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F ederal reserv e bank of DALLAS, TEXAS Dallas 75222 C ircu lar No. 77-115 October 12, 1977 PROPOSED AMENDMENT TO REGULATION Z Billing Requirements for Cash Advance Check T ransactions TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of G overnors of the Federal Reserve System has announced a proposal to modify existing provisions of its T ru th -in -L en d in g Regulation Z re lat ing to billing for cash advance check transactions. The proposed modification would permit cred ito rs to use the date on which a creditor c h arg e s a cash advance check to the custom er's account (the debit ing date) in billing custom ers. C reditors may continue to use the date a cash a d vance check is use d by the customer (the transaction date) or the date written on the check by the customer as p rese n tly allowed. However, the proposal would also provide that if the date of debiting is used and the customer makes any inquiry about the cash advance check transaction, the inquiry must be treated as a notification of a billing e r r o r trig g e rin g the proce d u res for settling billing e r r o r s u n d e r the Fair Credit Billing Act. F u rth e r, a questioned billing that uses the debiting date must be treated as an erroneous billing. This means that no finance c h a rg e on the transaction would be allowed d u rin g the time the credit card issu er took to p rovide the customer with documentary evidence supporting the bill. The Board made the proposal to facilitate compliance by c red ito rs who have experienced difficulty in ascertaining and stating on th eir bills the t r a n s a c tion dates relating to cash advance checks. In the light of these difficulties, the Board on September 2 announced that the date for full implementation of the section of Regulation Z relating to cash advance check transactions would be postponed from October 28, 1977 to March 28, 1978. The Board said then that it was considering proposals to facilitate compliance while maintaining requirem ents adequate to allow customers to identify transactions billed to them. A copy of the Board's o r d e r is prin te d on the following pages. Sincerely y o u r s , Robert H . Boykin First Vice P resid en t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) TITLE 12 - BANKS and BANKING CHAPTER II - FEDERAL RESERVE SYSTEM SUBCHAPTER A - BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (Reg. Z; Docket Nos. R-0087, R-0093) Part 226 - TRUTH-IN-LENDING Proposed amendment to Regulation Z concerning d escrip tiv e billing requirem ents AGENCY: Board of G overnors of the Federal Reserve System ACTION: Proposed rule SUMMARY: This proposed rule would amend the provision of Regulation Z that now r e q u ires that the date that a cash advance check transaction takes place be disclosed on the c r e d ito r's d es crip tiv e periodic billing statement. In lieu of disclosing the transaction date, the proposal would permit c re d ito rs to disclose the date of debiting (the date on which a cred ito r honors a cash advance check) provided that the cre d ito r treats any su b seq u ent related inquiry from a customer as a billing e r r o r and an erroneous billing u n d e r the Fair Credit Billing Act. The pu rp o se of the proposed rule is to facilitate compliance by certain cred ito rs who have e x p e r i enced operational difficulties in cap tu rin g transaction dates. Creditors with the capability of disclosing transaction dates would be permitted to do so. DATE: Comments must be received on o r before November 1, 1977. ADDRESS: S e c r e ta ry , Board of Governors of the Federal Reserve System, Washington, D.C. 20551. All materials submitted should include the docket num bers R-0087, R-0093. FOR FURTHER INFORMATION: Glenn E. Loney, Attorney, Fair Credit Practices Section, Divi sion of Consumer Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. (202) 452-2412. SUPPLEMENTARY INFORMATION: The Board of Governors of the Federal Reserve System is publishing for comment a proposed amendment to Regulation Z designed to facilitate compli ance with the d isc lo s u re requirem ents relating to cash advance check transactions that are descrip tively billed on periodic billing statements. The proposed amendment is in response to serious operational difficulties experienced by a number of c re d ito rs in c apturing t r a n s action dates on such ch eck s. The regulation c u r re n tly r eq u ire s that transaction dates be d is closed in all c ases. The proposed amendment would permit debiting dates to be disclosed in substitution for transaction dates provided that the cre d ito r treats any su b seq uen t customer inquiries seeking clarification of cash advance check transactions as billing e r r o r s and e r r o neous billings u n d e r the regulation. This would mean that no finance charge on such t r a n s actions would be allowed to accrue d u rin g the time that the cred ito r took to provide the customer with documentary or other evidence supporting the transactions. The c u r r e n t r e quirem ents were to become fully effective on October 28, 1977. In light of the creditor 2 - - compliance problems with these req u irem en ts, the Board on August 31, 1977, susp en d ed this effective date with re g a rd to cash advance transactions until March 28, 1978. The Board believes that the substitution of the date of debiting may be permitted without harm to the consum er's u n d erstand in g of transaction activity in his or h e r open-end cred it account. Cash advance transactions app ear to be relatively infrequent as compared with p u rc h a se transactions in such accounts. Moreover, cash advance transactions a p p ear to be substantially larg er in amount. Evidence submitted in su p po rt of these assumptions indi cated that one b a n k 's open-end credit plan averaged six cash advance transactions p e r account d u rin g 1976 and that the average amount was $176. Comparable figures on p u rch ase t r a n s actions u n d e r the same plan were 24 transactions p e r account d uring the year for an averag e amount of $29. This evidence suggests that consum ers may have less difficulty in recalling cash advance transactions in light of th eir relative infrequency and high dollar amounts. The Board is interested in having the views of interested pe rso ns on w hether these assumptions on dollar volume and frequency a r e typical of other open-end c red it plans. It is also interested in receiving relevant cost data on supplying transaction dates and debiting dates. P u rs u a n t to the authority g ran ted in 1 5 U .S .C . §1604 (1970), the Board proposes to amend p ara g ra p h 226. 7(k) (3) (ii) of Regulation Z, 12 CFR Part 226 as follows: Section 226.7—O pen-end cre d it accounts—specific d isc lo su res. * * * * * (k) *** (3) *** (ii) A description of the transaction, which ch aracterizes it as a cash advance, loan, o v erdraft loan, or other designation as a p p ro p ria te, and which includes the amount of the transaction and the date of the transaction 9e or the date which a p p e ars on the document or i n s t r u ment evidencing the transaction (if the customer signed the document or i n s tr u m e n t) , or the date of debiting the amount to the account, provided that if only the debiting date is disclosed and the customer submits a p ro p e r written notification of a billing e r r o r related to the t r a n s action, the c re d ito r shall treat such inquiry as a billing e r r o r u n d e r §§226.2(j) and 226.14, and as an erroneous billing u n d e r §226.1 4 (b ), and shall supply documentary evidence of the transaction w hether or not the customer req u ests it, within the time period allowed u n d er §226.14 for resolution of a billing e r r o r without ch arg e to the customer. If the date of deb it ing is disclosed, it must be reasonably identified as such on the periodic statement. To aid in the consideration of this proposal by the Board, interested person s are invited to submit relevant data, views, comments, or argu m en ts. All such material should be submitted in writing to the S e c re ta ry , Board of Governors of the Federal Reserve System, Washington, D .C . 20551, to be received not later than November 1, 1977. All material su b mitted should include the docket num bers R-0087, R-0093. Such information will be made available for inspection and copying upon r eq u est, except as provided in §261 .6(a) of the Board's Rules Regarding Availability of Information (12 CFR 261. 6 ( a ) ) . - 3 This notice is p ublished p u r s u a n t to §553 (b) of Title 5 United States Code and §262.2 (a) of the Rules of P rocedure of the Board of G overnors of the Federal Reserve System (12 CFR 262.2(a)) . By o r d e r of the Board of G o vern ors, September 28, 1977. (signed) Theodore E. Allison Theodore E. Allison S ecretary of the Board (SEAL)
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