased rates to
existing balances for these
circumstances, provided that the
increased rate does not exceed the rate
that applied prior to the period of
military service. See 12 CFR
227.24(b)(6), 74 FR 20814; see also 74
FR 20812. Revised TILA Section 171
does not contain a similar exception.
Nevertheless, the Board does not
believe that Congress intended to
prohibit creditors from returning an
annual percentage rate that has been
reduced by operation of the SCRA to its
pre-military service level once the SCRA
no longer applies. Accordingly, the
Board proposed to create § 226.55(b)(6),
which states that, if an annual
57 In response to requests for clarifications, the
Board has revised comment 55(b)(5)–4 to provide
an example of the application of § 226.55(b)(5) to
fees.
58 50 U.S.C. app. 527(a)(1)(B) applies to
obligations or liabilities that do not consist of a
mortgage, trust deed, or other security in the nature
of a mortgage.

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percentage rate has been decreased
pursuant to the SCRA, a card issuer may
increase that annual percentage rate
once the SCRA no longer applies.
However, the proposed rule would not
have permitted the card issuer to apply
an annual percentage rate to any
transactions that occurred prior to the
decrease that exceeds the rate that
applied to those transactions prior to the
decrease. Furthermore, because the
Board believes that a consumer leaving
military service should receive 45 days
advance notice of this increase in rate,
the Board did not propose a
corresponding exception to § 226.9.
Commenters were generally
supportive of proposed § 226.55(b)(6).
Accordingly, it is adopted as proposed.
However, although industry
commenters argued that a similar
exception should be adopted in
§ 226.9(c), the Board continues to
believe—as discussed above with
respect to § 226.9(c)—that consumers
who leave military service should
receive 45 days advance notice of an
increase in rate.
The Board has also adopted the
commentary to § 226.55(b)(6) as
proposed. Comment 55(b)(6)–1 clarifies
that, although § 226.55(b)(6) requires the
card issuer to apply to any transactions
that occurred prior to a decrease in
annual percentage rate pursuant to 50
U.S.C. app. 527 a rate that does not
exceed the rate that applied to those
transactions prior to the decrease, the
card issuer may apply an increased rate
once 50 U.S.C. app 527 no longer
applies, to the extent consistent with
any of the other exceptions in
§ 226.55(b). For example, if the rate that
applied prior to the decrease was a
variable rate, the card issuer may apply
any increase in that variable rate to the
extent consistent with § 226.55(b)(2).
This comment mirrors similar
commentary to § 226.55(b)(4) and (b)(5).
An illustrative example is provided in
comment 26(b)(6)–2.
55(c) Treatment of Protected Balances
Revised TILA Section 171(c)(1) states
that ‘‘[t]he creditor shall not change the
terms governing the repayment of any
outstanding balance, except that the
creditor may provide the [consumer]
with one of the methods described in
[revised Section 171(c)(2)] * * * or a
method that is no less beneficial to the
[consumer] than one of those methods.’’
Revised TILA Section 171(c)(2) lists two
methods of repaying an outstanding
balance: first, an amortization period of
not less than five years, beginning on
the effective date of the increase set
forth in the Section 127(i) notice; and,
second, a required minimum periodic

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payment that includes a percentage of
the outstanding balance that is equal to
not more than twice the percentage
required before the effective date of the
increase set forth in the Section 127(i)
notice.
For clarity, § 226.55(c)(1) defines the
balances subject to the protections in
revised TILA Section 171(c) as
‘‘protected balances.’’ Under this
definition, a ‘‘protected balance’’ is the
amount owed for a category of
transactions to which an increased
annual percentage rate or an increased
fee or charge required to be disclosed
under § 226.6(b)(2)(ii), (b)(2)(iii), or
(b)(2)(xii) cannot be applied after the
annual percentage rate, fee, or charge for
that category of transactions has been
increased pursuant to § 226.55(b)(3). For
example, when a card issuer notifies a
consumer of an increase in the annual
percentage rate that applies to new
purchases pursuant to § 226.9(c), the
protected balance is the purchase
balance at the end of the fourteenth day
after provision of the notice. See
§ 226.55(b)(3)(ii). The Board and the
other Agencies adopted a similar
definition in the January 2009 FTC Act
Rule. See 12 CFR 227.24(c), 74 FR 5560;
see also 74 FR 5532. The Board did not
receive significant comment on
§ 226.55(c)(1), which is adopted as
proposed.
Comment 55(c)(1)–1 provides an
illustrative example of a protected
balance. Comment 55(c)(1)–2 clarifies
that, because § 226.55(b)(3)(iii) does not
permit a card issuer to increase an
annual percentage rate or a fee or charge
required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
during the first year after account
opening, § 226.55(c) does not apply to
balances during the first year after
account opening. These comments are
adopted as proposed.
Comment 55(c)(1)–3 clarifies that,
although § 226.55(b)(3) does not permit
a card issuer to apply an increased fee
or charge required to be disclosed under
§ 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
to a protected balance, a card issuer is
not prohibited from increasing a fee or
charge that applies to the account as a
whole or to balances other than the
protected balance. For example, a card
issuer may add a new annual or a
monthly maintenance fee to an account
or increase such a fee so long as the fee
is not based solely on the protected
balance. However, if the consumer
rejects an increase in a fee or charge
pursuant to § 226.9(h), the card issuer is
prohibited from applying the increased
fee or charge to the account and from
imposing any other fee or charge solely
as a result of the rejection. See

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§ 226.9(h)(2)(i) and (ii); comment
9(h)(2)(ii)–2.
Proposed § 226.55(c)(2) would have
implemented the restrictions on
accelerating the repayment of protected
balances in revised TILA Section 171(c).
As discussed above with respect to
§ 226.9(h), the Board previously
implemented these restrictions in the
July 2009 Regulation Z Interim Final
Rule as § 226.9(h)(2)(iii). However, for
clarity and consistency, the Board
proposed to move these restrictions to
§ 226.55(c)(2). The Board did not
propose to substantively alter the
repayment methods in § 226.9(h)(2)(iii),
except that the repayment methods in
§ 226.55(c)(2) focused on the effective
date of the increase (rather than the date
on which the card issuer is notified of
the rejection pursuant to § 226.9(h)).
The Board did not receive significant
comment on § 226.55(c)(2), which is
adopted as proposed.
Similarly, for the reasons discussed
above with respect to § 226.9(h), the
Board proposed to move the
commentary clarifying the application
of the repayment methods from
§ 226.9(h)(2)(iii) to § 226.55(c) and to
adjust that commentary for consistency
with § 226.55(c). In addition, proposed
comment 55(c)(2)(iii)–1 clarified that,
although § 226.55(c)(2)(iii) limits the
extent to which the portion of the
required minimum periodic payment
based on the protected balance may be
increased, it does not limit or otherwise
address the creditor’s ability to
determine the amount of the required
minimum periodic payment based on
other balances on the account or to
apply that portion of the minimum
payment to the balances on the account.
Proposed comment 55(c)(2)(iii)–2
provided an illustrative example. These
comments are adopted as proposed.
55(d) Continuing Application of
§ 226.55
Pursuant to its authority under TILA
Section 105(a), the Board proposed to
adopt § 226.55(d), which provided that
the limitations in § 226.55 continue to
apply to a balance on a credit card
account after the account is closed or
acquired by another card issuer or 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 (unless the account to which
the balance is transferred is subject to
§ 226.5b). This provision is based on
commentary to the January 2009 FTC
Act Rule proposed by the Board and the
other Agencies in May 2009, primarily
in response to concerns that permitting
card issuers to apply an increased rate

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to an existing balance in these
circumstances could lead to
circumvention of the general
prohibition on such increases. See 12
CFR 227.21 comments 21(c)–1 through
–3, 74 FR 20814–20815; see also 74 FR
20805–20807. As discussed below,
§ 226.55(d) and its commentary are
adopted as proposed.
Because the protections in revised
TILA Section 171 and new TILA Section
172 cannot be waived or forfeited,
§ 226.55(d) does not distinguish
between closures or transfers initiated
by the card issuer and closures or
transfers initiated by the consumer.
Although there may be circumstances in
which individual consumers could
make informed choices about the
benefits and costs of waiving the
protections in revised Section 171 and
new Section 172, an exception for those
circumstances would create a significant
loophole that could be used to deny the
protections to other consumers. For
example, if a card issuer offered to
transfer its cardholder’s existing balance
to a credit product that would reduce
the rate on the balance for a period of
time in exchange for the cardholder
accepting a higher rate after that period,
the cardholder would have to determine
whether the savings created by the
temporary reduction would offset the
cost of the subsequent increase, which
would depend on the amount of the
balance, the amount and length of the
reduction, the amount of the increase,
and the length of time it would take the
consumer to pay off the balance at the
increased rate. Based on extensive
consumer testing conducted during the
preparation of the January 2009
Regulation Z Rule and the January 2009
FTC Act Rule, the Board believes that it
would be very difficult to ensure that
card issuers disclosed this information
in a manner that will enable most
consumers to make informed decisions
about whether to accept the increase in
rate. Although some approaches to
disclosure may be effective, others may
not and it would be impossible to
distinguish among such approaches in a
way that would provide clear guidance
for card issuers. Furthermore,
consumers might be presented with
choices that are not meaningful (such as
a choice between accepting a higher rate
on an existing balance or losing credit
privileges on the account).
Section 226.55(d)(1) provides that
§ 226.55 continues to apply to a balance
on a credit card account after the
account is closed or acquired by another
card issuer. In some cases, the acquiring
institution may elect to close the
acquired account and replace it with its
own credit card account. See comment

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12(a)(2)–3. The acquisition of an
account does not involve any choice on
the part of the consumer, and the Board
believes that consumers whose accounts
are acquired should receive the same
level of protection against increases in
annual percentage rates after acquisition
as they did beforehand.59 Comment
55(d)–1 clarifies that § 226.55 continues
to apply regardless of whether the
account is closed by the consumer or
the card issuer and provides illustrative
examples of the application of
§ 226.55(d)(1). Comment 55(d)–2
clarifies the application of § 226.55(d)(1)
to circumstances in which a card issuer
acquires a credit card account with a
balance by, for example, merging with
or acquiring another institution or by
purchasing another institution’s credit
card portfolio.
Section 226.55(d)(2) provides that
§ 226.55 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 (unless the account to which
the balance is transferred is subject to
§ 226.5b). Comment 55(d)–3.i provides
examples of circumstances in which
balances may be transferred from one
credit card account issued by a card
issuer to another credit card account
issued by the same card issuer (or its
affiliate or subsidiary), such as when the
consumer’s account is converted from a
retail credit card that may only be used
at a single retailer or an affiliated group
of retailers to a co-branded general
purpose credit card which may be used
at a wider number of merchants.
Because of the concerns discussed
above regarding circumvention and
informed consumer choice and for
consistency with the issuance rules
regarding card renewals or substitutions
for accepted credit cards under
§ 226.12(a)(2), the Board believes—and
§ 226.55(d)(2) provides—that these
transfers should be treated as a
continuation of the existing account
relationship rather than the creation of
a new account relationship. See
comment 12(a)(2)–2.
59 Thus, as discussed in the commentary to
§ 226.55(b)(2), a card issuer that acquires a credit
card account with a balance to which a variable rate
applies generally would not be permitted to
substitute a new index for the index used to
determine the variable rate if the change could
result in an increase in the annual percentage rate.
However, the commentary to § 226.55(b)(2) does
clarify that a card issuer that does not utilize the
index used to determine the variable rate for an
acquired balance may convert that rate to an equal
or lower non-variable rate, subject to the notice
requirements of § 226.9(c).

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Section 226.55(d)(2) does not apply to
balances transferred from a credit card
account issued by a card issuer to a
credit account issued by the same card
issuer (or its affiliate or subsidiary) that
is subject to § 226.5b (which applies to
open-end credit plans secured by the
consumer’s dwelling). The Board
believes that excluding transfers to such
accounts is appropriate because § 226.5b
provides protections that are similar
to—and, in some cases, more stringent
than—the protections in § 226.55. For
example, a card issuer may not change
the annual percentage rate on a homeequity plan unless the change is based
on an index that is not under the card
issuer’s control and is available to the
general public. See 12 CFR 226.5b(f)(1).
Comment 55(d)–3.ii clarifies that,
when a consumer chooses to transfer a
balance to a credit card account issued
by a different card issuer, § 226.55 does
not prohibit the card issuer to which the
balance is transferred from applying its
account terms to that balance, provided
those terms comply with 12 CFR part
226. For example, if a credit card
account issued by card issuer A has a
$1,000 purchase balance at an annual
percentage rate of 15% and the
consumer transfers that balance to a
credit card account with a purchase rate
of 17% issued by card issuer B, card
issuer B may apply the 17% rate to the
$1,000 balance. However, card issuer B
may not subsequently increase the rate
that applies to that balance unless
permitted by one of the exceptions in
§ 226.55(b).
Although balance transfers from one
card issuer to another raise some of the
same concerns as balance transfers
involving the same card issuer, the
Board believes that transfers between
card issuers are not contrary to the
intent of revised TILA Section 171 and
§ 226.55 because the card issuer to
which the balance is transferred is not
increasing the cost of credit it
previously extended to the consumer.
For example, assume that card issuer A
has extended a consumer $1,000 of
credit at a rate of 15%. Because § 226.55
generally prohibits card issuer A from
increasing the rate that applies to that
balance, it would be inconsistent with
§ 226.55 to allow card issuer A to
reprice that balance simply by
transferring it to another of its accounts.
In contrast, in order for the $1,000
balance to be transferred to card issuer
B, card issuer B must provide the
consumer with a new $1,000 extension
of credit in an arms-length transaction
and should be permitted to price that
new extension consistent with its
evaluation of prevailing market rates,
the risk presented by the consumer, and

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other factors. Thus, the transfer from
card issuer A to card issuer B does not
appear to raise concerns about
circumvention of proposed § 226.55
because card issuer B is not increasing
the cost of credit it previously extended.
Consumer groups and some industry
commenters supported proposed
§ 226.55(d). However, the Board
understands from industry comments
received regarding both the May 2009
and October 2009 proposals that
drawing a distinction between balance
transfers involving the same card issuer
and balance transfers involving different
card issuers may limit a card issuer’s
ability to offer its existing cardholders
the same terms that it would offer
another issuer’s cardholders. As noted
in those proposals, however, the Board
understands that currently card issuers
generally do not make promotional
balance transfer offers available to their
existing cardholders for balances held
by the issuer because it is not costeffective to do so. Furthermore,
although many card issuers do offer
existing cardholders the opportunity to
upgrade to accounts offering different
terms or features (such as upgrading to
an account that offers a particular type
of rewards), the Board understands that
these offers generally are not
conditioned on a balance transfer,
which indicates that it may be costeffective for card issuers to make these
offers without repricing an existing
balance. The comments opposing
§ 226.55(d) do not lead the Board to a
different understanding. Accordingly,
the Board continues to believe that
§ 226.55(d) will benefit consumers
overall.
Section 226.56 Requirements for Overthe-Limit Transactions
When a consumer seeks to engage in
a credit card transaction that may cause
his or her credit limit to be exceeded,
the creditor may, at its discretion,
authorize the over-the-limit transaction.
If the creditor pays an over-the-limit
transaction, the consumer is typically
assessed a fee or charge for the service.60
In addition, the over-the-limit
transaction may also be considered a
default under the terms of the credit
card agreement and trigger a rate
60 According to the GAO, the average over-thelimit fee assessed by issuers in 2005 was $30.81, an
increase of 138 percent since 1995. See Credit
Cards: Increased Complexity in Rates and Fees
Heightens Need for More Effective Disclosures to
Consumers, GAO Report 06–929, at 20 (September
2006) (citing data reported by CardWeb.com). The
GAO also reported that among cards issued by the
six largest issuers in 2005, most charged an overthe-limit fee amount between $35 and $39. Id. at 21.

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increase, in some cases up to the
default, or penalty, rate on the account.
The Credit Card Act adds new TILA
Section 127(k) and requires a creditor to
obtain a consumer’s express election, or
opt-in, before the creditor may impose
any fees on a consumer’s credit card
account for making an extension of
credit that exceeds the consumer’s
credit limit. 15 U.S.C. 1637(k). TILA
Section 127(k)(2) further provides that
no election shall take effect unless the
consumer, before making such election,
has received a notice from the creditor
of any fees that may be assessed for an
over-the-limit transaction. If the
consumer opts in to the service, the
creditor is also required to provide
notice of the consumer’s right to revoke
that election on any periodic statement
that reflects the imposition of an overthe-limit fee during the relevant billing
cycle. The Board is implementing the
over-the-limit consumer consent
requirements in § 226.56.
The Credit Card Act directs the Board
to issue rules governing the disclosures
required by TILA Section 127(k),
including rules regarding (i) the form,
manner and timing of the initial opt-in
notice and (ii) the form of the
subsequent notice describing how an
opt-in may be revoked. See TILA
Section 127(k)(2). In addition, the Board
must prescribe rules to prevent unfair or
deceptive acts or practices in
connection with the manipulation of
credit limits designed to increase overthe-limit fees or other penalty fees. See
TILA Section 127(k)(5)(B).

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56(a) Definition
Proposed § 226.56(a) defined ‘‘overthe-limit transaction’’ to mean any
extension of credit by a creditor to
complete a transaction that causes a
consumer’s credit card account balance
to exceed the consumer’s credit limit.
No comments were received on the
proposed definition and it is adopted as
proposed. The term is limited to
extensions of credit required to
complete a transaction that has been
requested by a consumer (for example,
to make a purchase at a point-of-sale or
on-line, or to transfer a balance from
another account). The term is not
intended to cover the assessment of fees
or interest charges by the card issuer
that may cause the consumer to exceed
the credit limit.61 See, however,
§ 226.56(j)(4), discussed below.
61 As discussed below, § 226.56 and the
accompanying commentary have been revised to
refer to a ‘‘card issuer’’ in place of ‘‘creditor’’ to
reflect the scope of accounts to which the rule
applies.

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56(b) Opt-In Requirement
General rule. Proposed § 226.56(b)(1)
set forth the general rule prohibiting a
creditor 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 creditor’s
payment of over-the-limit transactions
and the consumer has opted in. If the
consumer affirmatively consents, or
‘‘opts in,’’ to the service, the creditor
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.
The Board adopts the opt-in
requirement as proposed. Under the
final rule, § 226.56, including the
requirement to provide notice and an
opt-in right, applies only to a credit card
account under an open-end (not homesecured) consumer credit plan, and
therefore does not apply to credit cards
that access a home equity line of credit
or to debit cards linked to an overdraft
line of credit. See § 226.2(a)(15)(ii).
Section 226.56 and the accompanying
commentary are also revised throughout
to refer to a ‘‘card issuer,’’ rather than
‘‘creditor,’’ to reflect that the rule applies
only to credit card accounts.
The opt-in notice may be provided by
the card issuer orally, electronically, or
in writing. See § 226.56(b)(1)(i).
Compliance with the consumer consent
provisions or other requirements
necessary to provide consumer
disclosures electronically pursuant to
the E-Sign Act is not required if the card
issuer elects to provide the opt-in notice
electronically. See also
§ 226.5(a)(1)(ii)(A). However, as
discussed below under
§ 226.56(d)(1)(ii), before the consumer
may consent orally or electronically, the
card issuer must also have provided the
opt-in notice immediately prior to
obtaining that consent. In addition,
while the opt-in notice may be provided
orally, electronically, or in writing, the
revocation notice must be provided to
the consumer in writing, consistent with
the statutory requirement that such
notice appear on the periodic statement
reflecting the assessment of an over-thelimit fee or charge on the consumer’s
account. See TILA Section 127(k)(2),
and § 226.56(d)(3), discussed below.
Proposed comment 56(b)–1 clarified
that a creditor that has a policy and
practice of declining to authorize or pay
any transactions that the creditor
reasonably believes would cause the
consumer to exceed the credit limit is
not subject to the requirements of this
section and would therefore not be

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required to provide the consumer notice
or an opt-in right. This ‘‘reasonable
belief’’ standard recognizes that
creditors generally do not have real-time
information regarding a consumer’s
prior transactions or credits that may
have posted to the consumer’s credit
card account.
Industry commenters asked the Board
to clarify the aspects of the proposed
rule that would not be applicable to a
creditor that declined transactions if it
reasonably believed that a transaction
would cause the consumer to exceed the
credit limit. In particular, industry
commenters stated it was unclear
whether a creditor would be permitted
to charge an over-the-limit fee where a
transaction was authorized on the
creditor’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). Industry
commenters also requested additional
guidance regarding the ‘‘reasonable
belief’’ standard.
Comment 56(b)–1 as revised in the
final rule clarifies that § 226.56(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.
See also § 226.56(b)(2). This
clarification regarding application of the
fee prohibition has been moved into the
comment in response to consumer
group suggestions. Thus, if an over-thelimit transaction is paid, for example,
because of a must-pay transaction that
was authorized by the card issuer on the
belief that the consumer had sufficient
available credit and which later causes
the consumer’s credit limit to be
exceeded when it posts, the card issuer
may not charge a fee for paying the
transaction, absent the consumer’s
consent to the service. The revised
comment also clarifies 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

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authorization, would not cause the
consumer to exceed a credit limit.
Although a card issuer must obtain
consumer consent before any over-thelimit fees or charges are assessed on a
consumer’s account, the final rule does
not require that the card issuer obtain
the consumer’s separate consent for
each extension of credit that causes the
consumer to exceed his or her credit
limit. Such an approach is not
compelled by the Credit Card Act.
Comment 56(b)–2, which is
substantively unchanged from the
proposal, also explains, however, that
even if a consumer has affirmatively
consented or opted in to a card issuer’s
over-the-limit service, the card issuer is
not required to authorize or pay any
over-the-limit transactions.
Proposed comment 56(b)–3 would
have provided that the opt-in
requirement applies whether a creditor
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 has exceeded the credit limit
during a particular cycle (for example,
a monthly ‘‘over-the-limit protection’’
fee). As further discussed below under
§ 226.56(j)(1), however, TILA Section
127(k)(7) prohibits the imposition of
periodic or maintenance fees related to
the payment of over-the-limit
transactions, even with consumer
consent, if the consumer has not
engaged in an over-the-limit transaction
during the particular cycle.
Accordingly, the final rule does not
adopt proposed comment 56(b)–3.
Some industry commenters asserted
that the new provisions, 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-thelimit service, but fail to provide
affirmative consent by February 22,
2010. By contrast, consumer groups
strongly supported applying the new
requirements to all credit card accounts,
including existing accounts. Consumer
groups urged the Board to explicitly
state this fact in the rule or staff
commentary. As the Board stated
previously, nothing in the statute or the
legislative history suggests that Congress
intended that existing account-holders
should not have the same rights
regarding consumer choice for over-thelimit transactions as those afforded to
new customers. Thus, § 226.56 applies

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to all credit card accounts, including
those opened prior to February 22, 2010.
Reasonable opportunity to opt in.
Proposed § 226.56(b)(1)(ii) required a
creditor to provide a reasonable
opportunity for the consumer to
affirmatively consent to the creditor’s
payment of over-the-limit transactions.
TILA Section 127(k)(3) provides that the
consumer’s affirmative consent (and
revocation) may be made orally,
electronically, or in writing, pursuant to
regulations prescribed by the Board. See
also § 226.56(e), discussed below.
Proposed comment 56(b)–4 contained
examples to illustrate methods of
providing a consumer a reasonable
opportunity to affirmatively consent
using the specified methods. The rule
and comment (which has been
renumbered as comment 56(b)–3) are
adopted, substantially as proposed with
certain revisions for clarity.
Final comment 56(b)–3 explains that
a card issuer provides a consumer with
a reasonable opportunity to provide
affirmative consent when, among other
things, it provides reasonable methods
by which the consumer may
affirmatively consent. The comment
provides four examples of such
reasonable methods.
The first example provides that a card
issuer may include the notice on an
application form that a consumer may
fill out to request the service as part of
the application process. See comment
56(b)–3.i. Alternatively, after the
consumer has been approved for the
card, the card issuer could provide a
form with the account-opening
disclosures or the periodic statement
that can be filled out separately and
mailed to affirmatively request the
service. See comment 56(b)–3.ii and
Model Form G–25(A) in Appendix G,
discussed below.
Comment 56(b)–3.iii illustrates that a
card issuer may obtain consumer
consent through a readily available
telephone line. The final rule does not
require that the telephone number be
toll-free, however, as card issuers have
sufficient incentives to facilitate a
consumer’s opt-in choice. Of course, if
a card issuer elects to establish a tollfree number to obtain a consumer’s optin, it must similarly make that number
available for consumers to later revoke
their opt-ins if the consumer so decides.
See § 226.56(c).
Comment 56(b)–3.iv illustrates that a
card issuer may provide an electronic
means for the consumer to affirmatively
consent. For example, a card issuer
could provide a form on its Web site
that enables the consumer to check a
box to indicate his or her agreement to
the over-the-limit service and confirm

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that choice by clicking on a button that
affirms the consumer’s consent. See also
§ 226.56(d)(1)(ii) (requiring the opt-in
notice to be provided immediately prior
to the consumer’s consent). The final
comment does not require that a card
issuer direct consumers to a specific
Web site address because issuers have
an incentive to facilitate consumer optins.
Segregation of notice and consent.
The Board solicited comment in the
proposal regarding whether creditors
should be required to segregate the optin 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 proposed rule would also
require that the consumer’s consent 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. Consumer groups and one
state government agency, as well as one
industry commenter, however,
supported a segregation requirement to
ensure that the information is
highlighted and to help consumers
understand the choice that is presented
to them. 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.
The final rule requires that the opt-in
notice be segregated from all other
information given to the consumer. See
§ 226.56(b)(1)(i). The Board believes
such a requirement is necessary to
ensure that the information is not
obscured within other account
documents and overlooked by the
consumer, for example, in preprinted
language in the account-opening
disclosures, leading the consumer to
inadvertently consent to having overthe-limit transactions paid or authorized
by the card issuer. The rule 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.
As discussed above, § 226.56(b)(1)(iii)
of the final rule requires the card issuer
to obtain the consumer’s affirmative

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consent, or opt-in, to the card issuer’s
payment of over-the-limit transactions.
Proposed comment 56(b)–5 provided
examples of ways in which a
consumer’s affirmative consent is or is
not obtained. Specifically, the proposed
comment clarified that the consumer’s
consent must be obtained separately
from other consents or
acknowledgments provided by the
consumer. The proposal further
provided that the consumer must initial,
sign or otherwise make a separate
request for the over-the-limit service.
Thus, for example, a consumer’s
signature alone on an application for a
credit card would not sufficiently
evidence the consumer’s consent to the
creditor’s payment of over-the-limit
transactions. The final rule adopts the
proposed comment, renumbered as
comment 56(b)–4, substantially as
proposed.
One industry commenter agreed that
it was appropriate to segregate
consumer consent for over-the-limit
transactions from other consents
provided by the consumer. A state
government agency believed, however,
that the check box approach described
in the proposal would not sufficiently
ensure that consumers will understand
that the over-the-limit decision is not a
required part of the credit card
application. Accordingly, the agency
urged the Board to explicitly require
that both disclosures and written
consents are presented separately from
other account disclosures, with standalone plain language documents that
clearly present the over-the-limit service
as discretionary.
Final comment 56(b)–4 clarifies that
regardless of the means in 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. Consent to the payment of
over-the-limit transactions may not, for
example, be obtained solely because the
consumer signed a credit application to
request a credit card. The final comment
further 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. The Board
believes that the need to obtain a
consumer’s consent separate from any
other consents or acknowledgments,

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including from the request for the credit
card account itself, sufficiently ensures
that a consumer would understand that
consenting to the payment of over-thelimit transactions is not a required part
of the credit card application.62 See,
however, § 226.56(j)(3) (prohibiting card
issuers from conditioning the amount of
credit provided on the consumer also
opting in to over-the-limit coverage).
Written confirmation. The September
2009 Regulation Z Proposal also
solicited comment on whether creditors
should be required to provide the
consumer with written confirmation
once the consumer has opted in under
proposed § 226.56(b)(1)(iii) to verify that
the consumer intended to make the
election. Industry commenters opposed
such a requirement, stating that it would
impose considerable burden and costs
on creditors, while resulting in little
added protection for the consumer. In
particular, industry commenters
observed 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. Thus, industry commenters
argued that the revocation notice would
provide sufficient confirmation of the
consumer’s opt-in choice. Industry
commenters further noted that written
confirmation is not required by the
statute. In the event that written
confirmation was required, industry
commenters asked the Board to permit
creditors to provide such notice on or
with the next periodic statement
provided to the consumer after the optin election.
Consumer groups and one state
government agency strongly supported a
written confirmation requirement as a
safeguard to ensure consumers that have
opted in understand that they have
consented to the payment of over-thelimit transactions. These commenters
believed that written confirmation of the
consumer’s choice was critical where a
consumer has opted in by a non-written
method, such as by telephone or in
person. In this regard, one consumer
group asserted that oral opt-ins should
be permitted only if written
confirmation was also required to allow
consumers time to examine the terms of
the opt-in and make a considered
determination whether the option is
right for them.
The final rule in § 226.56(b)(1)(iv)
requires that the card issuer provide the
consumer with confirmation of the
62 Evidence of consumer consents (as well as
revocations) must be retained for a period of at least
two years under Regulation Z’s record retention
rules, regardless of the means by which consent is
obtained. See § 226.25.

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consumer’s consent in writing, or if the
consumer agrees, electronically. The
Board believes that written confirmation
will help ensure that a consumer
intended to opt into the over-the-limit
service by providing the consumer with
a written record of his or her choice.
The Board also anticipates that card
issuers are most likely to attempt to
obtain a consumer’s opt-in by
telephone, and thus in those
circumstances in particular, written
confirmation is appropriate to evidence
the consumer’s intent to opt in to the
service.
Under new comment 56(d)–5, a card
issuer could comply with the written
confirmation requirement, for example,
by sending a letter to the consumer
acknowledging that the consumer has
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 optin 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 has
opted in. See § 225.56(d)(2), discussed
below. Comment 56(d)–5 further
provides that a notice consistent with
the revocation notice described in
§ 226.56(e)(2) would satisfy the
requirement. Notwithstanding a
consumer’s consent, however, a card
issuer would be prohibited from
assessing over-the-limit fees or charges
to the consumer’s credit card account
until the card issuer has sent the written
confirmation. Thus, if a card issuer
elects to provide written confirmation
on the first periodic statement after the
consumer has opted in, it would not be
permitted to assess any over-the-limit
fees or charges until the next statement
cycle.
Payment of over-the-limit transactions
where consumer has not opted in.
Proposed § 226.56(b)(2) provided that a
creditor may pay an over-the-limit
transaction even if the consumer has not
provided affirmative consent, so long as
the creditor does not impose a fee or
charge for paying the transaction.
Proposed comment 56(b)(2)–1 contained
further guidance stating that the
prohibition on imposing fees for paying
an over-the-limit transaction where the
consumer has not opted in applies even
in circumstances where the creditor is
unable to avoid paying a transaction
that exceeds the consumer’s credit limit.
The proposed comment also set forth
two illustrative examples of this
provision.
The first proposed example addressed
circumstances where a merchant does
not submit a credit card transaction to

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the creditor for authorization. Such an
event may occur, for instance, because
the transaction is below the floor limits
established by the card network rules
requiring authorization or because the
small dollar amount of the transaction
does not pose significant payment risk
to the merchant. Under the proposed
example, if the transaction exceeds the
consumer’s credit limit, the creditor
would not be permitted to assess an
over-the-limit fee if the consumer has
not consented to the creditor’s payment
of over-the-limit transactions.
Under the second proposed example,
a creditor could not assess a fee for an
over-the-limit transaction that occurs
because the final transaction amount
exceeds the amount submitted for
authorization. For example, a consumer
may use his or her credit card at a payat-the-pump fuel dispenser to purchase
$50 of fuel. At the time of authorization,
the gas station may request an
authorization hold of $1 to verify the
validity of the card. Even if the
subsequent $50 transaction amount
exceeds the consumer’s credit limit,
proposed § 226.56(b)(2) would prohibit
the creditor from assessing an over-thelimit fee if the consumer has not opted
in to the creditor’s over-the-limit
service.
Industry commenters urged the Board
to create exceptions for the
circumstances described in the
examples to allow creditors to impose
over-the-limit fees or charges even if the
consumer has not consented to the
payment of over-the-limit transactions.
These commenters argued that
exceptions were warranted in these
circumstances because creditors may
not be able to block such transactions at
the time of purchase. One industry
commenter recommended that the
Board create 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. Consumer
group commenters strongly supported
the proposed comment and the included
examples.
Comment 56(b)(2)–1 is adopted
substantially as proposed and clarifies
that the prohibition against assessing
over-the-limit fees or charges without
consumer consent to the payment of
such transactions applies even in
circumstances where the card issuer is
unable to avoid paying a transaction
that exceeds the consumer’s credit limit.
As the Board stated in the
supplementary information to the
proposal, nothing in the statute suggests
that Congress intended to permit an
exception to allow any over-the-limit
fees to be charged in these

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circumstances absent consumer consent.
See 74 FR at 54179.
The final comment includes a third
example of circumstances where a card
issuer would not be permitted to assess
any fees or charges on a consumer’s
account in connection with an over-thelimit transaction if the consumer has not
opted in to the over-the-limit service.
Specifically, the new example 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-thelimit fee or charge for the previously
authorized transaction absent consumer
consent to the payment of over-the-limit
transactions. See comment 56(b)(2)–
1.iii.
Proposed comment 56(b)(2)–2
clarified that a creditor is not precluded
from assessing other fees and charges
unrelated to the payment of the overthe-limit transaction itself even where
the consumer has not provided consent
to the creditor’s over-the-limit service,
to the extent permitted under applicable
law. For example, if a consumer has not
opted in, a creditor could permissibly
assess a balance transfer fee for a
balance transfer, provided that such a
fee is assessed whether or not the
transfer exceeds the credit limit. The
proposed comment also clarified that a
creditor could continue to assess
interest charges for the over-the-limit
transaction.
Consumer groups opposed the
proposed comment, expressing concern
that the comment could enable creditors
to potentially circumvent the statutory
protections by charging consumers that
have not opted in a fee substantively
similar to an over-the-limit fee or
charge, and using a different term to
describe the fee. Consumer groups urged
the Board to instead broadly prohibit
any fee directly or indirectly caused by
or resulting from the payment of an
over-the-limit transaction unless the
consumer has opted in. Specifically,
consumer groups argued that creditors
should be prohibited from paying an
over-the-limit transaction if it might
result in any type of fee, including any
late fees that might arise if the consumer
cannot make the increased minimum
payment caused by the over-the-limit
transaction.
By its terms, TILA Section 127(k)(1)
applies only to the assessment of any
over-the-limit fees by the creditor as a
result of an extension of credit that

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exceeds a consumer’s credit limit where
the consumer has not consented to the
completion of such transactions. The
protections in TILA Section 127(k)(1)
apply to any such fees for paying an
over-the-limit transaction regardless of
the term used to describe the fee. This
provision does not, however, apply to
other fees or charges that may be
imposed as a result of the over-the-limit
transaction, such as balance transfer fees
or late payment fees. Nor does the
statute require that a card issuer cease
paying over-the-limit transactions
altogether if the consumer has not opted
in. Accordingly, the final rule adopts
comment 56(b)(2)–2 substantively as
proposed.63 The final comment has also
been revised to clarify 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. See comment
56(b)(2)–2.
56(c) Method of Election
TILA Section 127(k)(2) provides that
a consumer may consent or revoke
consent to over-the-limit transactions
orally, electronically, or in writing, and
directs the Board to prescribe rules to
ensure that the same options are
available for both making and revoking
such election. The Board proposed to
implement this requirement in
§ 226.56(c). In addition, proposed
comment 56(c)–1 clarified 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 § 226.56(c)
would have required that whatever
method a creditor provides for obtaining
consent, such method must be equally
available to the consumer to revoke the
prior consent. See TILA Section
127(k)(3). In that regard, the Board
requested comment on whether the rule
should require creditors to allow
consumers to opt in and to revoke that
consent using any of the three methods
(that is, 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
63 The final rule does not prohibit a creditor from
increasing the consumer’s interest rate as a result
of an over-the-limit transaction, subject to the
creditor’s compliance with the 45-day advance
notice requirement in § 226.9(g), the limitations on
applying an increased rate to an existing balance in
§ 226.55, and other provisions of the Credit Card
Act.

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burden and costs of setting up separate
systems for obtaining consumer
consents and processing consumer
revocations, particularly for small
community banks and credit unions.
Consumer groups agreed with the
clarification in comment 56(c)–1 that a
creditor should be required to accept
revocations of consent made by the
same methods made available to the
consumer for providing consent.
However, consumer groups believed
that the proposed rule fell short of that
goal because it did not similarly provide
a form that consumers could fill out and
mail in to revoke consent similar to the
form for providing consent. Instead,
consumer groups noted that the
proposed model revocation notice
directed the consumer to write a
separate letter and mail it in to the
creditor.
Section 226.56(c) is adopted
substantively as proposed and allows a
card issuer to obtain a consumer’s
consent to the card issuer’s payment of
over-the-limit transactions in writing,
orally, or electronically, at the card
issuer’s option. The rule recognizes that
card issuers have a strong interest in
facilitating a consumer’s ability to opt
in, and thus permits them to determine
the most effective means in obtaining
such consent. Regardless of which
methods are provided to the consumer
for obtaining consent, the final rule
requires that the same methods must be
made available to the consumer for
revoking consent. As discussed below,
Model Form G–25(B) has been revised
to include a check box form that a card
issuer may use to provide consumers for
revoking a prior consent.
Comment 56(c)–2 is adopted as
proposed and provides that consumer
consent or revocation requests are not
consumer disclosures for purposes of
the E-Sign Act. Accordingly, card
issuers would not be required to comply
with the consumer consent or other
requirements for providing disclosures
electronically pursuant to the E-Sign
Act for consumer requests submitted
electronically.
56(d) Timing
Proposed § 226.56(d)(1)(i) established
a general requirement that a creditor
provide an opt-in notice before the
creditor assesses any fee or charge on
the consumer’s account for paying an
over-the-limit transaction. No comments
were received regarding proposed
§ 226.56(d)(1)(i), and it is adopted as
proposed. A card issuer may comply
with the rule, for example, by including
the notice as part of the credit card
application. See comment 56(b)–3.i.
Alternatively, the creditor could include

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the notice with other account-opening
documents, either within the accountopening disclosures under § 226.6 or in
a stand-alone document. See comment
56(b)–3.ii.
Proposed § 226.56(d)(1)(ii) would
have required a creditor to provide the
opt-in notice immediately before and
contemporaneously with a consumer’s
election where the consumer consents
by oral or electronic means. For
example, if a consumer calls the creditor
to consent to the creditor’s payment of
over-the-limit transactions, the
proposed rule would have required the
creditor to provide the opt-in notice
immediately prior to obtaining the
consumer’s consent. This proposed
requirement recognized that creditors
may wish to contact consumers by
telephone or electronically as a more
expeditious means of obtaining
consumer consent to the payment of
over-the-limit transactions. Thus,
proposed § 226.56(d)(1)(ii) was intended
to ensure that a consumer would have
full information regarding the opt-in
right at the most meaningful time, that
is, when the opt-in decision is made.
Consumer groups strongly supported
the proposed requirement for oral and
electronic consents to ensure that
consumers are able to make an informed
decision regarding over-the-limit
transactions. Industry commenters did
not oppose this requirement. The final
rule adopts § 226.56(d)(1)(ii), generally
as proposed.
New comment 56(d)–1 clarifies that
the requirement to provide an opt-in
notice immediately prior to obtaining
consumer consent orally or
electronically means that the card issuer
must provide an opt-in notice prior to
and as part of the process of obtaining
the consumer’s consent. That is, the
issuer must provide an opt-in notice
containing the content in § 226.56(e)(1)
as part of the same transaction in which
the issuer obtains the consumer’s oral or
electronic consent.
As discussed above, a card issuer
must provide a consumer with written
confirmation of the consumer’s decision
to opt in to the card issuer’s payment of
over-the-limit transactions. See
§ 226.56(b)(1)(iv). New § 226.56(d)(2)
requires that this written confirmation
must be provided no later than the first
periodic statement sent after the
consumer has opted in. As discussed
above, a card issuer could provide a
notice consistent with the revocation
notice described in § 226.56(e)(2). See
comment 56(b)–5. Consistent with
§ 226.56(b)(1), however, a card issuer
may not assess any over-the-limit fees or
charges unless and until it has sent

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written confirmation of the consumer’s
opt-in decision.
Proposed § 226.56(d)(2) would have
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-thelimit fee or charge on a consumer’s
account. See TILA Section 127(k)(2). A
revocation notice would be required
regardless of whether the fee was
imposed due to an over-the-limit
transaction initiated by the consumer in
the prior cycle or because the consumer
failed to reduce the account balance
below the credit limit in the next cycle.
To ensure that the revocation notice is
clear and conspicuous, the proposed
rule required that the notice appear on
the front of any page of the periodic
statement. Proposed comment 56(d)–1
would have provided creditors
flexibility in how often a revocation
notice should be provided. Specifically,
creditors, at their option, could, but
were not required to, include the
revocation notice on every periodic
statement sent to the consumer, even if
the consumer has not incurred an overthe-limit fee or charge during a
particular billing cycle.
One industry commenter stated that
the periodic statement requirement
would be overly burdensome and costly
for financial institutions. This
commenter believed 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. Consumer groups believed that
the final rule should require that a
standalone revocation notice be sent to
a consumer after the incurrence of an
over-the-limit fee to make it more likely
that a consumer would see the notice,
rather than placing the notice on the
periodic statement with other
disclosures. In the alternative, consumer
groups stated that the revocation notice
should be placed on the first page of the
periodic statement or on the page
reflecting the fee to enhance likelihood
that the consumer would notice it.
Consumer groups also argued that
revocation notices should only be
provided by a creditor when an overthe-limit fee is assessed to a consumer’s
credit card account to avoid the
possibility that consumers would ignore
the notice as boilerplate language on the
statement.
In the final rule, the timing and
placement requirements for the notice of
the right of revocation has been adopted

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in § 226.56(d)(3), as proposed. The
requirement to provide notice informing
a consumer of the right to revoke a prior
election regarding the payment of overthe-limit transactions following the
imposition of an over-the-limit fee is
statutory. TILA Section 127(k)(2) also
provides that such notice must be on the
periodic statement reflecting the fee.
The final rule does not, however,
mandate that the notice be placed on the
front of the first page of the periodic
statement or on the front of the page that
indicates the over-the-limit fee or
charge. The Board is concerned about
the potential for information overload in
light of other requirements elsewhere in
the regulation regarding notices that
must be on the front of the first page of
the periodic statement or in proximity
to disclosures regarding fees that have
been assessed by the creditor during
that cycle. See, e.g., § 226.7(b)(6)(i);
§ 226.7(b)(13).
Proposed comment 56(d)–1, which
would have permitted creditors to
include a revocation notice on each
periodic statement whether or not a
consumer has incurred an over-the-limit
fee or charge, is not adopted in the final
rule. The final rule does not expressly
prohibit card issuers from providing a
revocation notice on every statement
regardless of whether a consumer has
been assessed an over-the-limit fee or
charge. Nonetheless, the Board believes
that for some consumers, a notice
appearing on each statement informing
the consumer of the right to revoke a
prior consent would not be as effective
as a more targeted notice that is
provided at a point in time when the
consumer may be motivated to act, that
is, after he or she has incurred an overthe-limit fee or charge.
56(e) Content and Format
TILA Section 127(k)(2) provides that
a consumer’s election to permit a
creditor to extend credit that would
exceed the credit limit may not take
effect unless the consumer receives
notice from the creditor of any over-thelimit fee ‘‘in the form and manner, and
at the time, determined by the Board.’’
TILA Section 127(k)(2) also requires that
the creditor provide notice to the
consumer of the right to revoke the
election, ‘‘in the form prescribed by the
Board,’’ in any periodic statement
reflecting the imposition of an over-thelimit fee. Proposed § 226.56(e) set forth
the content requirements for both
notices. The proposal also included
model forms that creditors could use to
facilitate compliance with the new
requirements. See proposed Model
Forms G–25(A) and G–25(B) in
Appendix G.

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Initial notice content. Proposed
§ 226.56(e)(1) 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. In
addition to the amount of the over-thelimit fee, the proposed rule prescribed
certain other information regarding the
opt-in right to be included in the opt-in
notice pursuant to the Board’s authority
under TILA Section 105(a) to make
adjustments that are necessary to
effectuate the purposes of TILA. 15
U.S.C. 1604(a). The Board requested
comment regarding whether the rule
should permit or require any other
information to be included in the optin notice.
Consumer groups and one state
government agency generally supported
the proposed content and model opt-in
form, but suggested the Board revise the
form to include additional information
about the opt-in right, including that a
consumer is not required to sign up for
over-the-limit coverage and the
minimum over-the-limit amount that
could trigger a fee. Consumer groups
and this agency also asserted that no
other information should be permitted
in the notice unless expressly specified
or permitted under the rule. For
example, these commenters believed
that creditors should be precluded from
including any marketing of the benefits
that may be associated with over-thelimit coverage out of concern that the
additional information could dilute
consumer understanding of the opt-in
disclosure. 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 or 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.
The Board is adopting § 226.56(e)(1)
largely as proposed, but with modified
content based on the comments received
and upon further consideration. The
final rule does not permit card issuers
to include any information in the optin notice that is not specified or
otherwise permitted by § 226.56(e)(1).
The Board believes that the addition of
other information would potentially
overwhelm the required content in the
notice and impede consumer
understanding of the opt-in right. For
the same reason, the final rule does not
require card issuers to include any
additional information regarding the
opt-in right as suggested by consumer
groups and others.

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Under § 226.56(e)(1)(i), the opt-in
notice must 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. The requirement to state the
fee amount on the opt-in notice itself is
separate from other required disclosures
regarding the amount of the over-thelimit fee or charge. See, e.g.,
§ 226.5a(b)(10). Because a card issuer
could comply with the opt-in notice
requirement in several forms, such as
providing the notice in the application
or solicitation, in the account-opening
disclosures, or as a stand-alone
document, the Board believes that
including the fee disclosure in the optin notice itself is necessary to ensure
that consumers can easily determine the
amounts they could be charged for an
over-the-limit transaction.
Some card issuers may vary the fee
amount that may be imposed based
upon the number of times the consumer
has gone over the limit, the amount the
consumer has exceeded the credit limit,
or due to other factors. Under these
circumstances, proposed comment
56(e)–1 would have permitted a creditor
to disclose the maximum fee that may
be imposed or a range of fees. The final
comment does not include the reference
to the range of fees. Card issuers that tier
the amount of the fee could otherwise
include a range from $0 to their
maximum fee, which could lead
consumers to underestimate the costs of
exceeding their credit limit. To address
tiered over-the-limit fees, comment
56(e)–1 provides that the card issuer
may indicate that the consumer may be
assessed a fee ‘‘up to’’ the maximum fee.
In addition to disclosing the amount
of the fee or charge that may be imposed
for an over-the-limit transaction,
§ 226.56(e)(1)(ii) requires card issuers to
disclose any increased rate that may
apply if consumers exceed their credit
limit. The Board believes the additional
requirement is necessary to ensure
consumers fully understand the
potential consequences of exceeding
their credit limit, particularly as a rate
increase can be more costly than the
imposition of a fee. This requirement is
consistent with the content required to
be disclosed regarding the consequences
of a late payment. See TILA Section
127(b)(12); § 226.7(b)(11) of the January
2009 Regulation Z Rule. Accordingly, if,
under the terms of the account
agreement, an over-the-limit transaction
could result in the loss of a promotional
rate, the imposition of a penalty rate, or
both, this fact must be included in the
opt-in notice.
Section 226.56(e)(1)(iii) requires card
issuers to explain the consumer’s right

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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. For
example, the card issuer could explain
that any transactions that exceed the
consumer’s credit limit will be declined
if the consumer does not consent to the
service. In addition, a card issuer should
explain that even if a consumer
consents, the payment of over-the-limit
transactions is at the card issuer’s
discretion. In this regard, the card issuer
may indicate that it may decline a
transaction for any reason, such as if the
consumer is past due or significantly
over the limit. The card issuer may also
disclose the consumer’s right to revoke
consent.
Under the comment as proposed, a
creditor would have been permitted to
also describe the benefits of the
payment of over-the-limit transactions.
Upon further analysis, the Board
believes that including discussion of
any such benefits could dilute the core
purpose of the form, which is to explain
the opt-in right in a clear and readily
understandable manner. Of course, a
card issuer may provide additional
discussion about the over-the-limit
service, including the potential benefits
of the service, in a separate document.
Notice of right of revocation. Section
226.56(e)(2) implements the
requirement in TILA Section 127(k)(2)
that a creditor must provide notice of
the right to revoke consent that was
previously granted for paying over-thelimit transactions. Under the final rule,
the notice must describe the consumer’s
right to revoke any consent previously
granted, including the method(s) by
which the consumer may revoke the
service. The Board did not receive any
comment on proposed § 226.56(e)(2),
and it is adopted without any
substantive changes.
Model forms. Model Forms G–25(A)
and (B) include sample language that
card issuers may use to comply with the
notice content requirement. Use of the
model forms, or substantially similar
notices, provides card issuers a safe
harbor for compliance under
§ 226.56(e)(3). The Model Forms have
been revised from the proposal for
clarity, and in response to comments
received. To facilitate consumer
understanding, a card issuer may, but is
not required, to provide a signature line
or check box on the opt-in form where
the consumer can indicate that they
decline to opt in. See Model Form G–
25(A). Nonetheless, if the consumer
does not check any box or provide a

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signature, the card issuer must assume
that the consumer does not opt in.
Model Form G–25(B) contains
language that card issuers may use to
satisfy both the revocation notice and
written confirmation requirements in
§ 226.56(b)(1)(iv) and (v). The model
form has been revised to include a form
that consumers may fill out and send
back to the card issuer to cancel or
revoke a prior consent.
56(f)–(i) Additional Provisions
Addressing Consumer Opt-In Right
Joint accounts. Proposed § 226.56(f)
would have required a creditor to treat
affirmative consent provided by any
joint consumer of a credit card account
as affirmative consent for the account
from all of the joint consumers. The
proposed provision also provided that a
creditor must treat a revocation of
affirmative consent by any of the joint
consumers as revocation of consent for
that account. Consumer groups urged
the Board to require creditors to obtain
consent from all account-holders on a
joint account before any over-the-limit
fees or charges could be assessed on the
account so that each account-holder
would have an equal opportunity to
avoid the imposition of such fees or
charges.
The Board is adopting § 226.56(f)
substantively as proposed. This
provision recognizes that it may not be
operationally feasible for a card issuer to
determine which account-holder was
responsible for a particular transaction
and then decide whether to authorize or
pay an over-the-limit transaction based
on that account-holder’s opt-in choice.
Moreover, because the same credit limit
presumably applies to a joint account,
one joint account-holder’s decision to
opt in to the payment of over-the-limit
transactions would also necessarily
impact the other account-holder.
Accordingly, if one joint consumer opts
in to the creditor’s payment of over-thelimit transactions, the card issuer must
treat the consent as applying to all overthe-limit transactions for that account.
The final rule would similarly provide
that if one joint consumer elects to
cancel the over-the-limit coverage for
the account, the card issuer must treat
the revocation as applying to all overthe-limit transactions for that account.
Section 226.56(f) applies only to
consumer consent and revocation
requests from consumers that are jointly
liable on a credit card account.
Accordingly, card issuers are not
required or permitted to honor a request
by an authorized user on an account to
opt in or revoke a prior consent with
respect to the card issuer’s over-the-

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limit transaction. Comment 56(f)–1
provides this guidance.
Continuing right to opt in or revoke
opt-in. Proposed § 226.56(g) provided
that a consumer may affirmatively
consent to a creditor’s payment of overthe-limit transactions at any time in the
manner described in the opt-in notice.
This provision would allow consumers
to decide later in the account
relationship whether they want to opt in
to the creditor’s payment of over-thelimit transactions. Similarly, a
consumer may revoke a prior consent at
any time in the manner described in the
revocation notice. See TILA Section
127(k)(4). No comments were received
on § 226.56(g), and it is adopted
substantively as proposed.
Comment 56(g)–1 has been revised to
clarify 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. Thus,
the comment permits a card issuer to
impose over-the-limit fees or charges for
transactions that the card issuer
authorized prior to implementing the
revocation request, even if the
transaction is not charged to the account
until after implementation. In addition,
the final 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. See
§ 226.56(j)(1).
Duration of opt-in. Section 226.56(h)
provides that a consumer’s affirmative
consent is generally effective until
revoked by the consumer. Comment
56(h)–1 clarifies, however, that a card
issuer may cease paying over-the-limit
transactions at any time and for any
reason even if the consumer has
consented to the service. For example,
a card issuer may wish to stop providing
the service in response to changes in the
credit risk presented by the consumer.
Section 226.56(h) and comment 56(h)–
1 are adopted substantively as proposed.
Time to implement consumer
revocation. Proposed § 226.56(i) would
have required a creditor to implement a
consumer’s revocation request as soon
as reasonably practicable after the
creditor receives the request. The
proposed requirement recognized that
while creditors will presumably want to
implement a consumer’s consent
request as soon as possible, the same
incentives may not apply if the

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
consumer subsequently decides to
revoke that request.
The proposal also solicited comment
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,
comment was requested 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. For
example, under the alternative
approach, if the creditor typically takes
three business days to implement a
consumer’s written opt-in request, it
should take no more than three business
days to implement the consumer’s later
written request to revoke that consent.
Consumer groups supported the
alternative approach of requiring
creditors to implement a consumer’s
revocation request within the same
period taken to implement the
consumer’s opt-in request, but believed
that a firm number of days would
provide greater certainty for consumers
regarding when their revocation
requests will be implemented.
Specifically, consumer groups urged the
Board to establish a safe harbor of three
days from when the creditor receives
the revocation request.
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 generally
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, including
the volume of requests and the channel
in which the creditor receives the
request. One industry commenter
supported the alternative approach
stating that there was little reason optin and revocation requests could not be
processed in the same period of time.
Another industry commenter stated,
however, 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.
The final rule requires a card issuer to
implement a consumer’s revocation
request as soon as reasonably
practicable after the creditor receives it,
as proposed. Accordingly, § 226.56(i)
does not prescribe a specific period of
time within which a card issuer must

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honor a consumer’s revocation request
because the appropriate time period
may depend on a number of variables,
including the method used by the
consumer to communicate the
revocation request (for example, in
writing or orally) and the channel in
which the request is received (for
example, if a consumer sends a written
request to the card issuer’s general
address for receiving correspondence or
to an address specifically designated to
receive consumer opt-in and revocation
requests). The Board also notes that the
approach taken in the final rule mirrors
the same rule adopted in the Board’s
recently issued final rule on overdraft
services for processing revocation
requests relating to consumer opt-ins to
ATM and one-time debit card overdraft
services. See 74 FR 59033 (Nov. 17,
2009). The Board believes that in light
of the similar opt-in and revocation
regimes adopted in both rules,
consistency across the regulations
would facilitate compliance for
institutions that offer both debit and
credit card products.
56(j) Prohibited Practices
Section 226.56(j) prohibits certain
card issuer practices in connection with
the assessment of over-the-limit fees or
charges. These prohibitions implement
separate requirements set forth in TILA
Sections 127(k)(5) and 127(k)(7), and
apply even if the consumer has
affirmatively consented to the card
issuer’s payment of over-the-limit
transactions.
56(j)(1) Fees Imposed Per Billing Cycle
New TILA Section 127(k)(7) provides
that a creditor may not impose more
than one over-the-limit fee during a
billing cycle. In addition, Section
127(k)(7) generally provides that an
over-the-limit fee may be imposed ‘‘only
once in each of the 2 subsequent billing
cycles’’ for the same over-the-limit
transaction. The Board proposed to
implement these restrictions in
§ 226.56(j)(1).
Proposed § 226.56(j)(1)(i) would have
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
proposed rule also prohibited a creditor
from imposing an over-the-limit fee or
charge on the account for the same overthe-limit transaction or transactions in
more than three billing cycles. Proposed
§ 226.56(j)(1)(ii) would have provided,
however, that the limitation on
imposing over-the-limit fees for more
than three billing cycles does not apply
if a consumer engages in an additional
over-the-limit transaction in either of

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the two billing cycles following the
cycle in which the consumer is first
assessed a fee for exceeding the credit
limit. No comments were received on
the proposed restrictions in
§ 226.56(j)(1) and the final rule adopts
§ 226.56(j)(1) substantively as proposed.
Section 226.56(j)(1)(i) in the final 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 has failed to reduce the
account balance below the credit limit
by the payment due date of either cycle.
The Board believes that this
interpretation of TILA Section 127(k)(7)
is consistent with Congress’s general
intent to limit a creditor’s ability to
impose multiple over-the-limit fees for
the same transaction as well as the
requirement in TILA Section 106(b) that
consumers be given a sufficient amount
of time to make payments.64
One possible interpretation of new
TILA Section 127(k)(7) would provide
consumers until the end of the billing
cycle, rather than the payment due date,
to make a payment that reduces the
account balance below the credit limit.
The Board understands, however, that
under current billing practices, the end
of the billing cycle serves as the
statement cut-off date and occurs a
certain number of days after the due
date for payment on the prior cycle’s
activity. The time period between the
payment due date and the end of the
billing cycle allows the card issuer
sufficient time to reflect timely
payments on the subsequent periodic
statement and to determine the fees and
interest charges for the statement
period. Thus, if the rule were to give
consumers until the end of the billing
cycle to reduce the account balance
below the credit limit, card issuers
would have difficulty determining
whether or not they could impose
another over-the-limit fee for the
statement cycle, which could delay the
generation and mailing of the periodic
statement and impede their ability to
comply with the 21-day requirement for
mailing statements in advance of the
payment due date. See TILA Section
163(a); § 226.5(b)(2)(ii).
64 In the supplementary information
accompanying the proposed rule, the Board noted
that a creditor’s failure to provide a consumer
sufficient time to reduce his or her balance below
the credit limit would appear to be an unfair or
deceptive act or practice. Because the Board has
used its authority under TILA Section 105(a) to
adjust the requirements in TILA Section 127(k)(7)
in order to ensure that the consumer has at least
until the payment due date to reduce his or her
balance below the credit limit, the Board believes
it is unnecessary to address this concern using its
separate authority under TILA Section 127(k)(5).

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Moreover, because a consumer is
likely to make payment by the due date
to avoid other adverse financial
consequences (such as a late payment
fee or increased APRs for new
transactions), the additional time to
make payment to avoid successive overthe-limit fees would appear to be
unnecessary from a consumer protection
perspective. Such a date also could
confuse consumers by providing two
distinct dates, each with different
consequences (that is, penalties for late
payment or the assessment of over-thelimit fees). For these reasons, the Board
is exercising its TILA Section 105(a)
authority to provide that a card issuer
may not impose an over-the-limit fee or
charge on the account for a consumer’s
failure to reduce the account balance
below the credit limit during the second
or third billing cycle unless the
consumer has not done so by the
payment due date.
New comment 56(j)–1 clarifies that an
over-the-limit fee or charge may be
assessed on a consumer’s account only
if the consumer has exceeded the credit
limit during the billing cycle. Thus, a
card issuer may not impose any
recurring or periodic fees for paying
over-the-limit transactions (for example,
a monthly ‘‘over-the-limit protection’’
service fee), even if the consumer has
affirmatively consented to or opted in to
the service, unless the consumer has in
fact exceeded the credit limit during
that cycle. The new comment is adopted
in response to a consumer group
comment that TILA Section 127(k)(7)
only permits an over-the-limit fee to be
charged during a billing cycle ‘‘if the
credit limit on the account is exceeded.’’
Section 226.56(j)(1)(ii) of the final rule
provides that the limitation on imposing
over-the-limit fees for more than three
billing cycles in § 226.56(j)(1)(i) does
not apply if a consumer engages in an
additional over-the-limit transaction in
either of the two billing cycles following
the cycle in which the consumer is first
assessed a fee for exceeding the credit
limit. The assessment of fees or interest
charges by the card issuer would not
constitute an additional over-the-limit
transaction for purposes of this
exception, consistent with the definition
of ‘‘over-the-limit transaction’’ under
§ 226.56(a). In addition, the exception
would not permit a card issuer to
impose fees for both the initial over-thelimit transaction as well as the
additional over-the-limit transaction(s),
as the general restriction on assessing
more than one over-the-limit fee in the
same billing cycle would continue to
apply. Comment 56(j)–2 contains
examples illustrating the general rule
and the exception.

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Proposed Prohibitions on Unfair or
Deceptive Over-the-Limit Acts or
Practices
Section 226.56(j) includes additional
substantive limitations and restrictions
on certain creditor acts or practices
regarding the imposition of over-thelimit fees. These limitations and
restrictions are based on the Board’s
authority under TILA Section
127(k)(5)(B) which directs the Board to
prescribe regulations that prevent unfair
or deceptive acts or practices in
connection with the manipulation of
credit limits designed to increase overthe-limit fees or other penalty fees.
Legal Authority
The Credit Card Act does not set forth
a standard for what is an ‘‘unfair or
deceptive act or practice’’ and the
legislative history for the Credit Card
Act is similarly silent. Congress has
elsewhere codified standards developed
by the Federal Trade Commission for
determining whether acts or practices
are unfair under Section 5(a) of the
Federal Trade Commission Act, 15
U.S.C. 45(a).65 Specifically, the FTC Act
provides that an act or practice is unfair
when it causes or is likely to cause
substantial injury to consumers which is
not reasonably avoidable by consumers
themselves and not outweighed by
countervailing benefits to consumers or
to competition. In addition, in
determining whether an act or practice
is unfair, the FTC may consider
established public policy, but public
policy considerations may not serve as
the primary basis for its determination
that an act or practice is unfair. 15
U.S.C. 45(a).
According to the FTC, an unfair act or
practice will almost always represent a
market failure or market imperfection
that prevents the forces of supply and
demand from maximizing benefits and
minimizing costs.66 Not all market
failures or imperfections constitute
unfair acts or practices, however.
Instead, the central focus of the FTC’s
unfairness analysis is whether the act or
practice causes substantial consumer
injury.67
The FTC has also adopted standards
for determining whether an act or
practice is deceptive, although these
65 See 15 U.S.C. 45(n); Letter from FTC to the
Hon. Wendell H. Ford and the Hon. John C.
Danforth, S. Comm. On Commerce, Science &
Transp. (Dec. 17, 1980) (FTC Policy Statement on
Unfairness) (available at http://www.ftc.gov/bcp/
policystmt/ad-unfair.htm).
66 Statement of Basis and Purpose and Regulatory
Analysis for Federal Trade Commission Credit
Practices Rule (Statement for FTC Credit Practices
Rule), 49 FR 7740, 7744 (Mar. 1, 1984).
67 Id. at 7743.

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standards, unlike unfairness standards,
have not been incorporated into the FTC
Act.68 Under the FTC’s standards, an act
or practice is deceptive where: (1) There
is a representation or omission of
information that is likely to mislead
consumers acting reasonably under the
circumstances; and (2) that information
is material to consumers.69
Many states also have adopted
statutes prohibiting unfair or deceptive
acts or practices, and these statutes may
employ standards that are different from
the standards currently applied to the
FTC Act.70 In adopting rules under
TILA Section 127(k)(5), the Board has
considered the standards currently
applied to the FTC Act’s prohibition
against unfair or deceptive acts or
practices, as well as the standards
applied to similar state statutes.
56(j)(2) Failure To Promptly Replenish
Section 226.10 of Regulation Z
generally requires creditors to credit
consumer payments as of the date of
receipt, except when a delay in
crediting does not result in a finance or
other charge. This provision does not
address, however, when a creditor must
replenish the consumer’s credit limit
after receiving payment. Thus, a
consumer may submit payment
sufficient to reduce his or her account
balance below the credit limit and make
additional purchases during the next
cycle on the assumption that the credit
line will be replenished once the
payment is credited. If the creditor does
not promptly replenish the credit line,
the additional transactions may cause
the consumer to exceed the credit limit
and incur fees.
In the September 2009 Regulation Z
Proposal, the Board proposed to
prohibit creditors from assessing an
over-the-limit fee or charge that is
caused by the creditor’s failure to
68 Letter from the FTC to the Hon. John H.
Dingell, H. Comm. on Energy & Commerce (Oct. 14,
1983) (FTC Policy Statement on Deception)
(available at http://www.ftc.gov/bcp/policystmt/addecept.html).
69 Id. at 1–2. The FTC views deception as a subset
of unfairness but does not apply the full unfairness
analysis because deception is very unlikely to
benefit consumers or competition and consumers
cannot reasonably avoid being harmed by
deception.
70 For example, a number of states follow an
unfairness standard formerly used by the FTC.
Under this standard, an act or practice is unfair
where it offends public policy; or is immoral,
unethical, oppressive, or unscrupulous; and causes
substantial injury to consumers. See, e.g., Kenai
Chrysler Ctr., Inc. v. Denison, 167 P.3d 1240, 1255
(Alaska 2007) (quoting FTC v. Sperry & Hutchinson
Co., 405 U.S. 233, 244–45 n.5 (1972)); State v.
Moran, 151 N.H. 450, 452, 861 A.2d 763, 755–56
(N.H. 2004); Robinson v. Toyota Motor Credit Corp.,
201 Ill. 2d 403, 417–418, 775, N.E.2d 951, 961–62
(2002).

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promptly replenish the consumer’s
available credit. Section 226.56(j)(2) of
the final rule adopts the prohibition
substantively as proposed.
Public Comments
Consumer groups supported the
proposed prohibition against assessing
over-the-limit fees or charges caused by
a creditor’s failure to promptly
replenish the consumer’s available
credit. Industry commenters generally
did not oppose the proposed
prohibition, but asked the Board to
provide additional guidance regarding
what it considered to be ‘‘prompt’’
replenishment of the consumer’s
available credit. One industry
commenter asked the Board to
specifically permit a creditor to wait a
reasonable amount of time after
receiving payment before replenishing
the consumer’s available credit. This
commenter noted that while creditors
will typically credit payments as of the
date of receipt, the rule should not
expose creditors to possible fraud or
nonpayment by requiring them to make
credit available in connection with a
payment that has not cleared.
In response to the Board’s request for
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 ten 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.

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Legal Analysis
The Board finds that the imposition of
fees or charges for an over-the-limit
transaction caused solely by a card
issuer’s failure to promptly replenish
the consumer’s available credit after the
card issuer has credited the consumer’s
payment is an unfair practice.
Potential injury that is not reasonably
avoidable. A 2006 Government
Accountability Office (GAO) report on
credit cards indicates that the average
cost to consumers resulting from overthe-limit transactions exceeded $30 in
2005.71 The GAO also reported that in
71 See U.S. Gov’t Accountability Office, Credit
Cards: Increased Complexity in Rates and Fees
Heightens Need for More Effective Disclosures to
Consumers at 20–21 (Sept. 2006) (GAO Credit Card

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the majority of credit card agreements
that it surveyed, default rates could
apply if a consumer exceeded the credit
limit on the card.72
In most cases, card issuers replenish
the available credit on a credit card
account shortly after the payment has
been credited to the account to enable
the cardholder to make new transactions
on the account. As a result, a consumer
that has used all or most of the available
credit during one billing cycle would
again be able to make transactions using
the credit card account once the
consumer has made payments on the
account balance and the available credit
is restored to the account. If, however,
the card issuer delays replenishment on
the account after crediting the payment
to the consumer’s account, the
consumer could inadvertently exceed
the credit limit if the consumer uses the
credit card account for new transactions
and such transactions are authorized by
the card issuer. In such event, the
consumer could incur substantial
monetary injury due to the fees assessed
and potential interest rate increases in
connection with the card issuer’s
payment of over-the-limit transactions.
Because the consumer will generally
be unaware when the card issuer has
delayed replenishing the available
credit on the account after crediting the
payment to the account, the Board
concludes that consumers cannot
reasonably avoid the injury caused by
over-the-limit fees and rate increases
triggered by transactions that exceed the
limit as a result of the delay in
replenishment.
Potential costs and benefits. The
Board also finds that the prohibited
practice does not create benefits for
consumers and competition that
outweigh the injury. While a card issuer
may reasonably decide to delay
replenishing a consumer’s available
credit, for example, to ensure the
payment clears or in cases of suspected
fraud on the account, there is minimal
if any benefit to the consumer from
permitting the card issuer to assess overthe-limit fees that may be incurred as a
result of the delay in replenishment.
Final Rule
Section 226.56(j)(2) is adopted
substantively as proposed and prohibits
a card issuer from imposing any overthe-limit fee or charge solely because of
the card issuer’s failure to promptly
replenish the consumer’s available
credit after the card issuer has credited
the consumer’s payment under § 226.10.
Report) (available at http://www.gao.gov/new.items/
d06929.pdf).
72 See id. at 25.

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Comment 56(j)–3 clarifies that the
final rule does not require card issuer to
immediately replenish the consumer’s
available credit upon crediting the
consumer’s payment under § 226.10.
Rather, the creditor is only prohibited
from assessing any over-the-limit fees or
charges caused by the creditor’s
decision not to replenish the available
credit after posting the consumer’s
payment to the account. Thus, a card
issuer may continue to delay
replenishment as necessary to allow the
consumer’s payment to clear or to
prevent potential fraud, provided that it
does not assess any over-the-limit fees
or charges because of its delay in
restoring the consumer’s available
credit. Comment 56(j)–3 also clarifies
that the rule does not require a card
issuer to decline all transactions for
consumers who have opted in to the
card issuer’s payment of over-the-limit
transactions until the available credit
has been restored.
As discussed above, § 226.56(j)(2)
solely prohibits the assessment of an
over-the-limit fee or charge due to a card
issuer’s failure to promptly replenish a
consumer’s available credit following
the crediting of the consumer’s payment
under § 226.10. Thus, the final rule does
not establish a number of days within
which a consumer’s available credit
must be replenished by a card issuer
after a payment has been credited.
Because the time in which a payment
may take to clear may vary greatly
depending on the type of payment, the
Board believes that the determination of
when the available credit should be
replenished should rest with the
individual card issuer, so long as the
consumer does not incur over-the-limit
fees or charges as a result of the card
issuer’s delay in replenishment.
56(j)(3) Conditioning
The Board proposed to prohibit a
creditor from conditioning the amount
of available credit provided on the
consumer’s affirmative consent to the
creditor’s payment of over-the-limit
transactions. Proposed § 226.56(j)(3) was
intended to address concerns that a
creditor may seek to tie the amount of
credit provided to the consumer
affirmatively consenting to the creditor’s
payment of over-the-limit transactions.
The final rule adopts the prohibition as
proposed.
Public Comments
Consumer groups and one federal
banking agency supported the proposed
prohibition to help ensure that
consumers can freely choose whether or
not to opt in. However, these
commenters believed that greater

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protections were needed to prevent
other creditor actions that could compel
a consumer to opt in or that otherwise
discriminated against a consumer that
elected not to opt in. Specifically, these
commenters urged the Board to prohibit
any differences in credit card accounts
based upon whether the consumer
elects to opt in to the payment of overthe-limit transactions. These
commenters were concerned that issuers
might otherwise offer other less
favorable terms to consumers who do
not opt in, such as a higher interest rate
or a higher annual fee. Or, creditors
might induce consumers to opt in by
waiving a fee or lowering applicable
APRs. Consumer groups further
observed that the Board has recently
taken a similar approach in the Board’s
recent final rules under Regulation E
addressing overdraft services to prohibit
financial institutions from varying the
account terms, conditions, or features
for consumers that do not opt in to
overdraft services for ATM and one-time
debit card transactions. See 74 FR 59033
(Nov. 17, 2009). Consumer groups also
urged the Board to prohibit issuers from
imposing fees, such as denied
transaction fees, that could be designed
to coerce consumers to opt in to overthe-limit coverage.
Both consumer groups and the federal
banking agency agreed with the Board’s
observation in the supplementary
information to the proposal that
conditioning the amount of credit
provided based on whether the
consumer opts in to the creditor’s
payment of over-the-limit transactions
raised significant concerns under the
Equal Credit Opportunity Act (ECOA).
See 15 U.S.C. 1691(a)(3). The federal
banking agency expressed concern,
however, that the Board’s failure to
similarly state that providing other
adverse credit terms, such as higher fees
or rates, based on the consumer’s
decision not to opt in could suggest that
such variances were in fact permissible
under ECOA and Regulation B (12 CFR
205).
Legal Analysis
The Board finds that conditioning or
linking the amount of credit available to
the consumer based on the consumer
consenting to the card issuer’s payment
of over-the-limit transactions is an
unfair practice.
Potential injury that is not reasonably
avoidable. As the Board has previously
stated elsewhere, consumers receive
considerable benefits from receiving
credit cards that provide a meaningful
amount of available credit. For example,
credit cards enable consumers to engage
in certain types of transactions, such as

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making purchases by telephone or online, or renting a car or hotel room.
Given these benefits, some consumers
might be compelled to opt in to a card
issuer’s payment of over-the-limit
transactions if not doing so may result
in the consumer otherwise obtaining a
minimal amount of credit or failing to
qualify for credit altogether. Thus, it
appears that such consumers would be
prevented from exercising a meaningful
choice regarding the card issuer’s
payment of over-the-limit transactions.
Potential costs and benefits. The
Board concludes that there are few if
any benefits to consumers or
competition from conditioning or
linking the amount of credit available to
the consumer based on the consumer
consenting to the card issuer’s payment
of over-the-limit transactions. While
some card issuers may seek to replace
the revenue from over-the-limit fees by
charging consumers higher annual
percentage rates or fees, the Board
believes that consumers will benefit
overall from having a meaningful choice
regarding whether to have over-the-limit
transactions approved by the card
issuer.
Final Rule
Section 226.56(j)(3) prohibits a card
issuer from conditioning or otherwise
linking the amount of credit granted on
the consumer opting in to the card
issuer’s payment of over-the-limit
transactions. Thus, the final rule is
intended to prevent card issuers from
effectively circumventing the consumer
choice requirement by tying the amount
of a consumer’s credit limit to the
consumer’s opt-in decision.
Under the final rule, a card issuer may
not, for example, require a consumer to
opt in to the card issuer’s fee-based
over-the-limit service in order to receive
a higher credit limit for the account.
Similarly, a card issuer would be
prohibited from denying a consumer’s
credit card application solely because
the consumer did not opt in to the card
issuer’s over-the-limit service. The final
rule is illustrated by way of example in
comment 56(j)–4.
The final rule does not address other
card issuer actions that may also lead a
consumer to opt in to the card issuer’s
payment of over-the-limit transactions
contrary to the consumer’s preferences.
As discussed above, TILA Section
127(k)(5)(B) directs the Board to
prescribe regulations preventing unfair
or deceptive acts or practices ‘‘in
connection with the manipulation of
credit limits designed to increase overthe-limit fees or other penalty fees.’’
Nonetheless, the Board notes this rule is
not intended to identify all unfair or

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deceptive acts or practices that may
arise in connection with the opt-in
requirement. To the extent that specific
practices raise concerns regarding
unfairness or deception under the FTC
Act with respect to this requirement,
this rule would not limit the ability of
the Board or any other agency to make
any such determination on a case-bycase basis. This rule also does not
preclude any action by the Board or any
other agency to address creditor
practices with respect to a consumer’s
exercise of the opt-in right that may
raise significant concerns under ECOA
and Regulation B.
56(j)(4) Over-the-Limit Fees Attributed
to Fees or Interest
The Board proposed to prohibit the
imposition of any over-the-limit fees or
charges if the credit limit is exceeded
solely because of the creditor’s
assessment of accrued interest charges
or fees on the consumer’s credit card
account. Section 226.56(j)(4) adopts this
prohibition substantively as proposed.
Public Comments
Consumer groups supported the
proposed prohibition. In contrast, one
industry trade association representing
community banks believed that the
proposed prohibition would require
extensive programming of data systems
and urged the Board not to adopt the
prohibition in light of the significant
operational burden and costs that would
be incurred. Another industry
commenter questioned whether the
proposed prohibition was sufficiently
tied to a creditor’s manipulation of
credit limits as contemplated by TILA
Section 127(k)(5).
Legal Analysis
The Board finds the imposition of any
over-the-limit fees or charges if a
consumer’s credit limit is exceeded
solely because of the card issuer’s
assessment of accrued interest charges
or fees on the consumer’s credit card
account is an unfair practice.
Potential injury that is not reasonably
avoidable. As discussed above,
consumers may incur substantial
monetary injury due to the fees assessed
in connection with the payment of overthe-limit transactions. In addition to per
transaction fees, consumers may also
trigger rate increases if the over-thelimit transaction is deemed to be a
violation of the credit card contract.
The Board concludes that the injury
from over-the-limit fees and potential
rate increases is not reasonably
avoidable in these circumstances
because consumers are, as a general
matter, unlikely to be aware of the

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amount of interest charges or fees that
may be added to their account balance
when deciding whether or not to engage
in a credit card transaction. With
respect to accrued interest charges,
these additional amounts are typically
added to a consumer’s account balance
at the end of the billing cycle after the
consumer has completed his or her
transactions for the cycle and thus are
unlikely to have been taken into account
when the consumer engages in the
transactions.
Potential costs and benefits. Although
prohibition of the assessment of overthe-limit fees caused by accrued finance
charges and fees may reduce card issuer
revenues and lead card issuers to
replace lost revenue by charging
consumers higher rates or fees, the
Board believes the final rule will result
in a net benefit to consumers because
some consumers are likely to benefit
substantially while the adverse effects
on others are likely to be small. Because
permitting fees and interest charges to
trigger over-the-limit fees may have the
effect of retroactively reducing a
consumer’s available credit for prior
transactions, prohibiting such a practice
would protect consumers against
unexpected over-the-limit fees and rate
increases which could substantially add
to their cost of credit. Moreover,
consumers will be able to more
accurately manage their credit lines
without having to factor additional costs
that cannot be easily determined. While
some consumers may pay higher fees
and initial rates, consumers are likely to
benefit overall through more transparent
pricing.
Final Rule
Section 226.56(j)(4) in the final rule
prohibits 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, as
proposed. 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 § 226.6(b)(3)(i). Thus, the
final rule also prohibits the 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 in the final rule does
not, however, restrict card issuers from
assessing over-the-limit fees due to
accrued finance charges or fees from

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prior cycles that have subsequently been
added to the account balance. New
comment 56(j)–5 includes this
additional guidance and illustrative
examples.
Section 226.57 Reporting and
Marketing Rules for College Student
Open-End Credit
New TILA Section 140(f), as added by
Section 304 of the Credit Card Act,
requires the public disclosure of
contracts or other agreements between
card issuers and institutions of higher
education for the purpose of marketing
a credit card and imposes new
restrictions related to marketing openend credit to college students. 15 U.S.C.
1650(f). The Board proposed to
implement these provisions in new
§ 226.57.
The Board also proposed to
implement provisions related to new
TILA Section 127(r) in § 226.57. TILA
Section 127(r), which was added by
Section 305 of the Credit Card Act,
requires card issuers to submit an
annual report to the Board containing
the terms and conditions of business,
marketing, promotional agreements, and
college affinity card agreements with an
institution of higher education, or other
related entities, with respect to any
college student credit card issued to a
college student at such institution. 15
U.S.C. 1637(r).
57(a) Definitions
New TILA Section 127(r) provides
definitions for terms that are also used
in new TILA Section 140(f). See 15
U.S.C. 1650(f). To ensure the use of
these terms is consistent throughout
these sections, the Board proposed to
incorporate the definitions set forth in
TILA Section 127(r) in § 226.57(a) and
apply them to regulations implementing
both TILA Sections 127(r) and 140(f).
Proposed § 226.57(a)(1) defined
‘‘college student credit card’’ as a credit
card issued under a credit card account
under an open-end (not home-secured)
consumer credit plan to any college
student. This definition is similar to
TILA Section 127(r)(1)(B), which
defines ‘‘college student credit card
account’’ as a credit card account under
an open-end consumer credit plan
established or maintained for or on
behalf of any college student. The Board
received no comments on this
definition, and the definition is adopted
as proposed with one non-substantive
wording change. As proposed,
§ 226.57(a)(1) defines ‘‘college student
credit card’’ rather than ‘‘college student
credit card account’’ because the statute
and regulation use the former term but
not the latter. Consistent with the

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approach the Board is implementing for
other sections of the Credit Card Act,
the definition uses the proposed term
‘‘credit card account under an open-end
(not home-secured) consumer credit
plan,’’ as defined in § 226.2(a)(15). The
term ‘‘college student credit card’’
therefore excludes home-equity lines of
credit accessed by credit cards and
overdraft lines of credit accessed by
debit cards, which the Board believes
are not typical types of college student
credit cards.
TILA Section 127(r)(1)(A) defines
‘‘college affinity card’’ as a credit card
issued under an open end consumer
credit plan in conjunction with an
agreement between the issuer and an
institution of higher education or an
alumni organization or a foundation
affiliated with or related to an
institution of higher education under
which cards are issued to college
students having an affinity with the
institution, organization or foundation
where at least one of three criteria also
is met. These three criteria are: (1) The
creditor has agreed to donate a portion
of the proceeds of the credit card to the
institution, organization, or foundation
(including a lump-sum or one-time
payment of money for access); (2) the
creditor has agreed to offer discounted
terms to the consumer; or (3) the credit
card bears the name, emblem, mascot, or
logo of such institution, organization, or
foundation, or other words, pictures or
symbols readily identified with such
institution or affiliated organization. In
connection with the proposed rule, the
Board solicited comment on whether
§ 226.57 should include a regulatory
definition of ‘‘college affinity card.’’ One
card issuer commenter requested that
the Board include such a definition in
the final rule. The Board continues to
believe, however, that the definition of
‘‘college student credit card,’’ discussed
above, is broad enough to encompass
any ‘‘college affinity card’’ as defined in
TILA Section 127(r)(1)(A), and that a
definition of ‘‘college affinity card’’
therefore is unnecessary. As proposed,
the Board is not adopting a regulatory
definition comparable to this definition
in the statute.
Comment 57(a)(1)–1 is adopted as
proposed. Comment 57(a)(1)–1 clarifies
that a college student credit card
includes a college affinity card, as
discussed above, and that, in addition,
a card may fall within the scope of the
definition regardless of the fact that it is
not intentionally targeted at or marketed
to college students.
Proposed § 226.57(a)(2) defined
‘‘college student’’ as an individual who
is a full-time or a part-time student
attending an institution of higher

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education. This definition is consistent
with the definition of ‘‘college student’’
in TILA Section 127(r)(1)(C). An
industry commenter suggested that the
Board limit the definition to students
who are under the age of 21. As the
Board discussed in the October 2009
Regulation Z Proposal, the definition is
intended to be broad and would apply
to students of any age attending an
institution of higher education and
applies to all students, including those
enrolled in graduate programs or joint
degree programs. The Board believes
that it was Congress’s intent to apply
this term broadly, and is adopting
§ 226.57(a)(2) as proposed with one nonsubstantive wording change.
As discussed in the October 2009
Regulation Z Proposal, the Board
proposed to adopt a definition of
‘‘institution of higher education’’ in
§ 226.57(a)(3) that would be consistent
with the definition of the term in TILA
Section 127(r)(1)(D) and in
§ 226.46(b)(2) for private education
loans. The proposed definition provided
that the term has the same meaning as
in sections 101 and 102 of the Higher
Education Act of 1965. 20 U.S.C. 1001
and 1002. In proposing the definition,
the Board proposed to use its authority
under TILA Section 105(a) to apply the
definition in TILA Section 127(r)(1)(D)
to TILA Section 140(f) in order to have
a consistent definition of the term for all
sections added by the Credit Card Act
and to facilitate compliance. 15 U.S.C.
1604(a). The Board received no
comment on the proposed definition,
and § 226.57(a)(3) is adopted as
proposed.
Proposed § 226.57(a)(4) defined
‘‘affiliated organization’’ as an alumni
organization or foundation affiliated
with or related to an institution of
higher education, to provide a
conveniently shorter term to be used to
refer to such organizations and
foundations in various provisions of the
proposed regulations. The Board
received no comment regarding this
definition, and § 226.57(a)(4) is adopted
as proposed with one non-substantive
wording change.
Proposed § 226.57(a)(5) delineated the
types of agreements for which creditors
must provide annual reports to the
Board, under the defined term ‘‘college
credit card agreement.’’ The term was
defined to include any business,
marketing or promotional agreement
between a card issuer and an institution
of higher education or an affiliated
organization in connection with which
college student credit cards are issued to
college students currently enrolled at
that institution. In connection with the
proposed rule, the Board noted that the

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proposed definition did not incorporate
the concept of a college affinity card
agreement used in TILA Section
127(r)(1)(A) and solicited comment on
whether language referring to college
affinity card agreements also should be
included in the regulations. The Board
received no comments on this issue.
The Board continues to believe that the
definition of ‘‘college credit card
agreement’’ is broad enough to include
agreements concerning college affinity
cards. Section 226.57(a)(5) therefore is
adopted as proposed with one nonsubstantive wording change.
Comment 57(a)(5)–1 is adopted as
proposed. Comment 57(a)(5)–1 clarifies
that business, marketing and
promotional agreements may include a
broad range of arrangements between a
creditor and an institution of higher
education or affiliated organization,
including arrangements that do not fall
within the concept of a college affinity
card agreement as discussed in TILA
Section 127(r)(1)(A). For example, TILA
Section 127(r)(1)(A) specifies that under
a college affinity card agreement, the
card issuer has agreed to make a
donation to the institution or affiliated
organization, the card issuer has agreed
to offer discounted terms to the
consumer, or the credit card will
display pictures, symbols, or words
identified with the institution or
affiliated organization; even if these
conditions are not met, an agreement
may qualify as a college credit card
agreement, if the agreement is a
business, marketing or promotional
agreement that contemplates the
issuance of college student credit cards
to college students currently enrolled at
the institution. An agreement may
qualify as a college credit card
agreement even if marketing of cards
under the agreement is targeted at
alumni, faculty, staff, and other nonstudent consumers, as long as cards may
also be issued to students in connection
with the agreement.
57(b) Public Disclosure of Agreements
In the October 2009 Regulation Z
Proposal the Board proposed to
implement new TILA Section 140(f)(1)
in § 226.57(b). Consistent with the
statute, proposed § 226.57(b) requires an
institution of higher education to
publicly disclose any credit card
marketing contract or other agreement
made with a card issuer or creditor. The
Board also proposed comment 57(b)–1
to specify that an institution of higher
education may fulfill its duty to
publicly disclose any contract or other
agreement made with a card issuer or
creditor for the purposes of marketing a
credit card by posting such contract or

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agreement on its Web site. Comment
57(b)–1 also provided that the
institution of higher education may
alternatively make such contract or
agreement available upon request,
provided the procedures for requesting
the documents are reasonable and free
of cost to the requestor, and the contract
or agreement is provided within a
reasonable time frame. As discussed in
the October 2009 Regulation Z Proposal
the list in proposed comment 57(b)–1
was not meant to be exhaustive, and the
Board noted that an institution of higher
education may publicly disclose these
contracts or agreements in other ways.
Consumer group commenters
suggested that the Board clarify that the
term ‘‘any contracts or agreements’’
includes a memorandum of
understanding or other amendment,
interpretation or understanding between
the parties that directly or indirectly
relates to a college credit agreement.
The Board does not believe such
amendments are necessary. If, as a
matter of contract law, any amendment
or memorandum of understanding
constitutes a part of a contract, the
Board believes that the language in the
regulation would require its disclosure.
As a result, the Board is adopting
comment 57(b)–1 as proposed.
The Board also proposed comment
57(b)–2 in the October 2009 Regulation
Z Proposal to bar institutions of higher
education from redacting any contracts
or agreements they are required to
publicly disclose under proposed
§ 226.57(b). As a result, any clauses in
existing contract or agreements
addressing the confidentiality of such
contracts or agreements would be
invalid to the extent they prevent
institutions of higher education from
publicly disclosing such contracts or
agreements in accordance with
proposed § 226.57(b). The Board did not
receive any significant comments on
comment 57(b)–2. Furthermore, the
Board continues to believe that it is
important that all provisions of these
contracts or agreements be available to
college students and other interested
parties, and comment 57(b)–2 is
adopted as proposed.
57(c) Prohibited Inducements
TILA Section 140(f)(2) 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

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or related to an institution of higher
education. Proposed § 226.57(c)
generally followed the statutory
language. As the Board noted in the
October 2009 Regulation Z Proposal,
TILA Section 140(f)(2) applies not only
to credit card accounts, but also other
open-end consumer credit plans, such
as lines of credit. The Board received
comment from some industry
commenters requesting that the Board
limit this provision to credit card
accounts only. The statute specifically
includes other open-end consumer
credit plans other than credit card
accounts, and the Board believes
Congress intended to cover all open-end
consumer credit plans. Therefore, the
Board is adopting § 226.57(c) as
proposed.
One industry commenter requested an
exception to the restrictions on offering
a tangible item in exchange for
introducing a wide range of financial
services to a college student. The Board
notes that the restriction in § 226.57(c)
applies to inducements to apply for or
participate in an open-end consumer
credit plan only. Consequently, if a
financial institution were to offer a
tangible item to induce a college student
to open a deposit account, for example,
such item would not be prohibited
because a deposit account is not an
open-end credit plan. However, if a
financial institution were to offer a
tangible item to induce a college student
to apply for or participate in a package
of financial services that includes any
open-end consumer credit plans, such
items would be prohibited under
§ 226.57(c).
Proposed comment 57(c)–1 in the
October 2009 Regulation Z Proposal
clarified that a tangible item under
§ 226.57(c) includes any physical item,
such as a gift card, a t-shirt, or a
magazine subscription, that a card
issuer or creditor offers to induce a
college student to apply for or open an
open-end consumer credit plan offered
by such card issuer or creditor. The
proposed comment also provided some
examples of non-physical inducements
that would not be considered tangible
items, such as discounts, rewards
points, or promotional credit terms.
Consumer group commenters
suggested that while the Board’s
interpretation of ‘‘tangible’’ item was
valid, there is an alternate definition of
‘‘tangible’’ item as an item that is real, as
opposed to visionary or imagined. The
Board believes interpreting the term
‘‘tangible’’ as these commenters’ suggest
would be inappropriate. Since it would
be impossible for a creditor to offer an
imagined item, defining ‘‘tangible’’ as
something real would render the term

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superfluous. The Board believes that
Congress meant to limit this prohibition
to a certain class of items; otherwise, the
statute would have prohibited the
offering any kind of inducement, rather
than a ‘‘tangible’’ one. Proposed
comment 57(c)–1 is therefore adopted as
proposed.
Under TILA Section 140(f)(2), offering
tangible items to college students is
prohibited only if the items are offered
to induce the student to apply for or
open an open-end consumer credit plan.
As a result, the Board proposed
comment 57(c)–2 to clarify that if a
tangible item is offered to a college
student whether or not that student
applies for or opens an open-end
consumer credit plan, the item is not an
inducement. Consumer group
commenters opposed the Board’s
interpretation and stated that any
tangible item offered to a college
student, even if it is not conditioned on
the college student applying for or
opening an open-end consumer credit
plan, is an inducement. The Board
disagrees with this interpretation. In
addition, the Board believes the
approach suggested by consumer group
commenters could produce unintended
consequences and practical
complications. For example, under the
interpretation suggested by commenters,
even a simple candy dish in the lobby
of a bank branch or at a retailer that has
a retail credit card program could be
prohibited because of the possibility a
college student may walk into the
branch or the store and take a piece of
candy. Therefore, the Board is adopting
comment 57(c)–2 as proposed.
TILA Section 140(f)(2)(B) requires the
Board to determine what is considered
near the campus of an institution of
higher education. As discussed in the
October 2009 Regulation Z Proposal, the
Board proposed comment 57(c)–3 to
provide 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
campus of an institution of higher
education. The Board based its proposal
on the distances used in state and
federal laws for other restricted
activities near a school,73 and solicited
73 See, e.g., 18 U.S.C. 922(q)(2) (making it
unlawful for an individual to possess an unlicensed
firearm in a school zone, defined in 18 U.S.C.
921(a)(25) as within 1,000 feet of the school); the
Family Smoking Prevention and Tobacco Control
Act (Pub. L. 111–31, June 22, 2009) (requiring
regulations to ban outdoor tobacco advertisements
within 1,000 feet of a school or playground); and
Mass. Gen. Laws ch. 94C, § 32J (requiring
mandatory minimum term of imprisonment for
drug violations committed within 1,000 feet of a
school).

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comment on other appropriate ways to
determine a location that is considered
near the campus of an institution of
higher education.
The Board received support for its
proposal from various types of
commenters, but many industry
commenters thought the Board’s
definition for what is considered near
campus to be too broad. Several of these
commenters suggested that the Board
provide exceptions from the prohibition
in § 226.57(c) for either retailer-creditors
or bank branches on or near campus.
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 on-line universities to
avoid interpretations that a student’s
home might constitute a part of the
‘‘campus.’’
The Board is adopting comment
57(c)–3 as proposed. The statute
provides that creditors are subject to the
restrictions on offering tangible items to
college students in particular locations
and makes no exceptions for creditors
that may already be established in such
locations. Furthermore, the Board
believes that institutions of higher
education would be the proper entities
to determine the borders of their
respective campuses. In addition, it is
the Board’s understanding that on-line
universities do not define their
campuses as inclusive of a student’s
home. Therefore, the Board believes it
would be unnecessary to provide an
exemption for such institutions.
Proposed comment 57(c)–4 clarified
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 § 226.57(c). Proposed
comment 57(c)–4 clarified that offers of
tangible items made on or near the
campus of an institution of higher
education for purposes of § 226.57(c)
include offers of tangible items that are
sent to those locations through the mail.
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 constituted
offers mailed to an address on or near
campus.
Comment 57(c)–4 is adopted as
proposed. As the Board discussed in the
October 2009 Regulation Z Proposal, the
statute does not distinguish between
different methods of making offers of
tangible items, but clearly delineates the
locations where such offers may not be

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made. The Board notes that the
prohibition in § 226.57(c) focuses on
offering a tangible item. Therefore,
creditors are not prohibited by the rule
from mailing applications and
solicitations to college students at an
address that is on or near campus. Such
mailings may even advertise the
possibility of a tangible item for any
applicant who is not a college student,
so long as the credit has reasonable
procedures for determining whether an
applicant is a college student, consistent
with comment 57(c)–6. Moreover, the
Board does not believe that comment
57(c)–4 as adopted would include
mailings to an e-mail address as it
encompasses only mailings to an
address that is on or near campus. An
e-mail address does not physically exist
anywhere, and therefore, cannot be
considered an address on or near
campus.
Furthermore, under § 226.57(c), an
offer of a tangible item to induce a
college student to apply for or open an
open-end consumer credit plan may not
be made at an event sponsored by or
related to an institution of higher
education. The Board proposed
comment 57(c)–5 to provide that an
event is related to an institution of
higher education if the marketing of
such event uses the name, emblem,
mascot, or logo of an institution of
higher education, or other words,
pictures, or symbols identified with an
institution of higher education in a way
that implies that the institution of
higher education endorses or otherwise
sponsors the event. The proposed
comment was adapted from guidance
the Board recently adopted in § 226.48
regarding co-branding restrictions for
certain private education loans.
A credit union commenter suggested
that the Board’s proposal was too broad,
particularly for credit unions that may
share a similar name to an institution of
higher education. While the Board
understands the difficulty in complying
with § 226.57(c) for such creditors, the
Board believes that the potential for
confusion that a particular event or
function is endorsed by the institution
of higher education is too great. The
Board, however, notes that comment
57(c)–6, as discussed below, provides
guidance for procedures such creditors
can put in place to mitigate the impact
of the rule.
Proposed comment 57(c)–6 requires
creditors to have reasonable procedures
for determining whether an applicant is
a college student. Since the prohibition
in § 226.57(c) applies solely to offering
a tangible item to a college student at
specified locations, a card issuer or
creditor would be permitted to offer any

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person who is not a college student a
tangible item to induce such person to
apply for or open an open-end
consumer credit plan offered by such
card issuer or creditor at such locations.
Proposed comment 57(c)–6 illustrated
one way in which a card issuer or
creditor might meet this standard and
provided that the card issuer or creditor
may rely on the representations made by
the applicant.
The Board did not receive significant
comment on this provision, and the
proposed comment is adopted in final.
As the Board discussed in the October
2009 Regulation Z Proposal, § 226.57(c)
would not prohibit card issuers and
creditors from instituting marketing
programs on or near the campus of an
institution of higher education, or at an
event sponsored by or related to an
institution of higher education, where a
tangible item will be offered to induce
people to apply for or open an open-end
consumer credit plan. However, those
card issuers or creditors that do so must
have reasonable procedures for
determining whether an applicant or
participant is a college student before
giving the applicant or participant the
tangible item.
57(d) Annual Report to the Board
The Board proposed to implement
new TILA Section 127(r)(2) in
§ 226.57(d). Consistent with the statute,
proposed § 226.57(d) required card
issuers that are a party to one or more
college credit card agreements to submit
annual reports to the Board regarding
those agreements. Section 226.57(d) is
adopted with modifications as
discussed below.
Proposed § 226.57(d) 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. The
Board is eliminating the registration
requirement from the final rule because
of technical changes to the Board’s
submission process. Proposed
§ 226.57(d)(1) therefore is not included
in the final rule. The Board will capture
the identifying information that would
have been captured from each issuer
during the registration process (e.g., the
issuer’s name, address, and identifying
number (such as an RSSD ID number or
tax identification number), and the
name, phone number and email address
of a contact person at the issuer) at the
time the issuer submits its annual report
to the Board. Under the final rule, there
is no requirement to register with the
Board prior to submitting an annual
report regarding college credit card
agreements. As proposed, issuers must
submit their initial annual report on

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college credit card agreements,
providing information for the 2009
calendar year, to the Board by February
22, 2010. For each subsequent calendar
year, issuers must submit annual reports
by the first business day on or after
March 31 of the following calendar year.
Proposed § 226.57(d) 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 final rule specifies 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 believes this more precisely
describes the information intended to be
captured under new TILA Section
127(r)(2).
In connection with the proposal, the
Board 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, such as
identifying specific terms that
differentiate between student and nonstudent accounts (for example, that
provide for difference in payments
based on whether an account is a
student or non-student account),
identifying specific terms that relate to
advertising or marketing (such as
provisions on mailing lists, on-line
advertising, or on-campus marketing),
and the terms and conditions of credit
card accounts (for example, rates and
fees) that may be opened in connection
with the college credit card agreement.
One card issuer commenter argued that
such additional information should not
be required, citing the additional burden
on issuers. Some consumer group
commenters urged the Board to collect
additional information including the
items identified by the Board in the
proposal as well as other information
such as the differences in comparative
rates of default and average outstanding
balances between student and nonstudent accounts. The Board believes

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that requiring issuers to track, assemble,
and submit this information would
impose significant costs and
administrative burdens on issuers, and
the Board does not believe that
requiring issuers to submit additional
information is necessary to achieve the
purposes of new TILA Section 127(r)(2).
Thus, no additional information
requirements are adopted in the final
rule.
As proposed, § 226.57(d) requires that
each annual report include a copy of
any memorandum of understanding that
‘‘directly or indirectly relates to the
college credit card agreement or that
controls or directs any obligations or
distribution of benefits between any
such entities.’’ Proposed comment
57(d)(3)–1 clarified what types of
documents would be considered
memoranda of understanding for
purposes of this requirement, by
providing that a memorandum of
understanding includes any document
that amends the college credit card
agreement, or that constitutes a further
agreement between the parties as to the
interpretation or administration of the
agreement, and by providing of
examples of documents that would or
would not be included. The Board
received no comments regarding what
types of documents should be
considered memoranda of
understanding, and comment 57(d)(3)–
1, redesignated as comment 57(d)(2)–1,
is adopted as proposed.
Additional details regarding the
submission process are provided in the
Consumer and College Credit Card
Agreement Submission Technical
Specifications Document, which is
published as Attachment I to this
Federal Register notice and which will
be available on the Board’s public Web
site.
Section 226.58 Internet Posting of
Credit Card Agreements
Section 204 of the Credit Card Act
adds new TILA Section 122(d) to
require creditors to post agreements for
open-end consumer credit card plans on
the creditors’ Web sites and to submit
those agreements to the Board for
posting on a publicly-available Web site
established and maintained by the
Board. 15 U.S.C. 1632(d). The Board
proposed to implement these provisions
in proposed § 226.58 with additional
guidance included in proposed
Appendix N. As discussed below,
proposed § 226.58 is adopted with
modifications. Proposed Appendix N
has been eliminated from the final rule,
but the provisions of proposed
Appendix N, with certain modifications,
have been incorporated into § 226.58.

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The final 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.
However, under the final rule, as
proposed, issuers are not required to
post on their publicly available Web
sites, or to submit to the Board, credit
card agreements that are no longer
offered to the public, even if the issuer
still has credit card accounts open
under such agreements.
In addition, the final rule requires that
issuers post on their Web sites, or
otherwise make available upon request
by the cardholder, all of their
agreements for open credit card
accounts, whether or not such
agreements are currently offered to the
public. Thus, any cardholder will be
able to access a copy of his or her own
credit card agreement. Agreements
posted (or otherwise made available)
under this provision in the final rule
may contain personally identifiable
information relating to the cardholder,
provided that the issuer takes
appropriate measures to make the
agreement accessible only to the
cardholder or other authorized persons.
In contrast, the agreements that are
currently offered to the public and that
must be posted on the issuer’s Web site
(and submitted to the Board) may not
contain personally identifiable
information.
The final rule also contains, as
proposed, a de minimis exception from
the requirement to post on issuers’
publicly available Web sites, and submit
to the Board for posting on the Board’s
public Web site, agreements currently
offered to the public. The de minimis
exception applies to issuers with fewer
than 10,000 open credit card accounts.
The final rule also contains exceptions
for private label plans offered on behalf
of a single merchant or a group of
affiliated merchants and for plans that
are offered in order to test a new credit
card product, provided that in each case
the plan involves no more than 10,000
credit card accounts. However, none of
these exceptions applies to the
requirement that issuers make available
by some means upon request all of their
credit card agreements for their open
credit card accounts, whether or not
currently offered to the public.
58(a) Applicability
The Board proposed to make § 226.58
applicable to any card issuer that issues
credit cards under a credit card account
under an open-end (not home-secured)
consumer credit plan, as defined in

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proposed § 226.2(a)(15). The Board
received no comments on proposed
§ 226.58(a) and therefore is adopting
this section as proposed. Thus,
consistent with the approach the Board
is implementing with respect to other
sections of the Credit Card Act, homeequity lines of credit accessible by
credit cards and overdraft lines of credit
accessed by debit cards are not covered
by § 226.58.
58(b) Definitions
58(b)(1) Agreement
Proposed § 226.58(b)(1) defined
‘‘agreement’’ or ‘‘credit card agreement’’
as a written document or documents
evidencing the terms of the legal
obligation or the prospective legal
obligation between a card issuer and a
consumer for a credit card account
under an open-end (not home-secured)
consumer credit plan. Proposed
§ 226.58(b)(1) further provided that an
agreement includes the information
listed under the defined term ‘‘pricing
information.’’
Commenters generally were
supportive of the Board’s proposed
definition of agreement, and the Board
is adopting § 226.58(b)(1) as proposed.
One card issuer commenter stated that
creditors should not be required to
provide pricing information as part of
agreements submitted to the Board. The
Board disagrees. The Board continues to
believe that, to enable consumers to
shop for credit cards and compare
information about various credit card
plans in an effective manner, it is
necessary that the credit card
agreements posted on the Board’s Web
site include rates, fees, and other pricing
information.
The Board proposed two comments
clarifying the definition of agreement
under § 226.58(b)(1). Proposed comment
58(b)(1)–1 clarified that an agreement is
deemed to include the information
listed under the defined term ‘‘pricing
information,’’ even if the issuer does not
otherwise include this information in
the document evidencing the terms of
the obligation. Comment 58(b)(1)–1 is
adopted as proposed.
Proposed comment 58(b)(1)–2
clarified that an agreement would not
include documents sent to the consumer
along with the credit card or credit card
agreement such as a cover letter, a
validation sticker on the card, other
information about card security, offers
for credit insurance or other optional
products, advertisements, and
disclosures required under federal or
state law. The Board received no
comments on proposed comment
58(b)(1)–2. For organizational reasons,

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proposed comment 58(b)(1)–2 has been
eliminated and the guidance contained
in proposed comment 58(b)(1)–2 has
been moved to § 228.58(c)(8), discussed
below.
The final rule adds new comment
58(b)(1)–2, which clarifies that an
agreement may consist of multiple
documents that, taken together, define
the legal obligation between the issuer
and the consumer. As an example,
comment 58(b)(1)–2 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. The definition
of agreement under § 226.58(b)(1)
indicates that an agreement may consist
of a ‘‘document or documents’’
(emphasis added). However, several
commenters indicated that it would be
helpful for the Board to emphasize this
point, and the Board agrees that further
clarity may assist issuers in complying
with § 226.58.
58(b)(2) Amends
In connection with the proposed rule,
the Board solicited comment on
whether issuers should be required to
resubmit agreements to the Board
following minor, technical changes.
Commenters overwhelmingly indicated
that the Board should only require
resubmission of agreements following
substantive changes. Commenters
including both large and small card
issuers noted that issuers frequently
make non-substantive changes without
simultaneously making substantive
changes and that requiring resubmission
following technical changes would
impose a significant burden on issuers
while providing little or no benefit to
consumers. The Board agrees that
requiring resubmission of agreements
following minor, technical changes
would impose a significant
administrative burden with no
corresponding benefit of increased
transparency.
The final rule therefore includes a
new definition of ‘‘amends’’ as
§ 226.58(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. Any change in the pricing
information, as defined in
§ 226.58(b)(6), is deemed to be a
substantive change, and therefore an
amendment. Under § 226.58(c),
discussed below, an issuer is only
required to resubmit an agreement to the

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Board following a change to the
agreement if that change constitutes an
amendment as defined in § 226.58(b)(2).
To provide additional clarity
regarding what types of changes would
be considered amendments, the final
rule includes 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: (i)
Addition or deletion of a provision
giving the issuer or consumer a right
under the agreement, such as a clause
that allows an issuer to unilaterally
change the terms of an agreement; (ii)
addition or deletion of a provision
giving the issuer or consumer an
obligation under the agreement, such as
a clause requiring the consumer to pay
an additional fee; (iii) changes that may
affect the cost of credit to the consumer,
such as changes in a clause describing
how the minimum payment will be
calculated; (iv) changes that may affect
how the terms of the agreement are
construed or applied, such as changes in
a choice-of-law provision; and (v)
changes that may affect the parties to
whom the agreement may apply, such as
changes in a provision regarding
authorized users or assignment of the
agreement.
Comment 58(b)(2)–2 gives examples
of changes that generally would not be
considered substantive, such as: (i)
Correction of typographical errors that
do not affect the meaning of any terms
of the agreement; (ii) changes to the
issuer’s corporate name, logo, or tagline;
(iii) changes to the format of the
agreement, such as conversion to a
booklet from a full-sheet format,
changes in font, or changes in margins;
(iv) changes to the name of the credit
card to which the program applies; (v)
reordering sections of the agreement
without affecting the meaning of any
terms of the agreement; (vi) adding,
removing, or modifying a table of
contents or index; and (vii) changes to
titles, headings, section numbers, or
captions.
58(b)(3) Business Day
As proposed, § 226.58(b)(3) of the
final rule, corresponding to proposed
§ 226.58(b)(2), defines ‘‘business day’’ as
a day on which the creditor’s offices are
open to the public for carrying on
substantially all of its business
functions. This is consistent with the
definition of business day used in most
other sections of Regulation Z. The
Board received no comments regarding
proposed § 226.58(b)(2).

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58(b)(4) Offers
The proposed rule provided that an
issuer ‘‘offers’’ or ‘‘offers to the public’’
an agreement if the issuer is soliciting
or accepting applications for new
accounts that would be subject to that
agreement. The Board received no
comments regarding the definition of
offers, and the § 226.58(b)(4) definition,
corresponding to proposed
§ 226.58(b)(3), is adopted as proposed.
Several credit union commenters
argued that credit cards issued by credit
unions are not offered to the public
under this definition because such cards
are available only to credit union
members. These commenters concluded
that credit unions therefore should not
be required to submit agreements to the
Board for posting on the Board’s Web
site. The Board disagrees. The Board
understands that, of the one hundred
largest Visa and MasterCard credit card
issuers in the United States, several
dozen are credit unions, including some
with hundreds of thousands of open
credit card accounts and at least one
with over one million open credit card
accounts. In addition, credit union
membership criteria have relaxed in
recent years, in some cases significantly.
Credit cards issued by credit unions are
a significant source of open-end
consumer credit, and exempting credit
unions from submitting agreements to
the Board would significantly lessen the
usefulness of the Board’s Web site as a
comparison shopping tool for
consumers. The final rule therefore
includes new language in comment
58(b)(4)–1, corresponding to proposed
comment 58(b)(3)–1, clarifying that
agreements for credit cards issued by
credit unions are considered to be
offered to the public even though they
are available only to credit union
members.
The two proposed comments to the
definition of offers are otherwise
adopted as proposed. Comment
58(b)(4)–1, corresponding to proposed
comment 58(b)(3)–1, clarifies that a card
issuer is deemed to offer a credit card
agreement to the public even if the
issuer solicits, or accepts applications
from, only a limited group of persons.
For example, an issuer may market
affinity cards to students and alumni of
a particular educational institution or
solicit only high-net-worth individuals
for a particular card, but the
corresponding agreements would be
considered to be offered to the public.
Comment 58(b)(4)–2, corresponding to
proposed comment 58(b)(3)–2, clarifies
that a card issuer is deemed to offer a
credit card agreement to the public even
if the terms of the agreement are

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changed immediately upon opening of
an account to terms not offered to the
public.
58(b)(5) Open Account
The proposed rule provided guidance
in proposed comment 58(e)–2 regarding
the definition of open accounts for
purposes of the de minimis exception.
Proposed comment 58(e)–2 stated that,
for purposes of the de minimis
exception, a credit card account is
considered to be open even if the
account is inactive, as long as the
account has not been closed by the
cardholder or the card issuer and the
cardholder can obtain extensions of
credit on the account. In addition, if an
account has only temporarily been
suspended (for example, due to a report
of unauthorized use), the account is
considered open. However, if an
account has been 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, the account need
not be considered open.
The final rule eliminates this
comment and adds a new definition of
‘‘open account’’ as § 226.58(b)(5). Under
§ 226.58(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
that has been 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 term open
account is used in the de minimis,
private label, and product testing
exceptions under § 226.58(c) and in
§ 226.58(e), regarding availability of
agreements to existing cardholders.
These sections are discussed below.
The final rule also includes new
comment 58(b)(5)–1. This comment
clarifies that, under the § 226.58(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.
Similarly, the comment clarifies that an
account is considered open if an
account has been 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.
The definition of open account
included in the final rule differs from
the guidance provided in proposed

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comment 58(e)–2. In particular,
accounts closed to new activity are
considered open accounts under
§ 226.58(b)(5), but were not considered
open accounts under the proposed
comment. The Board is aware that,
under the new definition of open
accounts, some issuers that may have
qualified for the de minimis exception
under the proposed rule will not qualify
for the exception under the final rule.
The Board believes that the approach to
accounts closed for new activity under
the final rule more accurately reflects
the size of an issuer’s portfolio. This
approach also is more consistent with
the treatment of such accounts under
other sections of Regulation Z.
In addition, the proposed comment
applied only to the de minimis
exception and did not provide guidance
on the meaning of open accounts for
other purposes, including for purposes
of determining availability of
agreements to existing cardholders.
Because the definition of open account
applies to all subsections of § 226.58,
the addition of the defined term clarifies
that issuers must provide a cardholder
with a copy of his or her particular
credit card agreement under § 226.58(e)
even if his or her account has been
closed to new activity.
58(b)(6) Pricing Information
Proposed § 226.58(b)(4) defined the
term ‘‘pricing information’’ to include:
(1) the information under § 226.6(b)(2)(i)
through (b)(2)(xii), (b)(3) and (b)(4) that
is required to be disclosed in writing
pursuant to § 226.5(a)(1)(ii); (2) the
credit limit; and (3) the method used to
calculate required minimum payments.
The Board received a number of
comments on the proposed definition of
pricing information, and the definition
is adopted with modifications, as
discussed below, as § 226.58(b)(6).
Section 226.58(b)(6) defines the
pricing information as the information
listed in § 226.6(b)(2)(i) through
(b)(2)(xii) and (b)(4). The definition
specifies that the pricing information
does not include temporary or
promotional rates and terms or rates and
terms that apply only to protected
balances.
Under § 226.58(b)(6), the pricing
information continues to include the
information listed in § 226.6(b)(2)(i)
through (b)(2)(xii), as proposed. The
information listed in § 226.6(b)(3) has
been omitted from the final rule, as
information listed under § 226.6(b)(3)
required to be disclosed in writing
pursuant to § 226.5(a)(1)(ii) is, by
definition, included in § 226.6(b)(2).
The information listed in § 226.6(b)(4) is
included as proposed.

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The credit limit is not included in the
definition of pricing information under
the final rule. Many card issuer
commenters stated that the Board
should not include the credit limit as an
element of the pricing information.
These commenters argued 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 noted that existing cardholders are
notified of their individual credit limit
on their periodic statements. These
commenters also noted that credit limits
are individually tailored and change
frequently. They argued that including
the credit limit as part of the pricing
information therefore would require
issuers to update and resubmit
agreements frequently, imposing a
significant burden on card issuers. The
Board agrees with these commenters.
The method used to calculate
minimum payments also is not included
in the definition of pricing information
under the final rule. Methods used to
calculate minimum payments are often
complex and may be difficult to explain
in a form that is readily understandable
but still accurate. Upon further
consideration, the Board believes that
including this information in the pricing
information likely would cause
confusion among consumers and is
unlikely to assist consumers in
shopping for a credit card.
The § 226.58(b)(6) definition of
pricing information also excludes
temporary or promotional rates and
terms or rates and terms that apply only
to protected balances. Several card
issuer commenters noted that
promotional terms change frequently
and therefore become outdated quickly.
They also noted that these terms may be
offered only to targeted groups of
consumers. Including such terms as part
of the pricing information likely would
lead to confusion, as consumers often
would be misled into believing they
could apply for a particular set of terms
when in fact they could not. The Board
agrees that including these terms likely
would lead to substantial consumer
confusion about the terms available
from a particular issuer. Similarly,
including rates and terms that apply
only to protected balances likely would
mislead consumers about the terms that
would apply to an account generally.
Consumer groups commented that the
Board should require issuers to disclose
as part of the pricing information how
the credit limit is set and under what
circumstances it may be reduced and
how issuers allocate the minimum
payment. The Board does not believe
that this information would assist

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consumers in shopping for a credit card.
The Board has conducted extensive
consumer testing to develop account
opening disclosures that are meaningful
and understandable to consumers. The
Board believes that these disclosures are
an appropriate basis for the pricing
information to be submitted to the
Board and provided to cardholders
under § 226.58. This additional
information therefore is not included in
the definition of pricing information
under the final rule.
Other commenters suggested that the
Board should use the disclosure
requirements for credit and charge card
applications and solicitations under
§ 226.5a, rather than the accountopening disclosures under § 226.6, as
the basis for the pricing information
definition. The Board continues to
believe that the account-opening
disclosures under § 226.6 are a more
appropriate basis for the pricing
information to be submitted to the
Board and provided to cardholders
under § 226.58. For example, the Board
believes that the more robust disclosure
regarding rates required by § 226.6(b)(4)
would be of substantial assistance to
consumers in comparing credit cards
among different issuers. As proposed,
the final rule continues to use § 226.6 as
the basis for the definition of pricing
information.
As proposed, the definition of pricing
information makes reference to the
provisions of § 226.6 as revised by the
January 2009 Regulation Z Rule. As
discussed elsewhere in this
supplementary information, the Board
has decided to retain the July 1, 2010,
mandatory compliance date for revised
§ 226.6, while the effective date of
§ 226.58 is February 22, 2010. The
definition of pricing information for
purposes of § 226.58 conforms to the
requirements of revised § 226.6(b)(2)(i)
through (b)(2)(xii) and (b)(4) beginning
on February 22, 2010, even though
compliance with portions of revised
§ 226.6(b) is not mandatory until July 1,
2010.
58(b)(7) Private Label Credit Card
Account and Private Label Credit Card
Plan
In connection with the proposed rule,
the Board solicited comment on
whether the Board should create an
exception applicable to small credit
card plans offered by an issuer of any
size. The Board is adopting in
§ 226.58(c)(6) an exception for small
private label credit card plans,
discussed below. The final rule includes
as § 226.58(b)(7) definitions for two new
defined terms, ‘‘private label credit card
account’’ and ‘‘private label credit card

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plan,’’ used in connection with that
exception.
Section 226.58(b)(7) defines a private
label credit card account as a credit card
account under an open-end (not homesecured) 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.
The final rule includes additional
guidance regarding these definitions in
four comments. Comment 58(b)(7)–1
clarifies 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.
Comment 58(b)(7)–2 clarifies that
accounts with so-called co-branded
credit cards are not considered private
label credit card accounts. Credit cards
that display the name, mark, or logo of
a merchant or affiliated group of
merchants as well as the mark, logo, or
brand of payment network are generally
referred to as co-branded cards. While
these credit cards may display the brand
of the merchant or affiliated group of
merchants as the dominant brand on the
card, such credit cards are usable at any
merchant that participates in the
payment network. Because these credit
cards can be used at multiple
unaffiliated merchants, they are not
considered private label credit cards
under § 226.58(b)(7).
Comment 58(b)(7)–3 clarifies 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. For
example, several local clothing retailers
jointly agree to issue credit cards called
the ‘‘Main Street Fashion Card’’ that can
be used to make purchases only at those
retailers. For purposes of this section,
these retailers would be considered an
affiliated group of merchants.

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Comment 58(b)(7)–4 provides
examples of which credit card accounts
constitute a private label credit card
plan under § 226.58(b)(7). As comment
58(b)(7)–4 indicates, which credit card
accounts issued by a particular issuer
constitute a private label credit card
plan is 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. Comment
58(b)(7)–4 provides the following
example: an issuer has 3,000 open
private label credit card accounts with
credit cards usable only at Merchant A
and 5,000 open private label credit card
accounts with credit cards usable only
at Merchant B and its affiliates. The
issuer has two separate private label
credit card plans, as defined by
§ 226.58(b)(7)—one plan consisting of
3,000 open accounts with credit cards
usable only at Merchant A and another
plan consisting of 5,000 open accounts
with credit cards usable only at
Merchant B and its affiliates.
Comment 58(b)(7)–4 notes that the
example above remains the same
regardless of whether (or the extent to
which) the terms applicable to the
individual open accounts differ. For
example, assume that, with respect to
the issuer’s 3,000 open accounts with
credit cards usable only at Merchant A
in the example above, 1,000 of the open
accounts have a purchase APR of 12
percent, 1,000 of the open accounts
have a purchase APR of 15 percent, and
1,000 of the open accounts have a
purchase APR of 18 percent. All of the
5,000 open accounts with credit cards
usable only at Merchant B and Merchant
B’s affiliates have the same 15 percent
purchase APR. The issuer still has only
two separate private label credit card
plans, as defined by § 226.58(b)(7). The
open accounts with credit cards usable
only at Merchant A do not constitute
three separate private label credit card
plans under § 226.58(b)(7), even though
the accounts are subject to different
terms.
Proposed 58(c) Registration With Board
Proposed § 226.58(c) required any
card issuer that offered one or more
credit card agreements as of December
31, 2009 to register with the Board, in
the form and manner prescribed by the
Board, no later than February 1, 2010.
The proposed rule required issuers that
had not previously registered with the
Board (such as new issuers formed after

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December 31, 2009) to register before
the deadline for their first quarterly
submission.
Proposed § 226.58(c) is not included
in the final rule. The Board is
eliminating the registration requirement
from the final rule because of technical
changes to the Board’s submission
process. The Board instead plans to
capture the identifying information
about each issuer that would have been
captured during the registration process
(e.g., the issuer’s name, address, and
identifying number (such as an RSSD ID
number or tax identification number),
and the name, phone number and e-mail
address of a contact person at the issuer)
at the time of each issuer’s first
submission of agreements to the Board.
Under the final rule, there is no
requirement to register with the Board
prior to submitting credit card
agreements.
58(c) Submission of Agreements to
Board
Proposed § 226.58(d) required that
each card issuer electronically submit to
the Board on a quarterly basis the credit
card agreements that the issuer offers to
the public. Commenters did not oppose
the general requirements of proposed
§ 226.58(d), and the Board is adopting
the proposed provision, redesignated as
§ 226.58(c), with certain modifications,
as discussed below. Consistent with
new TILA Section 122(d)(3), the Board
will post the credit card agreements it
receives on its Web site.
The Board proposed to use its
exemptive authority under Sections
105(a) and 122(d)(5) of TILA to require
issuers to submit to the Board only
agreements currently offered to the
public. Commenters generally were
supportive of this proposed use of the
Board’s exemptive authority, and the
Board received no comments indicating
that issuers should be required to
submit agreements not offered to the
public. The Board continues to believe
that, with respect to credit card
agreements that are not currently offered
to the public, the administrative burden
on issuers of preparing and submitting
agreements for posting on the Board’s
Web site would outweigh the benefit of
increased transparency for consumers.
The Board also continues to believe that
providing an exception for agreements
not currently offered to the public is
appropriate both to effectuate the
purposes of TILA and to facilitate
compliance with TILA.
As stated in the proposal, the Board
is aware that the number of credit card
agreements currently in effect but no
longer offered to the public is extremely
large, and the Board believes that

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requiring issuers to prepare and submit
these agreements would impose a
significant burden on issuers. The Board
also believes that the primary benefit of
making credit card agreements available
on the Board’s Web site is to assist
consumers in comparing credit card
agreements offered by various issuers
when shopping for a new credit card.
Including agreements that are no longer
offered to the public would not facilitate
comparison shopping by consumers
because consumers could not apply for
cards subject to these agreements. In
addition, including agreements no
longer offered to the public would
significantly increase the number of
agreements included on the Board’s
Web site, possibly to include hundreds
of thousands of agreements (or more).
This volume of data would render the
amount of data provided through the
Web site too large to be helpful to most
consumers. Thus, as proposed,
§ 226.58(c) requires issuers to submit to
the Board only those agreements the
issuer currently offers to the public.
58(c)(1) Quarterly Submissions
Proposed § 226.58(d)(1) required
issuers to send quarterly submissions to
the Board no later than the first business
day on or after January 31, April 30, July
31, and October 31 of each year. The
proposed rule required issuers to
submit: (i) The credit card agreements
that the issuer offered to the public as
of the last business day of the preceding
calendar quarter that the issuer has not
previously submitted to the Board; (ii)
any credit card agreement previously
submitted to the Board that was
modified or amended during the
preceding calendar quarter; and (iii)
notification regarding any credit card
agreement previously submitted to the
Board that the issuer is withdrawing.
Proposed comment § 226.58(d)–1
provided an example of the submission
requirements as applied to a
hypothetical issuer. Proposed comment
58(d)–2 clarified that an issuer is not
required to make any submission to the
Board if, during the previous calendar
quarter, the issuer did not take any of
the following actions: (1) Offering a new
credit card agreement that was not
submitted to the Board previously; (2)
revising or amending an agreement
previously submitted to the Board; and
(3) ceasing to offer an agreement
previously submitted to the Board.
Commenters did not oppose the
Board’s approach to submission of
agreements as described in proposed
§ 226.58(d)(1). The Board therefore is
adopting proposed § 226.58(d)(1) and
proposed comments 58(d)–1 and 58(d)–
2, redesignated in the final rule as

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§ 226.58(c)(1) and comments 58(c)(1)–1
and 58(c)(1)–2, with certain
modifications.
As discussed above, the Board is
eliminating from the final rule the
requirement that issuers register with
the Board before submitting agreements
to the Board. Section 226.58(c)(1)
therefore 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).
In addition, Sections 226.58(c)(1) and
comments 58(c)(1)–1 and (c)(1)–2
reflect, through use of the defined term
‘‘amend,’’ that issuers are required to
resubmit agreements only following
substantive changes. As discussed
above, commenters overwhelmingly
indicated that the Board should only
require resubmission of agreements
following substantive changes. The
Board agrees that requiring
resubmission of agreements following
minor, technical changes would impose
a significant administrative burden with
no corresponding benefit of
transparency. This is reflected in the
final rule by requiring that issuers
resubmit agreements under
§ 226.58(c)(1) only when an agreement
has been amended as defined in
§ 226.58(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. The Board agrees.
The final rule therefore includes new
comment 58(c)(1)–3, which clarifies that
§ 226.58(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. The comment gives the
following example: An issuer offers
agreements A, B and C to the public as
of March 31. The issuer submits each of
these agreements to the Board by April
30 as required by § 226.58(c)(1). On May
15, the issuer amends agreement A, but
does not make any changes to
agreements B or C. As of June 30, the
issuer continues to offer amended
agreement A and agreements B and C to
the public. At the next quarterly
submission deadline, July 31, the issuer

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must submit the entire amended
agreement A and is not required to make
any submission with respect to
agreements B and C. The issuer may
either: (i) Submit the entire amended
agreement A and make no submission
with respect to agreements B and C; or
(ii) submit the entire amended
agreement A and also resubmit
agreements B and C. The comment also
states that an issuer may choose to
resubmit to the Board all of the
agreements it offered to the public as of
a particular quarterly submission
deadline even if the issuer has not
introduced any new agreements or
amended any agreements since its last
submission and continues to offer all
previously submitted agreements.
Additional details regarding the
submission process are provided in the
Consumer and College Credit Card
Agreement Submission Technical
Specifications Document, which is
published as Attachment I to this
Federal Register notice and which will
be available on the Board’s public Web
site.
58(c)(2) Timing of First Two
Submissions
Proposed § 226.58(d)(2), redesignated
as § 226.58(c)(2), is adopted as
proposed. Section 3 of the Credit Card
Act provides that new TILA Section
122(d) becomes effective on February
22, 2010, nine months after the date of
enactment of the Credit Card Act. Thus,
consistent with Section 3 of the Credit
Card Act and as proposed, the final rule
requires issuers to send their initial
submissions, containing credit card
agreements offered to the public as of
December 31, 2009, to the Board no later
than February 22, 2010. The next
submission must be sent to the Board no
later than August 2, 2010 (the first
business day on or after July 31, 2010),
and must contain: (1) Any credit card
agreement that the card issuer offered to
the public as of June 30, 2010, that the
card issuer has not previously submitted
to the Board; (2) any credit card
agreement previously submitted to the
Board that was modified or amended
after December 31, 2009, and on or
before June 30, 2010, as described in
§ 226.58(c)(3); and (3) notification
regarding any credit card agreement
previously submitted to the Board that
the issuer is withdrawing as of June 30,
2010, as described in § 226.58(c)(4) and
(5).
For example, as of December 31, 2009,
a card issuer offers three agreements.
The issuer is required to submit these
agreements to the Board no later than
February 22, 2010. On March 10, 2010,
the issuer begins offering a new

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agreement. In general, an issuer that
begins offering a new agreement on
March 10 of a given year would be
required to submit that agreement to the
Board no later than April 30 of that year.
However, under § 226.58(c)(2), no
submission to the Board is due on April
30, 2010, and the issuer instead must
submit the new agreement no later than
August 2, 2010.
Several card issuer commenters
suggested that issuers’ initial
submission should be due on a date
later than February 22, 2010. The Board
is aware that many issuers are likely to
make changes to their agreements
related to other provisions of the Credit
Card Act before the February 22, 2010,
effective date and that agreements as of
December 31, 2009, therefore will be
somewhat outdated by the time they are
sent to the Board on February 22, 2010.
The Board believes, however, that it is
important to provide consumers with
access to issuer’s credit card agreements
promptly following the statutory
effective date.
58(c)(3) Amended Agreements
Proposed § 226.58(d)(3) required that,
if an issuer makes changes to an
agreement previously submitted to the
Board, the issuer must submit the entire
revised agreement to the Board by the
first quarterly submission deadline after
the last day of the calendar quarter in
which the change became effective. The
proposed rule also specified that, if a
credit card agreement has been
submitted to the Board, no changes have
been made to the agreement, and the
card issuer continues to offer the
agreement to the public, no additional
submission with respect to that
agreement is required. Two proposed
comments, proposed comments 58(d)–3
and 58(d)–4, provided examples of
situations in which resubmission would
not and would be required, respectively.
Proposed comment 58(d)–5 clarified
that an issuer could not fulfill the
requirement to submit the entire revised
agreement to the Board by submitting a
change-in-terms or similar notice
covering only the changed terms and
that revisions could not be submitted as
separate riders.
The proposed rule required credit
card issuers to resubmit agreements
following any change, regardless of
whether that change affects the
substance of the agreement. As
discussed above, the Board solicited
comment on whether issuers should be
required to resubmit agreements to the
Board following minor, technical
changes. Commenters overwhelmingly
indicated that the Board should only

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require resubmission of agreements
following substantive changes.
The Board agrees with these
commenters that requiring resubmission
of agreements following minor,
technical changes would impose a
significant administrative burden with
no corresponding benefit of increased
transparency to consumers. The final
rule therefore includes a new definition
of ‘‘amends’’ in § 226.58(b)(2), as
discussed above. Under the final rule,
an issuer is only required to resubmit an
agreement to the Board following a
change to the agreement if that change
constitutes an amendment as defined in
§ 226.58(b)(2). The definition in
§ 226.58(b)(2) 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. The
definition specifies that any change in
the pricing information is deemed to be
a substantive change and therefore an
amendment. Section 226.58(c)(3) and
comments 58(c)(3)–1, 58(c)(3)–2, and
58(c)(3)–3 (corresponding to proposed
§ 226.58(d)(3) and proposed comments
58(d)–3, 58(d)–4, and 58(d)–5) have
been revised to incorporate the defined
term ‘‘amend’’ but otherwise are adopted
as proposed with several technical
changes.
Under § 226.58(c)(3), corresponding to
proposed § 226.58(d)(3), if a credit card
agreement has been submitted to the
Board, the agreement has not been
amended as defined in § 226.58(b)(2)
and the card issuer continues to offer
the agreement to the public, no
additional submission regarding that
agreement is required. For example, as
described in comment 58(c)(3)–1,
corresponding to proposed comment
58(d)–3, a credit card issuer begins
offering an agreement in October and
submits the agreement to the Board the
following January 31, as required by
§ 226.58(c)(1). As of March 31, the
issuer has not amended the agreement
and is still offering the agreement to the
public. The issuer is not required to
submit anything to the Board regarding
that agreement by April 30.
If a credit card agreement that
previously has been submitted to the
Board is amended, as defined in
§ 226.58(b)(2), the final rule provides
that the card issuer must submit the
entire amended agreement to the Board
by the first quarterly submission
deadline after the last day of the
calendar quarter in which the change
became effective. Comment 58(c)(3)–2,
corresponding to proposed comment
58(d)–4, gives the following example: an
issuer submits an agreement to the

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Board on October 31. On November 15,
the issuer changes the balance
computation method used under the
agreement. Because an element of the
pricing information has changed, the
agreement has been amended and the
issuer must submit the entire amended
agreement to the Board no later than
January 31.
Comment 58(c)(3)–3, corresponding to
proposed comment 58(d)–5, explains
that an issuer may not fulfill the
requirement to submit the entire
amended agreement to the Board by
submitting a change-in-terms or similar
notice covering only the terms that have
changed. In addition, the comment
emphasizes that, as required by
§ 226.58(c)(8)(iv), amendments must be
integrated into the text of the agreement
(or the addenda described in
§ 226.58(c)(8)), not provided as separate
riders. For example, an issuer changes
the purchase APR associated with an
agreement the issuer has previously
submitted to the Board. The purchase
APR for that agreement was included in
the addendum of pricing information, as
required by § 226.58(c)(8). The issuer
may not submit a change-in-terms or
similar notice reflecting the change in
APR, either alone or accompanied by
the original text of the agreement and
original pricing information addendum.
Instead, the issuer must revise the
pricing information addendum to reflect
the change in APR and submit to the
Board the entire text of the agreement
and the entire revised addendum, even
though no changes have been made to
the provisions of the agreement and
only one item on the pricing
information addendum has changed.

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58(c)(4) Withdrawal of Agreements
Proposed § 226.58(d)(4), redesignated
as § 226.58(c)(4), and proposed
comment 58(d)–6, redesignated as
comment 58(c)(4)–1, are adopted as
proposed with one technical change.
The Board received no comments
regarding this section and the
accompanying commentary. As
proposed, § 226.58(c)(4) requires an
issuer to notify the Board if the issuer
ceases to offer any agreement previously
submitted to the Board by the first
quarterly submission deadline after the
last day of the calendar quarter in which
the issuer ceased to offer the agreement.
For example, as described in comment
58(c)(4)–1, on January 5 an issuer stops
offering to the public an agreement it
previously submitted to the Board. The
issuer must notify the Board that the
agreement is being withdrawn by April
30, the first quarterly submission
deadline after March 31, the last day of

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the calendar quarter in which the issuer
stopped offering the agreement.
58(c)(5) De Minimis Exception
Proposed § 226.58(e) provided 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 openend (not home-secured) consumer credit
plans. Commenters generally were
supportive of this provision, and
proposed § 226.58(e) is incorporated
into the final rule as § 226.58(c)(5) with
certain modifications as discussed
below.
The proposal noted that TILA Section
122(d)(5) provides that the Board may
establish exceptions to the requirements
that credit card agreements be posted on
creditors’ Web sites and submitted to
the Board for posting on the Board’s
Web site in any case where the
administrative burden outweighs the
benefit of increased transparency, such
as where a credit card plan has a de
minimis number of consumer account
holders. The Board expressed its belief
that a de minimis exception should be
created, but noted that it might not be
feasible to base such an exception on
the number of accounts under a credit
card plan. In particular, the Board stated
that it was unaware of a way to define
‘‘credit card plan’’ that would not divide
issuers’ portfolios into such small units
that large numbers of credit card
agreements could fall under the de
minimis exception. The Board therefore
proposed a de minimis exception for
issuers with fewer than 10,000 open
credit card accounts. Under the
proposed exception, such issuers were
not required to submit any credit card
agreements to the Board.
As described below, the Board is
adopting as part of the final rule two
exceptions based on the number of
accounts under a credit card plan—the
private label credit card exception and
the product testing exception. The
Board continues to believe, however,
that the administrative burden on small
issuers of preparing and submitting
agreements would outweigh the benefit
of increased transparency from
including those agreements on the
Board’s Web site. The final rule
therefore includes the proposed
§ 226.58(e) de minimis exception for
issuers with fewer than 10,000 open
accounts substantially as proposed,
redesignated as § 226.58(c)(5).
In connection with the proposed rule,
the Board solicited comment on the
10,000 open account threshold for the
de minimis exception. Several
commenters supported the 10,000
account threshold. Several other

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7765

commenters stated that the threshold
should be raised to 25,000 open
accounts. The Board continues to
believe that 10,000 open accounts is an
appropriate threshold for the de
minimis exception, and that threshold is
retained in the final rule. One
commenter stated that accounts with
terms and conditions that are no longer
offered to the public should not be
counted toward the 10,000 account
threshold. The Board believes that this
exception is unworkable and could
bring large numbers of issuers within
the de minimis exception. The final rule
therefore does not incorporate this
approach.
Proposed § 226.58(e)(1) has been
modified to incorporate the defined
term ‘‘open account,’’ discussed above,
and redesignated as § 226.58(c)(5)(i), but
otherwise is adopted as proposed.
Under § 226.58(c)(5)(i), a card issuer is
not required to submit any credit card
agreements to the Board if the card
issuer has fewer than 10,000 open credit
card accounts as of the last business day
of the calendar quarter.
The final rule includes new comment
58(c)(5)–1, which clarifies the
relationship between the de minimis
exception and the private label credit
card and product testing exceptions. As
comment 58(c)(5)–1 explains, the de
minimis exception is distinct from the
private label credit card exception
under § 226.58(c)(6) and the product
testing exception under § 226.58(c)(7).
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. In contrast, 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.
Proposed comments 58(e)–1 and
58(e)–3, redesignated as comments
58(c)(5)–2 and 58(c)(5)–3, have been
modified to incorporate the defined
term ‘‘open account,’’ but otherwise are
adopted as proposed. Comment
58(c)(5)–2 gives the following example
of an issuer that qualifies for the de
minimis exception: an issuer offers five
credit card agreements to the public as
of September 30. However, the issuer
has only 2,000 open credit card
accounts as of September 30. The issuer
is not required to submit any
agreements to the Board by October 31

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because the issuer qualifies for the de
minimis exception. Comment 58(c)(5)–3
clarifies that whether an issuer qualifies
for the de minimis exception is
determined as of the last business day
of the calendar quarter and gives the
following example: as of December 31,
an issuer offers three agreements to the
public and has 9,500 open credit card
accounts. As of January 30, the issuer
still offers three agreements, but has
10,100 open accounts. As of March 31,
the issuer still offers three agreements,
but has only 9,700 open accounts. Even
though the issuer had 10,100 open
accounts at one time during the
calendar quarter, the issuer qualifies for
the de minimis exception because the
number of open accounts was less than
10,000 as of March 31. The issuer
therefore is not required to submit any
agreements to the Board under
§ 226.58(c)(1) by April 30.
Proposed comment 58(e)–2 provided
guidance regarding the definition of
open accounts for purposes of the de
minimis exception. As discussed above,
the Board has eliminated proposed
comment 58(e)–2 from the final rule and
added a definition of ‘‘open account’’ as
§ 226.58(b)(5).
Proposed § 226.58(e)(2), redesignated
as § 226.58(c)(5)(ii), is adopted as
proposed. Section 226.58(c)(5)(ii)
specifies that if an issuer that previously
qualified for the de minimis exception
ceases to qualify, the card issuer must
begin making quarterly submissions to
the Board no later than the first
quarterly submission deadline after the
date as of which the issuer ceased to
qualify. Proposed comment 58(e)–4,
redesignated as comment 58(c)(5)–4, has
been modified to incorporate the
defined term ‘‘open account,’’ but
otherwise is adopted as proposed.
Comment 58(c)(5)–4 clarifies that
whether an issuer has ceased to qualify
for the de minimis exception is
determined as of the last business day
of the calendar quarter and provides the
following example: As of June 30, an
issuer offers three agreements to the
public and has 9,500 open credit card
accounts. The issuer is not required to
submit any agreements to the Board
under § 226.58(c)(1) because the issuer
qualifies for the de minimis exception.
As of July 15, the issuer still offers the
same three agreements, but now has
10,000 open accounts. The issuer is not
required to take any action at this time,
because whether an issuer qualifies for
the de minimis exception under
§ 226.58(c)(5) is determined as of the
last business day of the calendar
quarter. As of September 30, the issuer
still offers the same three agreements
and still has 10,000 open accounts.

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Because the issuer had 10,000 open
accounts as of September 30, the issuer
ceased to qualify for the de minimis
exception and must submit the three
agreements it offers to the Board by
October 31, the next quarterly
submission deadline.
Proposed § 226.58(e)(3), redesignated
as § 226.58(c)(5)(iii), has been modified
to reflect the elimination of the
requirement to register with the Board,
as discussed above, but otherwise is
adopted substantively as proposed.
Section 226.58(c)(5)(iii) provides that if
an issuer that did not previously qualify
for the de minimis exception qualifies
for the de minimis exception, the card
issuer must continue to make quarterly
submissions to the Board until the
issuer notifies the Board that the issuer
is withdrawing all agreements it
previously submitted to the Board.
Proposed comment 58(e)–5,
redesignated as comment 58(c)(5)–5, is
similarly modified to reflect the
elimination of the registration
requirement, but otherwise is adopted
substantively as proposed. Comment
58(c)(5)–5 gives the following example
of the option to withdraw agreements
under § 226.58(c)(5)(iii): An issuer has
10,001 open accounts and offers three
agreements to the public as of December
31. The issuer has submitted each of the
three agreements to the Board as
required under § 226.58(c)(1). As of
March 31, the issuer has only 9,999
open accounts. The issuer has two
options. First, the issuer may notify the
Board that the issuer is withdrawing
each of the three agreements it
previously submitted. Once the issuer
has notified the Board, the issuer is no
longer required to make quarterly
submissions to the Board under
§ 226.58(c)(1). Alternatively, the issuer
may choose not to notify the Board that
it is withdrawing its agreements. In this
case, the issuer must continue making
quarterly submissions to the Board as
required by § 226.58(c)(1). The issuer
might choose not to withdraw its
agreements if, for example, the issuer
believes that it likely will cease to
qualify for the de minimis exception
again in the near future.
58(c)(6) Private Label Credit Card
Exception
The final rule includes new section
§ 226.58(c)(6), which provides an
exception to the requirement that credit
card agreements be submitted to the
Board for private label credit card plans
with fewer than 10,000 open accounts.
TILA Section 122(d)(5) provides that the
Board may establish exceptions to the
requirements that credit card
agreements be posted on creditors’ Web

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sites and submitted to the Board for
posting on the Board’s Web site in any
case where the administrative burden
outweighs the benefit of increased
transparency, such as where a credit
card plan has a de minimis number of
consumer account holders. As discussed
above, the final rule includes a de
minimis exception for issuers with
fewer than 10,000 total open credit card
accounts as § 226.58(c)(5). As also
disclosed above, the Board solicited
comment in connection with the
proposed rule regarding whether the
Board should create a de minimis
exception applicable to small credit
card plans offered by an issuer of any
size and, if so, how the Board should
define a credit card plan. Commenters
generally supported creating such an
exception. One card issuer commenter
suggested that the Board create an
exception for credit cards that can only
be used for purchases at a single
merchant or affiliated group of
merchants, commonly referred to as
private label credit cards, regardless of
issuer size.
The Board is adopting such an
exception. The Board believes that the
administrative burden on issuers of
preparing and submitting to the Board
agreements for private label credit card
plans with a de minimis number of
consumer account holders outweighs
the benefit of increased transparency of
including these agreements on the
Board’s Web site. The small size of these
credit card plans suggests that it is
unlikely that most consumers would
regard these products as comparable
alternatives to other credit card
products. In addition, the Board is
aware that the number of small private
label credit card programs is very large.
Including agreements associated with
these plans on the Board’s Web site
would significantly increase the number
of agreements, potentially making the
Web site less useful to consumers as a
comparison shopping tool. Also, the
Board believes that, with respect to
private label credit cards, a credit card
plan can be defined sufficiently
narrowly to avoid dividing issuers’
portfolios into units so small that large
numbers of credit card agreements
would fall under the exception.
Under § 226.58(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.

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Federal Register / Vol. 75, No. 34 / Monday, February 22, 2010 / Rules and Regulations
As discussed above, a private label
credit card plan is defined in
§ 226.58(b)(7) 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. For
example, all of the private label credit
card accounts issued by Issuer A with
credit cards usable only at Merchant B
and Merchant B’s affiliates constitute a
single private label credit card plan
under § 226.58(b)(7).
The exception is limited to
agreements that are ‘‘not offered to the
public other than for accounts under
[one or more private label credit card
plans each of which has fewer than
10,000 open accounts]’’ in order to
ensure that issuers are required to
submit to the Board agreements that are
offered in connection with general
purpose credit card accounts or credit
card accounts under large (i.e., 10,000 or
more open accounts) private label plans,
regardless of whether those agreements
also are used in connection with a small
(i.e., fewer than 10,000 open accounts)
private label credit card plan. The Board
is concerned that, without this
limitation, large numbers of credit card
agreements could fall under the private
label credit card exception.
Section 226.58(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.
Section 226.58(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.
The final rule includes six related
comments. Comment 58(c)(6)–1 gives
the following two examples of how the
exception applies. In the first example,
an issuer offers to the public a credit
card agreement offered solely for private
label credit card accounts with credit
cards that can be used only at Merchant
A. The issuer has 8,000 open accounts
with such credit cards usable only at
Merchant A. The issuer is not required
to submit this agreement to the Board
under § 226.58(c)(1) because the
agreement is offered for accounts under
a private label credit card plan (i.e., the
8,000 private label credit card accounts
with credit cards usable only at
Merchant A), that private label credit
card plan has fewer than 10,000 open

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accounts, and the credit card agreement
is not offered to the public other than
for accounts under that private label
credit card plan.
In the second example, in contrast,
the same issuer also offers to the public
a different credit card agreement that is
offered solely for private label credit
card accounts with credit cards usable
only at Merchant B. The issuer has
12,000 open accounts with such credit
cards usable only at Merchant B. The
private label credit card exception does
not apply. Although this agreement is
offered for a private label credit card
plan (i.e., the 12,000 private label credit
card accounts with credit cards usable
only at Merchant B), and the agreement
is not offered to the public other than
for accounts under that private label
credit card plan, the private label credit
card plan has more than 10,000 open
accounts. (The issuer still is not
required to submit to the Board the
agreement offered in connection with
credit cards usable only at Merchant A,
as each agreement is evaluated
separately under the private label credit
card exception.)
Comment 58(c)(6)–2 clarifies that
whether the private label credit card
exception applies is determined on an
agreement-by-agreement basis.
Therefore, 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, such as agreements
offered for accounts with cards usable at
multiple unaffiliated merchants or
agreements offered for accounts under
private label credit card plans with
10,000 or more open accounts.
Comment 58(c)(6)–3 clarifies the
relationship between the private label
credit card exception and the
§ 226.58(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. For example, an issuer
offers to the public two credit card
agreements. Agreement A is offered
solely for private label credit card
accounts with credit cards usable only
at Merchant A. The issuer has 5,000
open credit card accounts with such
credit cards usable only at Merchant A.
Agreement B is offered solely for credit
card accounts with cards usable at

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7767

multiple unaffiliated merchants that
participate in a major payment network.
The issuer has 40,000 open credit card
accounts with such payment network
cards. The issuer is not required to
submit agreement A to the Board under
§ 226.58(c)(1) because agreement A
qualifies for the private label credit card
exception under § 226.58(c)(6).
Agreement A is offered for accounts
under a private label credit card plan
with fewer than 10,000 open accounts
(i.e., the 5,000 private label credit card
accounts with credit cards usable only
at Merchant A) and is not otherwise
offered to the public. The issuer is
required to submit agreement B to the
Board under § 226.58(c)(1). The issuer
does not qualify for the de minimis
exception under § 226.58(c)(5) because
it has more than 10,000 open accounts,
and agreement B does not qualify for the
private label credit card exception
under § 226.58(c)(6) because it is not
offered solely for accounts under a
private label credit card plan with fewer
than 10,000 open accounts.
Comment 58(c)(6)–4 gives the
following 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. An issuer offers an
agreement for private label credit card
accounts with credit cards usable only
at Merchant A. This private label plan
has 9,000 such open accounts. The same
agreement also is offered for credit card
accounts with credit cards usable at
multiple unaffiliated merchants that
participate in a major payment network.
The agreement does not qualify for the
private label credit card exception. The
agreement is offered for accounts under
a private label credit card plan with
fewer than 10,000 open accounts.
However, the agreement also is offered
to the public for accounts that are not
part of a private label credit card plan,
and therefore does not qualify for the
private label credit card exception.
Comment 58(c)(6)–4 notes that,
similarly, 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. For
example, an issuer offers a single credit
card agreement to the public. The
agreement is offered for two types of
accounts. The first type of account is a
private label credit card account with a
credit card usable only at Merchant A.
The second type of account is a private
label credit card account with a credit

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card usable only at Merchant B. The
issuer has 10,000 such open accounts
with credit cards usable only at
Merchant A and 5,000 such open
accounts with credit cards usable only
at Merchant B. The agreement does not
qualify for the private label credit card
exception. While the agreement is
offered for accounts under a private
label credit card plan with fewer than
10,000 open accounts (i.e., the 5,000
open accounts with credit cards usable
only at Merchant B), the agreement is
also offered for accounts not under such
a plan (i.e., the 10,000 open accounts
with credit cards usable only at
Merchant A).
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.
For example, a card issuer has 15,000
total open private label credit card
accounts. Of these, 7,000 accounts have
credit cards usable only at Merchant A,
5,000 accounts have credit cards usable
only at Merchant B, and 3,000 accounts
have credit cards usable only at
Merchant C. The card issuer offers to the
public a single credit card agreement
that is offered for all three types of
accounts and is not offered for any other
type of account. The issuer is not
required to submit the agreement to the
Board under § 226.58(c)(1). The
agreement is used for three different
private label credit card plans (i.e., the
accounts with credit cards usable at
Merchant A, the accounts with credit
cards usable at Merchant B, and the
accounts with credit cards usable at
Merchant C), each of which has fewer
than 10,000 open accounts, and the
issuer does not offer the agreement for
any other type of account. The
agreement therefore qualifies for the
private label credit card exception
under § 226.58(c)(6).
Comment 58(c)(6)–6 clarifies 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. For example, an issuer has 5,000
open private label credit card accounts
with credit cards usable only at
Merchant A. The issuer offers to the
public three different agreements each
of which may be used in connection
with private label credit card accounts
with credit cards usable only at
Merchant A. The agreements are not
offered for any other type of credit card
account. The issuer is not required to
submit any of the three agreements to
the Board under § 226.58(c)(1) because
each of the agreements is used for a
private label credit card plan which has

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fewer than 10,000 open accounts and
none of the three is offered to the public
other than for accounts under such a
plan.
58(c)(7) Product Testing Exception
The final rule includes new section
§ 226.58(c)(7), which 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 product test
by an issuer. As described above, TILA
Section 122(d)(5) provides that the
Board may establish exceptions to the
requirements that credit card
agreements be posted on creditors’ Web
sites and submitted to the Board for
posting on the Board’s Web site in any
case where the administrative burden
outweighs the benefit of increased
transparency, such as where a credit
card plan has a de minimis number of
consumer account holders. As discussed
above, the final rule includes a de
minimis exception for issuers with
fewer than 10,000 open credit card
accounts as § 226.58(c)(5). As also
discussed above, the Board solicited
comment in connection with the
proposed rule regarding whether the
Board should create a de minimis
exception applicable to small credit
card plans offered by an issuer of any
size and, if so, how the Board should
define a credit card plan. Commenters
generally supported creating such an
exception. One card issuer commenter
suggested that the Board create an
exception for agreements offered to
limited groups of consumers in
connection with product testing by an
issuer, regardless of issuer size.
The Board is adopting such an
exception. The Board believes that the
administrative burden on issuers of
preparing and submitting to the Board
agreements used for a small number of
consumer account holders in
connection with a product test by an
issuer outweighs the benefit of
increased transparency of including
these agreements on the Board’s Web
site. The Board understands that issuers
test new credit card strategies and
products by offering credit cards to
discrete, targeted groups of consumers
for a limited time. Posting these
agreements on the Board’s and issuers’
Web sites would not facilitate
comparison shopping by consumers, as
these terms are offered only to a limited
group of consumers for a short period of
time. Including these agreements could
mislead consumers into believing that
these terms are available more generally.
In addition, posting these agreements
would make issuer testing strategies
transparent to competitors. Also, the

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Board believes that, with respect to
product tests, a credit card plan can be
defined sufficiently narrowly to avoid
dividing issuers’ portfolios into units so
small that large numbers of credit card
agreements would fall under the
exception.
Under § 226.58(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. Section
226.58(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. Section
226.58(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.
58(c)(8) Form and Content of
Agreements Submitted to the Board
Many commenters on the proposed
rule expressed confusion about the form
and content requirements for
agreements submitted to the Board. In
order to make this information more
readily noticeable and understandable,
the Board is eliminating proposed
Appendix N and incorporating the form
and content requirements for
agreements submitted to the Board as
new § 226.58(c)(8). The form and
content requirements under
§ 226.58(c)(8) are organized into four
subsections, discussed below: (i) Form
and content generally; (ii) pricing
information; (iii) optional variable terms
addendum; and (iv) integrated
agreement. Form and content
requirements included in proposed
Appendix N for agreements posted on
issuers’ Web sites under proposed
§ 226.58(f)(1), redesignated as
§ 226.58(d), and individual cardholders’
agreements provided under proposed
§ 226.58(f)(2), redesignated as
§ 226.58(e), have similarly been
incorporated into those sections and are
discussed below.

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58(c)(8)(i) Form and Content Generally
Section 226.58(c)(8)(i)(A) 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, as proposed in
Appendix N, paragraph 1. One
commenter questioned whether a
change-in-terms notice should be
integrated into an agreement where the
change-in-terms notice is not yet
effective. The final rule therefore
includes new comment 58(c)(8)–1,
which gives the following example of
the application of § 226.5(c)(8)(i)(A): on
June 1, an issuer decides to decrease the
purchase APR associated with one of
the agreements it offers to the public.
The change in the APR will become
effective on August 1. If the issuer
submits the agreement to the Board on
July 31 (for example, because the
agreement has been otherwise
amended), the agreement submitted
should not include the new lower APR
because that APR was not in effect on
June 30, the last business day of the
preceding calendar quarter.
Section 226.58(c)(8)(i)(B) states that
agreements submitted to the Board must
not include any personally identifiable
information relating to any cardholder,
such as name, address, telephone
number, or account number, as
proposed in Appendix N, paragraph 1.
Section 226.58(c)(8)(i)(C) identifies
certain items that are not deemed to be
part of the agreement for purposes of
§ 226.58, and therefore are not required
to be included in submissions to the
Board. These items are as follows: (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; and (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.
This list incorporates items identified
as excluded from agreements in
proposed Appendix N, paragraph 1, and
proposed comment 58(b)(1)–2. In
addition, one commenter asked that
Board clarify that the agreement does
not include ancillary agreements
between the issuer and the consumer,
such as debt cancellation contracts or

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debt suspension agreements. Because
the Board agrees that including such
ancillary agreements would not assist
consumers in shopping for a credit card,
this item is included in
§ 226.58(c)(8)(i)(C).
The final rule also includes new
§ 226.58(c)(8)(i)(D), which provides that
agreements submitted to the Board must
be presented in a clear and legible font.
58(c)(8)(ii) Pricing Information
Section 226.58(c)(8)(ii)(A) of the final
rule specifies that pricing information
must be set forth in a single addendum
to the agreement that contains only the
pricing information. This differs from
proposed Appendix N, paragraph 1,
which required issuers to set forth any
information not uniform for all
cardholders, including the pricing
information, in an addendum to the
agreement.
The Board believes, on the basis of
consumer testing conducted in the
context of developing the requirements
for account-opening disclosures, that
the pricing information (which is
defined by reference to the requirements
for account-opening disclosures under
§ 226.6) is particularly relevant to
consumers in choosing a credit card.
Upon further consideration, the Board
has concluded that this information
could be difficult for consumers to find
if it is integrated into the text of the
credit card agreement. The Board
believes that requiring pricing
information to be attached as a separate
addendum would ensure that this
information is easily accessible to
consumers. The Board understands that
cardholder agreements may be complex
and densely worded, and the Board is
concerned that including pricing
information within such a document
could hamper the ability of consumers
to find and comprehend it. The Board
therefore is requiring under
§ 226.58(c)(8)(ii)(A) that this
information be provided in a separate
addendum.
The final rule also includes comment
58(c)(8)–2, which clarifies that pricing
information must be set forth in the
separate addendum described in
§ 226.58(c)(8)(ii)(A) even if it is also
stated elsewhere in the agreement.
Section 226.58(c)(8)(ii)(B) of the final
rule 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
(such as purchase APRs of 13 percent,
15 percent, 17 percent, and 19 percent)
or by providing a range of possible
variations (such as purchase APRs

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ranging from 13 percent to 19 percent).
This corresponds with a provision from
proposed Appendix N, paragraph 1.
One commenter stated 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. The Board’s final rule does
not provide this flexibility with respect
to pricing information. The Board
understands that issuers offer a range of
terms and conditions and that issuers
may make these terms and conditions
available in a variety of different
combinations, particularly with respect
to items included in the pricing
information. The Board is aware that the
number of variations of pricing
information is extremely large, and
believes that including each of these
variations on the Board’s Web site likely
would render the number of agreements
provided on the Web site too large to be
helpful to most consumers. For
example, an issuer might offer credit
cards with a purchase APR of 12
percent, 13 percent, 14 percent, 15
percent, 16 percent or 17 percent, an
annual fee of $0, $20, or $40, and one
of three debt suspension coverage fees.
Including each of the 54 possible
combinations of these terms as a
separate agreement on the Board’s Web
site would likely be overwhelming to
consumers shopping for a credit card.
The final rule includes comment
58(c)(8)–3, which clarifies that
variations in pricing information do not
constitute a separate agreement for
purposes of § 226.58(c). The comment
provides the following example: an
issuer offers two types of credit card
accounts that differ only with respect to
the purchase APR. The purchase APR
for one type of account is 15 percent,
while the purchase APR for the other
type of account is 18 percent. The
provisions of the agreement and pricing
information for the two types of
accounts are otherwise identical. The
issuer should not submit to the Board
one agreement with a pricing
information addendum listing a 15
percent purchase APR and another
agreement with a pricing information
addendum listing an 18 percent
purchase APR. Instead, the issuer
should submit to the Board one
agreement with a pricing information
addendum listing possible purchase
APRs of 15 percent and 18 percent.
Section 226.58(c)(8)(ii)(C) of the final
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

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disclosed by providing the index and
the possible margins (such as the prime
rate plus 5 percent, 8 percent, 10
percent, or 12 percent) or the range of
possible margins (such as 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.
Several card issuer commenters
requested that issuers be permitted to
provide interest rate information as an
index and range of margins. These
commenters argued that updating and
resubmitting agreements every time an
underlying index changes would be a
substantial burden on issuers that
would not provide a corresponding
benefit to consumers. The Board agrees
with these commenters. For purposes of
comparison shopping for credit cards
using the Board’s Web site, consumers
would be able to compare the margins
offered by issuers using the same index
and would be able to reference other online resources that provide the current
values of financial indices to compare
the rates offered by issuers using
different indices. To provide uniformity
in how variable rates are disclosed, the
Board is requiring that such rates be
provided as an index and margin, list of
possible margins or range of possible
margins.
58(c)(8)(iii) Optional Variable Terms
Addendum
Section 226.58(c)(8)(iii) of the final
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. This differs
from the provisions of proposed
Appendix N, paragraph 1, which
required issuers to set forth any
information not uniform for all
cardholders in a single addendum to the
agreement.
As noted above, one commenter
stated 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. The Board’s final rule
provides this flexibility with respect to
provisions of the agreement other than
the pricing information. The Board
understands that there is substantially
less variation in the credit card
agreements offered by a particular issuer
with respect to terms other than pricing
information. The Board therefore
believes that providing issuers with
flexibility regarding how these terms are

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disclosed is unlikely to result in a
volume of data on the Board’s Web site
that is overwhelming to consumers.
The final rule also includes comment
58(c)(8)–4, which gives examples of
provisions that might be included in the
optional variable terms addendum. For
example, the addendum might include
a clause that is required by law to be
included in credit card agreements in a
particular state but not in other states
(unless, for example, a clause is
included in the agreement used for all
cardholders under a heading such as
‘‘For State X Residents’’), the name of the
credit card plan to which the agreement
applies (if this information is included
in the agreement), or the name of a
charitable organization to which
donations will be made in connection
with a particular card (if this
information is included in the
agreement).
58(c)(8)(iv) Integrated Agreement
Section 226.58(c)(8)(iv) incorporates
provisions of proposed Appendix N,
paragraph 1, stating 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 § 226.58(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.
The final rule also includes new
comment 58(c)(8)–5, which provides
clarification regarding the integrated
agreement requirement. 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 § 226.58(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. For example,
it would be impermissible for an issuer
to submit to the Board an agreement in
the form of a terms and conditions
document dated January 1, 2005, four
subsequent change in terms notices, and
two addenda showing variations in
pricing information. Instead, the issuer
must submit a document that integrates
the changes made by each of the changein-terms notices into the body of the
original terms and conditions document
and a single addendum displaying
variations in pricing information.
As the Board stated in connection
with the proposal, the Board believes

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that permitting issuers to submit
agreements that include change-in-terms
notices or riders containing
amendments and revisions would be
confusing for consumers and would
greatly lessen the usefulness of the
agreements posted on the Board’s Web
site. Consumers would be required to
sift through change-in-terms notices and
riders in an attempt to assemble a
coherent picture of the terms currently
offered. The Board believes that this
would impose a significant burden on
consumers attempting to shop for credit
cards. The Board also believes that
consumers in many instances would
draw incorrect conclusions about which
terms have been changed or superseded,
causing these consumers to be misled
regarding the credit card terms that are
currently available. This would hinder
the ability of consumers to understand
and to effectively compare the terms
offered by various issuers. The Board
believes that issuers are better placed
than consumers to assemble this
information correctly. While the Board
understands that this requirement may
significantly increase the burden on
issuers, the Board believes that the
corresponding benefit of increased
transparency for consumers outweighs
this burden.
58(d) Posting of Agreements Offered to
the Public
New TILA Section 122(d) requires
that, in addition to submitting credit
card agreements to the Board for posting
on the Board’s Web site, each card
issuer must post the credit card
agreements to which it is a party on its
own Web site. The Board proposed to
implement this requirement in proposed
§ 226.58(f). Proposed § 226.58(f)(1)
required each 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 proposed
Appendix N, paragraph 2.
Commenters did not oppose the
general requirements of proposed
§ 226.58(f)(1), and the Board is adopting
the proposed provision in final form,
with certain modifications, as discussed
below. In the final rule, proposed
§ 226.58(f)(1) is redesignated
§ 226.58(d), and the content of
Appendix N, paragraph 2, is
incorporated into this section of the
regulation, in order to ensure that the
guidance provided is more readily
noticeable and conveniently located for
readers.
Comment 58(d)–1 is added in the
final rule to clarify that issuers are only

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required to post and maintain on their
publicly available Web site the credit
card agreements that the issuer must
submit to the Board under § 226.58(c).
If, for example, an issuer is not required
to submit any agreements to the Board
because the issuer qualifies for the de
minimis exception under § 226.58(c)(5),
the issuer is not required to post and
maintain any agreements on its Web site
under § 226.58(d). Similarly, if an issuer
is not required to submit a specific
agreement to the Board, such as an
agreement that qualifies for the private
label exception under § 226.58(c)(6), the
issuer is not required to post and
maintain that agreement under
§ 226.58(d) (either on the issuer’s
publicly available Web site or on the
publicly available Web sites of
merchants at which private label credit
cards can be used). The comment also
emphasizes 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 § 226.58(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.
Comment 58(d)–2 is added to the final
rule to clarify that, unlike § 226.58(e),
discussed below, § 226.58(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
§ 226.58(c), that issuer must post those
agreements on a publicly available Web
site it maintains (or, with respect to an
agreement for a private label credit card,
on the publicly available Web site of at
least one of the merchants at which the
card may be used, as provided in
§ 226.58(d)(1)).
Some card issuer commenters
suggested that issuers should be
permitted to post agreements for private
label or co-branded cards on the Web
site of a retailer that accepts the card,
rather than the issuer’s own Web site;
the commenters noted that consumers
are more likely to find such agreements
if posted on the retailer’s Web site. The
Board agrees with these commenters,
and accordingly § 226.58(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
§ 226.58(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.

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Comment 58(d)–3 is included in the
final rule to clarify how this provision
would apply. The comment provides
the following example: A card issuer
has 100,000 open private label credit
card accounts. Of these, 75,000 open
accounts have credit cards usable only
at Merchant A and 25,000 open
accounts have credit cards usable only
at Merchant B and Merchant B’s
affiliates, Merchants C and D. The card
issuer offers to the public a single credit
card agreement that is offered for both
of these types of accounts and is not
offered for any other type of account.
The issuer is required to submit the
agreement to the Board under
§ 226.58(c)(1). Because the issuer is
required to submit the agreement to the
Board under § 226.58(c)(1), the issuer is
required to post and maintain the
agreement on the issuer’s publicly
available Web site under § 226.58(d).
However, because the agreement is
offered solely for accounts under one or
more private label credit card plans, the
issuer may comply with § 226.58(d) in
either of two ways. First, the issuer may
comply by posting and maintaining the
agreement on the issuer’s own publicly
available Web site. Alternatively, the
issuer may comply by posting and
maintaining the agreement on the
publicly available Web site of Merchant
A and the publicly available Web site of
at least one of Merchants B, C and D. It
would not be sufficient for the issuer to
post the agreement on Merchant A’s
Web site alone because § 226.58(d)
requires the issuer to post the agreement
on the publicly available Web site of ‘‘at
least one of the merchants at which
cards issued under each private label
credit card plan may be used’’ (emphasis
added).
The comment also provides an
additional, contrasting example, as
follows: Assume that an issuer has
100,000 open private label credit card
accounts. Of these, 5,000 open accounts
have credit cards usable only at
Merchant A and 95,000 open accounts
have credit cards usable only at
Merchant B and Merchant B’s affiliates,
Merchants C and D. The card issuer
offers to the public a single credit card
agreement that is offered for both of
these types of accounts and is not
offered for any other type of account.
The issuer is required to submit the
agreement to the Board under
§ 226.58(c)(1). Because the issuer is
required to submit the agreement to the
Board under § 226.58(c)(1), the issuer is
required to post and maintain the
agreement on the issuer’s publicly
available Web site under § 226.58(d).
However, because the agreement is
offered solely for accounts under one or

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more private label credit card plans, the
issuer may comply with § 226.58(d) in
either of two ways. First, the issuer may
comply by posting and maintaining the
agreement on the issuer’s own publicly
available Web site. Alternatively, the
issuer may comply by posting and
maintaining the agreement on the
publicly available Web site of at least
one of Merchants B, C and D. The issuer
is not required to post and maintain the
agreement on the publicly available
Web site of Merchant A because the
issuer’s private label credit card plan
consisting of accounts with cards usable
only at Merchant A has fewer than
10,000 open accounts.
Section 226.58(d)(2) incorporates
provisions from proposed Appendix N,
paragraph 2, stating that agreements
posted pursuant to this section must
conform to the form and content
requirements for agreements submitted
to the Board specified in § 226.58(c)(8),
except as provided in § 226.58(d) (for
example, as provided in § 226.58(d)(3),
agreements posted on an issuer’s Web
site need not conform to the electronic
format required for submission to the
Board, as discussed below).
Proposed Appendix N clarified that
the agreements posted on an issuer’s
Web site need not conform to the
electronic format required for
submission to the Board. This
clarification is incorporated into the
final rule as § 226.58(d)(3), which states
that agreements posted pursuant to this
section may be posted in any electronic
format that is readily usable by the
general public. For example, when
posting the agreements on its own Web
site, an issuer may post the agreements
in plain text format, in PDF format, in
HTML format, or in some other
electronic format, provided the format is
readily usable by the general public.
Consumer group comments suggested
that the rule should ensure that
consumers are able to access credit card
agreements offered to the public through
an issuer’s Web site without being
required to provide personal
information. The Board believes that the
intent of the statute is to allow access to
credit card agreements offered to the
public without having to provide such
information; accordingly, § 226.58(d)(3)
also includes language setting forth this
requirement, as well as a requirement
that agreements posted on the issuer’s
Web site must be placed in a location
that is prominent and readily accessible
by the public, moved from proposed
Appendix N, paragraph 2.
Section 226.58(d)(4) incorporates
provisions from proposed Appendix N,
paragraph 2, stating that an issuer must
update the agreements posted on its

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Web site at least as frequently as the
quarterly schedule required for
submission of agreements to the Board.
If the issuer chooses to update the
agreements on its Web site more
frequently, the agreements posted on the
issuer’s Web site may contain the
provisions of the agreement and the
pricing information in effect as of a date
other than the last business day of the
preceding calendar quarter.
Consumer group commenters
suggested that the final rule clarify that
any member of the public may have
access to the agreement for any open
account, whether or not currently
offered to the public. The Board is not
adopting such a requirement because, as
discussed above, the Board believes the
administrative burden associated with
providing access to all open accounts
would outweigh the benefit to
consumers. A consumer group
commenter asked that the rule require
that, when a change is made to an
agreement, the on-line version of that
agreement be updated within a specific
period of time no greater than 72 hours.
The final rule does not include this
requirement because the Board believes
the burden to card issuers of updating
agreements in such a short time would
outweigh the benefit. In addition, if a
consumer applies or is solicited for a
credit card, the consumer will receive
updated disclosures under § 226.5a.
Finally, the same commenter suggested
that issuers should be required to
archive previous versions of credit card
agreements and allow on-line access to
them for purposes of comparison. The
Board believes the burden to card
issuers of being required to archive and
make available all previous versions of
its credit card agreements would
outweigh the benefit to consumers.
58(e) Agreements for All Open Accounts
In addition to the requirements under
proposed § 226.58(f)(1), proposed
§ 226.58(f)(2) 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. Proposed Appendix N,
paragraph 3, provided further guidance
on these requirements. Proposed
§ 226.58(f)(2), along with material from
proposed Appendix N, paragraph 3, is
incorporated into the final rule as
§ 226.58(e), with certain modifications,
as discussed below.
As discussed above, the Board is
exercising its authority to create

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exceptions from the requirements of
new TILA Section 122(d) with respect to
the submission of certain agreements to
the Board for posting on the Board’s
Web site. However, the Board believes
that it would not be appropriate to
apply these exceptions to the
requirement that issuers provide
cardholders with access to their specific
credit card agreement through the
issuer’s Web site. In particular, the
Board believes that, for the reasons
discussed above, posting credit card
agreements that are not currently offered
to the public on the Board’s Web site
would not be beneficial to consumers.
However, the Board believes that the
benefit of increased transparency of
providing an individual cardholder
access to his or her specific credit card
agreement is substantial regardless of
whether the cardholder’s agreement
continues to be offered by the issuer.
The Board believes that this benefit
outweighs the administrative burden on
issuers of providing such access, and
the final rule therefore does not exempt
agreements that are not offered to the
public from the requirements of
§ 226.58(e).
Similarly, the final rule provides that
card issuers with fewer than 10,000
open credit card accounts are not
required to submit agreements to the
Board, and provides for other
exceptions from the requirement to
submit agreements. However, the Board
believes that the benefit of increased
transparency associated with providing
an individual cardholder with access to
his or her specific credit card agreement
is substantial regardless of the whether
the card issuer is required to submit the
agreement to the Board for posting on
the Board’s Web site. The Board
believes that this benefit of increased
transparency for consumers outweighs
the administrative burden on issuers of
providing such access, and therefore
§ 226.58(e) in the final rule does not
include the exceptions from the
requirement to submit agreements to the
Board under § 226.58(c).
Comment 58(e)–1 clarifies that the
requirement to provide access to credit
card agreements under § 226.58(e)
applies to all open credit card accounts,
regardless of whether such agreements
are required to be submitted to the
Board pursuant to § 226.58(c) (or posted
on the issuer’s Web site pursuant to
§ 226.58(d)). For example, an issuer that
is not required to submit agreements to
the Board because it qualifies for the de
minimis exception under § 226.58(c)(5)
still is required to provide cardholders
with access to their specific agreements
under § 226.58(e). Similarly, an
agreement that is no longer offered to

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the public is not required to be
submitted to the Board under
§ 226.58(c), but nevertheless must be
provided to the cardholder to whom it
applies under § 226.58(e). This
comment corresponds to proposed
comment 58(f)(2)–2.
Section 226.58(e)(1)(ii) provides
issuers with the option to make copies
of cardholder agreements available on
request because the Board believes that
the benefit of increased transparency
associated with immediate access to
cardholder agreements, as compared to
access after a brief waiting period, does
not outweigh the administrative burden
on issuers of providing immediate
access. The Board believes that the
administrative burden associated with
posting each cardholder’s credit card
agreement on the issuer’s Web site may
be substantial for some issuers. In
particular, the Board notes that some
smaller institutions with limited
information technology resources could
find a requirement to post all
cardholder’s agreements to be a
significant burden. The Board
understands that it is important that all
cardholders be able to obtain copies of
their credit card agreements promptly,
and § 226.58(e)(1)(ii) ensures that this
will occur.
Under proposed § 226.58(f)(2)(ii), 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.
Commenters suggested that an
exception should be created for issuers
that do not maintain toll-free telephone
numbers; the commenters contended
that maintaining a toll-free telephone
number could be a substantial burden
for small issuers, and noted that issuers
that currently do not maintain toll-free
telephone numbers likely have a
primarily local customer base. The final
rule, in § 226.58(e)(1)(ii), 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.’’
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

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further 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 tollfree number or accept collect longdistance calls from outside the area
where it normally conducts business.
This standard is based on a comparable
requirement under Regulation E, 12 CFR
Part 205, that requires financial
institutions to provide a telephone line
for consumers to call for certain
purposes. See Regulation E,
§ 205.10(a)(1)(iii), 12 CFR
205.10(a)(1)(iii), and comment 10(a)(1)–
7 in the Regulation E Official Staff
Commentary, 12 CFR Part 205,
Supplement I, paragraph 10(a)(1)–7.
A number of commenters addressed
the requirement to provide cardholders
the ability to request a copy of their
agreement by using the issuer’s Web site
(under proposed § 226.58(f)(2)(ii)(A),
redesignated § 226.58(e)(1)(ii)(A) in the
final rule), in addition to the ability to
request a copy by calling a telephone
number. The commenters noted that
many card issuers do not have
interactive Web sites, and that some
may not have Web sites of any kind;
they contended that permitting
cardholders to request copies of their
particular agreements through a Web
site would require creating and
maintaining an interactive Web site and
complying with privacy and data
security requirements, which could
represent a significant compliance
burden, especially for smaller issuers.
The commenters suggested various
alternative means for providing
cardholders the means to request copies
of their agreements.
Based on information received from
financial institution trade associations
and service providers, it appears that a
substantial number of card issuers do
not maintain interactive Web sites, and
that some issuers (for example, more
than 250 credit unions) do not have
Web sites of any kind. The Board
believes that cardholders should be
provided with convenient means to
request copies of their credit card
agreements, but that there are
alternative methods that would serve
this purpose and would not require
issuers that do not have interactive Web
sites to incur the expense to create and
maintain such Web sites; the Board
believes that the burden of creating and
maintaining such Web sites would not
be outweighed by the convenience to
cardholders of being able to request a
copy of their agreements directly
through a Web site, as opposed to using
an alternative means.
Accordingly, in the final rule,
§ 226.58(e)(2) sets forth a special rule for

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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). Section 226.58(e)(2) provides
that, instead of complying with
§ 226.58(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.
The final rule includes comment
58(e)–3, which further clarifies how this
special rule applies. Comment 58(e)–3
clarifies 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 further
clarifies 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.
Under proposed § 226.58(f)(2)(ii), 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 comments on whether issuers
should have a shorter or longer period
in which to respond to cardholder
requests. Some commenters contended
that 10 business days would not provide
sufficient time to respond to a request;
the commenters noted that they will be
required to integrate changes in terms
into the agreement and provide pricing
information, which, particularly for
older agreements that may have had
many changes in terms over the years,
could require more time. The
commenters suggested various longer
time periods to respond to a cardholder
request, including 30 business days or
60 calendar days.
The Board believes that it would be
reasonable to provide more time for an
issuer to respond to a cardholder
request for a copy of the credit card
agreement. Although cardholders
should be able to obtain a copy of their

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agreement promptly, integrating
changes in terms may require more time
for older agreements; for newer
agreements with fewer changes since
the account was opened, the cardholder
is more likely to still have a copy of the
agreement and therefore less likely to
need to request a copy. For all
agreements, the pricing information has
been disclosed to cardholders at the
time the account is opened, and much
of the pricing information is disclosed
again on periodic statements.
Accordingly, the final rule, in
§§ 226.58(e)(1)(ii) and (e)(2), provides
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.
Proposed comment 58(f)(2)–3
provided guidance on the deadline for
providing agreements upon request. In
the final rule, the comment is
redesignated comment 58(e)–4. The
comment states that if an issuer chooses
to respond to a cardholder’s request by
mailing a paper copy of the cardholder’s
agreement, the issuer would be required
to mail the agreement no later than 30
days after receipt of the cardholder’s
request. Alternatively, if an issuer
chooses to respond to a cardholder’s
request by posting the cardholder’s
agreement on the issuer’s Web site, the
issuer must post the agreement on its
Web site no later than 30 days after
receipt of the cardholder’s request. The
comment further notes that, under
§ 226.58(e)(3)(v), issuers are permitted
to provide copies of agreements in
either paper or electronic form,
regardless of the form of the
cardholder’s request, as discussed
below.
Section 226.58(e)(3) states
requirements for the form and content of
agreements, and is drawn largely from
proposed Appendix N, paragraph 3, and
proposed staff commentary. Section
226.58(e)(3)(i) corresponds to part of
paragraph 3(b) of proposed Appendix N,
and states that except as elsewhere
provided, agreements posted on the card
issuer’s Web site pursuant to
§ 226.58(e)(1)(i) or made available upon
the cardholder’s request pursuant to
§ 226.58(e)(1)(ii) or (e)(2) must conform
to the form and content requirements for
agreements submitted to the Board
specified in § 226.58(c)(8).
Section 226.58(e)(3)(ii) corresponds to
proposed Appendix N, paragraph 3(a),
and states that if a card issuer posts an
agreement on its Web site or otherwise
provides an agreement to a cardholder
electronically pursuant to § 226.58(e),
the agreement may be posted in any
electronic format that is readily usable

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by the general public and must be
placed in a location that is prominent
and readily accessible to the cardholder.
Section 226.58(e)(1)(iii) is drawn from
part of paragraph 3(b) of proposed
Appendix N and provides that
agreements posted or otherwise
provided pursuant to § 226.58(e) may
contain personally identifiable
information relating to the cardholder,
such as name, address, telephone
number, or account number, provided
that the issuer takes appropriate
measures to make the agreement
accessible only to the cardholder or
other authorized persons.
Section 226.58(e)(1)(iv) corresponds
generally to proposed Appendix N,
paragraph (c), and states that agreements
must set forth the specific provisions
and pricing information applicable to
the particular cardholder, and that
agreement provisions and pricing
information must be complete and
accurate as of a date no more than 60
days prior to the date on which the
agreement is posted on the card issuer’s
Web site or the cardholder’s request is
received.
Finally, § 226.58(e)(1)(v) is drawn
from proposed comment 58(f)(2)–1, and
provides that agreements provided upon
request may be provided by the issuer
in either electronic or paper form,
regardless of the form of the
cardholder’s request.
Paragraph 3(d) of proposed Appendix
N clarified that issuers may not provide
provisions of the agreement or pricing
information in the form of change-interms notices or riders. This language is
not incorporated into the text of the
final rule as part of § 226.58(e), but the
requirement nevertheless applies
because § 226.58(e) provides that
agreements posted on the card issuer’s
Web site or made available upon the
cardholder’s request must conform to
the form and content requirements for
agreements submitted to the Board
specified in § 226.58(c)(8), and
§ 226.58(c)(8) imposes this requirement.
Thus, changes in provisions or pricing
information must be integrated into the
text of the agreement (or into the pricing
information described in
§ 226.58(c)(8)(ii)). For example, it is not
permissible for an issuer to send to a
cardholder under § 226.58(e)(1)(ii) an
agreement consisting of a terms and
conditions document dated January 1,
2005, and four subsequent change-interms notices. Instead, the issuer is
required to send to the cardholder a
single document that integrates the
changes made by each of the change-interms notices into the body of the terms
and conditions document or the pricing
information addendum.

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The Board believes that it is important
for consumers be able to accurately
assess the terms of a credit card
agreement to which they are a party. As
described above in connection with the
integrated agreement requirement for
agreements submitted to the Board, the
Board believes that requiring consumers
to sift through change-in-terms notices
and riders in an attempt to assemble the
current version of a credit card
agreement imposes a significant burden
on consumers, is likely to lead to
consumer confusion, and would greatly
lessen the usefulness of making credit
card agreements available under the
final rule. The Board believes that these
arguments apply with even more force
in the context of providing an
individual cardholder with access to his
or her specific credit card agreement.
Permitting issuers to provide provisions
of the agreement or pricing information
as change-in-terms notices or riders
would require consumers to bear the
burden of assembling a coherent picture
of the terms to which they are currently
subject. The Board believes that this
likely would hinder the ability of many
consumers to understand the terms
applicable to them. The Board also
believes that consumers in many
instances would draw incorrect
conclusions about which terms have
been changed or superseded, causing
these consumers to be misled regarding
the terms of their credit card agreement.
The Board believes that issuers are
better placed than consumers to
assemble this information correctly.
While the Board understands that this
may significantly increase the burden
on issuers, the Board believes that the
corresponding benefit of increased
transparency for consumers outweighs
this burden.
Some commenters suggested that the
final rule provide an exception from the
requirements of § 226.58(e) for accounts
purchased from another issuer.
Similarly, commenters suggested an
exception for older accounts.
Commenters argued that in such cases,
issuers may not have the agreements
and therefore may find it difficult or
impossible to comply. The final rule
does not contain the suggested
exceptions. The Board believes that
cardholders need to be able to obtain the
credit card agreements to which they are
parties.
Finally, some commenters suggested
that the final 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

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suggested that such a grace period be
provided for accounts opened prior to a
specific date. The final rule does not
provide such a grace period. As
discussed above, it likely would be
difficult in many cases for cardholders
to understand a complex credit card
agreement supplemented by change in
terms notices. In addition, as discussed
above, the final rule allows 30 days (as
opposed to 10 business days, as
proposed) for issuers to respond to
cardholder requests, in part in order to
provide issuers sufficient time to
integrate change in terms notices with
the initial agreement before sending it to
the cardholder.
58(f) E-Sign Act Requirements
Section § 226.58(f), corresponding to
proposed § 226.58(f)(3), provides that
card issuers may provide credit card
agreements in electronic form under
§ 226.58(d) and (e) without regard to the
consumer notice and consent
requirements of section 101(c) of the
Electronic Signatures in Global and
National Commerce Act (E-Sign Act) (15
U.S.C. 7001 et seq.). Because new TILA
Section 122(d) specifies that credit card
issuers must provide access to
cardholder agreements on the issuer’s
Web site, the Board believes that the
requirements of the E-Sign Act do not
apply.
Appendix M1—Repayment Disclosures
As discussed in the section-by-section
analysis to § 226.7(b)(12), TILA Section
127(b)(11), as added by Section 1301(a)
of the Bankruptcy Act, required
creditors, the FTC and the Board to
establish and maintain toll-free
telephone numbers in certain instances
in order to provide consumers with an
estimate of the time it will take to repay
the consumer’s outstanding balance,
assuming the consumer makes only
minimum payments on the account and
the consumer does not make any more
draws on the account. 15 U.S.C.
1637(b)(11)(F). The Act required
creditors, the FTC and the Board to
provide estimates that are based on
tables created by the Board that estimate
repayment periods for different
minimum monthly payment amounts,
interest rates, and outstanding balances.
In the January 2009 Regulation Z Rule,
instead of issuing a table, the Board
issued guidance in Appendix M1 to part
226 to card issuers and the FTC for how
to calculate this generic repayment
estimate. The Board would use the same
guidance to calculate the generic
repayment estimates given through its
toll-free telephone number.
TILA Section 127(b)(11), as added by
Section 1301(a) of the Bankruptcy Act,

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provided that a creditor may use a tollfree telephone number to provide the
actual number of months that it will
take consumers to repay their
outstanding balance instead of
providing an estimate based on the
Board-created table (‘‘actual repayment
disclosure’’). 15 U.S.C. 1637(b)(11)(I)–
(K). In the January 2009 Regulation Z
Rule, the Board implemented that
statutory provision and also provided
card issuers with the option to provide
the actual repayment disclosure on the
periodic statement instead of through a
toll-free telephone number. In the
January 2009 Regulation Z Rule, the
Board adopted new Appendix M2 to
part 226 to provide guidance to issuers
on how to calculate the actual
repayment disclosure.
As discussed in more detail in the
section-by-section analysis to
§ 226.7(b)(12), the Credit Card Act
substantially revised Section 127(b)(11)
of TILA. Specifically, Section 201 of the
Credit Card Act amends TILA Section
127(b)(11) to provide that creditors that
extend open-end credit must provide
the following disclosures on each
periodic statement: (1) A ‘‘warning’’
statement indicating that making only
the minimum payment will increase the
interest the consumer pays and the time
it takes to repay the consumer’s balance;
(2) the number of months that it would
take to repay the outstanding balance if
the consumer pays only the required
minimum monthly payments and if no
further advances are made; (3) the total
cost to the consumer, including interest
and principal payments, of paying that
balance in full, if the consumer pays
only the required minimum monthly
payments and if no further advances are
made; (4) the monthly payment amount
that would be required for the consumer
to pay off the outstanding balance in 36
months, if no further advances are
made, and the total cost to the
consumer, including interest and
principal payments, of paying that
balance in full if the consumer pays the
balance over 36 months; and (5) a tollfree telephone number at which the
consumer may receive information
about credit counseling and debt
management services. For ease of
reference, this supplementary
information will refer to the above
disclosures in the Credit Card Act as
‘‘the repayment disclosures.’’
As discussed in more detail in the
section-by-section analysis to
§ 226.7(b)(12), the final rule limits the
repayment disclosure requirements to
credit card accounts under open-end
(not home-secured) consumer credit
plans, as that term is defined in
proposed § 226.2(a)(15)(ii). As proposed,

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Appendix M1 to part 226 provides
guidance for calculating the repayment
disclosures.
Calculating the minimum payment
repayment estimate. As proposed in the
October 2009 Regulation Z Proposal, the
minimum payment repayment estimate
would have been an estimate of the
number of months that it would take to
pay the outstanding balance shown on
the periodic statement, if the consumer
pays only the required minimum
monthly payments and if no further
advances are made. The final rule
adopts guidance in Appendix M1 to part
226 for calculating the minimum
payment repayment estimate as
proposed with several modifications as
discussed below. The guidance in
Appendix M1 to part 226 for calculating
the minimum payment repayment
estimate is similar to the guidance that
the Board adopted in Appendix M2 to
part 226 in the January 2009 Regulation
Z Rule for calculating the actual
repayment disclosure. Under Appendix
M1 to part 226, credit card issuers
generally must calculate the minimum
payment repayment estimate for a
consumer based on the minimum
payment formula(s), the APRs and the
outstanding balance currently
applicable to a consumer’s account. For
other terms that may impact the
calculation of the minimum payment
repayment estimate, issuers are allowed
to make certain assumption about these
terms.
1. Minimum payment formulas. When
calculating the minimum payment
repayment estimate, in the October 2009
Regulation Z Proposal, the Board
proposed that credit card issuers
generally must use the minimum
payment formula(s) that apply to a
cardholder’s account. The final rule
retains this provision as proposed.
Appendix M1 to part 226 provides that
in calculating the minimum payment
repayment estimate, if more than one
minimum payment formula applies to
an account, the issuer must apply each
minimum payment formula to the
portion of the balance to which the
formula applies. In providing the
minimum payment repayment estimate,
an issuer must disclose the longest
repayment period calculated. For
example, assume that an issuer uses one
minimum payment formula to calculate
the minimum payment amount for a
general revolving feature, and another
minimum payment formula to calculate
the minimum payment amount for
special purchases, such as a ‘‘club plan
purchase.’’ Also, assume that based on a
consumer’s balances in these features,
the repayment period calculated
pursuant to Appendix M1 to part 226

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for the general revolving feature is 5
years, while the repayment period
calculated for the special purchase
feature is 3 years. This issuer must
disclose 5 years as the repayment period
for the entire balance to the consumer.
This provision of the final rule differs
from the approach adopted in the
January 2009 Regulation Z Rule, which
gave card issuers the option of
disclosing either the longest repayment
period calculated or the repayment
period calculated for each minimum
payment formula, when disclosing the
actual repayment disclosures through a
toll-free telephone number. The Board
believes that allowing card issuers to
disclose on the periodic statement the
repayment period calculated for each
minimum payment formula might create
‘‘information overload’’ for consumers
and might distract the consumer from
other important information that is
contained on the periodic statement.
Under proposed Appendix M1 to part
226, card issuers would have been
allowed to disregard promotional terms
related to payments, such as deferred
billing promotional plans and skip
payment features. In response to the
October 2009 Regulation Z Proposal,
several industry commenters requested
clarification on how to handle
promotional programs that involve a
reduction in the requirement minimum
payment for a limited time period, such
as may occur with fixed payment
programs. These commenters suggested
that the Board provide a card issuer
with flexibility to choose whether the
repayment disclosures are based only on
the promotional minimum payment or
on the minimum payments as they will
be calculated over the duration of the
account.
The final rule retains the provision in
Appendix M1 to part 226 that if any
promotional terms related to payments
apply to a cardholder’s account, such as
a deferred billing plan where minimum
payments are not required for 12
months, credit card issuers may assume
no promotional terms apply to the
account. In Appendix M1 to part 226,
the term ‘‘promotional terms’’ is defined
as terms of a cardholder’s account that
will expire in a fixed period of time, as
set forth by the card issuer. Appendix
M1 to part 226 clarifies that issuers have
two alternatives for handling
promotional minimum payments. Under
the first alternative, an issuer may
disregard the promotional minimum
payment during the promotional period,
and instead calculated the minimum
payment repayment estimate using the
standard minimum payment formula
that is applicable to the account. For
example, assume that a promotional

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minimum payment of $10 applies to an
account for six months, and then after
the promotional period expires, the
minimum payment is calculated as 2
percent of the outstanding balance on
the account or $20 whichever is greater.
An issuer may assume during the
promotional period that the $10
promotional minimum payment does
not apply, and instead calculate the
minimum payment disclosures based on
the minimum payment formula of 2
percent of the outstanding balance or
$20, whichever is greater. The Board
notes that allowing issuers to disregard
promotional payment terms on accounts
where the promotional payment terms
apply only for a limited amount of time
eases compliance burden on issuers,
without a significant impact on the
accuracy of the repayment estimates for
consumers.
Under the second alternative, an
issuer in calculating the minimum
payment repayment estimate during the
promotional period may choose not to
disregard the promotional minimum
payment but instead may calculate the
minimum payments as they will be
calculated over the duration of the
account. In the above example, an issuer
could calculate the minimum payment
repayment estimate during the
promotional period by assuming the $10
promotional minimum payment will
apply for the first six months and then
assuming the 2 percent or $20
(whichever is greater) minimum
payment formula will apply until the
balance is repaid. Appendix M1 to part
226 clarifies, however, that in
calculating the minimum payment
repayment estimate during a
promotional period, an issuer may not
assume that the promotional minimum
payment will apply until the
outstanding balance is paid off by
making only minimum payments
(assuming the repayment estimate is
longer than the promotional period.) In
the above example, the issuer may not
calculate the minimum payment
repayment estimate during the
promotional period by assuming that
the $10 promotional minimum payment
will apply beyond the six months until
the outstanding balance is repaid. The
Board believes that allowing the card
issuer to assume during the promotional
period that the promotional minimum
payment will apply indefinitely would
distort the repayment disclosures
provided to consumers.
2. Annual percentage rates. Generally,
when calculating the minimum
payment repayment estimate, the
October 2009 Regulation Z Proposal
would have required credit card issuers
to use each of the APRs that currently

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apply to a consumer’s account, based on
the portion of the balance to which that
rate applies.
TILA Section 127(b)(11), as revised by
the Credit Card Act, specifically
requires that in calculating the
minimum payment repayment estimate,
if the interest rate in effect on the date
on which the disclosure is made is a
temporary rate that will change under a
contractual provision applying an index
or formula for subsequent interest rate
adjustments, the creditor must apply the
interest rate in effect on the date on
which the disclosure is made for as long
as that interest rate will apply under
that contractual provision, and then
apply an interest rate based on the index
or formula in effect on the applicable
billing date.
Consistent with TILA Section
127(b)(11), as revised by the Credit Card
Act, under proposed Appendix M1 to
part 226, the term ‘‘promotional terms’’
would have been defined as ‘‘terms of a
cardholder’s account that will expire in
a fixed period of time, as set forth by the
card issuer.’’ The term ‘‘deferred interest
or similar plan’’ would have meant a
plan where a consumer will not be
obligated to pay interest that accrues on
balances or transactions if those
balances or transactions are paid in full
prior to the expiration of a specified
period of time. If any promotional APRs
apply to a cardholder’s account, other
than deferred interest or similar plans,
a credit card issuer in calculating the
minimum payment repayment estimate
during the promotional period would
have been required to apply the
promotional APR(s) until it expires and
then must apply the rate that applies
after the promotional rate(s) expires. If
the rate that applies after the
promotional rate(s) expires is a variable
rate, a card issuer would have been
required to calculate that rate based on
the applicable index or formula. This
variable rate would have been
considered accurate if it was in effect
within the last 30 days before the
minimum payment repayment estimate
is provided. The final rule retains these
provisions as proposed.
For deferred interest or similar plans,
under the October 2009 Regulation Z
Proposal, if minimum payments under
the plan will repay the balances or
transactions prior to the expiration of
the specified period of time, a card
issuer would have been required to
assume that the consumer will not be
obligated to pay the accrued interest.
This means, in calculating the minimum
payment repayment estimate, the card
issuer must apply a zero percent APR to
the balance subject to the deferred
interest or similar plan. If, however,

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minimum payments under the deferred
interest or similar plan may not repay
the balances or transactions in full prior
to the expiration of the specified period
of time, a credit card issuer would have
been required to assume that a
consumer will not repay the balances or
transactions in full prior to the
expiration of the specified period and
thus the consumer will be obligated to
pay the accrued interest. This means, in
calculating the minimum payment
repayment estimate, the card issuer
must apply the APR at which interest is
accruing to the balance subject to the
deferred interest or similar plan. The
final rule retains these provisions as
proposed. This approach with respect to
deferred interest or similar plans is
consistent with the assumption that
only minimum payments are made in
repaying the balance on the account.
For example, assume under a deferred
interest plan, a card issuer will not
charge interest on a certain purchase if
the consumer repays that purchase
amount within 12 months. Also, assume
that under the account agreement, the
minimum payments for the deferred
interest plan are calculated as 1/12 of
the purchase amount, such that if the
consumer makes timely minimum
payments each month for 12 months,
the purchase amount will be paid off by
the end of the deferred interest period.
In this case, the card issuer must assume
that the consumer will not be obligated
to pay the deferred interest. This means,
in calculating the minimum payment
repayment estimate, the card issuer
must apply a zero percent APR to the
balance subject to the deferred interest
plan. On the other hand, if under the
account agreement, the minimum
payments for the deferred interest plan
may not necessarily repay the purchase
balance within the deferred interest
period (such as where the minimum
payments are calculated as 3 percent of
the outstanding balance), a credit card
issuer must assume that a consumer will
not repay the balances or transactions in
full by the specified date and thus the
consumer will be obligated to pay the
deferred interest. This means, in
calculating the minimum payment
repayment estimate, the card issuer
must apply the APR at which deferred
interest is accruing to the balance
subject to the deferred interest plan.
3. Outstanding balance. When
calculating the minimum payment
repayment estimate, the Board proposed
that credit card issuers must use the
outstanding balance on a consumer’s
account as of the closing date of the last
billing cycle. The final rule retains this
provision as proposed. Issuers would
not be required to take into account any

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transactions consumers may have made
since the last billing cycle. The Board
believes that this approach would make
it easier for consumers to understand
the minimum payment repayment
estimate, because the outstanding
balance used to calculate the minimum
payment repayment estimate would be
the same as the outstanding balance
shown on the periodic statement.
Issuers would be allowed to round the
outstanding balance to the nearest
whole dollar to calculate the minimum
payment repayment estimate.
4. Other terms. As discussed above,
the Board proposed in Appendix M1 to
part 226 that issuers must calculate the
minimum payment repayment estimate
for a consumer based on the minimum
payment formula(s), the APRs and the
outstanding balance currently
applicable to a consumer’s account. For
other terms that may impact the
calculation of the minimum payment
repayment estimate, the Board proposed
to allow issuers to make certain
assumptions about these terms. The
final rule retains this approach.
a. Balance computation method. The
Board proposed to allow issuers to use
the average daily balance method for
purposes of calculating the minimum
payment repayment estimate. The
average daily balance method is
commonly used by issuers to compute
the balance on credit card accounts.
Nonetheless, requiring use of the
average daily balance method makes
other assumptions necessary, including
the length of the billing cycle, and when
payments are made. The Board
proposed to allow an issuer to assume
a monthly or daily periodic rate applies
to the account. If a daily periodic rate
is used, the issuer would be allowed to
assume either (1) a year is 365 days
long, and all months are 30.41667 days
long, or (2) a year is 360 days long, and
all months are 30 days long. Both sets
of assumptions about the length of the
year and months would yield the same
repayment estimates. The Board also
proposed to allow issuers to assume that
payments are credited on the last day of
the month. The final rule retains these
provisions with one modification. Based
on comments received in response to
the October 2009 Regulation Z Proposal,
Appendix M1 to part 226 is revised to
allow card issuers to assume either that
payments are credited on the last day of
the month or the last day of the billing
cycle.
b. Grace period. In proposed
Appendix M1 to part 226, the Board
proposed to allow issuers to assume that
no grace period exists. The final rule
retains this provision as proposed. The
required disclosures about the effect of

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making minimum payments are based
on the assumption that the consumer
will be ‘‘revolving’’ or carrying a
balance. Thus, it seems reasonable to
assume that the account is already in a
revolving condition at the time the
minimum payment repayment estimate
is disclosed on the periodic statement,
and that no grace period applies. This
assumption about the grace period is
also consistent with the rule to exempt
issuers from providing the minimum
payment repayment estimate to
consumers that have paid their balances
in full for two consecutive months.
c. Residual interest. When the
consumer’s account balance at the end
of a billing cycle is less than the
required minimum payment, the Board
proposed to allow an issuer to assume
that no additional transactions occurred
after the end of the billing cycle, that the
account balance will be paid in full, and
that no additional finance charges will
be applied to the account between the
date the statement was issued and the
date of the final payment. The final rule
retains these provisions as proposed.
These assumptions are necessary to
have a finite solution to the repayment
period calculation. Without these
assumptions, the repayment period
could be infinite.
d. Minimum payments are made each
month. In proposed Appendix M1 to
part 226, issuers would have been
allowed to assume that minimum
payments are made each month and any
debt cancellation or suspension
agreements or skip payment features do
not apply to a consumer’s account. The
final rule retains this provision as
proposed. The Board believes that this
assumption will ease compliance
burden on issuers, without a significant
impact on the accuracy of the
repayment estimates for consumers.
e. APR will not change. TILA Section
127(b)(11), as revised by the Credit Card
Act, provides that in calculating the
minimum payment repayment estimate,
a creditor must apply the interest rate or
rates in effect on the date on which the
disclosure is made until the date on
which the balance would be paid in full.
Nonetheless, if the interest rate in effect
on the date on which the disclosure is
made is a temporary rate that will
change under a contractual provision
applying an index or formula for
subsequent interest rate adjustment, the
creditor must apply the interest rate in
effect on the date on which the
disclosure is made for as long as that
interest rate will apply under that
contractual provision, and then apply
an interest rate based on the index or
formula in effect on the applicable
billing date. As discussed above, if any

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promotional APRs apply to a
cardholder’s account, other than
deferred interest or similar plans, a
credit card issuer in calculating the
minimum payment repayment estimate
during the promotional period would be
required to apply the promotional
APR(s) until it expires and then must
apply the rate that applies after the
promotional rate(s) expires. If the rate
that applies after the promotional rate(s)
expires is a variable rate, a card issuer
would be required to calculate that rate
based on the applicable index or
formula. This variable rate would be
considered accurate if it was in effect
within the last 30 days before the
minimum payment repayment estimate
is provided. For deferred interest or
similar plans, if minimum payments
under the plan will repay the balances
or transactions in full prior to the
expiration of the specified period of
time, a card issuer must assume that the
consumer will not be obligated to pay
the accrued interest. This means, in
calculating the minimum payment
repayment estimate, the card issuer
must apply a zero percent APR to the
balance subject to the deferred interest
or similar plan. If, however, minimum
payments under the deferred interest or
similar plan may not repay the balances
or transactions in full by the expiration
of the specified period of time, a credit
card issuer must assume that a
consumer will not repay the balances or
transactions in full prior to the
expiration of the specified period of
time and thus the consumer will be
obligated to pay the accrued interest.
This means, in calculating the minimum
payment repayment estimate, the card
issuer must apply the APR at which
interest is accruing (or deferred interest
is accruing) to the balance subject to the
deferred interest or interest waiver plan.
Consistent with TILA Section
127(b)(11), as revised by the Credit Card
Act, the Board proposed to allow issuers
to assume that the APR on the account
will not change either through the
operation of a variable rate or the
change to a rate, except with respect to
promotional APRs as discussed above.
The final rule retains this provision as
proposed. For example, if a penalty APR
currently applies to a consumer’s
account, an issuer would be allowed to
assume that the penalty APR will apply
to the consumer’s account indefinitely,
even if the consumer may potentially
return to a non-penalty APR in the
future under the account agreement.
f. Payment allocation. In proposed
Appendix M1 to part 226, the Board
proposed to allow issuers to assume that
payments are allocated to lower APR
balances before higher APR balances

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when multiple APRs apply to an
account. The final rule retains this
provision as proposed. As discussed in
the section-by-section analysis to
§ 226.53, the rule permits issuers to
allocate minimum payment amounts as
they choose; however, issuers are
restricted in how they may allocate
payments above the minimum payment
amount. The Board assumes that issuers
are likely to allocate the minimum
payment amount to lower APR balances
before higher APR balances, and issuers
may assume that is the case in
calculating the minimum payment
repayment estimate.
g. Account not past due and the
account balance does not exceed the
credit limit. The proposed rule would
have allowed issuers to assume that the
consumer’s account is not past due and
the account balance is not over the
credit limit. The final rule retains this
provision as proposed. The Board
believes that this assumption will ease
compliance burden on issuers, without
a significant impact on the accuracy of
the repayment estimates for consumers.
In response to the October 2009
Regulation Z Proposal, one commenter
asked for confirmation that if the
account terms operate such that the past
due amount will be added to the
minimum payment due in the next
billing cycle, the card issuer may
assume that the consumer will pay that
higher minimum payment amount in
the next billing cycle in calculating the
minimum payment repayment estimate.
The Board notes that while issuers are
allowed to assume that an account is not
past due, the issuer is not required to
assume that fact. The Board notes that
under Appendix M1 to part 226, when
calculating the minimum payment
repayment estimate, a credit card issuer
may make certain assumptions about
account terms (as set forth in paragraph
(b)(4) of Appendix M1 to part 226) or
may use the account term that applies
to a consumer’s account.
h. Rounding assumed payments,
current balance and interest charges to
the nearest cent. Under proposed
Appendix M1 to part 226, when
calculating the minimum payment
repayment estimate, an issuer would
have been permitted to round to the
nearest cent the assumed payments,
current balance and interest charges for
each month, as shown in proposed
Appendix M2 to part 226. The final rule
retains this provision as proposed.
5. Tolerances. The Board proposed to
provide that the minimum payment
repayment estimate calculated by an
issuer will be considered accurate if it
is not more than 2 months above or
below the minimum payment

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repayment estimate determined in
accordance with the guidance in
proposed Appendix M1 to part 226,
prior to rounding. The final rule retains
this provision with one technical
revision as discussed below. This
tolerance would prevent small
variations in the calculation of the
minimum payment repayment estimate
from causing a disclosure to be
inaccurate. Take, for example, a
minimum payment formula of the
greater of 2 percent or $20 and two
separate amortization calculations that,
at the end of 28 months, arrived at
remaining balances of $20 and $20.01
respectively. The $20 remaining balance
would be paid off in the 29th month,
resulting in the disclosure of a 2-year
repayment period due to the Board’s
rounding rule set forth in
§ 226.7(b)(12)(i)(B). The $20.01
remaining balance would be paid off in
the 30th month, resulting in the
disclosure of a 3-year repayment period
due to the Board’s rounding rule. Thus,
in the example above, an issuer would
be in compliance with the guidance in
Appendix M1 to part 226 by disclosing
3 years, instead of 2 years, because the
issuer’s estimate is within the 2 months’
tolerance, prior to rounding. In addition,
the rule also provides that even if an
issuer’s estimate is more than 2 months
above or below the minimum payment
repayment estimate calculated using the
guidance in Appendix M1 to part 226,
so long as the issuer discloses the
correct number of years to the consumer
based on the rounding rule set forth in
§ 226.7(b)(12)(i)(B), the issuer would be
in compliance with the guidance in
Appendix M1 to part 226. For example,
assume the minimum payment
repayment estimate calculated using the
guidance in Appendix M1 to part 226 is
32 months (2 years, 8 months), and the
minimum payment repayment estimate
calculated by the issuer is 38 months (3
years, 2 months). Under the rounding
rule set forth in § 226.7(b)(12)(i)(B), both
of these estimates would be rounded
and disclosed to the consumer as 3
years. Thus, if the issuer disclosed 3
years to the consumer, the issuer would
be in compliance with the guidance in
Appendix M1 to part 226 even through
the minimum payment repayment
estimate calculated by the issuer is
outside the 2 months’ tolerance amount.
In response to comments received on
the October 2009 Regulation Z Proposal,
Appendix M1 to part 226 is revised to
clarify that the 2-month tolerance
described above will apply even if the
card issuer uses the consumer’s account
terms in calculating the minimum
payment repayment estimate (instead of

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the listed assumptions set forth in
paragraph (b)(4) of Appendix M1 to part
226).
The Board recognizes that the
minimum payment repayment
estimates, the minimum payment total
cost estimates, the estimated monthly
payments for repayment in 36 months,
and the total cost estimates for
repayment in 36 months, as calculated
in Appendix M1 to part 226, are
estimates. The Board would expect that
issuers would not be liable under
federal or State unfair or deceptive
practices laws for providing inaccurate
or misleading information, when issuers
provide to consumers these disclosures
calculated according to guidance
provided in Appendix M1 to part 226,
as required by TILA.
Calculating the minimum payment
total cost estimate. Under proposed
Appendix M1 to part 226, when
calculating the minimum payment total
cost estimate, a credit card issuer would
have been required to total the dollar
amount of the interest and principal that
the consumer would pay if he or she
made minimum payments for the length
of time calculated as the minimum
payment repayment estimate using the
guidance in proposed Appendix M1 to
part 226. Under the proposal, the
minimum payment total cost estimate
would have been deemed to be accurate
if it is based on a minimum payment
repayment estimate that is within the
tolerance guidance set forth in proposed
Appendix M1 to part 226, as discussed
above. The final rule adopts these
provisions as proposed. For example,
assume the minimum payment
repayment estimate calculated using the
guidance in Appendix M1 to part 226 is
28 months (2 years, 4 months), and the
minimum payment repayment estimate
calculated by the issuer is 30 months (2
years, 6 months). The minimum
payment total cost estimate will be
deemed accurate even if it is based on
the 30 month estimate for length of
repayment, because the issuer’s
minimum payment repayment estimate
is within the 2 months’ tolerance, prior
to rounding. In addition, assume the
minimum payment repayment estimate
calculated using the guidance in
Appendix M1 to part 226 is 32 months
(2 years, 8 months), and the minimum
payment repayment estimate calculated
by the issuer is 38 months (3 years, 2
months). Under the rounding rule set
forth in § 226.7(b)(12)(i)(B), both of
these estimates would be rounded and
disclosed to the consumer as 3 years. If
the issuer based the minimum payment
total cost estimate on 38 months (or any
other minimum payment repayment
estimate that would be rounded to 3

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years), the minimum payment total cost
estimate would be deemed to be
accurate.
Calculating the estimated monthly
payment for repayment in 36 months.
Under proposed Appendix M1 to part
226, when calculating the estimated
monthly payment for repayment in 36
months, a credit card issuer would have
been required to calculate the estimated
monthly payment amount that would be
required to pay off the outstanding
balance shown on the statement within
36 months, assuming the consumer paid
the same amount each month for 36
months.
In calculating the estimated monthly
payment for repayment in 36 months,
the Board proposed to require an issuer
to use a weighted APR that is based on
the APRs that apply to a cardholder’s
account and the portion of the balance
to which the rate applies, as shown in
proposed Appendix M2 to part 226. In
response to the October 2009 Regulation
Z Proposal, several industry
commenters requested that the Board
allow issuers to utilize other methods of
calculating the estimated monthly
payment for repayment in 36 months
(other than a weighted average). These
commenters indicate that use of the
weighted average does not seem to
provide the most accurate calculation in
all circumstances and other methods of
calculating the estimated monthly
payment for repayment in 36 months,
which do not use the weighted average,
provide less variance and are arguably
more accurate.
Based on these comments, Appendix
M1 to part 226 is revised to permit card
issuers to use methods of calculating the
estimated monthly payment for
repayment in 36 months other than a
weighted average, so long as the
calculation results in the same payment
amount each month and so long as the
total of the payments would pay off the
outstanding balance shown on the
periodic statement within 36 months.
The Board believes this approach will
provide card issuers with the flexibility
to use calculation methods other than a
weighed APR that provide more
accurate estimates of the monthly
payment for repayment in 36 months.
Nonetheless, Appendix M1 to part
226 would still permit, but not require,
card issuers to use a weighted APR to
calculate the estimated monthly
payment for repayment in 36 months.
The Board believes that permitting card
issuers to use a weighted APR to
calculate the estimated monthly
payment for repayment in 36 months
when multiple APRs apply to an
account will ease compliance burden on
issuers by significantly simplifying the

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calculation of the estimated monthly
payment, without a significant impact
on the accuracy of the estimated
monthly payments for consumers.
Appendix M1 to part 226 provides
guidance on how to calculate the
weighted APR if promotional APRs
apply. If any promotional terms related
to APRs apply to a cardholder’s account,
other than deferred interest or similar
plans, in calculating the weighted APR,
the issuer must calculate a weighted
average of the promotional rate and the
rate that will apply after the
promotional rate expires based on the
percentage of 36 months each rate will
apply, as shown in Appendix M2 to part
226.
Under Appendix M1 to part 226, for
deferred interest or similar plans, if
minimum payments under the plan will
repay the balances or transactions in full
prior to the expiration of the specified
period of time, a card issuer in
calculating the weighted APR must
assume that the consumer will not be
obligated to pay the accrued interest.
This means, in calculating the weighted
APR, the card issuer must apply a zero
percent APR to the balance subject to
the deferred interest or similar plan. If,
however, minimum payments under the
deferred interest or similar plan may not
repay the balances or transactions in full
prior to the expiration of the specified
period of time, a credit card issuer in
calculating the weighted APR must
assume that a consumer will not repay
the balances or transactions in full prior
to the expiration of the specified period
and thus the consumer will be obligated
to pay the accrued interest. This means,
in calculating the weighted APR, the
card issuer must apply the APR at
which interest is accruing to the balance
subject to the deferred interest or similar
plan. To simplify the calculation of the
repayment estimates, this approach
focuses on whether minimum payments
will repay the balances or transactions
in full prior to the expiration of the
specified period of time instead of
whether the estimated monthly payment
for repayment in 36 months will repay
the balances or transaction prior to the
expiration of the specified period. The
Board believes that if minimum
payments under the deferred interest or
similar plan will not repay the balances
or transactions in full prior to the
expiration of the specified period of
time, it is not likely that the estimated
monthly payment for repayment in 36
months will repay the balances or
transactions in full prior to the
expiration of the specified period, given
that (1) under § 226.53, card issuers
generally may not allocate payments in
excess of the minimum payment to

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deferred interest or similar balances
before other balances on which interest
is being charged except in the last two
months before a deferred interest or
similar period is set to expire (unless
the card issuer is complying with a
consumer request), and (2) deferred
interest or similar periods typically are
shorter than 3 years.
In the October 2009 Regulation Z
Proposal, the Board requested comment
on whether the Board should adopt
specific tolerances for calculation and
disclosure of the estimated monthly
payment for repayment in 36 months,
and if so, what those tolerances should
be. In response to the October 2009
Regulation Z Proposal, one industry
commenter suggested the Board adopt a
tolerance of 10 percent, such that the
estimated monthly payment for
repayment in 36 months that is
disclosed to the consumer would be
considered accurate if it is not more
than 10 percent above or below the
estimated monthly payment for
repayment in 36 months determined in
accordance with the guidance in
Appendix M1 to part 226. Another
industry commenter suggested 5 percent
as the tolerance amount. The final rule
adopts 10 percent as the tolerance
amount for accuracy of the estimated
monthly payment for repayment in 36
months, to account for complexity in
calculating that disclosure.
Calculating the total cost estimate for
repayment in 36 months. Under
proposed Appendix M1 to part 226,
when calculating the total cost estimate
for repayment in 36 months, a credit
card issuer would have been required to
total the dollar amount of the interest
and principal that the consumer would
pay if he or she made the estimated
monthly payment for repayment in 36
months calculated under proposed
Appendix M1 to part 226 each month
for 36 months. The final rule retains this
provision as proposed.
In the October 2009 Regulation Z
Proposal, the Board requested comment
on whether the Board should adopt
specific tolerances for calculation and
disclosure of the total cost estimate for
repayment in 36 months, and if so, what
those tolerances should be. In response
to the October 2009 Regulation Z
Proposal, one industry commenter
suggested that the Board amend
Appendix M1 to part 226 to provide that
the total cost estimate for repayment in
36 months is deemed accurate if it is
based on the estimated monthly
payment for repayment in 36 months
that is calculated in accordance with
paragraph (d) of Appendix M1 to part
226. The Board recognizes that the total
cost estimate for repayment in 36

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months is an estimate. Accordingly, the
Board revises Appendix M1 to part 226
to incorporate the above accuracy
standard for the total cost estimate for
repayment in 36 months.
Calculating savings estimate for
repayment in 36 months. Under
proposed Appendix M1 to part 226,
when calculating the savings estimate
for repayment in 36 months, a credit
card issuer would be required to
subtract the total cost estimate for
repayment in 36 months calculated
under paragraph (e) of Appendix M1
(rounded to the nearest whole dollar as
set forth in proposed
§ 226.7(b)(12)(i)(F)(3)) from the
minimum payment total cost estimate
calculated under paragraph (c) of
Appendix M1 (rounded to the nearest
whole dollar as set forth in proposed
§ 226.7(b)(12)(i)(C)). The final rule
retains this provision as proposed.
In the October 2009 Regulation Z
Proposal, the Board requested comment
on whether the Board should adopt
specific tolerances for calculation and
disclosure of the savings estimate for
repayment in 36 months, and if so, what
those tolerances should be. In response
to the October 2009 Regulation Z
Proposal, one industry commenter
suggested that the Board amend
Appendix M1 to part 226 to provide that
the savings estimate for repayment in 36
months is deemed to be accurate if it is
based on the total cost estimate for
repayment in 36 months that is
calculated in accordance with paragraph
(e) of Appendix M1 to part 226 and the
minimum payment total cost estimate
calculated under paragraph (c) of
Appendix M1 to part 226. The Board
recognizes that the savings estimate for
repayment in 36 months is an estimate.
Accordingly, the Board revises
Appendix M1 to part 226 to incorporate
the above accuracy standard for the
saving estimate.

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Appendix M2—Sample Calculations of
Repayment Disclosures
In proposed Appendix M2, the Board
proposed to provide sample calculations
for the minimum payment repayment
estimate, the total cost repayment
estimate, the estimated monthly
payment for repayment in 36 months,
the total cost estimate for repayment in
36 months, and the savings estimate for
repayment in 36 months discussed in
proposed Appendix M1 to part 226. The
final rule retains Appendix M2 to part
226 as proposed.

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Additional Issues Raised by
Commenters
Circumvention or Evasion
Consumer groups and a member of
Congress requested that the Board adopt
a provision specifically prohibiting
creditors from circumventing or evading
Regulation Z. However, this request
seems to suggest that circumvention or
evasion of Regulation Z is permitted
unless specifically prohibited by the
Board when, in fact, the opposite is true.
Nothing in TILA or Regulation Z
permits a creditor to circumvent or
evade their provisions. Thus, although
the Board agrees that circumvention or
evasion of Regulation Z is prohibited,
the Board does not believe that it is
necessary or appropriate to adopt a
provision specifically prohibiting
circumvention or evasion. Furthermore,
because the requested provision would
be broad and general, the Board is
concerned that it would produce
uncertainty for creditors regarding
compliance with Regulation Z and for
the agencies that supervise compliance
with Regulation Z without producing
compensating benefits for consumers.
Accordingly, it appears that the better
approach is for the Board to continue
using its authority under TILA Section
105(a) to prevent circumvention or
evasion by prohibiting specific practices
that—although arguably not expressly
prohibited by TILA—are nevertheless
clearly inconsistent with its provisions.
For example, in this rulemaking, the
Board has:
• Provided that the restrictions in
revised TILA Section 171 and new TILA
Section 172 on increasing annual
percentage rates and certain fees
continue to apply after an account is
closed or acquired by another creditor
or after the balance is transferred to
another credit account issued by the
same creditor or its affiliate or
subsidiary. See § 226.55(d).
• Provided that a card issuer that uses
fixed ‘‘floors’’ to exercise control over
the operation of an index cannot utilize
the exception for variable rates in
revised TILA Section 171(b)(2). See
comment 55(b)(2)–2.
• Provided that the restrictions in
new TILA Section 127(n) apply not only
to fees charged to a credit card account
but also to fees that the consumer is
required to pay with respect to that
account through other means (such as
through a payment from the consumer
to the card issuer or from another credit
account provided by the card issuer).
See comment 52(a)(1)–1.
The Board will continue to monitor
industry practices and take action when
appropriate. In addition, Section 502 of

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the Credit Card Act requires that—at
least every two years—the Board
conduct a review of, among other
things, the terms of credit card
agreements, the practices of card
issuers, the effectiveness of credit card
disclosures, and the adequacy of
protections against unfair or deceptive
acts or practices relating to credit cards.
Waiver or Forfeiture of Protections
Consumer groups also requested
that—in order to prevent creditors from
misleading consumers into consenting
to practices prohibited by Regulation
Z—the Board adopt a provision
affirmatively stating that the protections
in Regulation Z cannot be waived or
forfeited. However, as above, this
request incorrectly assumes that
creditors are generally permitted to
engage in practices prohibited by
Regulation Z in these circumstances.
There is no such general exception to
the provisions in Regulation Z. Instead,
the Board has expressly and narrowly
defined the circumstances in which a
consumer’s consent or request alters the
requirements in Regulation Z.74 For this
reason, the Board does not believe that
the requested provision is necessary.
VI. Mandatory Compliance Dates
A. Mandatory compliance dates—in
general. The mandatory compliance
date for the portion of § 226.5(a)(2)(iii)
regarding use of the term ‘‘fixed’’ and for
§§ 226.5(b)(2)(ii), 226.7(b)(11),
226.7(b)(12), 226.7(b)(13), 226.9(c)(2)
(except for 226.9(c)(2)(iv)(D)), 226.9(e),
226.9(g) (except for 226.9(g)(3)(ii)),
226.9(h), 226.10, 226.11(c), 226.16(f),
and §§ 226.51–226.58 is February 22,
2010. The mandatory compliance date
for all other provisions of this final rule
is July 1, 2010. For those provisions that
are effective July 1, 2010, except to the
extent that early compliance with this
final rule is permitted, creditors
generally must comply with the existing
requirements of Regulation Z until July
1, 2010.
B. Prospective application of new
rules. The final rule is prospective in
application. The following paragraphs
set forth additional guidance and
examples as to how a creditor must
74 See, e.g., comment 53(b)–5 (clarifying that
preprinted language in an account agreement or on
a payment coupon does not constitute a consumer
request for purposes of allocating a payment in
excess of the minimum pursuant to § 226.53(b)(2));
revised § 226.9(c)(2)(i) (clarifying that the statement
in § 226.9(c)(2)(i) that the 45-day timing
requirement does not apply if the consumer has
agreed to a particular change is solely intended for
use in the unusual instance when a consumer
substitutes collateral or when the creditor can
advance additional credit only if a change relatively
unique to that consumer is made).

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comply with the final rule by the
relevant mandatory compliance date.
C. Tabular summaries that
accompany applications or solicitations
(§ 226.5a). Credit and charge card
applications provided or made available
to consumers on or after July 1, 2010
must comply with the final rule,
including format and terminology
requirements. For example, if a directmail application or solicitation is
mailed to a consumer on June 30, 2010,
it is not required to comply with the
new requirements, even if the consumer
does not receive it until July 7, 2010. If
a direct-mail application or solicitation
is mailed to consumers on or after July
1, 2010, however, it must comply with
the final rule. If a card issuer makes an
application or solicitation available to
the general public, such as ‘‘take-one’’
applications, any new applications or
solicitations issued by the creditor on or
after July 1, 2010 must comply with the
new rule. However, if a card issuer
issues an application or solicitation by
making it available to the public prior
to July 1, 2010, for example by
restocking an in-store display of ‘‘takeone’’ applications on June 15, 2010,
those applications need not comply
with the new rule, even if a consumer
may pick up one of the applications
from the display after July 1, 2010. Any
‘‘take-one’’ applications that the card
issuer uses to restock the display on or
after July 1, 2010, however, must
comply with the final rule.
D. Account-opening disclosures
(§ 226.6). Account-opening disclosures
furnished on or after July 1, 2010 must
comply with the final rule, including
format and terminology requirements.
The relevant date for purposes of this
requirement is the date on which the
disclosures are furnished, not when the
consumer applies for the account. For
example, if a consumer applies for an
account on June 30, 2010, but the
account-opening disclosures are not
mailed until July 2, 2010, those
disclosures must comply with the final
rule. In addition, if the disclosures are
furnished by mail, the relevant date is
the day on which the disclosures were
sent, not the date on which the
consumer receives the disclosures.
Thus, if a creditor mails the accountopening disclosures on June 30, 2010,
even if the consumer receives those
disclosures on July 7, 2010, the
disclosures are not required to comply
with the final rule.
E. Periodic statements (§ § 226.7 and
226.5(b)(2)).
Timing requirements (§ 226.5(b)(2)).
As discussed in the July 2009
Regulation Z Interim Final Rule, revised
TILA Section 163 (as amended by the

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Credit Card Act) became effective on
August 20, 2009. Accordingly, the
interim final rule’s revisions to
§ 226.5(b)(2)(ii) also became effective on
August 22, 2009. In the interim final
rule, the Board recognized that, with
respect to open-end consumer credit
plans other than credit cards, it could be
difficult for some creditors to update
their systems to produce periodic
statements by August 20, 2009 that
disclosed payment due dates and grace
period expiration dates (if applicable)
that were consistent with the 21-day
requirement in revised § 226.5(b)(2)(ii).
As a result, the Board noted the
possibility that, for a short period of
time after August 20, some periodic
statements for open-end consumer
credit plans other than credit cards
might disclose payment due dates and
grace period expiration dates (if
applicable) that were technically
inconsistent with the interim final rule.
In these circumstances, the Board stated
that the creditor could remedy this
technical issue by prominently
disclosing elsewhere on or with the
periodic statement that the consumer’s
payment will not be treated as late for
any purpose if received within 21 days
after the statement was mailed or
delivered.
However, on November 6, 2009, the
Technical Corrections Act amended
Section 163(a) to remove the
requirement that creditors provide
periodic statements at least 21 days
before the payment due date with
respect to open-end consumer credit
plans other than credit card accounts.
Thus, effective November 6, 2009,
creditors were no longer required to
comply with § 226.5(b)(2)(ii) to the
extent inconsistent with TILA Section
163(a), as amended by the Technical
Corrections Act.
As noted above, the final rule’s
revisions to § 226.5(b)(2)(ii) and its
commentary are intended to implement
the Technical Corrections Act and to
clarify certain aspects of the interim
final rule. These revisions are not
intended to impose any new substantive
requirements on creditors. Nevertheless,
to the extent that these revisions require
creditors to make any changes to their
systems or processes for providing
periodic statements, the relevant date
for purposes of determining when a
creditor must comply with the final rule
is the date on which the periodic
statement is mailed or delivered, not the
due date or grace period expiration date
reflected on the statement. Thus, if a
periodic statement is mailed or
delivered on February 22, the creditor
must have reasonable procedures
designed to ensure that the payment due

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date and the grace period expiration
date are not earlier than March 15,
consistent with the revisions to
§ 226.5(b)(2)(ii) in this final rule.
However, if a periodic statement is
mailed or delivered on February 21, the
revisions to § 226.5(b)(2)(ii) in this final
rule do not apply to that statement.
Content requirements (§ 226.7).
Periodic statements mailed or delivered
on or after February 22, 2010 must
comply with § 226.7(b)(11), (b)(12), and
(b)(13) of the final rule. The requirement
in § 226.7(b)(11)(i)(A) that the due date
for a credit card account under an openend (not home-secured) consumer credit
plan be the same day each month
applies beginning with the first
statement for an account that is mailed
or delivered on or after February 22,
2010. The due date disclosed on the last
statement for an account mailed or
delivered prior to February 22, 2010
need not be the same day of the month
as the due date disclosed on the first
statement for that account that is mailed
or delivered on or after February 22,
2010.
For all other requirements of
§ 226.7(b), periodic statements mailed or
delivered on or after July 1, 2010 must
comply with the final rule. For example,
if a creditor mails a periodic statement
to the consumer on June 30, 2010, that
statement is not required to comply
with the final rule, even if the consumer
does not receive the statement until July
7, 2010.
For periodic statements mailed on or
after July 1, 2010, fees and interest
charges must be disclosed for the
statement period and year-to-date. For
the year-to-date figure, creditors comply
with the final rule by aggregating fees
and interest charges beginning with the
first periodic statement mailed on or
after July 1, 2010. The first statement
mailed on or after July 1, 2010 need not
disclose aggregated fees and interest
charges from prior cycles in the year. At
the creditor’s option, however, the yearto-date figure may reflect amounts
computed in accordance with comment
7(b)(6)–3 for prior cycles in the year.
The Board recognizes that a creditor
may wish to comply with certain
provisions of the final rule for periodic
statements that are mailed prior to July
1, 2010. A creditor may phase in
disclosures required on the periodic
statement under the final rule that are
not currently required prior to July 1,
2010. A creditor also may generally omit
from the periodic statement any
disclosures that are not required under
the final rule prior to July 1, 2010.
However, a creditor must continue to
disclose an effective APR unless and
until that creditor provides disclosures

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of fees and interest that comply with
§ 226.7(b)(6) of the final rule. Similarly,
as provided in § 226.7(a), in connection
with a HELOC, a creditor must continue
to disclose an effective APR unless and
until that creditor provides fee and
interest disclosures under § 226.7(b)(6).
F. Checks that access a credit card
account (§ 226.9(b)). A creditor must
comply with the disclosure
requirements of § 226.9(b)(3) of the final
rule for checks that access a credit
account that are provided on or after
July 1, 2010. Thus, for example, if a
creditor mails access checks to a
consumer on June 30, 2010, these
checks are not required to comply with
new § 226.9(b)(3), even if the consumer
receives them on July 7, 2010.
G. Notices of changes in terms and
penalty rate increases for credit card
accounts under an open-end (not homesecured) consumer credit plan
(§ 226.9(c)(2) and (g)).
In general. With the exception of the
formatting requirements in
§ 226.9(c)(2)(iv)(D) and (g)(3)(ii),
compliance with § 226.9(c)(2) and (g) is
mandatory on the effective date of this
final rule, February 22, 2010.
Compliance with the formatting
requirements set forth in
§ 226.9(c)(2)(iv)(D) and (g)(3)(ii) is
mandatory on July 1, 2010.
Change in terms notices. The relevant
date for determining whether a changein-terms notice must comply with the
new requirements of revised
§ 226.9(c)(2) is generally the date on
which the notice is provided, not the
effective date of the change. Therefore,
if a card issuer provides a notice of a
change in terms for a credit card
account under an open-end (not homesecured) consumer credit plan pursuant
to § 226.9(c)(2) of the July 2009
Regulation Z Interim Final Rule prior to
February 22, 2010, the notice generally
is required to comply with the
requirements of § 226.9(c)(2) of the
Board’s July 2009 Regulation Z Interim
Final Rule rather than the final rule.
Accordingly, a card issuer may
provide a notice in accordance with the
July 2009 Regulation Z Interim Final
Rule on February 20, 2010 disclosing a
change-in-terms effective April 6, 2009.
This notice would not be required to
comply with the revised requirements of
this final rule. For example, if the
change being disclosed is a rate increase
due to the consumer’s failure to make a
required minimum payment within 60
days of the due date, a notice provided
prior to February 22, 2010 is not
required to disclose the consumer’s
right to cure the rate increase by making
the first six minimum payments on time

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following the effective date of the rate
increase.
This transition guidance is similar to
the guidance the Board provided with
the July 2009 Regulation Z Interim Final
Rule. The Board believes that this is the
appropriate way to implement the
February 22, 2010 effective date in order
to ensure that institutions are provided
the full implementation period provided
under the Credit Card Act. In the
alternative, the Credit Card Act could be
construed to require creditors to provide
notices, pursuant to new § 226.9(c)(2),
45 days in advance of changes occurring
on or after February 22. However, this
reading would create uncertainty
regarding compliance with the rule by
requiring creditors to begin providing
change-in-terms notices in accordance
with revised § 226.9(c)(2) prior to the
publication of this final rule.
Accordingly, for clarity and consistency,
the Board believes the better
interpretation is that creditors must
begin to comply with amended TILA
Section 127(i) (as implemented in
amended § 226.9(c)(2)) for change-interms notices provided on or after
February 22, 2010.
Penalty rate increases. For rate
increases due to the consumer’s default
or delinquency or as a penalty, the 45day timing requirement of § 226.9(g) of
the July 2009 Regulation Z Interim Final
Rule currently applies to credit card
accounts under an open-end (not homesecured) consumer credit plan.
The Board is adopting an amended
§ 226.9(g) in this final rule, which
retains the 45-day notice requirement
from the July 2009 Regulation Z Interim
Final Rule, with several changes. For
example, for rate increases due to the
consumer’s failure to make a required
minimum payment within 60 days of
the due date, the final rule requires
disclosure of the consumer’s right to
cure the rate increase by making the first
six minimum payments on time
following the effective date of the rate
increase. Similar to, and for the reasons
discussed in connection with, the
transition guidance for § 226.9(c)(2), the
relevant date for determining whether a
change-in-terms notice must comply
with the new requirements of revised
§ 226.9(g) is generally the date on which
the notice is provided, not the effective
date of the rate increase. Therefore, if a
card issuer provides a notice of a rate
increase due to delinquency, default, or
as a penalty for a credit card account
under an open-end (not home-secured)
consumer credit plan pursuant to
§ 226.9(g) of the July 2009 Regulation Z
Interim Final Rule prior to February 22,
2010, the notice generally is required to
comply with the requirements of

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§ 226.9(g) of the Board’s July 2009
Regulation Z Interim Final Rule rather
than the final rule.
Workout and temporary hardship
arrangements. The Board’s July 2009
Regulation Z Interim Final Rule
amended § 226.9(c)(2) and (g) to provide
that creditors are not required to
provide 45 days advance notice when a
rate is increased due to the completion
or failure of a workout or temporary
hardship arrangement, provided that,
among other things, the creditor had
provided the consumer prior to
commencement of the arrangement with
a clear and conspicuous written
disclosure of the terms of the
arrangement (including any increases
due to completion or failure of the
arrangement). This final rule further
amends § 226.9(c)(2)(v)(D) to provide
that, although this disclosure must
generally be in writing, a creditor may
disclose the terms of the arrangement
orally by telephone, provided that the
creditor mails or delivers a written
disclosure of the terms to the consumer
as soon as reasonably practicable after
the oral disclosure is provided.
The revision to § 226.9(c)(2)(v)(D)
recognizes that workout and temporary
hardship arrangements are frequently
established over the telephone and that
creditors often apply the reduced rate
immediately. Accordingly, to the extent
that a creditor disclosed the terms of a
workout or temporary hardship
arrangement orally by telephone prior to
February 22, 2010, the creditor may
increase a rate to the extent consistent
with § 226.9(c)(2)(v)(D)(1) on or after
February 22 so long as the creditor has
mailed or delivered written disclosure
of the terms to the consumer by
February 22.
Changes necessary to comply with
final rule. The Board understands that,
in order to comply with the final rule by
February 22, 2010, card issuers may
have to make changes to the account
terms set forth in a consumer’s credit
agreement or similar legal documents.
The Board also understands that, in
some circumstances, the terms of the
account may be inconsistent with the
final rule on February 22, 2010 because
those terms have not yet been amended
consistent with the 45-day notice
requirement in § 226.9(c)(2). For
example, if a card issuer provides a
notice on January 30, 2010 informing
the consumer of changes to the method
used to calculate a variable rate
necessary to comply with § 226.55(b)(2),
changes to the balance computation
method necessary to comply with
§ 226.54, § 226.9(c)(2) technically
prohibits the issuer from applying those
changes to the account until March 16,

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2010. In these circumstances, however,
the card issuer must comply with the
provisions of the final rule on February
22, 2010, even if the terms of the
account have not yet been amended
consistent with § 226.9(c)(2). Otherwise,
card issuers could continue to, for
example, calculate variable rates in a
manner that is inconsistent with
§ 226.55(b)(2) after February 22, which
would not be consistent with Congress’
intent.
Accordingly, if on February 22, 2010
the terms of an account are inconsistent
with the final rule, the card issuer is
prohibited from enforcing those terms,
even if those terms have not yet been
amended consistent with the 45-day
notice requirement in § 226.9(c)(2).
Illustrative examples are provided
below in the transition guidance for
§ 226.55(b)(2).
Right to reject. The Board’s July 2009
Regulation Z Interim Final Rule adopted
§ 226.9(h), which provides consumers
with the right to reject certain
significant changes in account terms.
Under § 226.9(h), the right to reject
applies when the card issuer is required
to disclose that right in a § 226.9 notice.
Current § 226.9(c) and (g) generally
require disclosure of the right to reject
when a rate is increased and when
certain other significant account terms
are changed. However, under the final
rule, disclosure of the right to reject will
no longer be required for rate increases
because § 226.55 generally prohibits
application of increased rates to existing
balances. Thus, card issuers are not
required to provide consumers with the
right to reject a rate increase that is
subject to § 226.55, consistent with the
transition guidance for § 226.55
(discussed below).
Furthermore, as discussed above with
respect to § 226.9(c)(2), the Board
understands that card issuers will have
to make significant changes in account
terms in order to comply with the final
rule by February 22, 2010. Because it
would not be appropriate to permit
consumers to reject changes that are
mandated by the Credit Card Act and
this final rule, card issuers are not
required to provide consumers with the
right to reject a change that is necessary
to comply with the final rule. For
example, card issuers are not required to
provide a right to reject for changes to
a balance computation method
necessary to comply with § 226.54 or
changes to the method used to calculate
a variable rate necessary to comply with
§ 226.55(b)(2).
H. Notices of changes in terms and
penalty rate increases for other openend (not home-secured) plans
(§ 226.9(c)(2) and (g)).

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Change in terms notices—in general.
Compliance with § 226.9(c)(2) of the
final rule (except for the formatting
requirements of § 226.9(c)(2)(iv)(D)) is
mandatory on February 22, 2010 for
open-end (not home-secured) plans that
are not credit card accounts under an
open-end (not home-secured) consumer
credit plan. Prior to February 22, 2010,
such creditors may provide change-interms notices 15 days in advance of a
change, consistent with § 226.9(c)(1) of
the July 2009 Interim Final Rule. For
example, such a creditor may mail a
change-in-terms notice to a consumer on
February 20, 2010 disclosing a change
effective on March 7, 2010. In contrast,
a notice of a rate increase sent on
February 22, 2010 would be required to
comply with § 226.9(c)(2) of the final
rule (except for the formatting
requirements of § 226.9(c)(2)(iv)(D)), and
thus the change disclosed in the notice
could have an effective date no earlier
than April 8, 2010.
Promotional rates.75 Some creditors
that are not card issuers may have
outstanding promotional rate programs
that were in place before the effective
date of this final rule, but under which
the promotional rate will not expire
until after February 22, 2010. For
example, a creditor may have offered its
consumers a 5% promotional rate on
transactions beginning on September 1,
2009 that will be increased to 15%
effective as of September 1, 2010. Such
creditors may have concerns about
whether the disclosures that they have
provided to consumers in accordance
with these arrangements are sufficient to
qualify for the exception in
§ 226.9(c)(2)(v)(B). The Board notes that
§ 226.9(c)(2)(v)(B) of this final rule
requires written disclosures of the term
of the promotional rate and the rate that
will apply when the promotional rate
expires. The final rule further requires
that the term of the promotional rate
and the rate that will apply when the
promotional rate expires be disclosed in
close proximity and equally prominent
to the disclosure of the promotional
rate. The Board anticipates that many
creditors offering such a promotional
rate program may already have
complied with these advance notice
requirements in connection with
offering the promotional program.
The Board is nonetheless aware that
some other creditors may be uncertain
whether written disclosures provided at
the time an existing promotional rate
program was offered are sufficient to
75 For simplicity, the Board refers in this
transition guidance to ‘‘promotional rates.’’
However, pursuant to new comment 9(c)(2)(v)–9,
this transition guidance is intended to apply
equally to deferred interest or similar programs.

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comply with the exception in
§ 226.9(c)(2)(v)(B). For example, for
promotional rate offers provided after
February 22, 2010, the disclosure under
§ 226.9(c)(2)(v)(B)(1) must include the
rate that will apply after the expiration
of the promotional period. For an
existing promotional rate program, a
creditor might instead have disclosed
this rate narratively, for example by
stating that the rate that will apply after
expiration of the promotional rate is the
standard annual percentage rate
applicable to purchases. The Board does
not believe that it is appropriate to
require a creditor that generally
provided disclosures consistent with
§ 226.9(c)(2)(v)(B), but that are
technically not compliant because they
described the post-promotional rate
narratively, to provide consumers with
45 days’ advance notice before
expiration of the promotional period.
This would have the impact of imposing
the requirements of this final rule
retroactively, to disclosures given prior
to the February 22, 2010 effective date.
Therefore, a creditor that generally
made disclosures in connection with an
open-end (not home-secured) plan that
is not a credit card account under an
open-end (not home-secured) consumer
credit plan prior to February 22, 2010
complying with § 226.9(c)(2)(v)(B) but
that describe the type of postpromotional rate rather than disclosing
the actual rate is not required to provide
an additional notice pursuant to
§ 226.9(c)(2) before expiration of the
promotional rate in order to use the
exception.
Similarly, the Board acknowledges
that there may be some creditors with
outstanding promotional rate programs
that did not make, or, without
conducting extensive research, are not
aware if they made, written disclosures
of the length of the promotional period
and the post-promotional rate. For
example, some creditors may have made
these disclosures orally. For the same
reasons described in the foregoing
paragraph, the Board believes that it
would be inappropriate to preclude use
of the § 226.9(c)(2)(v)(B) exception by
creditors offering these promotional rate
programs. That interpretation of the rule
would in effect require creditors to have
complied with the precise requirements
of the exception before the February 22,
2010 effective date. However, the Board
believes at the same time that it would
be inconsistent with the intent of the
Credit Card Act for creditors that
provided no advance notice of the term
of the promotion and the postpromotional rate to receive an

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exemption from the general notice
requirements of § 229.9(c)(2).
Consequently, any creditor that is not
a card issuer that provides a written
disclosure to consumers subject to an
existing promotional rate program, prior
to February 22, 2010, stating the length
of the promotional period and the rate
or type of rate that will apply after that
promotional rate expires is not required
to provide an additional notice pursuant
to § 226.9(c)(2) prior to applying the
post-promotional rate. In addition, any
creditor that is not a card issuer that
provided, prior to February 22, 2010,
oral disclosures of the length of the
promotional period and the rate or type
of rate that will apply after the
promotional period also need not
provide an additional notice under
§ 226.9(c)(2). However, any creditor
subject to § 226.9(c)(2) that is not a card
issuer and has not provided advance
notice of the term of a promotion and
the rate that will apply upon expiration
of that promotion in the manner
described above prior to February 22,
2010 will be required to provide 45
days’ advance notice containing the
content set forth in this final rule before
raising the rate.
Penalty rate increases. For open-end
(not home-secured) plans that are not
credit card accounts under an open-end
(not home-secured) consumer credit
plan, § 226.9(c)(1) of the July 2009
Regulation Z Interim Final Rule requires
only that notice of an increase due to
the consumer’s default, delinquency, or
as a penalty must be given before the
effective date of the change. Therefore,
the relevant date for purposes of such
penalty rate increases generally is the
date on which the increase becomes
effective. For example, if a consumer
makes a late payment on February 15,
2010 that triggers penalty pricing, a
creditor that is not a card issuer may
increase the rate effective on or before
February 21, 2010 in compliance with
§ 226.9(c)(1) of the July 2009 Regulation
Z Interim Final Rule, and need not
provide 45 days’ advance notice of the
change.
The Board is aware that there may be
some circumstances in which a
consumer’s actions prior to February 22,
2010 trigger a penalty rate, but a creditor
that is not a card issuer may be unable
to implement that rate increase prior to
February 22, 2010. For example, a
consumer may make a late payment on
February 15, 2010 that triggers a penalty
rate, but the creditor may not be able to
implement that rate increase until
March 1, 2010 for operational reasons.
In these circumstances, the Board
believes that requiring 45 days’ advance
notice prior to the imposition of the

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penalty rate would not be appropriate,
because it would in effect require
compliance with new § 226.9(g) prior to
the February 22 effective date.
Therefore, for such penalty rate
increases that are triggered, but cannot
be implemented, prior to February 22,
2010, a creditor must either provide the
consumer, prior to February 22, 2010,
with a written notice disclosing the
impending rate increase and its effective
date, or must comply with new
§ 226.9(g). In the example described
above, therefore, a creditor could mail to
the consumer a notice on February 20,
2010 disclosing that the consumer has
triggered a penalty rate increase that
will be effective on March 1, 2010. If the
creditor mailed such a notice, it would
not be required to comply with new
§ 226.9(g). This transition guidance
applies only to penalty rate increases
triggered prior to February 22, 2010; if
a consumer engages in actions that
trigger penalty pricing on February 22,
2010, the creditor must comply with
new § 226.9(g) and, accordingly, must
provide the consumer with a notice at
least 45 days in advance of the effective
date of the increase.
I. Renewal disclosures (§ 226.9(e)).
Amended § 226.9(e) is effective
February 22, 2010. Accordingly,
renewal notices provided on or after
February 22, 2010 must be provided 30
days in advance of renewal and must
comply with § 226.9(e). If a creditor
provides a renewal notice prior to
February 22, 2010, even if the renewal
occurs after the effective date, that
notice need not comply with the final
rule. For example, a card issuer may
impose an annual fee and provide a
renewal notice on February 21, 2010
consistent with the alternative timing
rule currently in § 226.9(e)(2). In
addition, the requirement to provide a
renewal notice based on an undisclosed
change in a term required to be
disclosed pursuant to § 226.6(b)(1) and
(b)(2) applies only if the change
occurred on or after February 22, 2010.
The Board believes that this is
appropriate because card issuers may
not have systems in place to track
whether undisclosed changes of the
type subject to § 226.9(e) have occurred
prior to the effective date of this rule.
J. Advertising rules (§ 226.16).
Advertisements occurring on or after
February 22, 2010, such as an
advertisement broadcast on the radio,
published in a newspaper, or mailed on
February 22, 2010 or later, must comply
with the new rules regarding the use of
the term ‘‘fixed.’’ Thus, an advertisement
mailed on February 21, 2010 is not
required to comply with the final rule
regarding use of the term ‘‘fixed’’ even if

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that advertisement is received by the
consumer on February 28, 2010.
Advertisements occurring on or after
July 1, 2010, such as an advertisement
broadcast on the radio, published in a
newspaper, or mailed on July 1, 2010 or
later, must comply with the remainder
of the final rule regarding
advertisements.
K. Additional rules regarding
disclosures. The final rule contains
additional new rules, such as revisions
to certain definitions, that differ from
current interpretations and are
prospective. For example, creditors may
rely on current interpretations on the
definition of ‘‘finance charge’’ in § 226.4
regarding the treatment of fees for cash
advances obtained from automatic teller
machines (ATMs) until July 1, 2010. On
or after that date, however, such fees
must be treated as a finance charge. For
example, for account-opening
disclosures provided on or after July 1,
2010, a creditor will need to disclose
fees to obtain cash advances at ATMs in
accordance with the requirements
§ 226.6 of the final rule for disclosing
finance charges. In addition, a HELOC
creditor that chooses to continue to
disclose an effective APR on the
periodic statement will need to treat
fees for obtaining cash advances at
ATMs as finance charges for purposes of
computing the effective APR on or after
July 1, 2010. Similarly, foreign
transaction fees must be treated as a
finance charge on or after July 1, 2010.
L. Definition of open-end credit. As
discussed in the section-by-section
analysis to § 226.2(a)(20), all creditors
must provide closed-end or open-end
disclosures, as appropriate in light of
revised § 226.2(a)(20) and the associated
commentary, as of July 1, 2010.
M. Implementation of disclosure rules
in stages. As noted above, commenters
indicated creditors will likely
implement the disclosure requirements
of the final rule for which compliance
is mandatory by July 1, 2010 in stages.
As a result, some disclosures may
contain existing terminology required
currently under Regulation Z while
other disclosures may contain new
terminology required in this final rule.
For example, the final rule requires
creditors to use the term ‘‘penalty rate’’
when referring to a rate that can be
increased due to a consumer’s
delinquency or default or as a penalty.
In addition, creditors are required under
the final rule to use a phrase other than
the term ‘‘grace period’’ in describing
whether a grace period is offered for
purchases or other transactions. The
final rule also requires in some
circumstances that a creditor use a term
other than ‘‘finance charge,’’ such as

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‘‘interest charge.’’ As discussed in the
section-by-section analysis to the
January 2009 Regulation Z Rule, during
the implementation period, terminology
need not be consistent across all
disclosures. For example, if a creditor
uses terminology required by the final
rule in the disclosures given with
applications or solicitations, that
creditor may continue to use existing
terminology in the disclosures it
provides at account-opening or on
periodic statements until July 1, 2010.
Similarly, a creditor may use one of the
new terms or phrases required by the
final rule in a certain disclosure but is
not required to use other terminology
required by the final rule in that
disclosure prior to the mandatory
compliance date. For example, the
creditor may use new terminology to
describe the grace period, consistent
with the final rule, in the disclosures it
provides at account-opening, but may
continue to use other terminology
currently permitted under the rules to
describe a penalty rate in the same
account-opening disclosure. By the
mandatory compliance date of this rule,
however, all disclosures must have
consistent terminology.
N. Ability to pay rules (§ 226.51).
Section 226.51 applies to the opening of
all accounts on or after February 22,
2010 as well as to all credit line
increases occurring on or after February
22, 2010 for existing accounts. Industry
commenters suggested that the Board
apply the provisions of § 226.51 to
applications received on or after
February 22, 2010. The Board is
concerned, however, that if the rule is
applied only to applications received on
or after February 22, 2010, it will be
possible for a consumer whose
application is received before February
22, 2010 but whose account is not
opened until after February 22, 2010 to
be deprived of the protections afforded
by the statute. TILA Section 150 states,
in part, that a card issuer may not open
a credit card account unless the card
issuer has considered the consumer’s
ability to make the required payments.
Similarly, for consumer under 21 years
old, TILA Section 127(c)(8) prohibits the
issuance of a credit card without the
submission of a written application
meeting the requirements set forth in
the statute. Therefore, the Board
believes the relevant date is the date the
account is opened.
Industry commenters also requested
that the Board provide an exception to
§ 226.51 for accounts opened in
response to solicitations and
applications mailed before February 22,
2010. For the same reasons associated
with the Board’s decision to apply

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§ 226.51 to applications received on or
after February 22, 2010, the Board
declines to make such an exception. The
Board, however, is providing a limited
exception for firm offers of credit made
before February 22, 2010. The Fair
Credit Reporting Act prohibits
conditioning an offer on the consumer’s
income if income was not previously
established as one of the card issuer’s
specific criteria prior to prescreening.
15. U.S.C. 1681a(l)(1)(A). Consequently,
the Board does not believe § 226.51
should apply to accounts opened in
response to firm offers of credit made
before February 22, 2010 where income
was not previously established as a
specific criteria prior to prescreening.
The Board also received requests that
the provisions of § 226.51 not apply to
credit line increases on accounts in
existence before February 22, 2010. The
Board believes that grandfathering such
accounts would be contrary to the
Credit Card Act’s purpose, and therefore
declines to make such an exception. The
Board notes, however, that
§ 226.51(b)(2) only applies to accounts
that have been opened pursuant to
§ 226.51(b)(1)(ii). As a result, if a
consumer under the age of 21 has an
existing account that was opened before
February 22, 2010 without a cosigner,
guarantor, or joint accountholder, the
issuer need not obtain the written
consent required under § 226.51(b)(2)
before increasing the credit limit. The
issuer, however, must still evaluate the
consumer’s ability to make the required
payments under the credit line increase,
consistent with § 226.51(a). If the
consumer under the age of 21 is not able
to make the required payments under
the credit line increase, the issuer may
either refrain from granting the credit
line increase or have the consumer
obtain a cosigner, guarantor, or joint
accountholder on the account,
consistent with the procedures set forth
in § 226.51(b)(1)(ii), for the increased
credit line. Moreover, if a consumer
under the age of 21 has an existing
account that was opened before
February 22, 2010 with a cosigner,
guarantor, or joint accountholder, the
issuer must comply with § 226.51(b)(2)
before increasing the credit limit,
whether or not such cosigner, guarantor,
or joint accountholder is at least 21
years old.
O. Limitations on fees (§ 226.52). The
effective date for new TILA Section
127(n) is February 22, 2010.
Accordingly, card issuers must comply
with § 226.52(a) beginning on February
22, 2010. However, § 226.52(a) does not
apply to accounts opened prior to
February 22, 2010.

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Some commenters suggested that the
limitations in new TILA Section 127(n)
should apply to accounts opened less
than one year before the statutory
effective date. Although the Board has
generally taken the position that the
provisions of the Credit Card Act apply
to existing accounts as of the effective
date, the Board has also generally
attempted to avoid applying those
provisions retroactively. Section 127(n)
is different than most provisions of the
Credit Card Act because it applies only
during a specified period of time (the
first year after account opening). Thus,
if the Board were to apply § 226.52(a) to
any account opened on or after February
23, 2009, card issuers could be in
violation of the 25 percent limit as a
result of fees that were permissible at
the time they were imposed.76
The Board believes that limiting
application of new TILA Section 127(n)
and § 226.52(a) to accounts opened on
or after February 22, 2010 is consistent
with Congress’ intent. The Credit Card
Act expressly provides that certain
requirements in revised TILA Section
148(b) apply retroactively. Specifically,
although the Credit Card Act was
enacted on May 22, 2009, revised TILA
Section 148(b)(2) states that the
requirement that card issuers review
rate increases no less frequently than
once every six months applies to
‘‘accounts as to which the annual
percentage rate has been increased since
January 1, 2009.’’ However, Congress did
not include any language in new TILA
Section 127(n) suggesting that it should
apply retroactively.
P. Payment allocation (§ 226.53). The
effective date for revised TILA Section
164(b) is February 22, 2010.
Accordingly, card issuers must comply
with § 226.53 beginning on February 22,
2010. As of that date, § 226.53 applies
to existing as well as new accounts and
balances. Thus, if a card issuer receives
a payment that exceeds the required
minimum periodic payment on or after
February 22, 2010, the card issuer must
apply the excess amount consistent with
§ 226.53.
Q. Limitations on the imposition of
finance charges (§ 226.54). The effective
76 For example, if the Board interpreted new TILA
Section 127(n) as applying retroactively, a card
issuer that opened an account with a $500 limit and
$150 dollars in fees for the issuance or availability
of credit on March 1, 2009 would be in violation
of the Credit Card Act, despite the fact that the
legislation was not enacted until May 22, 2009.
Similarly, a card issuer that opened an account with
a $500 limit and $125 dollars in fees for the
issuance or availability of credit on June 1, 2009
would be prohibited from charging any fees to the
account (other than those exempted by
§ 226.52(a)(2)) until June 1, 2010 as a result of
imposing fees that were permitted at the time of
imposition.

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date for new TILA Section 127(j) is
February 22, 2010. Accordingly, card
issuers must comply with § 226.54
beginning on February 22, 2010. The
Board understands that card issuers
generally calculate finance charges
imposed with respect to transactions
that occur during a billing cycle at the
end of that cycle. Accordingly, if
§ 226.54 were applied to billing cycles
that end on or after February 22, 2010,
card issuers would be required to
comply with its requirements with
respect to transactions that occurred
before February 22, 2010. However, for
the reasons discussed above, the Board
does not believe that Congress intended
the provisions of the Credit Card Act to
apply retroactively unless expressly
provided. Accordingly, § 226.54 applies
to the imposition of finance charges
with respect to billing cycles that begin
on or after February 22, 2010.
R. Limitations on increasing annual
percentage rates, fees, and charges
(§ 226.55). The effective date for revised
TILA Section 171 and new TILA Section
172 is February 22, 2010. Accordingly,
compliance with § 226.55 is mandatory
beginning on February 22, 2010.
Prohibition on increases in rates and
fees (§ 226.55(a)). Beginning on
February 22, 2010, § 226.55(a) prohibits
a card issuer from increasing an annual
percentage rate or a fee or charge
required to be disclosed under
§ 226.6(b)(2)(ii), (iii), or (xii) unless the
increase is consistent with one of the
exceptions in § 226.55(b) or the
implementation guidance discussed
below. The prohibition in § 226.55(a)
applies to both existing accounts and
accounts opened after February 22,
2010.
Temporary rates—generally
(§ 226.55(b)(1)).77 If a rate that will
increase upon the expiration of a
specified period of time applies to a
balance on February 22, 2010,
§ 226.55(b)(1) permits the card issuer to
apply an increased rate to that balance
at expiration of the period so long as the
card issuer previously disclosed to the
consumer the length of the period and
the rate that would apply upon
expiration of the period. For example, if
on February 22, 2010 a 5% rate applies
to a $1,000 purchase balance and that
rate is scheduled to increase to 15% on
June 1, 2010, the card issuer may apply
the 15% rate to any remaining portion
of the $1,000 balance on June 1,
provided that the card issuer previously

disclosed that the 15% rate would apply
on June 1.
A card issuer has satisfied the
disclosure requirement in
§ 226.55(b)(1)(i) if it has provided
disclosures consistent with
§ 226.9(c)(2)(v)(B), as adopted by the
Board in the July 2009 Regulation Z
Interim Final Rule. Because
§ 226.9(c)(2)(v)(B) became effective on
August 20, 2009, the Board expects that
card issuers will have satisfied the
disclosure requirement in
§ 226.55(b)(1)(i) with respect to any
temporary rate offered on or after that
date. However, the Board understands
that, with respect to temporary rates
offered prior to August 20, 2009, card
issuers may be uncertain whether the
disclosures provided at the time those
rates were offered are sufficient to
comply with § 226.9(c)(2)(v)(B) and
§ 226.55(b)(1)(i). The Board addressed
this issue in the implementation
guidance for § 226.9(c)(2)(v)(B) in the
July 2009 Regulation Z Interim Final
Rule. See 74 FR 36091–36092. That
guidance applies equally with respect to
§ 226.55(b)(1)(i).
Specifically, the Board stated in the
July 2009 Regulation Z Interim Final
Rule that, if prior to August 20, 2009 a
creditor provided disclosures that
generally complied with
§ 226.9(c)(2)(v)(B) but described the type
of increased rate that would apply upon
expiration of the period instead of
disclosing the actual rate,78 the creditor
could utilize the exception in
§ 226.9(c)(2)(v)(B). See 74 FR 36092. In
these circumstances, a card issuer has
also satisfied the requirements of
§ 226.55(b)(1)(i).
In addition, the Board acknowledged
in the July 2009 Regulation Z Interim
Final Rule that, prior to August 20,
2009, some creditors may not have
provided written disclosures of the
period during which the temporary rate
would apply and the increased rate that
would apply thereafter or may not be
able to determine if they provided such
disclosures without conducting
extensive research.79 The Board stated
that, in these circumstances, a creditor
could utilize the exception in
§ 226.9(c)(2)(v)(B) if it provided written
disclosures that met the requirements in
§ 226.9(c)(2)(v)(B) prior to August 20,
2009 or if it can demonstrate that it
provided oral disclosures that otherwise
meet the requirements in
§ 226.9(c)(2)(v)(B). See 74 FR 36092.

77 For simplicity, this implementation guidance
refers to rates subject to § 226.55(b)(1) as ‘‘temporary
rates.’’ However, pursuant to comment 55(b)(1)–3,
this guidance is intended to apply equally to
deferred interest or similar programs.

78 For example: ‘‘After six months, the standard
annual percentage rate applicable to purchases will
apply.’’
79 For example, some creditors may have
provided these disclosures orally.

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Similarly, in these circumstances, a card
issuer that satisfies either of these
criteria has also satisfied the
requirements of § 226.55(b)(1)(i).
Temporary rates—six-month
requirement (§ 226.55(b)(1)). The
requirement in § 226.55(b)(1) that
temporary rates expire after a period of
no less than six months applies to
temporary rates offered on or after
February 22, 2010. Thus, for example, if
a card issuer offered a temporary rate on
December 1, 2009 that applies to
purchases until March 1, 2010,
§ 226.55(b)(1) would not prohibit the
card issuer from applying an increased
rate to the purchase balance on March
1 so long as the card issuer previously
disclosed the period during which the
temporary rate would apply and the
increased rate that would apply
thereafter. Some commenters suggested
that the six-month requirement in
§ 226.55(b)(1) (which implements new
TILA Section 172(b)) should apply to
temporary rates offered less than six
months before the statutory effective
date (in other words, any temporary rate
offered after September 22, 2009).
However, as discussed above with
respect to the restrictions on fees during
the first year after account opening in
new TILA Section 127(n) and new
§ 226.52(a), the Board believes that
limiting application of the six-month
requirement in new TILA Section 172(b)
to temporary rates offered on or after
February 22, 2010 is consistent with
Congress’ intent because—in contrast to
revised TILA Section 148—Congress did
not expressly provide that new TILA
Section 172(b) applies retroactively.
Variable rates (§ 226.55(b)(2)). If a rate
that varies according to a publiclyavailable index applies to a balance on
February 22, 2010, the card issuer may
continue to adjust that rate due to
changes in the relevant index consistent
with § 226.55(b)(2). However, if on
February 22, 2010 the account terms
governing the variable rate permit the
card issuer to exercise control over the
operation of the index in a manner that
is inconsistent with § 226.55(b)(2) or its
commentary, the card issuer is
prohibited from enforcing those terms
with respect to subsequent adjustments
to the variable rate, even if the terms of
the account have not yet been amended
consistent with the 45-day notice
requirement in § 226.9(c). The following
examples illustrate the application of
this guidance:
• Assume that the billing cycles for a
credit card account begin on the first
day of the month and end on the last
day of the month. The terms of the
account provide that, at the beginning of
each billing cycle, the card issuer will

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calculate the variable rate by adding a
margin of 10 percentage points to the
value of a publicly-available index on
the last day of the prior billing cycle.
However, contrary to § 226.55(b)(2), the
terms of the account also provide that
the variable rate will not decrease below
15%. See comment 55(b)(2)–2. On
January 30, 2010, the card issuer
provides a notice pursuant to
§ 226.9(c)(2) informing the consumer
that, effective March 16, the 15% fixed
minimum rate will be removed from the
account terms. On January 31, the value
of the index is 3% but, consistent with
the fixed minimum rate, the card issuer
applies a 15% rate beginning on
February 1. The card issuer is not
required to adjust the variable rate on
February 22 because the terms of the
account do not provide for a rate
adjustment until the beginning of the
March billing cycle. However, if the
value of the index is 3% on February 28,
the card issuer must apply a 13% rate
beginning on March 1, even though the
amendment to the account terms is not
effective until March 16.
• Assume that the billing cycles for a
credit card account begin on the first
day of the month and end on the last
day of the month. The terms of the
account provide that, at the beginning of
each billing cycle, the card issuer will
calculate the variable rate by adding a
margin of 10 percentage points to the
value of a publicly-available index.
However, contrary to § 226.55(b)(2), the
terms of the account also provide that
the variable rate will be calculated
based on the highest index value during
the prior billing cycle. See comment
55(b)(2)–2. On January 30, 2010, the
card issuer provides a notice pursuant
to § 226.9(c)(2) informing the consumer
that, effective March 16, the terms of the
account will be amended to provide that
the variable rate will be calculated
based on the value of the index on the
last day of the prior billing cycle. On
January 31, the value of the index is
4.9% but, because the highest value for
the index during the January billing
cycle was 5.1%, the card issuer applies
a 15.1% rate beginning on February 1.
The card issuer is not required to adjust
the variable rate on February 22 because
the terms of the account do not provide
for a rate adjustment until the beginning
of the March billing cycle. However, if
the value of the index is 4.9% on
February 28, the card issuer complies
with § 226.55(b)(2) if it applies a 14.9%
rate beginning on March 1, even though
the amendment to the account terms is
not effective until March 16.
Increases in rates and certain fees and
charges that apply to new transactions
(§ 226.55(b)(3)). Section 226.55(b)(3)

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applies to any increase in a rate or in a
fee or charge required to be disclosed
under § 226.6(b)(2)(ii), (iii), or (xii) that
is effective on or after February 22,
2010. Some commenters argued that the
Board should adopt guidance similar to
that in the July 2009 Regulation Z
Interim Final Rule, where the Board
determined that the relevant date for
purposes of compliance with revised
§ 226.9(c)(2) and new § 226.9(g) was
generally the date on which the notice
was provided. That guidance, however,
was based in large part on concerns
about requiring creditors to comply with
revised TILA Section 127(i) with respect
to notices provided as much as 45 days
prior to the statutory effective date. See
74 FR 36091.
In contrast, under this guidance, card
issuers are only required to comply with
revised TILA Section 171 with respect
to increases that take effect after the
statutory effective date. Furthermore, if
the relevant date for compliance with
§ 226.55(b)(3) was the date on which a
§ 226.9(c) or (g) notice was provided,
card issuers would be permitted to
apply increased rates, fees, or charges to
existing balances until April 7, 2010 so
long as the notice was sent before the
Credit Card Act’s February 22, 2010
effective date. The Board does not
believe that this was Congress’ intent.
The following examples illustrate the
application of this guidance:
• On January 7, 2010, a card issuer
provides a notice of an increase in the
purchase rate pursuant to § 226.9(c).
Consistent with § 226.9(c), the increased
rate is effective on February 21, 2010.
Therefore, § 226.55(b)(3) does not apply.
Accordingly, on February 21, 2010, the
card issuer may apply the increased rate
to both new purchases and the existing
purchase balance (provided the
consumer has not rejected application of
the increased rate to the existing balance
pursuant to § 226.9(h)).
• On January 8, 2010, a card issuer
provides a notice of an increase in the
purchase rate pursuant to § 226.9(c).
Consistent with § 226.9(c), the increased
rate is effective on February 22, 2010.
Therefore, § 226.55(b)(3) applies.
Accordingly, on February 22, 2010, the
card issuer cannot apply the increased
rate to purchases that occurred on or
before January 22, 2010 (which is the
fourteenth day after provision of the
notice) but may apply the increased rate
to purchases that occurred after that
date.
Prohibition on increasing rates and
certain fees and charges during first
year after account opening
(§ 226.55(b)(3)(iii)). The prohibition in
§ 226.55(b)(3)(iii) on increasing rates
and certain fees and charges during the

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first year after account opening applies
to accounts opened on or after February
22, 2010. Some commenters suggested
that this provision (which implements
new TILA Section 172(a)) should apply
to accounts opened less than one year
before the statutory effective date.
However, as discussed above with
respect to new TILA Section 172(b), the
Board believes that limiting application
of new TILA Section 172(a) to accounts
opened on or after February 22, 2010 is
consistent with Congress’ intent because
Congress did not expressly provide that
new TILA Section 172(a) applies
retroactively.
Delinquencies of more than 60 days
(§ 226.55(b)(4)). Section 226.55(b)(4)
applies once an account becomes more
than 60 days delinquent even if the
delinquency began prior to February 22,
2010. For example, if the required
minimum periodic payment due on
January 1, 2010 has not been received
by March 3, 2010, § 226.55(b)(4) permits
the card issuer to apply an increased
rate, fee, or charge to existing balances
on the account after providing notice
pursuant to § 226.9(c) or (g).
Workout and temporary hardship
arrangements (§ 226.55(b)(5)). Section
226.55(b)(5) applies to workout and
temporary hardship arrangements that
apply to an account on February 22,
2010. A card issuer that has complied
with § 226.9(c)(2)(v)(D) or the transition
guidance for that provision has satisfied
the disclosure requirement in
§ 226.55(b)(5)(i).
If a workout or temporary hardship
arrangement applies to an account on
February 22, 2010 and the consumer
completes or fails to comply with the
terms of the arrangement on or after that
date, § 226.55(b)(5)(ii) only permits the
card issuer to apply an increased rate,
fee, or charge that does not exceed the
rate, fee, or charge that applied prior to
commencement of the workout
arrangement. For example, assume that,
on January 1, 2010, a card issuer
decreases the rate that applies to a
$5,000 balance from 30% to 5%
pursuant to a workout or temporary
hardship arrangement between the
issuer and the consumer. Under this
arrangement, the consumer must pay by
the fifteenth of each month in order to
retain the 5% rate. The card issuer does
not receive the payment due on March
15 until March 20. In these
circumstances, § 226.55(b)(5)(ii) does
not permit the card issuer to apply a rate
to any remaining portion of the $5,000
balance that exceeds the 30% penalty
rate.
Servicemembers Civil Relief Act
(§ 226.55(b)(6)). If a card issuer reduced
an annual percentage rate pursuant to

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50 U.S.C. app. 527 prior to February 22,
2010 and the consumer leaves military
service on or after that date,
§ 226.55(b)(6) only permits the card
issuer to apply an increased rate that
does not exceed the rate that applied
prior to the reduction.
Closed or acquired accounts and
transferred balances (§ 226.55(d)).
Section 226.55(d) applies to any credit
card account under an open-end (not
home-secured) consumer credit plan
that is closed on or after February 22,
2010 or acquired by another creditor on
or after February 22, 2010. Section
226.55(d) also applies to any balance
that is transferred from a credit card
account under an open-end (not homesecured) consumer credit plan issued by
a creditor to another credit account
issued by the same creditor or its
affiliate or subsidiary on or after
February 22, 2010. Thus, beginning on
February 22, 2010, card issuers are
prohibited from increasing rates, fees, or
charges in these circumstances to the
extent inconsistent with § 226.55, its
commentary, and this guidance.
S. Over-the-limit transactions
(§ 226.56). For credit card accounts
opened prior to February 22, 2010, a
card issuer may elect to provide an optin notice to all of its account-holders on
or with the first periodic statement sent
after the effective date of the final rule.
Card issuers that choose to do so are
prohibited from assessing any over-thelimit fees or charges after the effective
date of the rule and prior to providing
the opt-in notice, and subsequently
could not assess any such fees or
charges unless and until the consumer
opts in and the card issuer sends written
confirmation of the opt-in. The final
rule does not, however, require that a
card issuer waive fees that are incurred
in connection with over-the-limit
transactions that occur prior to February
22, 2010 even if the consumer has not
opted in by the effective date. Thus, for
example, a card issuer may assess fees
if the consumer engages in an over-thelimit transaction prior to February 22,
2010, but the transaction posts or is
charged to the account after that date,
even if the consumer has not opted in
by the effective date.
Early compliance. For existing
accounts, an opt-in requirement could
potentially result in a disruption in a
consumer’s ability to complete
transactions if card issuers could not
send notices, and obtain consumer optins, until February 22, 2010.
Accordingly, the Board solicited
comment regarding whether a creditor
should be permitted to obtain consumer
consent for the payment of over-thelimit transactions prior to that date.

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Allowing creditors to obtain consumer
consent prior to February 22, 2010
could also allow creditors to phase in
their delivery of opt-in notices and
processing of consumer consents.
Industry commenters agreed that the
rule should permit creditors to obtain
consents prior to February 22, 2010 to
enable both creditors and consumers to
avoid a flood of opt-in notices and
transaction denials on or after that date.
One industry commenter urged the
Board to permit creditors to obtain valid
consumer consents so long as they
follow the requirements set forth in the
proposed rule and provide the proposed
model form. In contrast, consumer
groups and one state government agency
argued that creditors should not be
permitted to obtain consumer consents
prior to the effective date of the rule
because they did not believe that the
rule as proposed afforded consumers
adequate protections.
Under the final rule, card issuers may
provide the notice and obtain the
consumer’s affirmative consent prior to
the effective date, provided that the card
issuer complies with all the
requirements in § 226.56, including the
requirements to segregate the notice and
provide written confirmation of the
consumer’s choice. The opt-in notice
must also include the specified content
in § 226.56(e)(1). Use of Model Form G–
25(A), or a substantially similar notice,
constitutes compliance with the notice
requirements in § 226.56(e)(1). See
§ 226.56(e)(3). If an existing accountholder responds to an opt-in notice
provided before February 22, 2010 and
expresses a desire not to opt in, the
Board expects that the card issuer
would honor the consumer’s choice at
that time, unless the card issuer has
clearly and conspicuously explained in
the opt-in notice that the opt-in
protections do not apply until that date.
In addition, in order to minimize
potential disruptions to the payment
systems that may otherwise result if
card issuers could not send notices or
obtain consumer consents until near the
effective date of the rule, the Board
believes that it is appropriate to treat
opt-in notices that follow the model
form as proposed as a substantially
similar notice to the final model form
for purposes of § 226.56(e)(3). That is,
card issuers that provide opt-in notices
based on the proposed model form
would be deemed to be in compliance
with the over-the-limit opt-in
provisions, provided that the other
requirements of the rule, including the
written confirmation requirement, are
satisfied. The Board anticipates that
such relief would be temporary,
however, and expects that card issuers

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will transition to the final Model Form
G–25(A) as soon as reasonably
practicable after February 22, 2010 in
order to retain the safe harbor.
Prohibited practices. Sections
226.56(j)(2)–(4) prohibit certain credit
card acts or practices regarding the
imposition of over-the-limit fees. These
prohibitions are based on the Board’s
authority under TILA Section
127(k)(5)(B) to prescribe regulations that
prevent unfair or deceptive acts or
practices in connection with the
manipulation of credit limits designed
to increase over-the-limit fees or other
penalty fees. However, compliance with
the provisions of the final rule is not
required before February 22, 2010.
Thus, the final rule and the Board’s
accompanying analysis should have no
bearing on whether or not acts or
practices restricted or prohibited under
this rule are unfair or deceptive before
the effective date of this rule.
Unfair acts or practices can be
addressed through case-by-case
enforcement actions against specific
institutions, through regulations
applying to all institutions, or both. An
enforcement action concerns a specific
institution’s conduct and is based on all
of the facts and circumstances
surrounding that conduct. By contrast, a
regulation is prospective and applies to
the market as a whole, drawing bright
lines that distinguish broad categories of
conduct.
Moreover, as part of the Board’s
unfairness analysis, the Board has
considered that broad regulations, such
as the prohibitions in connection with
over-the-limit practices in the final rule,
can require large numbers of institutions
to make major adjustments to their
practices, and that there could be more
harm to consumers than benefit if the
regulations were effective earlier than
the effective date. If institutions were
not provided a reasonable time to make
changes to their operations and systems
to comply with the final rule, they
would either incur excessively large
expenses, which would be passed on to
consumers, or cease engaging in the
regulated activity altogether, to the
detriment of consumers. For example,
card issuers may be required to make
significant systems changes in order to
ensure that fees and interest charges
assessed during a billing cycle did not
cause an over-the-limit fee or charge to
be imposed on a consumer’s account.
Thus, because the Board finds an act or
practice unfair only when the harm
outweighs the benefits to consumers or
to competition, the implementation
period preceding the effective date set
forth in the final rule is integral to the

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Board’s decision to restrict or prohibit
certain acts or practices by regulation.
For these reasons, acts or practices
occurring before the effective date of the
final rule will be judged on the totality
of the circumstances under applicable
laws or regulations. Similarly, acts or
practices occurring after the rule’s
effective date that are not governed by
these rules will be judged on the totality
of the circumstances under applicable
laws or regulations. Consequently, only
acts or practices covered by the rule that
occur on or after the effective date
would be prohibited by the regulation.
T. Reporting and marketing rules for
college student open-end credit
(§ 226.57).
Prohibited inducements (§ 226.57(c)).
All tangible items offered to induce a
college student to apply for or
participate in an open end consumer
credit plan, on or near the campus of an
institution of higher education or at an
event sponsored by or related to an
institution of higher education, are
prohibited on or after February 22, 2010
pursuant to § 226.57(c). If a college
student has submitted an application
for, or agreed to participate in, an openend consumer credit plan prior to
February 22, 2010, in reliance on the
offer of a tangible item, such item may
still be provided to the student on or
after February 22, 2010.
Submission of reports to Board
(§ 226.57(d)). Section 226.57(d)(3)
provides that card issuers must submit
the first report regarding college credit
card agreements for the 2009 calendar
year to the Board by February 22, 2010.
U. Internet posting of credit card
agreements (§ 226.58). Section
226.58(c)(2) provides that card issuers
must submit credit card agreements
offered to the public as of December 31,
2009 to the Board no later than February
22, 2010.
V. Open-End Credit Secured by Real
Property.
In the May 2009 Regulation Z
Proposed Clarifications, the Board
solicited comment on whether
additional transition guidance is needed
for creditors that offer open-end credit
secured by real property, where it is
unclear whether that property is, or
remains, the consumer’s dwelling. The
issue arose because the January 2009
Regulation Z Rule preserved certain
existing rules, for example the rules
under §§ 226.6, 226.7, and 226.9, for
home-equity plans subject to § 226.5b
pending the completion of the Board’s
separate review of the rules applicable
to home-secured credit. The Board
noted that creditors offering open-end
credit secured by real property may be
uncertain how they should comply with

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the January 2009 Regulation Z Rule.
Financial institution commenters
suggested that creditors be permitted to
treat all open-end credit secured by
residential property as covered by
§ 226.5b, rather than the rules for openend (not home-secured) credit,
regardless of whether the property is the
consumer’s dwelling. Consumer group
commenters did not address this issue.
In the August 2009 Regulation Z
HELOC Proposal, the Board proposed to
adopt a new comment 5–1 that would
provide guidance in situations where a
creditor is uncertain whether an openend credit plan is covered by the
§ 226.5b rules for HELOCs or the rules
for open-end (not home-secured) credit.
The comment period on this proposal
closed on December 24, 2009, and the
Board is still considering the comments
it received.
Accordingly, the Board believes that
until the August 2009 Regulation Z
HELOC Proposal is finalized, it is
appropriate to permit creditors that offer
open-end credit secured by real
property that are uncertain whether the
plan is covered by § 226.5b to comply
with this final rule by complying with,
at their option, either the new rules that
apply to open-end (not home-secured)
credit, or the existing rules applicable to
home-equity plans. Therefore, if a
creditor that offers open-end credit
secured by real property is uncertain
whether that property is, or remains, the
consumer’s dwelling, that creditor may
comply with either the new rules
regarding account-opening disclosures
in § 226.6(b), periodic statement
disclosures in § 226.7(b), and change-interms notices in § 226.9(c)(2), or the
existing rules as preserved in
§§ 226.6(a), 226.7(a), and 226.9(c)(1).
However, such a creditor must treat the
product consistently for the purpose of
the disclosures in §§ 226.6, 226.7, and
226.9(c); f