Topics In This Issue
• Federal Issues
• State Issues
• Firm News
• Credit Cards
• Criminal Enforcement Action
Excerpt from "Federal Issues"
Federal Reserve Board Issues Rule Amending Regulation Z to Clarify Its Earlier Rules Implementing the CARD Act. On March 18, the Federal Reserve Board (Board) issued a rule to clarify certain aspects of its prior rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act). The Credit Card Act primarily amended the Truth in Lending Act (TILA) by instituting a number of new requirements to establish fair and transparent practices relating to open-end consumer credit plans. The Board’s new rule is intended to enhance protections for consumers who use credit cards and to resolve areas of uncertainty concerning credit card issuers’ compliance obligations. The Credit Card Act requires such issuers to consider a consumer’s ability to make the required payments on the account prior to either opening a new account or increasing the credit limits on an existing account. The Board’s rule addresses practices that can result in extensions of credit to consumers who lack the ability to pay. Specifically, the rule provides that credit card applications generally cannot request a consumer’s "household income" because that term is too vague to allow issuers to accurately determine the consumer’s ability to pay. Instead, issuers must consider the consumer’s individual income or salary in making that determination. Further, the Board’s rule makes clear that issuers’ promotional programs that fully waive interest charges for a specified time period are subject to the same Credit Card Act protections as such programs that apply a reduced rate of interest for a specified time period. The rule also states that application fees, and similar fees that a consumer is required to pay before a credit card account is opened are covered by the same limitations as fees charged during the first year after the account is opened. The total amount of these fees cannot exceed 25 percent of the account’s initial credit limit.For a copy of the press release and the Board’s rule as prepared for submission to the Federal Register.
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