Full text of Federal Reserve Bank of New York Circulars : 7628. Regulation Z

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FEDERAL RESERVE BANK
OF N E W YORK

[

C ircu lar No. 7628
M ay 9, 1975

REG U LA TIO N Z
Proposed Fair Credit Billing Amendments
To A ll Banks, and Others Concerned,
in the Second Federal Reserve District:

Following is the text of a statement issued April 30 by the Board of Governors of the Federal Reserve
System:
The Board of Governors of the Federal Reserve System today published for comment draft regulations to
implement the new Fair Credit Billing Act, enacted to protect consumers against inaccurate and unfair credit
billing and credit card practices.
The new Act, which goes into effect on October 28, amends the Truth in Lending Act. It directs the Federal
Reserve to issue implementing regulations which will be enforced by the same Federal agencies which enforce
the other parts of the Truth in Lending Act. Following receipt and study of comment on the draft regulations,
the Board will issue final regulations to become effective October 28. Comment should be received by the Board
through May 30.
Today’s action was the second time in two weeks that the Board issued draft regulations to implement new
consumer-oriented legislation for which the Congress designated the Board as rule-writing authority. Last week
the Board published for comment a proposed regulation to give effect to the provisions of the Equal Credit
Opportunity Act barring discrimination in the granting of credit on the basis of sex or marital status. That Act
and the Board’s final regulations also go into effect October 28.
Credit extended on an account by use of a credit card is the primary subject of the requirements of the Fair
Credit Billing Act. The chief purpose of the Act, and of the Board’s draft regulations, is to help consumers
resolve credit billing disputes promptly and fairly. Certain practices deemed unfair to consumers arising out of
the use of credit cards or other open-end credit accounts and certain anticompetitive practices between credit
card issuers and the retail merchants who sell merchandise on the basis of such cards, are prohibited by the Act
and regulations.
The central provisions of the draft regulations issued today are:
I. Billing error resolution:

A billing error is any of six specified categories of acts or omissions by the creditor. To trigger the resolution
procedure the customer must send a proper written notification of a billing error. This must contain the
customer’s name, the account number, if any, and the customer’s statement of what error he thinks has been
made and the estimated amount involved.
Upon receipt of proper written notification, the creditor must acknowledge the inquiry within 30 days and
resolve the dispute in no more than 90 days. The creditor may not, meanwhile, impose finance charges on the
disputed amount or include the disputed amount in any calculation of the customer’s minimum payment. The
customer’s account may not be closed because he fails to pay an amount he believes to be incorrect. The creditor
may not report adversely on the customer’s credit standing with regard to amounts in dispute nor threaten to
make such a report until the creditor has complied with his responsibilities under the error resolution procedure.
Failure to comply subjects the creditor to a forfeiture of the disputed amount, up to $50, regardless of whether
an error has been made.




(Over)

2. Rights o f the cardholder to assert claims:

The credit-card holder may withhold payment, and assert legal claims with respect to shoddy or defective
merchandise or services purchased with a credit card (with certain exceptions and limitations) against the card
issuer, following an unsuccessful attempt to resolve the problem with the merchant.
3. Discounts for cash payment:

The card issuers may not forbid merchants to give discounts for cash payments. Customers must be notified
of the availability of such discounts if they are offered. Discounts of up to 5 per cent do not constitute finance
charges to credit-card users.
4. Payment crediting:

Payments must be credited as of the date of receipt, whether they are posted then or later.
5. Disclosure o f rights:

Creditors must disclose to customers an address to which billing inquiries may be sent. Creditors are
required to send to their customers a semi-annual statement of the customer’s rights and the creditor’s
responsibilities under the Act.
6. Billing period:

Customers must be billed at least 14 days before the end of any billing period allowed by the creditor in
which the customer can avoid additional finance charges or late-payment charge.
Enclosed is a copy of the proposal. Comments thereon should be submitted by May 30, 1975, and
may be sent to our Bank Regulations Department.
Additional copies of this circular and the enclosure will be furnished upon request.




A LFR E D H AYES,
President.

FEDERAL RESERVE SYSTEM
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
[REG. Z]
[12 C.F.R. PART 226]
Truth in Lending
Fair Credit Billing Amendments
In order to implement the amendments to the Truth in Lending
Act (15 U.S.C. Chapter 41, §
§ 1601-1681) included in Title III (Fair Credit Billing) of Pub. L. 93-495 (§ 301-308), the Board proposes
to amend Regulation Z.




These amendments would provide:

(1)

that the term "creditor" as defined in the regulation shall
include credit card issuers for certain purposes, whether
or not a finance charge is imposed, and the term "open end
credit" shall include consumer credit extended by use of a
credit card for certain limited purposes.

(2)

that,for certain limited purposes, persons who honor credit
cards shall be termed "creditors" as defined by the regula­
tion .

(3)

that discounts not in excess of 5% offered by sellers
to induce purchasers to pay by cash rather than by use
of a credit card are not finance charges if they are
available to all prospective purchasers and are disclosed
as required in the regulation.

(4)

that customers shall be apprised of their rights under
the Act and the regulation by the creditor w h e n they open
an account, or, in the case of accounts in existence on
the effective date of the Act and regulation, during the
first billing cycle in which they are active, and semiannually.
A form for this disclosure is provided in the regulation.

(5)

that a periodic statement must be sent to all customers of an
open end credit plan if there is a debit or credit balance
in the account during the cycle. If the plan provides a
period during which the customer can pay without incurring
a finance or late payment charge, the periodic statement
must be mailed or delivered to the customer, with some
exceptions, 14 days prior to the end of the period.




-2 -

(6)

that payments by a customer of an open end credit plan
must be credited to the account as of the date the p a y ­
ment is received by the creditor. This requirement
would relate only to the crediting of payments to the
account as of the day of receipt for the purpose of the
computation of finance charges and late payment charges;
it would not impose any requirements with respect to the
date on which physical posting of payments to the account
takes place.

(7)

that notification of refunds for returned merchandise or
forgiven debt for services which are to be made in the
form of a credit to a customer's credit card account shall
be made promptly by the seller and the amount of the
refund shall be credited promptly by the card issuer. If
a seller gives refunds for returns by cash to cash custo­
mers, refunds by credit must be given to credit card
customers unless the seller discloses to the contrary at
the time of the transaction.

(8)

that creditors who extend other than open end credit by use
of a credit card shall, for certain purposes under the
regulation, be required to comply with provisions which
generally apply only to open end

(9)

that, with certain exceptions and limitations, credit
cardholders will be able to withhold payment and assert
claims and defenses which they may have with respect to
defective merchandise purchased by use of a credit card
against the card issuer.

(10)

that credit card issuers may not offset a customer's debt
by using the customer's funds held by the creditor in any
deposit accounts except by court order or remedies which
are constitutionally available to all creditors generally.

(11)

that credit card issuers shall not require persons who
honor their cards to open accounts with, or procure any
services from, them; nor shall they prohibit persons who
honor their cards from offering discounts to their custo­
mers to induce them to pay by cash rather than by use of
a credit card.

(12)

a procedure for prompt response to, and resolution of,
billing inquiries by customers directed to open end credi­
tors, as defined in the regulation. The regulation sets
time limits for the exercise of the responsibilities of
the parties and provides a forfeiture penalty for creditors
who fail to comply with the requirements.

1

-3 -

(13)

a definition of a "billing error," which includes extensions
of credit improperly charged to a customer's account; r e ­
quests for clarification or explanation of items on a
statement, including requests for documentary evidence of
the indebtedness; extensions of credit for goods not
accepted by, or delivered to, the customer in accordance
with the agreement with the seller; failure to properly
reflect payments or credits to the customer's account; com­
putation or accounting errors; and failure to send a state­
ment to the customer's current address.

(14)

a procedure for preventing bank credit card issuers from
automatically debiting credit card debts from a customer's
deposit account when some or all of the items on a periodic
statement are disputed by the customer.

(15)

that a customer's account may not be closed or restricted
before the creditor has fulfilled its responsibilities under
the error resolution procedure solely because the customer
fails to pay the amount in dispute.

(16)

for suspension of the accrual of finance charges on amounts
in dispute during the pendency of the error resolution p r o ­
cedure, whether or not the dispute is ultimately resolved in
the customer's favor; and for recapture of minimum payments not
made during the dispute period if it is later determined
that the customer owes some or all of the disputed amount.

(17)

a system for treatment of delinquency credit reports and
threats by creditors to report adversely to third parties
with respect to amounts which are disputed. The regulation
prohibits such threats and reports during the pendency of
the dispute resolution procedure and requires qualification
of such reports made before and after the resolution pro­
cess to indicate the disputed nature of the amount and any
resolution of the dispute.
Creditors’failure to comply
with these requirements may also result in a forfeiture
penalty being imposed.




-4 -

P u r s u a n t to the authority granted in 1 5 U. S. C. §1604 (1970).
the B o a r d p r o p o s e s to a m e n d Regulation Z, 12 C . F . R .

P a r t 226, as

follows:
1.

T o i m p l e m e n t §302, §226. 1(a) w o u l d b e a m e n d e d

as follows:
§226. 1 - -A U T H O R I T Y ,
(a)

SCOPE,

A N D PURPOSE,

ETC.

Authority, scope, a n d p u r p o s e . (1) This P a r t

c o m p r i s e s the regulations issued b y the B o a r d of G o v e r n o r s of
the F e d e r a l R e s e r v e S y s t e m p u r s u a n t to Title I (Truth in L e n d i n g
Act) a n d Title V (General Provisions) of the C o n s u m e r Credit
Protection Act, as a m e n d e d (15 U. S. C. § 1601 et seq. ).

E x c e p t as

oth e r w i s e p r o v i d e d herein, this Part, within the context of its related
provisions, applies to all p e r s o n s w h o a r e creditors, as defined in
p a r a g r a p h (s) of §226. 2.
(2)

* * * * * in addition, this P a r t is d e s i g n e d to assist

the c u s t o m e r to resolve credit billing disputes in a fair a n d t i mely
m a n n e r , to regulate certain billing a n d credit c a r d practices,
a n d to strengthen the legal rights of c o n s u m e r s .




* * * * *

-5

2.

To implement §
§ 103 a n d 161, §226. 2 w o u l d be a m e n d e d a n d certain

subsections r e d e s i g n a t e d as follows:




§226. 13(a)(1) is redes i g n a t e d §226. 2(a)
§2 2 6 . 2(a) is redes i g n a t e d §226. 2(b).
§226. 13(a)(2) is r e d e s i g n a t e d §226. 2(c).
§226.2(b) is r e d e si g n a t e d §226.2(d).
§226.2(c) is r e d e signated §226.2(e).
§226. 2(d) is redes i g n a t e d §226. 2(f).
§226. 2(e) is r e d e s i g n a t e d §226. 2(g).
§226. 2(f) is rede s i g n a t e d §226. 2(h), a n d the structure h a s b e e n
altered to m a k e the subsection m o r e readable.
§226. 2(g) is r e d e s i g n a t e d §226. 2(i)
§226. 2(j) is added.
§226. 2(h) is redes i g n a t e d §226. 2(k).
§226. 13(a)(4) is r e d e s i g n a t e d §226. 2(1).
§226. 13(a)(3) is redes i g n a t e d §226. 2(m).
§226. 2(i) is r e d e s ignated §226. 2(n).
§226. 2(j) is r e d e s ignated §226. 2(o).
§226. 2(k) is a m e n d e d a n d is r e d e s i g n a t e d §226. 2(p).
§226. 2(1) is a m e n d e d a n d is r e d e s i g n a t e d §226. 2(q).
§226. 13(a)(5) has b e e n i n c o r p o r a t e d in §226. 2(q).
§226. 13(a)(6) is r e d e s i g n a t e d §226. 2(r).
§226. 2 ( m ) is a m e n d e d a n d is r e d e s i g n a t e d §226. 2(s)
§226. 2(n) is r e d e s i g n a t e d §226. 2(t).
§226. 2(o) is a m e n d e d a n d is r e d e s ignated §226. 2(u).
§226. 2(p) is redes i g n a t e d §226. 2(v).

-6 -

§226. 2(q) is r e d e s i g n a t e d §226. 2(w).
§226. 2(r) is a m e n d e d a n d is r e d e s i g n a t e d §226. 2(x).
§226. 2(s) is r e d e s i g n a t e d §226. 2(y).
§226. 2(t) is r e d e s ig n a t e d §226. 2(z).
§226. 2(u) is r e d e s i g n a t e d §226. 2(aa).
§226. 2(v) is r e d e s i g n a t e d §226.2(bb).
§226. 2(cc) is added.
§226. 2(w) is r e d e s i g n a t e d §226. 2(dd).
§226. 2(x) is r e d e s i g n a t e d §226. 2(ee).
§226. 2(y) is r e d e s i g n a t e d §226. 2(ff).
§2 2 6 . 2(z) is r e d e s i g n a t e d §2 2 6 . 2(gg).
§226. 2(aa) is r e d e s i g n a t e d §226. 2(hh).
§226. 13(a)(7) is r e d e s i g n a t e d §226. 2(ii).
§226. 2(bb) is r e d e s i g n a t e d §226. 2(jj).
§226. 2(cc) is r e d e s i g n a t e d §226. 2(kk), a n d
§226. 2(dd) is r e d e s i g n a t e d §226. 2(11).
>!< 'f' 'T' $ ^

§226. 2-- DEFINITIONS AND RULES OF CONSTRUCTION
* * # * #

(h)

" A r r a n g e for the extension of credit”m e a n s to prov i d e or

offer to pr o v i d e c o n s u m e r credit w h i c h is or will b e e x t e n d e d b y a n o t h e r
p e r s o n u n d e r a b u s i n e s s or other relationship p u r s u a n t to w h i c h the
p e r s o n a r r a n g i n g s u c h credit




(1)

receives or will rece i v e a fee, c o m p e n s a t i o n ,
or other consideration for s u c h service, or

1

-7(2)

has k n o w l e d g e of the credit t e r m s a n d participates
in the prepa r a t i o n of the contract d o c u m e n t s
r e q u i r e d in connection w i t h the extension of credit.

It do e s not include h o n o r i n g a credit c a r d or similar device w h e r e n o
finance c h a r g e is i m p o s e d at the t i m e of that transaction.
if

if

if

if

if

(j) "Billing e r r o r " includes:
(1)

A reflection on a periodic s t a t e m e n t of a n extension
of credit w h i c h w a s not m a d e to the c u s t o m e r or
f r o m w h i c h h e receives n o benefit, or, if m a d e ,
w a s not in the a m o u n t indicated on the periodic
statement, or

(2)

A reflection on a periodic s t a t e m e n t of a n extension
of credit or i ndebtedness for w h i c h the c u s t o m e r
requests explanation or clarification, including
requests for d o c u m e n t a r y e v i d e n c e of the indebt­
e d n e s s reflected therein, or

(3)

A reflection on a periodic s t a t e m e n t of a n extension
of credit for g o o d s or s ervices not a c c e p t e d

U

b y the

c u s t o m e r or his designee, or not delivered to the
customer or his designee in accordance with any
a g r e e m e n t m a d e in c o n n e c t i o n w ith the transaction,
or
(4)

A n y failure to p r o p e r l y reflect on a periodic statement,
a p a y m e n t or other credit to the c u s t o m e r ' s account, or

1_/ T h e t e r m " a c c e p t e d " shall b e c o n s t r u e d to m e a n " a c c e p t a n c e " as defined
in §2- 6 0 6 of the U n i f o r m C o m m e r c i a l C o d e .




-8 (5)

A c o m p u t a t i o n e r r o r o r similar e r r o r of a n accounting
n a ture m a d e b y the creditor on a periodic statement,
including e r r o r s in c o m p u t i n g finance c h a r g e s or
late p a y m e n t charg e s , or

(6)

A failure to m a i l or deliver a c u s t o m e r ' s periodic
st a t e m e n t to his c u r r e n t ad d r e s s , w h i c h results
in a n additional finance c h a r g e or additional m i n i m u m
p a y m e n t , if the c u s t o m e r notified the creditor of
his c h a n g e of a d d r e s s b y the closing date of the
prev i o u s billing cycle.
❖

❖

'j'

(p) " C o n s u m e r credit" m e a n s credit offered or e x t e n d e d to a
natural person, in w h i c h the m o n e y , property, or service w h i c h is the
subject of the transaction is p r i m a r i l y for personal, family, household,
or agricultural p u r p o s e s .

" C o n s u m e r loan" is one type of " c o n s u m e r

credit. "

(q) "Cre d i t " m e a n s the right g r a n t e d b y a creditor to a c u s t o m e r
to defer p a y m e n t of debt, incur debt a n d defer its p a y m e n t , or p u r c h a s e
p r o p e r t y or services a n d defer p a y m e n t therefor. (See also p a r a g r a p h (jj)
of this section.)
j{e ;}e ;[< # >[<

(s) " C r e d i t o r " m e a n s a p e r s o n w h o in the o r d i n a r y c o u r s e
of bus i n e s s regularly extends or a r r a n g e s for the extension of c o n s u m e r
credit, or offers to extend or a r r a n g e for the extension of s u c h credit,
w h i c h is p a y a b l e b y a g r e e m e n t in m o r e than four instalments, or for




-9-

w h i c h the p a y m e n t of a finance c h a r g e is o r m a y b e required, w h e t h e r
in connection with loans, sales of p r o p e r t y o r services, or otherwise.
F o r p u r p o s e s of the r e q u i r e m e n t s of §
§ 226.7(a)(6), (7), (8), a n d (9);
226. 7 (b)(1 )(i), (ii), (iii), (ix), a n d (x); 226.7(b)(2); 226.7(c), (d), (f), (g),
(h), a n d (i); 226. 13; a n d 226. 14, the t e r m "creditor" shall also include
c a r d issuers, w h e t h e r or not the p a y m e n t of a finance c h a r g e is or m a y
b e required.

F o r p u r p o s e s of the r e q u i r e m e n t s of §226. 4(i) a n d 226. 13(k),

the t e r m "creditor" shall include a n y p e r s o n w h o h o n o r s a credit card.
vU

'lS 'J*
-T*

(u)

st*

Ox

"I"

" C u s t o m e r " m e a n s (1) a c a r d h o l d e r or (2) a natural p e r s o n to

w h o m c o n s u m e r credit is offered or to w h o m it is or will b e extended,
a n d includes a c o m a k e r , e n d o r s e r , guarantor, or surety for s u c h natural
p e r s o n w h o is o r m a y be obligated to r e p a y the extension of c o n s u m e r credit.
❖ # ❖ * *

(x) " O p e n e n d credit" m e a n s c o n s u m e r credit e x t e n d e d on
a n a c c ount p u r s u a n t to a plan u n d e r w h i c h (1) the creditor m a y p e r m i t
the c u s t o m e r to m a k e p u r c h a s e s or obtain loans, f r o m t i m e to time,
directly f r o m the creditor or indirectly b y u s e of a credit card, check,
or other device, as the plan m a y provide; (2) the c u s t o m e r h a s the
privilege of paying the bala n c e in full o r in instalments; a n d (3) a finance
c h a r g e m a y b e c o m p u t e d b y the creditor f r o m t i m e to t i m e on a n out­
standing unpaid balance.

F o r p u r p o s e s of the r e q u i r e m e n t s of §
§ 226.7(a)(6),

(7), (8), and (9); 226 .7(b)(1)(i), (ii), (iii),|(ix), and (x) ; 226.7 (b) (2);226.7(c)
(d), (f), (g), (h), a n d (i); 226. 13; a n d 226. 14, the t e r m includes c o n s u m e r
credit ext e n d e d on a n a c c o u n t b y u s e of a credit card, w h e t h e r or not a
finance c h a r g e m a y be i m p o s e d .

T h e t e r m d o e s not include negotiated a d v a n c e s

u n d e r a n o p e n e n d real estate m o r t g a g e or a letter of credit.



-1 0 -

(cc) ,rP r o p e r written notification of a billing e r r o r " is anywritten notification (on a p a y m e n t m e d i u m or other m a t e r i a l a c c o m p a n y i n g
the periodic s t a t e m e n t or on a separate sheet, if the creditor so stipulates
in the disclosure requ i r e d b y §226. 7(a)(9), (d), a n d (j)), r e c e i v e d at the
a d d r e s s disclosed u n d e r §226. 7(b)(l)(x) within 60 d a y s of the first m a i ling
or delivering to the c u s t o m e r ' s c u r r e n t a d d r e s s (as r e q u i r e d in §226. 7(b))
of the periodic s t a t e m e n t on w h i c h the disputed item(s) or a m o u n t ( s ) is
reflected in w h i c h the c u s t o m e r
(1)

sets forth o r o t h e r w i s e enables the creditor to
identify the n a m e a n d a c c o u n t n u m b e r (if any)
of the customer,

(2)

indicates the c u s t o m e r ' s belief that the periodic
s t a t e m e n t contains a billing e r r o r a n d the s u s p e c t e d
a m o u n t of s u c h error, a n d

(3)

sets forth the r e a s o n s for s u c h belief, to the
extent possible.

3.

Fo o t n o t e




in §226. 3 w o u l d be r edesignated as follows:

F o o t n o t e 1 / is rede s i g n a t e d la/.

-1 1 4.

T o i m p l e m e n t §167, §226. 4(i) w o u l d b e a d d e d as follows:
§226. 4 - - D E T E R M I N A T I O N O F F I N A N C E C H A R G E
^^

(i)

^ ^

Disco u n t s for p a y m e n t s m

cash.

(1) N otwithstanding

a n y other provision of this section, a discount w h i c h a p e r s o n
offers, allows, or o t h e r w i s e m a k e s available for the p u r p o s e of inducing
p a y m e n t for a p u r c h a s e b y cash, check, or similar m e a n s rather than
b y u s e of an o p e n e n d credit c a r d account, w h e t h e r or not a credit c a r d
is physically used, is not a finance charge, p r o v i d e d that:
(i ) S u c h discount does not e x c e e d five p e r cent
w h e n c o m p u t e d o r e x p r e s s e d as a p e r c e n t a g e
of the tag, posted, or a d v ertised price of the
g o o d s or services w h i c h a r e the subject of the
transaction,
(li) S u c h discount is available to all pr o s pective
buyers,
(iii) T h e availability of s u c h discount is clearly
a n d c o n s p i c u o u s l y discl o s e d to all p r o s p e c t i v e
buyers by a sign or display posted at or near each




public e n t r a n c e to the seller's place of b u s i n e s s
w h e r e i n s u c h discount is offered, a n d at all
locations within the place of b u s i n e s s w h e r e a
p u r c h a s e m a y be m a d e , a n d
(iv)

If an offer of sale is a d v e r t i s e d in a n y

m e d i u m or if offers to b u y a r e invited or a l l o w e d
b y a seller to be m a d e b y mail, telephone, or b y
m e a n s other than p e r s o n a l contact b e t w e e n the

c u s t o m e r a n d seller a n d if c u s t o m e r s a r e a l l o w e d
to p a y b y u s e of a credit c a r d or its underlying
a c c o u n t a n d s u c h fact is disclosed b y the a d v e r t i s e ­
m e n t , telephone contact, or in the c o u r s e of the
m a i l c o r r e s p o n d e n c e , the availability of a discount
for p a y m e n t s in c a s h m u s t b e clearly a n d c o n s p i c u o u s l y
disclosed in a n y a d v e r t i s e m e n t for s u c h offerings
and, in a n y case, before the transaction h a s b e e n
c o m p l e t e d b y u s e of the credit c a r d or its underlying
account.
(2) Notwithstanding anything contained in the foregoing p a r a ­
g r a p h to the contrary, a n y s u r c h a r g e a d d e d to the tag, posted, or
ot h e r w i s e generally available price of g o o d s or services offered for
sale b y a seller, w h i c h is i m p o s e d b y s u c h seller as a condition or
c o n s e q u e n c e of the u s e of the credit c a r d with respect to a transaction
involving s u c h g o o d s or services, shall be a finance c h a r g e subject
to the r e q u i r e m e n t s of this section.
(3) W i t h respect to a n y discount for c a s h in e x c e s s of five
p e r cent, the total a m o u n t of the discount shall constitute a finance ch a r
u n d e r §226. 4(a) to b e disclosed in a c c o r d a n c e with §226. 7(e).

5.

T o i m p l e m e n t §171 (a) and to provide a transition p e riod for the u se

of old f o r m s ,




§226. 6 w o u l d b e a m e n d e d as follows:

§226. 6 - - G E N E R A L D I S C L O S U R E R E Q U I R E M E N T S

-13-

(b)

I n c o n s is t e n t State r e q u i r e m e n t s .

(1) With r e s p e c t to the

r e q u ir e m e n t s o f t h is P a r t, State law i s in c o n s i s t e n t w ith the r e q u ir e m e n t s
of the A c t and th is P a r t , w ithin the m e a n in g of §§ 111(a) and 171(a) of the
Act to the e x te n t th at i t :
(1)

R e q u ir e s a c r e d i t o r to m a k e d i s c l o s u r e s or ta k e a c tio n s

d iffe r e n t fr o m th e r e q u ir e m e n t s of th is P a r t w ith r e s p e c t to f o r m , conten t,
t e r m i n o l o g y , or t im e of d e liv e r y ;
ii)\

J/ *.1*

t-

t- J/
'ft

or

(iii) * * * * *
(2)

If a n y p r o v is io n of State la w p r o v id e s g r e a t e r p r o t e c tio n to

the c o n s u m e r than that p r o v id ed by C h a p ter 4 of the A ct, then that p r o v is io n
of State la w is not in c o n s is t e n t w ith the p r o v i s i o n s of the A c t or th is P a r t.
'i'

(k)

T r a n s it io n p e r i o d .

A ny c r e d i t o r who ca n d e m o n s t r a t e

that he h as tak en bona fide s t e p s , p r io r to O c to b er 28, 1975, to obtain
p rin ted f o r m s w h ic h a r e n e c e s s a r y to c o m p ly w ith the r e q u ir e m e n t s
of th is P a r t m a y , u n til su ch f o r m s a r e r e c e i v e d but in no e v e n t la t e r
than A p r il 30, 1976, u tiliz e e x is t in g s u p p lie s of p rin ted f o r m s fo r the
p u r p o se of c o m p ly in g w ith the d i s c l o s u r e r e q u ir e m e n t s of th is P a r t,
o th er than the r e q u ir e m e n t s of p a r a g r a p h s (a )( 9 ), (d), and (i) of
§ 226. 7, P r o v i d e d , that such f o r m s a r e a l t e r e d o r s u p p le m e n t e d a s
n e c e s s a r y to a s s u r e that a ll of the it e m s o f in fo r m a tio n the c r e d i t o r
is r e q u ir e d to d i s c l o s e to the c u s t o m e r a r e s e t forth c l e a r l y and
c o n s p ic u o u s ly .




-14-

6.

167,

T o i m p l e m e n t §§ 1 2 7 (a )(8 ), 1 2 7 ( b ) ( l l ) , 1 2 7 ( c ) , 1 6 3 , 16 4, 1 6 5 , and
§ 2 2 6 .7 is a m en d ed as fo llo w s:

S e c t io n 22 6. 7 ( b ) ,p a r a g r a p h s (1) th r o u g h ( 9 ) ,a r e r e d e s i g n a t e d
(i) th r o u g h (ix).
S e c t io n 226. 7(d) and (e) a r e r e d e s i g n a t e d (e) and (f)
r e sp e c tiv e ly .
§ 2 26. 7 - - O P E N E N D C R E D IT A C C O U N T S - - S P E C I F I C D IS C L O S U R E S ,
(a) O p en in g n e w a c c o u n t .
J/ *r* -r
t *si/t* 'r

(9)

T h e f o llo w in g n o t ic e :

"N o t i c e : S e e a c c o m p a n y in g s t a t e m e n

f o r im p o r t a n t i n f o r m a t io n r e g a r d i n g y o u r r ig h t s to d is p u t e b i l l i n g e r r o r s , "
and a s e p a r a t e s t a t e m e n t c o n t a in in g s u b s t a n t i a l l y th e f o llo w in g t e x t , a s
a p p l i c a b l e , w r it t e n c l e a r l y an d c o n s p i c u o u s l y on o n e s i d e of a s e p a r a t e
p a g e , s h a l l a c c o m p a n y s u c h a s t a t e m e n t ; o r the la n g u a g e w ith o u t th e
p r e c e d i n g n o t ic e m a y be in c lu d e d on th e s t a t e m e n t r e q u ir e d b y p a r a g r a p h (a)
o f th is s e c t i o n if d i s c l o s e d c l e a r l y and c o n s p i c u o u s l y :




-15IN C A S E OF E R R O R S ON Y O U R BILL

T h e Federal Truth in Lending Act requires prompt correction of billing mistakes.
Here's what to do if you think your bill is wrong or if you need m o r e information about
an item on your bill:
1.

Don't write on the bill. On a separate sheet of paper wr i t e (you may telephone
your inquiry but doing so will not preserve your rights under this law) the
following:
a)

Your name and account number (if any) .

b)

Describe the error and why ('to the extent you can) you believe it is an error
If you
and if
slip.
have a

2.

only need more information, explain the item you are not sure about,
you wish, ask for evidence of the charge such as a copy of the sales
Don't send in your copy of a sales slip or other document unless you
duplicate copy for your records.

c)

The dollar amount of the suspected error if you can.

d)

Any other information (such as your address) which you think will help the
company (bank) to identify you or the reason for your complaint or inquiry.

Send your billing error notice to the address on your bill which is listed after
the words:
"Send Inquiries T o :"
Ma i l it as soon as you can, but in any case early enough to reach the company
(bank) within 60 days after the bill was mailed to you.
If your bank automatically pays these bills from your c h e c k i n g or savings account
you can stop payment on the amount you think is wrong by mailing your notice
w i t h i n 10 days after receiving your bill.
You don't have to meet this 10 day
deadline, though, to get your bill corrected.

3.

The company (bank) must answer all letters pointing out possible errors and must
do so within 30 days. Within 90 days after receiving your letter, the company
(bank) must either correct the error or show why the bill was correct.

4.

Meanwhile, neither the company (bank) nor its attorney nor a collection agency
m a y send you dunning letters. You cannot be threatened with damage to your
credit rating or sued for the amount in question, nor can the disputed amount
be reported to a credit bureau or to other creditors as delinquent.

5.

If it is determined that you owe all or a part of the disputed amount, you will
have to pay any finance charges on the disputed amount(s) that you owe up to
the time you sent the error notice.
But no finance charges may be imposed on
the amount in dispute from the time your notice is received until the error is
resolved. You will have to make up any missed mini m u m payments from the time
you received the bill on which the suspected error first appeared.
The comoany
(bank) must send you a statement of what you owe, and y o u must be given the
same time to pay which you normally are given to pay undisputed amounts.

6.

If the company's (bank's) explanation doesn't satisfy you and you notify the
creditor in writing that you still refuse to pay the disputed amount, the company
(bank) may report you to credit bureaus and other creditors.
But it must tell
them that you don't think you owe the money, and it must let you know to w h o m it
has reported you. Once the matter has been settled between you and the company
(bank), it must send follow-up notices to those to w h o m it reported you as
de l i n q u e n t .

7.

Companies (banks) that don't follow these rules are not allowed to collect the
first $50 of a disputed amount, even if the bill turns out to be correct.

8.

You may have good grounds in a law suit for w i t hholding payment of the amount you
9till owe for merchandise or services that prove defective if three conditions
are m e t :
(1)
(2)

(3)

you must first give the merchant an opportunity to correct the problem;
you must have made the purchase in your home state or within 100 miles of
your home (whichever is f a r t h e r ) ; and
the purchase price must be more than $50.

However, the dollar and distance limitations do not apply if the merchant and the
credit card company are the same or a related organization, or if the credit card
company participated in offering the merchandise or services through the mail.




-16(b)

P e r io d ic sta tem en ts r e q u ir e d .

(1)

E x c e p t in th e c a s e

o f an a c c o u n t w h i c h th e c r e d i t o r d e e m s to b e u n c o l l e c t a b l e o r w ith
r e s p e c t to w h i c h d e lin q u e n c y c o l l e c t i o n p r o c e d u r e s h a v e b e e n in s t it u t e d ,
th e c r e d i t o r o f a n y op en en d c r e d i t a c c o u n t s h a l l m a i l o r d e l i v e r to th e
c u s t o m e r ' s c u r r e n t a d d r e s s (if th e c u s t o m e r h a s n o t if ie d th e c r e d i t o r
o f h is c h a n g e o f a d d r e s s by the c l o s i n g d a te o f th e p r e v i o u s b ill in g
cy cle),

f o r e a c h b ill in g c y c l e at the end of w h ic h t h e r e i s a n o u tsta n d in g

d e b it o r c r e d i t b a l a n c e in e x c e s s o f $1 in th a t a c c o u n t o r w i t h r e s p e c t
to w h i c h a f i n a n c e c h a r g e i s i m p o s e d , a s t a t e m e n t o r s t a t e m e n t s w h ic h
th e c u s t o m e r m a y r e t a i n , s e t t in g fo r th in a c c o r d a n c e w it h p a r a g r a p h (c)
o f t h is s e c t i o n e a c h o f th e f o ll o w i n g i t e m s to the e x t e n t a p p lic a b le :




#

( ii i)

sjs s}e sje >f:

T h e a m o u n ts p o s t e d to th e a c c o u n t d u r in g th e
b ill in g c y c l e fo r p a y m e n t s , u s in g th e t e r m
" p a y m e n t s , " and f o r o t h e r c r e d i t s in c lu d in g
r e t u r n s , r e b a t e s of f in a n c e c h a r g e s , o v e r p a y m e n t s ,
and a d j u s t m e n t s , u s i n g th e t e r m " c r e d i t s , "
and u n l e s s p r e v i o u s l y f u r n is h e d a b r i e f id e n t if ic a t io n
o f e a c h of th e i t e m s i n c l u d e d in s u c h o t h e r c r e d i t s .
^ ^ ^ ^

* (v)

E a c h p e r i o d i c r a t e , u s i n g th e t e r m " p e r io d ic ra te"
(o r " r a t e s " ) , th a t m a y b e u s e d to c o m p u t e the
fin a n c e c h a r g e ( w h e th e r o r n ot a p p lie d d u r in g th e
b ill in g c y c l e ) , th e r a n g e o f b a l a n c e s to w h ic h it
i s a p p lic a b l e , and th e c o r r e s p o n d i n g a n n u a l
p e r c e n t a g e r a t e d e t e r m i n e d b y m u l t i p l y i n g the




-17-

p e r i o d i c r a te b y th e n u m b e r o f p e r i o d s in a y e a r .
The w o r d s " c o r r e s p o n d in g a n n u a l p e r c e n t a g e r a t e , M
" c o r r e s p o n d in g n o m i n a l a n n u a l p e r c e n t a g e r a t e , 11
" n o m in a l a n n u a l p e r c e n t a g e r a t e " o r " an n u al
p e r c e n t a g e r a t e " (o r " r a t e s " ) m a y b e u s e d to
d e s c r i b e th e c o r r e s p o n d i n g a n n u a l p e r c e n t a g e
rate.

T he r e q u i r e m e n t s of § 2 2 6 . 6 ( a ) o f t h is

P a r t w ith r e s p e c t to d i s c l o s i n g th e t e r m "annual
p e r c e n t a g e r a te " m o r e c o n s p i c u o u s l y th a n o t h e r
r e q u ir e d t e r m i n o l o g y s h a l l n o t b e a p p l i c a b l e
to th e d i s c l o s u r e m a d e u n d e r t h is p a r a g r a p h ,
a lth o u g h s u c h t e r m (o r w o r d s in c o r p o r a t i n g
s u c h t e r m ) m a y , at th e c r e d i t o r ' s o p tio n ,
b e sh ow n a s c o n s p i c u o u s l y a s th e t e r m i n o l o g y
r e q u ir e d u n d e r s u b p a r a g r a p h (vi) o f t h is p a r a g r a p h .
W h e r e a m i n i m u m c h a r g e m a y b e a p p l i c a b l e to
th e a c c o u n t , th e a m o u n t o f s u c h m i n i m u m c h a r g e
9a/
s h a l l be d i s c l o s e d .
;J<sjc * * ;[c

(ix )

T h e c l o s i n g date o f th e b i l l i n g c y c l e and th e
o u tsta n d in g b a la n c e in th e a c c o u n t on th a t d a te ,
u s in g the t e r m "new b a l a n c e , " a c c o m p a n i e d by
th e s t a t e m e n t o f th e d a te b y w h i c h , o r th e p e r io d ,
i f an y, w ith in w h ic h , p a y m e n t m u s t b e m a d e to
a v o id a d d it io n a l f in a n c e c h a r g e s o r l a t e p a y m e n t
charges.

-18-

(x)

A n a d d r e s s to be u s e d b y th e c r e d i t o r fo r
the p u r p o s e o f r e c e i v i n g b i l l i n g in q u i r i e s f r o m
cu stom ers.

S u ch a d d r e s s s h a l l b e p r e c e d e d

b y th e c a p tio n :
(2)

"Send I n q u i r i e s T o :M.

If th e t e r m s o f th e o p e n en d c r e d i t p la n p r o v id e a t i m e

p e r i o d w it h in w h ic h th e c u s t o m e r m a y r e p a y a n y p o r t io n o f th e n ew
b a l a n c e w ith o u t in c u r r i n g an a d d it io n a l f in a n c e c h a r g e o r a l a t e p a y ­
m e n t c h a r g e , no s u c h c h a r g e m a y be i m p o s e d w it h r e s p e c t to an y
p o r t io n o f s u c h n e w b a la n c e u n l e s s th e p e r i o d i c s t a t e m e n t d i s c l o s i n g
s u c h n e w b a la n c e i s m a i l e d or d e l i v e r e d to th e c u s t o m e r ' s c u r r e n t
a d d r e s s (if th e c u s t o m e r h a s n o t i f i e d th e c r e d i t o r o f h is c h a n g e o f
a d d r e s s by th e c l o s i n g d a te o f th e p r e v i o u s b i l l i n g c y c l e ) a t l e a s t 14
d a y s p r i o r to the d a te s p e c i f i e d in the s t a t e m e n t a s b e in g the date b y
w h i c h p a y m e n t m u s t b e m a d e in o r d e r to a v o id th e i m p o s i t i o n o f th at
f in a n c e c h a r g e o r l a t e p a y m e n t c h a r g e , e x c e p t t h a t s u c h t i m e l i m i t a t i o n
s h a l l n o t a p p ly in an y c a s e w h e r e th e c r e d i t o r h a s b e e n p r e v e n t e d , d e la y e d ,
o r h in d e r e d in m a i l i n g o r d e l i v e r i n g s u c h p e r i o d i c s t a t e m e n t w ith in s u c h
t i m e l i m i t b e c a u s e of an a c t o f God, w a r , c i v i l d i s o r d e r , n a tu r a l d i s a s t e r ,
or strik e.




-19-

* (c )

L o c a t io n of d i s c l o s u r e s .
•J/ T* vU
'I'*
"l> J/
T* "'I

(3 )

* * * * £ T h e d i s c l o s u r e r e q u i r e d by s u b p a r a g r a p h

( b ) ( l) ( x ) o f t h is s e c t i o n m a y b e made on the r e v e r s e s id e o f the p e r i o d i c s ta te m e n t.
'I' ^O/ *+'i(*' '"i" v

(d)

S e m ia n n u a l n o t i c e r e q u i r e d .

(1)

The c r e d ito r sh a ll

m a i l o r d e l i v e r s e m i a n n u a l l y to e a c h c u s t o m e r e n t i t l e d to r e c e i v e
a p e r i o d i c s t a t e m e n t u n d e r § 2 2 6 . 7(b), th e n o t i c e r e q u i r e d b y
§ 22 6. 7 ( a ) (9 ) , w r it t e n c l e a r l y and c o n s p i c u o u s l y on o n e s i d e o f a
s e p a r a t e p a g e o r in c lu d e d w ith the d i s c l o s u r e s r e q u i r e d b y
p a r a g r a p h (b) o f t h is s e c t i o n i f d i s c l o s e d c l e a r l y an d c o n s p i c u o u s l y .
(2)

The s e m ia n n u a l n o t i c e s h a l l b e m a i l e d o r d e l i v e r e d

n o t l e s s than 5 n o r m o r e than 7 m o n t h s a f t e r th e m o n t h in w h ic h the
l a s t p r e c e d i n g s u c h n o t i c e w a s m a i l e d o r d e l i v e r e d , p r o v id e d th a t,
(i)

in any c a s e th e c r e d i t o r s h a l l m a i l o r d e l i v e r
s u c h n o t i c e s a t l e a s t t w i c e in a n y 1 2 m o n th
c a l e n d a r p e r i o d , and

(ii)

th e f i r s t s e m i a n n u a l n o t i c e to a n y n e w c u s t o m e r
m a y be m a i l e d o r d e l i v e r e d to th a t c u s t o m e r
d u rin g th e n e x t r e g u l a r l y s c h e d u l e d m a i l i n g or
d e liv e r y o f se m ia n n u a l n o tic e s .

(3)

If the c r e d i t o r c h o o s e s to a l t e r th e c y c l e o f m a i l i n g o r

d e l i v e r i n g s e m i a n n u a l n o t i c e s , th e c r e d i t o r m a y m a i l o r d e l i v e r th e s e m i ­
a n n u a l n o t i c e l e s s than 5 m o n t h s a f t e r th e l a s t p r e c e d i n g s u c h n o t i c e w a s
m a i l e d o r d e l i v e r e d , p r o v id e d th a t th e c r e d i t o r m a i l s o r d e l i v e r s at l e a s t 3
s u c h n o t i c e s in th e n e x t t w e l v e m o n t h s c o m p u t e d f r o m th e m o n th in w h ic h
th e l a s t p r e c e d i n g s e m ia n n u a l n o t i c e w a s m a i l e d o r d e l i v e r e d .



-2 0 -

(4)

N o th in g in th is s u b s e c t i o n s h a l l b e c o n s t r u e d to p r o h ib it

a c r e d i t o r f r o m m a i l i n g o r d e l i v e r i n g th e n o t i c e r e q u i r e d b y t h is s u b ­
s e c t i o n m o r e f r e q u e n t l y than s e m i a n n u a l l y , s u c h a s m o n t h l y .
( e ) F i n a n c e c h a r g e i m p o s e d at th e t i m e o f t r a n s a c t i o n .
A n y c r e d i t o r , o t h e r than the c r e d i t o r o f th e o p e n en d c r e d i t a c c o u n t ,
w h o i m p o s e s a f in a n c e c h a r g e n ot e x c e p t e d b y § 226. 4 (i) , D is c o u n t s for
p a y m e n t in c a s h , at th e t i m e o f h o n o r in g a c u s t o m e r ' s c r e d i t c a r d ,
s h a l l m a k e th e d i s c l o s u r e s r e q u ir e d u n d e r p a r a g r a p h s (b )( 2 ) and (d)
of § 2 2 6 . 8 , C r e d it o th e r than op en end - s p e c i f i c d i s c l o s u r e s , a t the
t i m e o f th at t r a n s a c t i o n , and the a n n u a l p e r c e n t a g e r a t e to b e d i s c l o s e d
s h a l l b e d e t e r m i n e d by d iv id in g the a m o u n t of the f in a n c e c h a r g e by the
a m o u n t f in a n c e d an d m u lt ip ly i n g th e q u o t ie n t ( e x p r e s s e d a s a p e r c e n t a g e )
by 1 2 .

(g)

P r o m p t c r e d i t in g of p a y m e n t s .

R e g a r d l e s s o f th e date

o f a c t u a l p o s t i n g o f p a y m e n t s to an a c c o u n t , a n y p a y m e n t s s h a l l be
c r e d i t e d to th e c u s t o m e r ' s a c c o u n t a s o f th e d a te s u c h p a y m e n t is
r e c e i v e d by th e c r e d i t o r and no f in a n c e c h a r g e o r l a t e p a y m e n t c h a r g e
m a y b e i m p o s e d w it h r e s p e c t to th e a m o u n t o f s u c h p a y m e n t w h ic h is
p r o p e r l y r e c e i v e d b y the c r e d i t o r on o r b e f o r e th e t i m e in d ic a t e d by
th e c r e d i t o r to a v o id i m p o s it io n t h e r e o f , e x c e p t that:




(1)

The cre d ito r m a y s p e c ify r ea so n a b le r e q u ir e m e n ts
w it h r e s p e c t to th e f o r m , a m o u n t, m a n n e r , lo c a t i o n ,
an d t i m e o f s u c h p a y m e n t s in o r d e r th a t s u c h p a y ­
m e n t s w i l l b e c r e d i t e d a s o f th e d a y o f r e c e i p t
p r o v i d e d that:

-2 1 -

(i ) If no p a r t i c u l a r h o u r of th e d ay h a s b e e n c l e a r l y i n ­
d ic a t e d to the c u s t o m e r on th e p e r i o d i c s t a t e m e n t
a s the t i m e by w h ic h p a y m e n t m u s t b e r e c e i v e d b y the
c r e d i t o r in o r d e r to o b ta in c r e d i t i n g to th e custom er's
a c c o u n t on s u c h d a t e , p a y m e n t s m a d e p r i o r to the
c l o s e of b u s i n e s s on th a t d ay m u s t b e c r e d i t e d a s
o f th at d a t e , and
(ii)

If no l o c a t i o n ( s ) h a s b e e n c l e a r l y i n d ic a t e d on th e
p e r i o d i c s t a t e m e n t a s th e l o c a t i o n ( s ) a t w h ic h p a y m e n t
m a y be m a d e , then p a y m e n t at a n y l o c a t i o n w h e r e
the c r e d i t o r c o n d u c t s b u s i n e s s s h a l l b e c r e d i t e d a s
of th e d a te s u c h p a y m e n t i s p r e s e n t e d , and

( ii i) If no p a r t i c u l a r m a n n e r o f p a y m e n t h a s b e e n c l e a r l y
in d ic a t e d on th e p e r i o d i c s t a t e m e n t , th en p a y m e n t b y
c h e c k , c a s h , m o n e y o r d e r , b ank d r a ft, o r o th e r s i m i l a r
i n s t r u m e n t in p r o p e r l y n e g o t i a b l e f o r m s h a l l c o n s t it u t e
p r o p e r m a n n e r of p a y m e n t .
(2)

If th e c r e d i t o r a c c e p t s p a y m e n t at l o c a t i o n s o t h e r than
that in d ic a t e d a s n e c e s s a r y f o r c r e d i t i n g a s o f th e
d a te of r e c e i p t , th e c r e d i t o r m u s t c r e d i t th e c u s t o m e r ' s
a c c o u n t a s o f the day p a y m e n t i s r e c e i v e d a t th e
a l t e r n a t e l o c a t i o n ( s ) , e v e n th ou g h the a c t u a l p o s t in g
m a y o c c u r at a l a t e r d a y .

(h)

C r e d it in g an d r e fu n d in g e x c e s s p a y m e n t s .

(1)

a c u s t o m e r m a i l s o r d e l i v e r s p a y m e n t to th e c r e d i t o r in e x c e s s of the t o ta l
b a la n c e due on the a c c o u n t , th e c r e d i t o r s h a l l




W henever

-22-

(i)

c r e d i t th e c u s t o m e r ' s a c c o u n t w ith the a m o u n t of th e
o v e r p a y m e n t a s o f the d a te o f r e c e i p t a s s p e c i f i e d
in s u b s e c t i o n (g) of t h is s e c t i o n , o r

(ii)

if th e c r e d i t o r s o e l e c t s an d , in an y c a s e , i f th e
c u s t o m e r h a s p r e v i o u s l y r e q u e s t e d in w r it in g , p r o m p t ly
(in no c a s e m o r e than 5 b u s i n e s s d a y s f r o m r e c e i p t
o f th e p a y m e n t ) refu n d th e a m o u n t o f th e o v e r p a y m e n t .

(2)

N o t w it h s t a n d in g th e p r o v i s i o n s o f p a r a g r a p h (1), upon

r e c e i p t o f a c u s t o m e r ' s r e q u e s t , th e c r e d i t o r s h a l l p r o m p t ly (in no
c a s e m o r e than 5 b u s i n e s s d a y s f r o m r e c e i p t o f a c u s t o m e r ' s r e q u e s t )
refu n d the a m o u n t o f an y o v e r p a y m e n t ( s ) .
(i ) O pen end c r e d i t a c c o u n t s e x i s t i n g on O c to b e r 28, 1 9 7 5 .
In th e c a s e of a n y op en end c r e d i t a c c o u n t in e x i s t e n c e an d in w h ic h
a b a la n c e o f m o r e than $1 r e m a i n s u n paid at o r a f t e r th e c l o s i n g d a te
o f th e c r e d i t o r ' s f i r s t fu ll b i l l i n g c y c l e a f t e r O c to b e r 28, 1 9 7 5 , and w h ic h
b a la n c e i s d e e m e d to b e c o l l e c t i b l e and n o t s u b j e c t to d e lin q u e n c y c o l l e c t i o n
p r o c e d u r e s , th e i t e m s d e s c r i b e d in p a r a g r a p h (a) of t h is s e c t i o n , to
the e x t e n t a p p lic a b l e and n ot p r e v i o u s l y d i s c l o s e d to the c u s t o m e r ,
s h a l l b e d i s c l o s e d in the f o r m p r e s c r i b e d in p a r a g r a p h (a) of t h is
s e c t i o n , and m a i l e d o r d e l i v e r e d to the c u s t o m e r n o t l a t e r than th e
t i m e o f m a i l i n g o r d e l i v e r y o f the p e r i o d i c s t a t e m e n t r e q u ir e d u n d e r
s u b s e c t i o n (b) o f th is s e c t i o n f o r that b i l l i n g c y c l e .




-237.

To i m p l e m e n t § 103(f) and to c l a r i f y c e r t a i n d i s c l o s u r e r e q u i r e ­

m e n t s w it h r e s p e c t to c r e d i t o t h e r than o p e n end w h ic h i s e x t e n d e d
§ 226. 8 is a m en d ed a s fo llo w s:

on an a c c o u n t b y u s e o f a c r e d i t c a r d ,

§ 2 2 6 . 8 - - C R E D IT O T H E R TH A N O P E N E N D - - S P E C I F I C D IS C L O S U R E S
vU
«t >

si/
*

t

sU

O/
n*

si/
" i'

(n) P e r i o d i c s t a t e m e n t s . (1) If a c r e d i t o r t r a n s m i t s a p e r i o d i c
n u
b illin g sta te m e n t
o th e r than a d e l i n q u e n c y n o t i c e , p a y m e n t c o u p o n b o o k ,
o r p a y m e n t p a s s b o o k , o r a s t a t e m e n t , b ill i n g , o r a d v i c e r e l a t i n g e x c l u s i v e l y
to a m o u n ts to b e p aid b y th e c u s t o m e r a s e s c r o w s f o r p a y m e n t o f t a x e s ,
i n s u r a n c e , and w a t e r , s e w e r , and la n d r e n t s , it s h a l l be in a f o r m w h ic h
th e c u s t o m e r m a y r e t a i n and s h a l l s e t fo r th
(i)

T h e an n u a l p e r c e n t a g e r a t e o r r a t e s u n l e s s e x e m p t e d
b y § 2 2 6 . 8 (b )( 2 ); and

(ii)

T h e d a te b y w h ic h , or th e p e r i o d , i f a n y , w it h in
w h ic h p a y m e n t m u s t b e m a d e in o r d e r to a v o id
la t e p a y m e n t o r d e lin q u e n c y c h a r g e s .

(2)

If th e c r e d i t o r i s r e q u i r e d to s e n d a p e r i o d i c s t a t e m e n t u n d e r

s u b s e c t i o n (q) o f th is s e c t i o n , the d i s c l o s u r e s r e q u i r e d b y § 2 2 6 . 7 (b )(l )(i),
( ii) , ( li i) , (ix), and (x), and § 226 . 7(b )(2) s h a l l b e m a d e in a d d it io n to the
d i s c l o s u r e s r e q u i r e d by t h is s u b s e c t i o n .
*

(q)

~'c

C r e d it c a r d a c c o u n t s .

*

ic

In a d d itio n , to th e r e q u i r e m e n t s o f th is

s e c t i o n c r e d i t o t h e r than op en en d w h i c h i s e x t e n d e d on an a c c o u n t by u s e
of a c r e d i t c a r d s h a l l a l s o b e s u b j e c t to th e r e q u i r e m e n t s o f §§ 2 2 6 . 7(a)(6)
(7), (8 ), and (9); 22 6. 7 (b )(l ) ( i ) , ( i i ) ,

( i i i ) , ( i x ) , and (x); 2 2 6 . 7 ( c ), (d), (g),

(h), and (i); 226 . 13; and 22 6. 14, to th e e x t e n t not r e q u i r e d b y o t h e r
p o r t io n s o f t h is s e c t i o n .




-2 4 8.

To i m p l e m e n t § 171,

§ 2 2 6 . 12 i s a m e n d e d a s f o ll o w s :

§ 226 . 1 2 - - E X E M P T I O N O F C E R T A IN S T A T E

REGULATED

T R A N SA C TIO N S

(a ) E x e m p t io n fo r S ta te r e g u l a t e d t r a n s a c t i o n s . In a c c o r d a n c e
w it h the p r o v i s i o n s o f S u p p le m e n t s II, IV, and V to R e g u la t io n Z,
a n y S ta te m a y m a k e a p p lic a t i o n to th e B o a r d f o r e x e m p t io n o f an y c l a s s
o f t r a n s a c t i o n s w it h in th e S ta te f r o m th e r e q u i r e m e n t s of C h a p te r s 2 and
4 o f the A c t and th e c o r r e s p o n d i n g p r o v i s i o n s of t h is P a r t , p r o v id e d , that:
1.

T h e B o a r d d e t e r m i n e s th a t, u n d er the la w o f th at S tate,
th a t c l a s s o f t r a n s a c t i o n s i s s u b j e c t to r e q u i r e m e n t s
s u b s t a n t i a l l y s i m i l a r to t h o s e i m p o s e d u n d e r C h a p ter 2
or

C h a p ter 4 o f the A c t o r b oth and the c o r r e s p o n d in g

p r o v i s i o n s of t h is P a r t; o r in the c a s e o f C h a p te r 4,
th e c o n s u m e r i s a ff o r d e d g r e a t e r p r o t e c t i o n than
i s a f f o r d e d u n d e r C h a p te r 4 of the A c t , and
2.

T h e r e i s a d e q u a te p r o v i s i o n fo r e n f o r c e m e n t .

(b)

P r o c e d u r e s and c r i t e r i a . T h e p r o c e d u r e s and c r i t e r i a u n d e r

w h i c h any S ta te m a y ap p ly fo r th e d e t e r m i n a t i o n p r o v id e d fo r in p a r a g r a p h
(a) of th is s e c t i o n a r e s e t f o r t h in S u p p le m e n t II to R e g u la tio n Z w ith
r e s p e c t to d i s c l o s u r e and r e s c i s s i o n r e q u i r e m e n t s (§§ 1 2 1 - 1 3 1 of C h a p ter
2), S u p p le m e n t IV w ith r e s p e c t to th e p r o h ib it io n of the i s s u a n c e of u n ­
s o l i c i t e d c r e d i t c a r d s and th e l i a b i l i t y of the c a r d h o ld e r fo r u n a u t h o r iz e d
u s e o f a c r e d i t c a r d (§ 1 3 2 - 1 3 3 o f C h a p te r 2), and in Supplement V which w i l l
b e i s s u e d on o r b e f o r e O c to b e r 28, 1 9 7 5 , w it h r e s p e c t to f a i r c r e d i t
b i l l i n g r e q u i r e m e n t s (§§ 1 6 1 - 1 7 1 o f C h a p te r 4).




9.

To i m p l e m e n t §§ 1 66, 1 6 7 , 168 , 1 6 9 , and 170,

§ 2 2 6 .1 3 is am ended

a s f o ll o w s :
S u b s e c t i o n (a) is i n c o r p o r a t e d in to § 2 2 6 . 2.
S u b s e c t i o n (b) th r o u g h (h) a r e r e d e s i g n a t e d (a) th r o u g h (g).
§ 2 2 6 . 1 3 - - C R E D IT C A R D T R A N S A C T I O N S - -S P E C I A L R E Q U IR E M E N T S
^

(i)

R ig h t o f c a r d h o l d e r to a s s e r t c l a i m s o r d e f e n s e s

a g a i n s t c a r d i s s u e r . (1) W hen a p e r s o n w h o s e l l s p r o p e r t y o r s e r v i c e s
f a i l s to s a t i s f a c t o r i l y r e s o l v e a d is p u t e a s to d e f e c t i v e p r o p e r t y o r s e r v i c e s
16/
p u r c h a s e d b y u s e of a c r e d i t c a r d , th e c a r d h o ld e r m a y a s s e r t a l l c l a i m s
and d e f e n s e s a r i s i n g out of the t r a n s a c t i o n and r e l a t i n g to s u c h f a i l u r e
a g a i n s t th e c a r d i s s u e r w ho h a s i s s u e d th e c r e d i t c a r d if:
(i )

the c u s t o m e r h a s m a d e a g o od f a it h a t t e m p t to
o b ta in s a t i s f a c t o r y r e s o l u t i o n o f a d i s a g r e e m e n t
o r p r o b le m r e l a t i v e to the t r a n s a c t i o n f r o m th e
p e r s o n h o n o r in g th e c r e d i t c a r d ,

(ii)

the a m o u n t of c r e d i t e x t e n d e d b y th e c a r d i s s u e r
to th e c u s t o m e r to p u r c h a s e th e p r o p e r t y o r s e r v i c e s
w h ic h r e s u l t e d in the a s s e r t i o n of th e c l a i m or
o r d e f e n s e by th e c u s t o m e r e x c e e d s $ 5 0 , and

(iii)

T he i n i t i a l t r a n s a c t i o n w h i c h g a v e r i s e to th e
a s s e r t i o n o f th e c l a i m o r d e f e n s e b y th e c u s t o m e r
o c c u r r e d in th e s a m e S ta te a s th e m a i l i n g a d d r e s s

l 6 / T h e s e c l a i m s s h a l l not in c lu d e t o r t c l a i m s o r c o n t r a c t c l a i m s o f d a m a g e s
to p e r s o n o r p r o p e r t y r e s u l t i n g f r o m th e m e r c h a n t ’s f a i l u r e to r e s o l v e
a d is p u t e a s to d e f e c t i v e p r o p e r t y o r s e r v i c e s . T he e x c l u s i o n o f t o r t
c l a i m s i s n o t in te n d e d to d e fe a t th e a s s e r t i o n of c l a i m s th a t c o u ld a l t e r n a t i v e l y
b e p le a d e d in t o r t o r c o n t r a c t .




-26p r e v i o u s l y p r o v id e d by th e c a r d h o ld e r o r w ith in
1 00 m i l e s f r o m s u c h a d d r e s s ( w h i c h e v e r i s g r e a t e r ) ,

e x c e p t th a t th e l i m i t a t i o n s s t a t e d in s u b p a r a g r a p h s
(ii) and (iii) s h a l l n o t a p p ly w h e n th e p e r s o n h o n o r in g
the c r e d i t c a r d :
(A)

i s th e s a m e p e r s o n a s th e c a r d i s s u e r , o r

(B)

is c o n t r o l l e d , d i r e c t l y o r i n d i r e c t l y , by the
card is s u e r , or

(C)

i s u n d e r th e d i r e c t o r i n d i r e c t c o n t r o l o f a
t h ir d p e r s o n w h o a l s o d i r e c t l y o r i n d i r e c t l y
c o n t r o l s th e c a r d i s s u e r , or

(D)

is a f r a n c h i s e d d e a l e r in th e c a r d i s s u e r ' s
p r o d u c t s o r s e r v i c e s , or

(E)

h a s o b t a in e d the o r d e r fo r the t r a n s a c t i o n
r e l a t i v e to w h ic h the c l a i m ( s ) o r d e f e n s e ( s )
i s a s s e r t e d th r o u g h a m a i l s o l i c i t a t i o n m a d e
1i/
b y o r p a r t i c i p a t e d in
by th e c a r d i s s u e r ,
in w h ic h th e c a r d h o l d e r i s s o l i c i t e d to e n t e r
in to s u c h t r a n s a c t i o n by u s in g th e c r e d i t c a r d
i s s u e d b y th e c a r d i s s u e r , o r

(F)
(2)

c o n t r o l s , d i r e c t l y o r i n d i r e c t l y , the c a r d i s s u e r .

T he a m o u n t o f th e c l a i m s o r d e f e n s e s a s s e r t a b l e b y the

c a r d h o l d e r u n d e r t h is s u b s e c t i o n m a y n ot e x c e e d the a m o u n t of c r e d i t
o u t s t a n d in g w ith r e s p e c t to the t r a n s a c t i o n w h ic h g a v e r i s e to the a s s e r t i o n
o f th e c l a i m ( s ) o r d e f e n s e ( s ) at th e t i m e th e c a r d h o l d e r f i r s t n o t i f i e s

1 7 / " P a r t i c i p a t e d in" d o e s n o t in c lu d e a m e r e in d ic a t i o n b y a p e r s o n th at
he" h o n o r s a p a r t i c u l a r c r e d i t c a r d ( s ) .




-27th e c a r d i s s u e r o r th e p e r s o n h o n o r in g th e c r e d i t c a r d fo r s u c h t r a n s a c t i o n
o f th e e x i s t e n c e of s u c h c l a i m ( s ) o r d e f e n s e ( s ) .

F o r p u rp o ses of d eterm in in g

th e a m o u n t of c r e d i t o u ts t a n d in g w ith r e s p e c t to s u c h t r a n s a c t i o n s a s p r o v id e d
in th e p r e c e d i n g s e n t e n c e , p a y m e n t s and o t h e r c r e d i t s to th e c a r d h o l d e r ' s
a c c o u n t w i l l be d e e m e d to h a v e b e e n a p p lie d , in th e o r d e r in d ic a t e d , to the
p a y m e n t of:
(i)

l a t e c h a r g e s in th e o r d e r o f e n t r y to the a c c o u n t;

(ii)

f in a n c e c h a r g e s in the o r d e r o f e n t r y to th e a c c o u n t;

( iii)

a n y o t h e r d e b its in th e o r d e r in w h ic h e a c h d eb it
e n t r y w a s m a d e to the a c c o u n t;

(iv)

and

w h e n m o r e than o n e i t e m is in c l u d e d in a s i n g l e
e x t e n s i o n o f c r e d i t , c r e d i t s a r e to be d is t r ib u t e d
p r o r a ta a c c o r d i n g to p r i c e s an d a p p lic a b l e t a x e s .

(3)

T h is s u b s e c t i o n d o e s not a p p ly to c a s h a d v a n c e s o b ta in e d

w ith a c r e d i t c a r d w h e n th e a d v a n c e i s o b ta in e d f r o m th e c a r d i s s u e r
and is u n r e l a t e d to a n y s p e c i f i c c r e d i t s a l e i t e m .
(j)

P r o h i b i t io n o f o f f s e t s by c a r d i s s u e r .

(1) A c a r d i s s u e r

m a y n o t ta k e any a c t io n to o f f s e t a c a r d h o l d e r ' s i n d e b t e d n e s s a r i s i n g
in c o n n e c t io n w ith a c o n s u m e r c r e d i t t r a n s a c t i o n u n d e r th e r e l e v a n t
c r e d i t c a r d p lan o r u n d e r ly in g a c c o u n t a g a i n s t fu n ds o f th e c a r d h o ld e r
18/
h e ld on d e p o s it w ith th e c a r d i s s u e r u n l e s s a c o u r t o r d e r i s o b ta in e d .
(2)

T he p r o h ib it io n in p a r a g r a p h (1) o f t h is s u b s e c t i o n d o e s

n o t a p p ly to c r e d i t c a r d p la n s w h e r e b y the c a r d h o l d e r a u t h o r i z e s th e
c a r d i s s u e r a s a m e t h o d of p a y m e n t to p e r i o d i c a l l y d e d u c t a l l o r a p o r t io n

1 8 / T h is p a r a g r a p h d o e s n o t a l t e r o r a f f e c t the r ig h t o f a c a r d i s s u e r a c t in g
u n d e r S ta te la w to a t t a c h o r o t h e r w i s e l e v y upon fun ds o f a c a r d h o ld e r
h e ld on d e p o s it w ith th e c a r d i s s u e r if th a t r e m e d y i s c o n s t it u t io n a lly
a v a i l a b l e to c r e d i t o r s g e n e r a l l y .




-28o f th e c a r d h o l d e r ' s c r e d i t c a r d d eb t f r o m h is d e p o s i t a c c o u n t ( s u b j e c t to
th e l i m i t a t i o n s in § 2 26 . 1 4 (a )(2 )), p r o v id e d th at,
(i)

s u c h a u t o m a t ic d e b it w a s p r e v i o u s l y a u t h o r iz e d in
w r it in g by th e c a r d h o l d e r , or

(ii)

w ith r e s p e c t to s u c h a u t o m a t ic d eb it a c c o u n t s in
e x i s t e n c e on O c to b e r 28, 1 9 7 5 , the c r e d i t o r h a s
g iv e n n o t i c e of the p r o v i s i o n s o f s u b s e c t i o n (j)
of t h is s e c t i o n to s u c h a c c o u n t s p r i o r to r e n e w a l

of th e a u th o r iz a t io n (in n o c a s e l a t e r th a n O c to b e r 28,
1 97 6).
(k)

P r o m p t n o t if ic a ti o n o f r e t u r n s .

(1)

W hen a n y p e r s o n

a c c e p t s t h e r e t u r n of p r o p e r t y o r f o r g i v e s a d ebt fo r s e r v i c e s w h ic h i s
to be r e f l e c t e d a s a c r e d i t to th e c u s t o m e r ' s c r e d i t c a r d a c c o u n t , he
s h a l l p r o m p t ly (in n o c a s e l a t e r than 3 b u s i n e s s d a y s f r o m th e d ate the
r e t u r n i s a g r e e d to) m a i l o r d e l i v e r to the c a r d i s s u e r a c r e d i t s t a t e m e n t
w ith r e s p e c t t h e r e t o in th e m a n n e r , t i m e , and l o c a t i o n in d ic a t e d by the
c a r d i s s u e r a s b e in g n e c e s s a r y to i m m e d i a t e l y c r e d i t th e c u s t o m e r ' s
a c c o u n t and f u r n i s h th e c u s t o m e r w ith a c o p y of s u c h s t a t e m e n t .
(2)

Upon r e c e i p t of s u c h c r e d i t s t a t e m e n t , the c a r d i s s u e r

s h a l l c r e d i t the a c c o u n t o f s u c h c u s t o m e r a s he w o u ld a p r o p e r l y t r a n s m i t t e d
p a y m e n t u n d e r § 2 2 6 . 7(g).

If the c a r d i s s u e r d o e s n ot in d i c a t e a s p e c i f i c

m a n n e r , t i m e , and lo c a t i o n fo r p r o m p t r e c e i p t of c r e d i t s fo r r e t u r n s ,
then the a s s u m p t i o n s in § 226. 7(g) w i l l a p p ly .
(3)

If it is the s e l l e r ' s p o l i c y to g iv e c a s h r e fu n d s to c a s h c u s t o m e r s ,

h e m u s t a l s o g iv e c r e d i t r e fu n d s to c r e d i t c a r d c u s t o m e r s , u n l e s s he c l e a r l y
and c o n s p i c u o u s l y d i s c l o s e s that he d o e s n o t g iv e c r e d i t r e fu n d s a t the
t i m e th e p u r c h a s e t r a n s a c t i o n i s c o n s u m m a t e d .




-2 9 -

(1) P r o h i b i t e d a c t s o f c a r d i s s u e r s .

N o t w it h s t a n d in g any e x i s t i n g

a g r e e m e n t ( s ) to th e c o n t r a r y , n o c a r d i s s u e r m a y , by c o n t r a c t o r o t h e r w i s e ,
(1)

P r o h i b i t any p e r s o n f r o m o f f e r i n g a d i s c o u n t to a l l c u s t o m e r s

of such p erso n ,

in c lu d in g c a r d h o ld e r c u s t o m e r s , to in d u c e s u c h c u s t o m e r s

to p a y b y c a s h , c h e c k , o r o t h e r s i m i l a r m e a n s r a t h e r th a n b y u s e o f a
c r e d i t c a r d o r i t s u n d e r ly in g a c c o u n t f o r th e p u r c h a s e o f p r o p e r t y o r
s e r v ic e s ; or
(2)

R e q u i r e a n y p e r s o n to o p e n o r m a i n t a i n an a c c o u n t o r

p r o c u r e a n y o t h e r s e r v i c e o r d e v i c e f r o m th e c a r d i s s u e r , i t s s u b s i d i a r y ,
a g e n t , o r a n y o t h e r p e r s o n , a s a c o n d itio n o f p a r t i c i p a t i o n in a c r e d i t
c a r d p la n .

10.

To i m p l e m e n t §§ 1 61, 1 6 2 , and 1 7 0 , § 2 2 6 . 14 i s a d d e d a s f o llo w s :
§ 2 2 6 . 1 4 — BILLING E R R O R S - - R E S O L U T IO N P R O C E D U R E
(a)

C o r r e c t i o n of b ill in g e r r o r s .

A f t e r the c r e d i t o r r e c e i v e s

p r o p e r w r it t e n n o t if ic a t i o n o f a b ill in g e r r o r r e f l e c t e d on a p e r i o d i c
s t a t e m e n t f r o m a c u s t o m e r , u n l e s s the c u s t o m e r h a s s u b s e q u e n t ly
a g r e e d in w r i t i n g th a t the p e r i o d i c s t a t e m e n t i s c o r r e c t , th e c r e d i t o r
s h a ll:




J

-30(1) N ot l a t e r than 30 d a y s a f t e r r e c e i p t o f s u c h n o t if ic a t i o n ,
m a i l o r d e l i v e r w r it t e n a c k n o w l e d g m e n t t h e r e o f to th e c u s t o m e r ' s
c u r r e n t a d d r e s s , u n l e s s th e a p p r o p r ia t e a c t i o n s in p a r a g r a p h ( 2 ) o f
t h is s u b s e c t i o n a r e tak en w it h in s u c h 30 d a y p e r io d ;
(2)

and

R e s o l v e the d is p u t e n o t l a t e r than 2 c o m p l e t e b ill in g

c y c l e s (in no e v e n t m o r e than 90 d a y s ) f r o m th e d a te o f r e c e i p t of
th e n o t i c e of b ill in g e r r o r and p r i o r to a n y a c t io n b y th e c r e d i t o r to
c o l l e c t a n y p o r tio n of th e a m o u n t ( s ) i n d ic a t e d b y th e c u s t o m e r a s b e in g
in d is p u t e o r a n y fin a n c e c h a r g e s o r l a t e p a y m e n t c h a r g e s c o m p u t e d on
s u c h d is p u t e d a m o u n t( s ) by
(i)

m a k in g a n y a p p r o p r ia t e c o r r e c t i o n s in th e
a c c o u n t of th e c u s t o m e r w ith r e g a r d to any
d is p u t e d a m o u n t s e r r o n e o u s l y b i l l e d , i n c l u d ­
ing th e c r e d i t i n g of an y f in a n c e c h a r g e s o r
la t e p a y m e n t c h a r g e s i m p o s e d upon any
a m o u n ts e r r o n e o u s l y b ill e d , and m a i l i n g o r
d e l i v e r i n g to the c u s t o m e r a w r it t e n
n o t if ic a t i o n o f c o r r e c t i o n s ;

(ii)

11/

or

c o r r e c t i n g the c u s t o m e r ' s a c c o u n t by a
d if f e r i n g a m o u n t f r o m th a t in d ic a t e d by the
c u s t o m e r a s b e in g e r r o n e o u s l y b i l l e d and
m a i l i n g or d e l i v e r i n g to the c u s t o m e r an
e x p la n a t io n o f the c h a n g e ( s ) , a c c o m p a n i e d by

T 97 A n o t i c e on a s u b s e q u e n t b ill in g s t a t e m e n t c l e a r l y id e n t if y in g an y
a m o u n t c r e d i t e d the c u s t o m e r ' s a c c o u n t p u r s u a n t to a b ill in g e r r o r
n o t i c e s h a l l be d e e m e d a p r o p e r t r a n s m i t t a l o f a w r i t t e n n o t if ic a t i o n
of c o r r e c t i o n s .






-31d o c u m e n t a r y e v i d e n c e o f th e c u s t o m e r ' s in ­
d e b t e d n e s s a s to the a m o u n t in d is p u t e , i f s u c h
e v i d e n c e i s r e q u e s t e d b y th e c u s t o m e r ; or
( iii) m a i l i n g o r d e l i v e r i n g a w r i t t e n e x p la n a t io n o r
c l a r i f i c a t i o n to th e c u s t o m e r , a f t e r h a v in g
con d u cted a r e a s o n a b le in v e s tig a tio n settin g
f o r t h , to th e e x t e n t a p p l i c a b l e , the r e a s o n s
w h y th e c r e d i t o r b e l i e v e s th e a m o u n t( s ) w a s
c o r r e c t l y sh ow n on th e p e r i o d i c s t a t e m e n t and,
if the c u s t o m e r s o r e q u e s t s , f u r n is h in g c o p i e s
of a n y d o c u m e n t a r y e v i d e n c e o f the c u s t o m e r ' s
i n d e b t e d n e s s w ith r e s p e c t to a d is p u t e d a m o u n t.
In an y c a s e w h e r e th e c u s t o m e r a l l e g e s th a t th e
p erio d ic sta tem en t r e fle c ts p rop erty or s e r v ic e s
n o t d e l i v e r e d to th e c u s t o m e r o r h is d e s i g n e e in
a c c o r d a n c e w ith a n y a g r e e m e n t m a d e in c o n n e c t io n
w ith th e t r a n s a c t i o n g iv i n g r i s e to the d is p u te d
a m o u n t, a c r e d i t o r m a y n o t c o n s t r u e s u c h a m o u n t
to be c o r r e c t l y sh o w n on th e b i l l i n g s t a t e m e n t u n l e s s
the c r e d i t o r d e t e r m i n e s , u p on r e a s o n a b l e in q u ir y and
i n v e s t i g a t i o n , that s u c h p r o p e r t y o r s e r v i c e s w e r e
a c t u a l l y d e l i v e r e d , m a i l e d , o r o t h e r w i s e s e n t to th e
c u s t o m e r and p r o v i d e s th e c u s t o m e r w it h a w r i t t e n
s t a t e m e n t e x p la i n i n g s u c h d e t e r m i n a t i o n . In a n y
c a s e w h e r e th e c u s t o m e r a l l e g e s th at an a m o u n t o f
a t r a n s a c t i o n r e f l e c t e d on th e p e r i o d i c s t a t e m e n t i s
i m p r o p e r b e c a u s e th e p e r s o n h o n o r in g th e c r e d i t

-32-

c a r d h a s m a d e an i n c o r r e c t r e p o r t to th e c a r d i s s u e r
of the am o u n t w hich sho u ld h av e b e e n ch arg ed ^ th e
c a r d i s s u e r m a y no t c o n s tr u e su ch am o u n t to be c o r ­
r e c t l y r e f l e c t e d on th e p e r io d ic s t a t e m e n t u n le s s the
c r e d i t o r d e t e r m i n e s , upon r e a s o n a b l e in q u iry and
in v e s tig a tio n , th a t th e p r o p e r am o u n t i s shown on the
p e rio d ic s ta t e m e n t and p r o v id e s th e c u s t o m e r with
a w r itte n s ta t e m e n t e x p lain in g such d e te r m in a tio n .
(b) M in im u m p a y m e n ts and fin a n c e c h a r g e s on d isp u te d a m o u n ts .
(1) W hen a c u s t o m e r is p e r m it t e d to m a k e a m in im u m p a y m e n t, he n eed
only m a k e a m i n i m u m p a y m e n t c a lc u la te d on th e b a s i s of am o u n ts not in
d is p u te .

W hen th e d isp u te d am o u n t is only a p a r t of th e t o ta l am ount of

an i te m ,t h e c u s t o m e r r e m a i n s o b lig ated to pay the am o u n t not in d isp u te ,
and any m in im u m p ay m en t and fin a n c e c h a r g e s o r la t e p a y m e n t c h a r g e s
m a y be c a lc u la te d on th e u n d isp u te d a m o u n t.

If, a t th e c o m p le tio n of the

e r r o r r e s o l u t i o n p r o c e d u r e , it is d e t e r m in e d th a t the c u s t o m e r owes s o m e
o r a ll of the d is p u te d am o u n t, the c r e d i t o r m a y r e q u i r e p a y m e n t of any
m in im u m p a y m e n t am o u n ts which th e c u s t o m e r failed to pay b e c a u s e of
the d is p u te .

T h e c r e d i t o r m a y not, h o w e v e r , a c c e l e r a t e th e c u s t o m e r 's

e n t ir e deb t s o le ly b e c a u s e the c u s t o m e r h a s e x e r c i s e d r i g h t s p rov id ed by
the A c t o r th is P a r t .
(2)

A f t e r the r e s o lu tio n of a d is p u te , f in a n c e c h a r g e s o r la te

p a y m e n t c h a r g e s which could h ave b een im p o s e d on a m o u n ts in d isp u te
p r i o r to r e c e i p t by th e c r e d i t o r of the p r o p e r w r i tt e n n o tific a tio n of a




-33-

b illin g e r r o r m a y be c o lle c te d , u n le s s :
(i)

it is r e s o l v e d t h a t th e c u s t o m e r ow es
none of th e am o u n t in d is p u te , in w hich
c a s e no fin a n c e c h a r g e s o r l a t e p a y m e n t
c h a r g e s m a y be c o lle c te d f o r any t i m e on
th a t am ou n t; o r

(ii)

it is r e s o l v e d th a t th e c u s to m e r ow es
som e

of th e d isp u te d am o u n t, in

which c a s e fin a n c e c h a r g e s o r l a t e p a y m e n t
c h a r g e s f o r such p e r io d m a y b e im p o s e d
only on th e a m o u n t owed.
In no c a s e m a y fin a n c e c h a r g e s o r la te p a y m e n t c h a r g e s b e im p o s e d
on d isp u te d a m o u n ts d u r in g th e tim e th e d is p u te r e s o l u t i o n p r o c e d u r e
of th is s e c tio n is in p r o c e s s .

A f te r th e c o m p le tio n of a d is p u te r e s o lu t i o n

p r o c e d u r e , as p ro v id e d in s u b s e c tio n (a) of th is s e c tio n , th e c r e d i t o r s h a ll
p r o m p tly m a i l o r d e l i v e r to the c u s t o m e r a s t a t e m e n t of th e am o u n t
owed by the c u s t o m e r a c c o r d in g to the r e q u i r e m e n t s of § 226. 7(b)(2).
(3) N othing in th is s e c tio n s h a ll b e c o n s tr u e d to p r o h ib it
the m a ilin g o r d e l iv e r y of p e r io d ic s ta t e m e n t s to th e c u s t o m e r , p ro v id e d
th a t th e c r e d i t o r in d ic a te s to the c u s t o m e r on th e f a c e of th e p e r io d ic
s ta t e m e n t th a t p a y m e n t of th e s p e c ific a m o u n t in d is p u te i s n ot r e q u i r e d
pending the c r e d i t o r ' s c o m p lia n c e w ith th e p r o v is io n s of th is s e c tio n .
(4) Nothing in th is s e c tio n s h a ll p r o h ib it any a c tio n by a
c r e d i t o r to c o lle c t any am o u n t w hich h a s not b e e n in d ic a te d by th e
c u s t o m e r to c o n ta in a b illin g e r r o r .
(c)

A u to m a tic d e b it of d isp u te d a m o u n ts .

(1) In th e c a s e of

c r e d i t p la n s w h e r e th e c a r d h o l d e r h a s a g r e e d to p e r m i t th e c a r d i s s u e r
to p e r io d ic a lly p ay the c a r d h o l d e r ’s in d e b te d n e s s by d e d u c tin g th e



-34a p p r o

p r i a te a m o u n t f r o m th e c a r d h o l d e r 's d e p o s it a c c o u n t, th e c r e d i t o r

s h a ll n ot a u to m a tic a lly d eb it any d isp u te d a m o u n ts if the c u s t o m e r h a s
m a ile d o r d e l i v e r e d a p r o p e r w r i tt e n n o tific a tio n of a b illin g e r r o r w ithin
10 d a y s of r e c e i p t of the p e r io d ic s ta t e m e n t on w hich th e s u s p e c t e d b illin g
e r r o r firs t appears.
(2) Upon r e c e i p t of su c h n o tific a tio n , if th e c r e d i t o r h a s
a l r e a d y a u to m a tic a lly d e b ite d th e c u s t o m e r 's a c c o u n t, th e c r e d i t o r
s h a ll p r o m p tly (in no c a s e no m o r e

th a n

one b u s i n e s s

day a f t e r

receip t

of

th e n o tic e ) r e s t o r e to th e c u s t o m e r 's d e p o s it a c c o u n t any p o r tio n of
th e d is p u te d am o u n t w hich w a s p r e v i o u s ly d e d u c te d .
(3) N othing in th is s u b s e c tio n s h a ll l i m i t th e c u s t o m e r 's
r ig h t to d is p u te an am o u n t he b e lie v e s to be in e r r o r w ithin 60 days
as o t h e r w i s e p r o v id e d in t h is s e c tio n .
(d) C lo s in g of a c c o u n t s .

A c r e d i t o r m a y not, p r i o r to c o m p ly ­

ing w ith the r e q u i r e m e n t s of su b se c tio n s (a) and (b) of th is s e c tio n , r e s t r i c t
o r c lo s e an acco u n t with r e s p e c t to w hich the c u s t o m e r in d ic a te d a b e lie f
th a t su c h a c c o u n t c o n ta in s a b illin g e r r o r s o le ly b e c a u s e of th e c u s t o m e r 's
r e f u s a l o r f a i lu r e to pay th e a m o u n t in d ic a te d to be in e r r o r .

T h is s u b s e c ­

tion d o e s not p r o h ib it th e c r e d i t o r f r o m applying any such am o u n t to th e
c u s t o m e r 's c r e d i t lim ita tio n .
(e) C r e d i t r e p o r t s on am o u n ts in d i s p u t e .

(1) A f te r r e c e i v in g

a p r o p e r w r i tt e n n o tific a tio n of a b illin g e r r o r p u r s u a n t to th is s e c tio n ,
n e i t h e r th e c r e d i t o r n o r h is a g e n t m a y d i r e c t l y o r in d i r e c tl y t h r e a t e n to
r e p o r t a d v e r s e l y to any p e r s o n on th e c u s t o m e r 's c r e d i t s ta n d in g o r c r e d i t
r a t in g b e c a u s e of th e c u s t o m e r 's f a i l u r e to pay th e a m o u n t s p e c ifie d in
s u c h n o tific a tio n a s b ein g in e r r o r o r any fin a n c e c h a r g e im p o s e d on th e




-3 5 20/

d is p u te d am o u n t, n o r s h a ll s u c h am o u n t be r e p o r t e d a s d e lin q u e n t
to any t h i r d p e r s o n u n l e s s su ch am o u n t r e m a i n s u n p a id a f t e r c r e d i t o r
h a s c o m p lie d w ith a ll the r e q u i r e m e n t s of t h is s e c t io n and h a s allo w ed
th a t c u s t o m e r the s a m e n u m b e r of d a y s t h e r e a f t e r a s h e c u s t o m a r i l y o r
b y c r e d i t a g r e e m e n t a llo w s, w h ic h e v e r is l o n g e r (in no c a s e l e s s th an
10 d a y s ), f o r th e c u s t o m e r to pay u n d isp u te d a m o u n ts .
(2) If, w ithin th e t i m e l i m i t allow ed f o r p a y m e n t in p a r a g r a p h
(1) of t h is s u b s e c tio n , th e c r e d i t o r r e c e i v e s a f u r t h e r w r i tt e n n o tific a tio n
f r o m the c u s to m e r th a t any p o r tio n of a p r e v i o u s l y d is p u te d am o u n t i s
s t i l l in d is p u te , th e c r e d i t o r m a y not r e p o r t to any t h i r d p a r t y th a t su ch
a m o u n t is d e lin q u e n t, u n l e s s the c r e d i t o r a ls o r e p o r t s th a t th e a m o u n t
is in d is p u te p u r s u a n t to th e a p p lic a b le p r o v is i o n s of th is s e c tio n and, a t
th e s a m e tim e , n o tifie s th e c u s t o m e r in w r itin g of th e n a m e
and a d d r e s s of each p a r t y to w hom th e c r e d i t o r is r e p o r t i n g in f o r m a tio n
c o n c e r n in g the d elin q u en cy .
(3) If a c r e d i t o r h a s r e p o r t e d a d is p u te d a m o u n t a s b ein g
d e lin q u e n t to any th i r d p e r s o n , the c r e d i t o r s h a ll r e p o r t p r o m p tly in
w r itin g to any p e r s o n to w hom su ch r e p o r t w a s m a d e any s u b s e q u e n t
r e s o l u t i o n of th e r e p o r t e d d elin q u e n c y .
(4) If a c r e d i t o r h a s r e p o r t e d an am o u n t a s bein g d elin q u en t
to a t h i r d p a r t y , and such a m o u n t is s u b s e q u e n tly d isp u te d by th e c u s t o m e r
in a c c o r d a n c e w ith the r e q u i r e m e n t s of s u b s e c tio n (a) of th is s e c tio n ,
th e c r e d i t o r s h a ll p r o m p tly (in no c a s e m o r e than 5 b u s in e s s d a y s a f t e r
r e c e i p t by the c r e d i t o r of th e p r o p e r w r i t t e n n o tific a tio n of th e b illin g
20/ A r e p o r t by a c r e d i t o r with r e f e r e n c e to a d isp u te d am ount m u s t
in c lu d e a r e f e r e n c e th a t th e am o u n t is in d is p u te p u r s u a n t to th e a p p li ­
c a b le p r o v is i o n s of th is s e c tio n and s h a ll n o t be c o n s id e r e d to be
" r e p o r t e d a s d e lin q u e n t. "




-36-

e r r o r ) m a i l o r d e l i v e r a w r i tt e n n o tic e to each t h i r d p a r t y to whom the
d e lin q u e n c y w as r e p o r t e d th a t th e am o u n t is in d is p u te , and s h a ll p r o m p tly
n otify each su ch t h i r d p a r t y of any s u b s e q u e n t r e s o l u t i o n of th e d is p u te .
A c r e d i t o r n e e d n ot co m p ly with the r e q u i r e m e n t s of th is p a r a g r a p h if the
d is p u te is r e s o l v e d w ithin 5 b u s in e s s d a y s a f t e r r e c e i p t by the c r e d i t o r
of p r o p e r w r i tte n n o tific a tio n of a b illin g e r r o r .
(f) F o r f e i t u r e p e n a lt y .

(1) Any c r e d i t o r who f a ils to

c o m p ly with the r e q u i r e m e n t s of th is s e c t io n f o r f e i ts any r ig h t to
c o lle c t f r o m th e c u s t o m e r the a m o u n t in d ic a te d by th e c u s to m e r as
b ein g in e r r o r , w h e th e r o r n o t su ch a m o u n t is in fa c t in e r r o r , and
any c o r r e s p o n d i n g fin a n ce c h a r g e s , p ro v id e d th a t the a m o u n t so f o rf e ite d
u n d e r th is s e c tio n s h a ll not e x c e e d $50 f o r each it e m o r t r a n s a c t i o n
on a p e r io d ic s t a t e m e n t in d ic a te d by th e c u s t o m e r a s b ein g in e r r o r .
In no c a s e s h a ll a c r e d i t o r f o r f e i t any am o u n t f o r an e r r o r in a to ta l
f ig u r e o r s u b to ta l f ig u r e r e f l e c t e d on a s t a t e m e n t which is c a u s e d s o le ly
by an e r r o r in a n o th e r i te m w hich is the s u b je c t of a d is p u te , n o r s h a ll
a c r e d i t o r s u f f e r any f o r f e it m o r e th an on ce f o r any it e m o r t r a n s a c t i o n
which m a y a p p e a r on a p e r io d ic s ta t e m e n t .
(2)

N othing in th is s u b s e c tio n s h a ll be c o n s tr u e d to li m it a

c u s t o m e r ’s r ig h t to r e c o v e r u n d e r § 130 of the A ct.
(g) E x c e p tio n s to g e n e r a l r u l e .

T h is s e c tio n d o e s not apply

to c r e d i t o t h e r th an open end, w h e th e r o r not a p e r io d ic s ta t e m e n t is
m a ile d o r d e l i v e r e d , u n l e s s su ch c r e d i t is ex ten d ed on an acco u n t by
u s e of a c r e d i t c a r d .




11.

D r a ft r e g u l a t i o n s to i m p l e m e n t §§ 4 0 9 and 411 of T it l e IV o f

P . L . 9 3 - 4 9 5 w i l l b e i s s u e d by th e B o a r d at a l a t e r d a te .

12.

T h e e f f e c t i v e d ate of t h e s e r e g u l a t i o n s s h a l l b e O c to b e r 28, 1 9 7 5 .

13.

T h is n o t i c e i s p u b lis h e d p u r s u a n t to s e c t i o n 553(b) o f T it l e 5,

U n ited S t a t e s C o d e , and § 2 6 2 . 2(a) o f th e R u l e s o f P r o c e d u r e o f the
B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s t e m (12 C. F . R. 2 6 2 . 2(a)).
I n t e r e s t e d p e r s o n s a r e in v it e d to s u b m it r e l e v a n t d a ta , v i e w s ,
o r a r g u m e n t s c o n c e r n i n g t h is p r o p o s a l , in c lu d in g p o s s i b l e e f f e c t s on th e
c o s t and th e a v a i l a b i l i t y of c o n s u m e r c r e d i t . A n y s u c h m a t e r i a l s h o u ld
b e s u b m it te d in w r it in g to th e S e c r e t a r y , B o a r d o f G o v e r n o r s o f th e
F e d e r a l R e s e r v e S y s t e m , W a s h in g to n , D. C. 2 0 5 5 1 , to b e r e c e i v e d
n o t l a t e r than M a y 30, 19 75.

S u ch m a t e r i a l w i l l b e m a d e a v a i l a b l e

f o r i n s p e c t i o n and c o p y in g upon r e q u e s t , e x c e p t a s p r o v id e d in § 2 6 1 . 6 ( a )
of th e B o a r d 's R u le s R e g a r d in g A v a i l a b i l i t y o f I n fo r m a t io n .
B y o r d e r o f the B o a r d o f G o v e r n o r s , A p r i l 28, 1 9 7 5 .

( s ig n e d ) G r if f it h L . G a r w o o d _________
G r if f it h L. G a r w o o d
A s s i s t a n t S e c r e t a r y o f th e B o a r d

[SE A L ]