Summary of Proposed CARD Act Clarifications


On November 2, 2010, the Federal Reserve Board (“Board”) published a proposed rule to clarify certain recent amendments to Regulation Z, particularly those implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (“CARD Act”). While the Board indicated that the proposed rule is intended to enhance consumer protection and to facilitate compliance by resolving areas of uncertainty, the proposed rule could significantly impact current industry practices and, in some instances, would require issuers to again revise compliance policies and procedures, application and account-opening disclosures, and change in terms notices and other consumer communications. The comment period will close on January 3, 2011, and final clarifications are expected in April 2011, with a mandatory compliance date in October 2011.

ABILITY TO PAY (Section 226.51)

Section 226.51 requires an issuer to assess a consumer’s ability to repay his or her credit card obligations prior to opening a new account or increasing the line of credit on an existing account. In addition, Section 226.51(b) prohibits an issuer from opening an account for a consumer under the age of 21, unless the consumer has submitted a written application and either has the “independent means” of repaying the obligation or provides the signature of a cosigner with such means.

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