Full text of Federal Reserve Bank of New York Circulars : 6783. Interpretation of Regulation Z

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FEDERAL RESERVE BANK
OF NEW YORK

6783
|__A u g u s t 16, 1971

’]

INTERPRETATION OF REGULATION Z
To All State Member Banks, and Others Concerned,
in the Second Federal R e se rv e D istrict:

Printed below is the text of an interpretation of Regulation Z, issued August 12 by the
Board of Governors of the Federal Reserve System, relating to annual membership fees
charged by some credit card users.
Additional copies of this circular will be furnished upon request.
Alfred Hayes,
President.

§ 226.407 Charges for membership in open
end credit plan

arises whether these fees are finance charges
under § 226.4(a) of Regulation Z.

(b)
Since such fees are imposed as a
(a)
A credit card issuer charges the
qualification of membership in the plan and
cardholder an annual fee for membership in
for the issuance of a credit card, and not as
the credit plan and for issuance of a credit
incident to or as a condition of any specific
card for use in conjunction with the plan.
extension of credit, they do not fall within
The payment of the fee is required as a
the definition of a "finance charge" under
condition of membership in the plan, whether
§ 226.4(a) of Regulation Z.
or not the cardholder uses his card for the
(Interprets and applies 15 U.S. C. 1605)
purpose of obtaining credit. The question