Reg Z: Special Credit Card Rules Flashcards
Reg Z: Credit Card Rules
What are the exceptions that allow a credit union to increase the APR and fees on a credit card account?
- Advance Notice Exception - Credit union being able to charge the higher APR on transactions conducted more than 14 days after the end of the 45-day notice period (the credit union would need to charge the current APR until the effective date of the change)
- Variable Rate Exception - APR can be increased following an increase in the underlying index (outside of the credit union’s control only). If the credit card contains a floor rate, it cannot use this exception.
- Temporary Rate Exception - Increase an APR on an account if it has properly disclosed a temporary rate applicable to the credit card account. The temporary rate period must be at least six months long and can be either an introductory APR at account opening or a temporary rate applicable to an existing account.
- Other exceptions:
- Delinquency situations
- End of a workout or temporary hardship arrangement
- Servicemembers Civil Relief Act (SCRA) permits APR to increase after member leaves military service
Reg Z: Credit Card Rules
When must a credit union reevaluate a credit card APR that has been increased (3 reasons)? When does the obligation to reevaluate terminate?
- Increase was imposed using a 45-day change in terms notice
- Based on a member’s individual creditworthiness
- APR increases done on a portfolio-wide basis
The credit union is required to evaluate the decision every six months until the member’s APR has been reduced to the previous level or lower.
Reg Z: Credit Card Rules
Describe the de minimis exception to the rules for submitting credit card agreements to the CFPB. When is the measuring date?
- Credit unions that have fewer than 10,000 open credit card accounts as of the last business day of the calendar quarter are not required to submit any agreements to the CFPB
- When a credit union no longer qualifies for the exception, quarterly submissions to the CFPB must resume no later than the first quarterly submission deadline after the date on which the credit union offered 10,000 or more credit card accounts
The “measuring date” for purposes of this part of the rule is the last business day of the calendar quarter
Reg Z: Credit Card Rules
What are the fee limitations during the first year after a credit card account is opened? Which exception to the limitation on increasing the APR cannot be used during the first year?
- May not charge fees in excess of 25% of the member’s credit limit
- An increase in the credit limit during the first year does not allow the credit union to charge additional fees
- If the credit union decreases the credit limit during the first year, it is only allowed to charge a total of 25% of the lowered credit limit
- Any fees charged above the 25% would have to be refunded
Advanced Notice exception cannot be used during the first year.
Reg Z: Credit Card Rules
When must a credit union consider a member’s ability to pay? How is the analysis different for members under 21?
Must consider a member’s ability to pay the required minimum payment prior to OPENING a new credit card account or INCREASING a credit limit on an existing account.
A member under 21 needs to be able to qualify using their own independent income to meet the ability to repay requirement or have a joint owner or guarantor on the account who is at least 21 years old and has the ability to repay
- Cannot use the “reasonable expectation of access” test to demonstrate their ability to repay
Reg Z: Credit Card Rules
What are the limitations on penalty fees?
- Cannot charge a fee in excess of the amount of the transaction that resulted in a violation
- Cannot charge fees for transactions without a cost involved (e.g., fees for declining a transaction, inactivity fees and account closure fees)
- Cannot charge more than one penalty fee based on a single event or transaction (e.g., returned check causes the payment to be late)
