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FED ER A L RESERVE BANK OF NEW YORK r Circular No. 81921 L J October 6, 1977 PROPOSED AM ENDM ENT TO R EG U LA TIO N Z Billing Requirements for Cash Advance Check Transactions To All Member Banks, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement by the Board of Governors of the Federal Reserve System, relating to a proposed amendment to its Regulation Z : The Board of Governors of the Federal Reserve System today announced a proposal to modify existing provisions of its Truth in Lending Regulation Z relating to billing for cash advance check transactions. The proposed modification would permit creditors to use the date on which a creditor charges a cash advance check to the customer’s account (the debiting date) in billing customers. Creditors may continue to use the date a cash advance check is used by the customer (the transaction date) or the date written on the check by the customer as presently 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 error triggering the procedures for settling billing errors under the Fair Credit Billing Act. Further, a questioned billing that uses the debiting date must be treated as an erroneous billing. This means that no finance charge on the transaction would be allowed during the time the credit card issuer took to pro vide the customer with documentary evidence supporting the bill. The Board made the proposal to facilitate compliance by creditors who have experienced difficulty in ascertaining and stating on their bills the transactions dates relating to cash advance checks. In light of these difficulties the Board on September 2 announced that the date for full implementation of the section of Reg ulation Z relating to cash advance check transactions would be postponed from October 28, 1977 to March 28, 1978 [Cir. No. 8178, dated September 12, 1977]. The Board said then that it was considering proposals to facilitate compliance while maintaining requirements adequate to allow customers to identify transactions billed to them. Printed below is the text of the proposed amendment. Comments on the proposal should be submitted by November 1 and may be sent to our Consumer Affairs Division. P a u l A. V o lc ker , President. FEDERAL RESERVE SYSTEM [Reg. Z ; Docket Nos. R-0087, R-0093] Proposed Amendment to Regulation Z Concerning Descriptive Billing Requirements A G E N C Y : Board of Governors of the Federal Reserve System. A C T IO N : Proposed rule. S U M M A R Y : This proposed rule would amend the provision of Regulation Z that now requires that the date that a cash advance check transaction takes place be disclosed on the creditor’s descriptive periodic billing statement. In lieu of disclosing the transaction date, the proposal would permit creditors to disclose the date of debiting (the date on which a creditor honors a cash advance check) provided that the creditor treats any subsequent related inquiry from a customer as a billing error and an erroneous billing under the Fair Credit Billing Act. The purpose of the proposed rule is to facilitate compliance by certain creditors who have ex perienced operational difficulties in capturing transac tion dates. Creditors with the capability of disclosing transaction dates would be permitted to do so. D A T E S : Comments must be received on or before November 1, 1977. A D D R E S S : Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. All ( o ver ) materials submitted should include the docket numbers R-0087, R-0093. FO R F U R TH E R IN F O R M A T IO N : Glenn E. Loney, Attorney, Fair Credit Practices Section, Division of Consumer Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551 (202-4522412). S U P P L E M E N T A R Y IN F O R M A T IO N : The Board of Governors of the Federal Reserve System is pub lishing for comment a proposed amendment to Regu lation Z designed to facilitate compliance with the dis closure requirements relating to cash advance check transactions that are descriptively billed on periodic billing statements. The proposed amendment is in re sponse to serious operational difficulties experienced by a number of creditors in capturing transaction dates on such checks. The regulation currently requires that transaction dates be disclosed in all cases. The pro posed amendment would permit debiting dates to be disclosed in substitution for transaction dates provided that the creditor treats any subsequent customer in quiries seeking clarification of cash advance check trans actions as billing errors and erroneous billings under the regulation. This would mean that no finance charge on such transactions would be allowed to accrue during the time that the creditor took to provide the customer with documentary or other evidence support ing the transactions. The current requirements were to become fully effective on October 28, 1977. In light of the creditor compliance problems with these require ments, the Board on August 31, 1977, suspended this effective date with regard 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 con sumer’s understanding of transaction activity in his or her open end credit account. Cash advance transactions appear to be relatively infrequent as compared with purchase transactions in such accounts. Moreover, cash advance transactions appear to be substantially larger in amount. Evidence submitted in support of these assump tions indicated that one bank’s open end credit plan averaged six cash advance transactions per account dur ing 1976 and that the average amount was $176. Com parable figures on purchase transactions under the same plan were 24 transactions per account during the year for an average amount of $29. This evidence suggests that consumers may have less difficulty in recalling cash advance transactions in light of their relative infre quency and high dollar amounts. The Board is interested in having the views of inter ested persons on whether these assumptions on dollar volume and frequency are typical of other open end credit plans. It is also interested in receiving relevant cost data on supplying transaction dates and debiting dates. Pursuant to the authority granted in 15 U.S.C. § 1604 (1970), the Board proposes to amend paragraph 226.7 (k ) (3 ) (ii) of Regulation Z, 12 CFR Part 226, as follows: SECTION 226.7— OPEN END CREDIT ACCO U N TS— SPECIFIC DISCLOSURES * * * (k ) *** (3 ) * * * (ii) A description of the transaction, which charac terizes it as a cash advance, loan, overdraft loan, or other designation as appropriate, and which includes the amount of the transaction and the date of the trans action 9e or the date which appears on the document or instrument evidencing the transaction (if the cus tomer signed the'document or instrument), or the date of debiting the amount to the account, provided that if only the debiting date is disclosed and the customer submits a proper written notification of a billing error related to the transaction, the creditor shall treat such inquiry as a billing error under §§ 226.2(j) and 226.14, and as an erroneous billing under § 226.14(b), and shall supply documentary evidence of the transaction whether or not the customer requests it, within the time period allowed under § 226.14 for resolution of a billing error without charge to the customer. If the date of debiting 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 persons are invited to submit relevant data, views, comments, or arguments. All such material should be submitted in writing to the Secretary, Board of Governors of the Federal Reserve System, Washing ton, D.C. 20551, to be received not later than November 1, 1977. All material submitted should include the docket numbers R-0087, R-0093. Such information will be made available for inspection and copying upon re quest, except as provided in § 261.6(a) of the Board’s Rules Regarding Availability of Information (12 CFR 261.6(a)). This notice is published pursuant to § 553(b) of Title 5 United States Code and §262 2 (a ) of the Rules of Procedure of the Board of Governors of the Federal Reserve System (12 CFR 262.2(a)).
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