The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FED ER AL RESERVE BANK OF NEW YORK [ Circular No. 8 2 7 0 1 February 8,1978 J AMENDMENT TO REGULATION Z Billing Requirements for Cash Advance Check Transactions To A ll Member Banks, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued by the Board of Governors of the Federal Reserve System, relating to an amendment to its Regulation Z, “Truth-in-Lending,” effective March 28, 1978. The Board of Governors of the Federal Reserve System announced today [January 26, ip/S] that it is modifying provisions of its Truth in Lending Regulation Z relating to billing for cash advance check transac tions. The revised rule will become effective March 28, 1978. The modification will permit creditors to use—in addition to methods already in use for identifying trans actions involving cash advance checks—the date on which a creditor charges a cash advance check to the customer’s account (the debiting date) in billing the customer. However, the revised rule provides also: 1. If the date of debiting is used to identify a cash advance check charge, and the customer makes any inquiry about that item, the inquiry must be treated as a notification of a billing error, triggering the provisions of the Fair Credit Billing Act for settling billing errors. 2. No finance charge on the transaction will be allowed during the time a credit card issuer takes to provide required supporting documentary evidence to a customer who questions a billing using the debit ing date. 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. The Board proposed to modify the rules for identifying transactions involving cash advance checks on September 29, 1977. The proposal, now adopted, was designed to facilitate compliance with the Fair Credit Billing provisions of Truth in Lending and at the same time to maintain requirements adequate to allow customers to identify transactions billed to them. While considering the change, the Board postponed the date for full implementation of the section of Regulation Z relating to cash advance check transactions from Octo ber 28, 1977 to March 28, 1978. Enclosed is a copy of the amendment to Regulation Z. (The Board’s Order postponing full implementation of Section 226.7(k) (3) (ii) of the regulation until March 28, 1978, issued with our Circular No. 8178, may be discarded). Questions regarding this matter may be directed to our Con sumer Affairs Division (Tel. No. 212-791-5919). P aul A. V olcker, President. Board of Governors of the Federal Reserve System TRUTH IN LENDING AM ENDM ENT TO REGULATION Z A G E N C Y : Board of Governors of the Federal Reserve System. A C T IO N : Final rule. S U M M A R Y : The Board hereby adopts an amendment to § 226.7 (k) (3) (ii) of Regula tion Z relating to descriptive billing of nonsale credit transactions, such as cash advance check transactions, on open end credit accounts. In lieu of disclosing the date of the cash advance check transaction or the date which appears on the document or instrument evidencing the transaction (if the customer signed the docu ment or instrument), the amendment permits creditors to disclose the date of debiting the transaction to the customer’s account, provided that the creditor treats any subsequent inquiry from the customer related to the transaction as a billing error and an erroneous billing under the provisions of the Fair Credit Billing Act. The purpose of the amendment is to facilitate compliance with the descriptive billing provi sions of Regulation Z by creditors who have experienced operational difficulties in disclosing transaction dates, while assuring that customers may obtain, without cost, clarification as to the transaction to which a debiting date relates if there is difficulty in determining that informa tion from a periodic statement which discloses only the debiting date. Under the amendment, creditors that disclose the debiting date must reasonably identify it as such. Creditors with the capability of disclosing the date of the trans action or the date which appears on the docu ment or instrument evidencing the transaction (if the customer signed the document or instru ment) are permitted to do so. E F F E C T IV E D A T E : March 28, 1978. FOR F U R T H E R IN F O R M A T IO N CON TA C T: Glenn E. Loney, Section Chief, Divi sion of Consumer Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551 (202) 452-3946. S U P P L E M E N T A R Y I N F O R M A T IO N : Section 226.7(k) (3) (ii) of Regulation Z, which was to have become fully effective on October 28, 1977, would have required, in con nection with descriptive billing of nonsale credit transactions, that creditors disclose the date of the transaction or the date which appears on the document or instrument evidencing the trans action (if the customer signed the document or instrument). Prior to the effective date of § 226.7(k) (3) (ii), certain creditors petitioned the Board to provide an alternative to that re quirement which would allow them to substi tute for disclosure of the transaction date the date on which a nonsale credit transaction, par ticularly a cash advance check transaction, is debited to a customer’s account. These creditors asserted that requiring disclosure of the trans action date or the date on the document would give rise to serious operational difficulties. In response to the concerns and asserted dif ficulties engendered by § 226.7(k) (3) (ii), the Board suspended the effective date of that sec tion of Regulation Z until March 28, 1978, and on October 4, 1977, published for comment (42 FR 53969) a proposed amendment to the regulation which it now adopts in final form. This amendment to § 226.7(k) (3) (ii) per mits creditors to disclose on their periodic de scriptive billing statements the date on which a nonsale credit transaction is debited to a cus tomer’s account rather than the date of the transaction or the date on the document or in strument evidencing the transaction. If a credi tor elects to disclose only the debiting date, it must treat any subsequent inquiry by a cus tomer seeking clarification of a transaction as a billing error and an erroneous billing under the provisions of the Fair Credit Billing Act and Regulation Z. Upon receipt of such an inquiry, in proper written form, the creditor is required to resolve the error and to supply documentary evidence of the transaction whether or not the customer requests it, and the creditor is pro hibited from collecting any finance charge or other charge that accrues in connection with the transaction as a result of the error. Comments received by the Board tend to support the earlier assertions regarding the difficulty of capturing and disclosing a trans action date or the date appearing on the credit For this regulation to be complete, retain : 1) Regulation Z pamphlet, amended to March 23, 1977. 2) Amendments effective April 11, 1977, October 10, 1977, and July 20, 1977. 3) This slip sheet. [Enc. Cir. No. 8270] PRINTED IN NEW YORK ( over) document for cash advance check transactions. Furthermore, commenters provided data which tend to confirm that cash advance transactions on open end accounts are relatively infrequent and substantially larger in amount than other transactions on such accounts. Therefore, the Board believes that adoption of the amendment to § 226.7(k) (3) (ii) will facilitate compliance with the regulation by creditors while not un duly hampering consumers’ understanding of the transaction activity reflected on their peri odic descriptive billing statements. Because of the relative infrequency of cash advance trans actions and the relatively large amounts in volved in such transactions when compared with other transactions, the Board anticipates that consumers will, in most instances, be able to identify cash advance transactions from a description containing the debiting date and the other information required to be disclosed. In those instances where a creditor discloses the debiting date of a nonsale credit transaction rather than the date of the transaction or the date on the document evidencing the transaction and a customer has an inquiry regarding the transaction, the Board believes that the amended § 226.7(k) (3) (ii) will enable the customer to obtain sufficient information to clarify any ques tions he or she may have without incurring additional charges caused by a delay in paying due to an inability to identify the transaction. The final sentence of the amendment to § 226.7(k) (3) (ii) provides that, “If the debit ing date is disclosed, it must be reasonably identified as such on the periodic statement.” Some comments received by the Board ques tioned the need for this requirement. The pur pose of this provision is twofold : (1) to elimi nate the possibility of confusion which might result when debiting dates for some transactions appear on a periodic statement on which trans actions are identified by another date, such as the date of the transaction; and (2) to provide consumers with an indication as to the rele vance of the date which is disclosed in connec tion with nonsale credit transactions on a periodic statement which discloses only the debiting dates of such transactions. Therefore, pursuant to the authority granted in 15 U.S.C. § 1604 (1970), the Board hereby amends § 226.7(k) (3) (ii) of Regulation Z, 12 C.F.R. Part 226, as follows (inasmuch as footnote 9(e) to § 226.7(k) (3) (ii) is unaf fected by this amendment, the text of the foot note is not reproduced below) : SECTION 226.7—O PEN END CREDIT ACCOUNTS—SPE C IFIC DISCLOSURES ♦ * * (k) *** (3) *** (ii) A description of the transaction, which characterizes it as a cash advance, loan, over draft loan, or other designation as appropr iate, and which includes the amount of the transaction and the date of the transaction9* or the date which appears on the document or instrument evidencing the transaction (if the customer signed the document or instru ment), or the date of debiting the amount to the account, provided that if only the debit ing date is disclosed and the customer sub mits 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 er roneous billing under § 226.14(b), and shall supply documentary evidence of the transac tion 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 reason ably identified as such on the periodic statement.
@FedFRASER