Regulation Z Changes Overhaul
Credit Card Lending
January 6, 2009
On December 18, 2008, the FRB staff published changes to Regulation Z affecting credit cards and multi-featured
open-end lending. These rules, numbering over 1,000 pages of regulation, deeply overhaul credit card disclosure
requirements. The rules require changes to the timing and contents of the “Schumer Box”, which sets forth the
terms and conditions of a credit card account, adds a “Schumer Box” type of disclosure to the initial Truth in
Lending disclosures, and substantially alters the periodic statement disclosure requirements. Credit unions must
comply with these new rules by July 1, 2010. The changes to the periodic statements for credit cards and other
open-end lending plans will require card processors to change their processes.
Below is a summary of new Regulation Z requirements pertaining to credit card accounts. Our team of
legal experts will continue to evaluate the language of the new regulation to provide additional, in-depth
information to our credit union customers.
Any changes to LOANLINER documentation as a result of the new regulation will be completed well in
advance of the final compliance date. Credit union lending and documentation experts should contact credit card
processors and issuers to ensure they will be in compliance by the date.
Credit Card Applications and Solicitations
Penalty pricing
Fees
New disclosures
Variable rate information
Balance computation
methods
Grace period description
Subprime accounts
Schumer Box must contain penalty pricing information
• Specific actions that trigger penalty rate
• Penalty rate that will apply
• Circumstances that will allow rate to expire, or that it will continue indefinitely if that
is the case
• Must use term “Penalty APR”
Table must also include notice of any fees for:
• Late payments
• Exceeding credit limit
• Returned payments
• Cash advances
• Balance transfers
• Returned-payment fees
• Fees for required credit insurance, debt suspension or debt cancellation
• Foreign transaction fees
Variable APR information must be reduced to a single phrase indicating APR varies
“with the market” and referencing the type of index used, such as “Prime”
Name of method can be identified outside the table
• Must use “How to Avoid Paying Interest on Purchases” as heading on row
describing grace period offered for all purchases.
• “Paying Interest” must be used if grace period is not offered on all purchases.
Additional disclosures required if fees or security deposit are greater than 15% of
minimum credit limit offered for account
Requires example in table of amount of available credit after fees and/or deposit if
borrower receives only minimum credit limit
Changes to Regulation Z Affect Credit Card Lending
©CUNA Mutual Group LL-0109-9EBF 1/6/2009
Account Opening Disclosures
Account opening
summary table
How charges are
disclosed
• Substantially similar to table provided with direct mail credit card application and
solicitations. More detailed than table required at application.
• Can provide account opening table in lieu of application to reduce burden.
Specifies precisely how charges are to be disclosed in writing at account opening
• Interest
• Minimum charges
• Transaction fees
• Annual fees
• Penalty fees (late payment fees, etc.
Allows less critical charges to be disclosed orally or in writing before consumer agrees
to or becomes obligated to pay the charge. Includes some charges that were
previously excluded, including:
• Expedited payment
• Expedited delivery
Changes in Consumer’s Interest Rate and Other Account Terms
Timing
Penalty rates
Format
• Creditors generally must give 45 days advance notice prior to change in any term
required to be disclosed in account-opening table
• Creditors must provide 45 days advance notice before rate increases due to
delinquency or default or as penalty
• If term is in account opening table, change notice must be in a summary table
• If notice is provided in a periodic statement, it must be in a table on the front page of
statement, although not necessarily on the first page
Advertisements
Advertising periodic
payments
Advertising fixed rates
• If creditor states a periodic amount for an open-end credit plan, it must also state
equally as prominent the time period required to repay balance and total of
payments
• Creditor can state rate is “fixed” if it specifies the time period rate is fixed and that
the rate will not increase during that period
• If no time period is specified, creditor may refer to “fixed’ if rate won’t change while
plan is open
Changes to Regulation Z Affect Credit Card Lending
©CUNA Mutual Group LL-0109-9EBF 1/6/2009
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Periodic Statements
How charges are
disclosed
Minimum payments
Fees must be grouped together and interest charges separately itemized by
transaction type
• Describe in manner consistent with consumers’ general understanding (“interest
charge” or “fee”) without regard to whether they are “finance charge,” “other
charge,” or neither
• Identify by type, such as:
• Interest on purchases
• Interest on balance transfers
• Cash advance fee
• Late payment fee
• Must disclose total fees and total interest imposed for each cycle and year to date
• No “Effective APR” requirement
• No need to group transactions by type
• Payment due date must appear on front of periodic statement
• Late payment fee and resulting penalty APR to appear in close proximity
Credit card issuers only, must provide:
• Warning statement indicating making minimum payment will increase interest paid
and time to repay balance
• Hypothetical example of how long it would take to repay a specified balance if only
minimum payments are made
• Toll-free number to call and get estimate of time to repay balance using current
balance and minimum payments
• FRB will establish and maintain number for two years for creditors that are
depository institutions with assets of $250M or less (FTC will manage for
nondepository institutions)
• Estimate to be based on generic repayment schedule to be created by FRB
• Issuer may have telephone number that will provide actual number of months
rather than an estimate
• Issuers encouraged to provide actual repayment information on periodic statement.
If they do so, there is no need to provide warning, example or telephone number,
nor maintain the toll-free number.
Changes to Regulation Z Affect Credit Card Lending
©CUNA Mutual Group LL-0109-9EBF 1/6/2009
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Other Disclosures and Protections
“Open-end” plans
comprised of closed-end
features
Checks that access
credit card account
Cut-off times and due
dates for mailing
payments
Credit insurance, debt
cancellation and debt
suspension coverage
• Credit is not open-end if advances are separately underwritten
Tabular disclosures required on front page of checks:
• Discounted initial rate and expiration date of rate, if applicable
• Type of rate that will apply after expiration of any discounted initial rate (i.e.,
purchase or cash advance rate) and applicable APR
• Transaction fees
• Grace period or that interest accrues immediately if no grace period
• Date by which checks must be used to receive discounted rate
• Next business day is timely if creditor does not receive and accept mail on due date
• Reasonable cut-off time on due date (5 p.m. is reasonable)
• Debt cancellation rules apply to debt suspension
• Expands concept of “written in connection” with transaction
Every transaction — from consumer to business to real
estate and beyond — requires fully-compliant
documentation. Get what you need
from CUNA Mutual Group.
For the most current information on Regulation Z changes, go to www.loanliner.com/regz
or call us at 800.356.5012, option 2, then option 3.
For additional information on LOANLINER Documentation, call your sales representative
or a documentation expert at 800.356.5012, option 1.
Changes to Regulation Z Affect Credit Card Lending
©CUNA Mutual Group LL-0109-9EBF 1/6/2009
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