Truth in Lending, 32948-33145 [07-2656]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 114 (Thursday, June 14, 2007)]
[Proposed Rules]
[Pages 32948-33145]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-2656]



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Part II





Federal Reserve System





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12 CFR Part 226



Truth in Lending; Proposed Rule

Federal Register / Vol. 72, No. 114 / Thursday, June 14, 2007 / 
Proposed Rules

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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1286]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Board proposes to amend Regulation Z, which implements the 
Truth in Lending Act (TILA), and the staff commentary to the 
regulation, following a comprehensive review of TILA's rules for open-
end (revolving) credit that is not home-secured. The proposed revisions 
take into consideration comments from the public on an initial advance 
notice of proposed rulemaking (ANPR) published in December 2004 on a 
variety of issues relating to the format and content of open-end credit 
disclosures and the substantive protections provided under the 
regulation. The proposal also considers comments received on a second 
ANPR published in October 2005 that addressed several amendments to 
TILA's open-end credit rules contained in the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005. Consumer testing was 
conducted as a part of the review.
    Except as otherwise noted, the proposed changes apply solely to 
open-end credit. Disclosures accompanying credit card applications and 
solicitations would highlight fees and reasons penalty rates might be 
applied, such as for paying late. Creditors would be required to 
summarize key terms at account opening and when terms are changed. The 
proposal would identify specific fees that must be disclosed to 
consumers in writing before an account is opened, and give creditors 
flexibility regarding how and when to disclose other fees imposed as 
part of the open-end plan. Periodic statements would break out costs 
for interest and fees. Two alternatives are proposed dealing with the 
``effective'' or ``historical'' annual percentage rate disclosed on 
periodic statements.
    Rules of general applicability such as the definition of open-end 
credit and dispute resolution procedures would apply to all open-end 
plans, including home-equity lines of credit. Rules regarding the 
disclosure of debt cancellation and debt suspension agreements would be 
revised for both closed-end and open-end credit transactions. Loans 
taken against employer-sponsored retirement plans would be exempt from 
TILA coverage.

DATES: Comments must be received on or before October 12, 2007.

ADDRESSES: You may submit comments, identified by Docket No. R-1286, by 
any of the following methods:
     Agency Web Site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Amy Burke or Vivian Wong, Attorneys, 
Krista Ayoub, Dan Sokolov, Ky Tran-Trong, or John Wood, Counsels, or 
Jane Ahrens, Senior Counsel, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667 or 452-2412; for users of Telecommunications Device for the 
Deaf (TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background on TILA and Regulation Z

    Congress enacted the Truth in Lending Act (TILA) based on findings 
that economic stability would be enhanced and competition among 
consumer credit providers would be strengthened by the informed use of 
credit resulting from consumers' awareness of the cost of credit. The 
purposes of TILA are (1) to provide a meaningful disclosure of credit 
terms to enable consumers to compare credit terms available in the 
marketplace more readily and avoid the uninformed use of credit; and 
(2) to protect consumers against inaccurate and unfair credit billing 
and credit card practices.
    TILA's disclosures differ depending on whether consumer credit is 
an open-end (revolving) plan or a closed-end (installment) loan. TILA 
also contains procedural and substantive protections for consumers. 
TILA is implemented by the Board's Regulation Z. An Official Staff 
Commentary interprets the requirements of Regulation Z. By statute, 
creditors that follow in good faith Board or official staff 
interpretations are insulated from civil liability, criminal penalties, 
or administrative sanction.

II. Summary of Major Proposed Changes

    The goal of the proposed amendments to Regulation Z is to improve 
the effectiveness of the disclosures that creditors provide to 
consumers at application and throughout the life of an open-end (not 
home-secured) account. The proposed changes are the result of the 
Board's review of the provisions that apply to open-end (not home-
secured) credit. The Board's last comprehensive review of Regulation Z 
was in 1981. The Board is proposing changes to format, timing, and 
content requirements for the five main types of open-end credit 
disclosures governed by Regulation Z: (1) Credit and charge card 
application and solicitation disclosures; (2) account-opening 
disclosures; (3) periodic statement disclosures; (4) change-in-terms 
notices; and (5) advertising provisions.
    Applications and solicitations. The proposal contains changes to 
the format and content to make the credit and charge card application 
and solicitation disclosures more meaningful and easier for consumers 
to use. The proposed changes include:
     Adopting new format requirements for the summary table, 
including rules regarding: Type size and use of boldface type for 
certain key terms, placement of information, and the use of cross-
references.
     Revising content, including: A requirement that creditors 
disclose the duration that penalty rates may be in effect, a shorter 
disclosure about variable rates, new disclosures highlighting the 
effect of creditors' payment allocation practices, and a reference to 
consumer education materials on the Board's Web site.
    Account-opening disclosures. The proposal also contains revisions 
to the cost disclosures provided at account opening to make the 
information more conspicuous and easier to read. The proposed changes 
include:

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     Disclosing certain key terms in a summary table at account 
opening, which would be substantially similar to the table required for 
credit and charge card applications and solicitations, in order to 
summarize for consumers key information that is most important to 
informed decision-making.
     Adopting a different approach to disclosing fees, to 
provide greater clarity for identifying fees that must be disclosed. In 
addition, creditors would have flexibility to disclose charges (other 
than those in the summary table) in writing or orally.
    Periodic statement disclosures. The proposal also contains 
revisions to make disclosures on periodic statements more 
understandable, primarily by making changes to the format requirements, 
such as by grouping fees, interest charges, and transactions together. 
The proposed changes include:
     Itemizing interest charges for different types of 
transactions, such as purchases and cash advances, and providing 
separate totals of fees and interest for the month and year-to-date.
     Modifying the provisions for disclosing the ``effective 
APR,'' including format and terminology requirements to make it more 
understandable. Because of concerns about the disclosure's 
effectiveness, however, the Board is also soliciting comment on whether 
this rate should be required to be disclosed.
     Requiring disclosure of the effect of making only the 
minimum required payment on repayment of balances (changes required by 
the Bankruptcy Act).
    Changes in consumer's interest rate and other account terms. The 
proposal would expand the circumstances under which consumers receive 
written notice of changes in the terms (e.g., an increase in the 
interest rate) applicable to their accounts, and increase the amount of 
time these notices must be sent before the change becomes effective. 
The proposed changes include:
     Generally increasing advance notice before a changed term 
can be imposed from 15 to 45 days, to better allow consumers to obtain 
alternative financing or change their account usage.
     Requiring creditors to provide 45 days' prior notice 
before the creditor increases a rate due to the consumer's delinquency 
or default.
     When a change-in-terms notice accompanies a periodic 
statement, requiring a tabular disclosure on the front of the periodic 
statement of the key terms being changed.
    Advertising provisions. The proposal would revise the rules 
governing advertising of open-end credit to help ensure consumers 
better understand the credit terms offered. These proposed revisions 
include:
     Requiring advertisements that state a minimum monthly 
payment on a plan offered to finance the purchase of goods or services 
to state, in equal prominence to the minimum payment, the time period 
required to pay the balance and the total of payments if only minimum 
payments are made.
     Permitting advertisements to refer to a rate as ``fixed'' 
only if the advertisement specifies a time period for which the rate is 
fixed and the rate will not increase for any reason during that time, 
or if a time period is not specified, if the rate will not increase for 
any reason while the plan is open.

III. The Board's Review of Open-End Credit Rules

A. December 2004 Advance Notice of Proposed Rulemaking

    The Board began a review of Regulation Z in December 2004.\1\ The 
Board initiated its review of Regulation Z by issuing an advance notice 
of proposed rulemaking (December 2004 ANPR). 69 FR 70925; December 8, 
2004. At that time, the Board announced its intent to conduct its 
review of Regulation Z in stages, focusing first on the rules for open-
end (revolving) credit accounts that are not home-secured, chiefly 
general-purpose credit cards and retailer credit card plans. The 
December 2004 ANPR sought public comment on a variety of specific 
issues relating to three broad categories: the format of open-end 
credit disclosures, the content of those disclosures, and the 
substantive protections provided for open-end credit under the 
regulation. The December 2004 ANPR solicited comment on the scope of 
the Board's review, and also requested commenters to identify other 
issues that the Board should address in the review. The comment period 
closed on March 28, 2005.
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    \1\ The review was initiated pursuant to requirements of section 
303 of the Riegle Community Development and Regulatory Improvement 
Act of 1994, section 610(c) of the Regulatory Flexibility Act of 
1980, and section 2222 of the Economic Growth and Regulatory 
Paperwork Reduction Act of 1996.
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    The Board received over 200 comment letters in response to the 
December 2004 ANPR. More than half of the comments were from individual 
consumers. About 60 comments were received from the industry or 
industry representatives, and about 20 comments were received from 
consumer advocates and community development groups. The Office of the 
Comptroller of the Currency, one state agency, and one member of 
Congress also submitted comments.
    Scope. Commenters' views on a staged review of Regulation Z were 
divided. Some believe reviewing the regulation in stages makes the 
process manageable and focuses discussion and analysis. Others 
supported an independent focus on open-end credit rules because they 
believe open-end credit by its nature is distinct from other credit 
products covered by TILA and Regulation Z.
    Some commenters supported the Board's approach generally, but 
voiced concern that looking at the regulation in a piecemeal fashion 
may lead to decisions in the early stages of the review that may need 
to be revisited later. If the review is staged, these commenters want 
all changes implemented at the same time, to ensure consistency between 
the open-end and closed-end rules.
    Some commenters urged the Board to include open-end rules affecting 
home-equity lines of credit (HELOCs) in the initial stage of the 
review. If the Board chooses not to expand its review of open-end 
credit rules to cover home-secured credit, these commenters urged the 
Board to avoid making any revisions that would be inconsistent with 
existing HELOC requirements.
    A few commenters concurred with the Board's approach of reviewing 
Regulation Z in stages, but they preferred that the Board start with 
rules of general applicability, such as definitions. These commenters 
generally urged the Board to provide additional clarity on the 
definition of ``finance charge,'' TILA's dollar cost of credit.
    Finally, a few commenters stated the Board needs to review the 
entire regulation at the same time. They suggested a staged approach is 
not workable, and cited concerns about duplicating efforts, creating 
inconsistencies, and revisiting changes made in earlier stages of a 
lengthy review.
    Format. In general, commenters representing both consumers and 
industry stated that the tabular format requirements for TILA's direct-
mail credit card application and solicitation disclosures have proven 
useful to consumers, although a variety of suggestions were made to add 
or delete specific disclosures. Many, however, noted that typical 
account-opening disclosures are lengthy and complex, and suggested that 
the effectiveness of account-opening disclosures could be improved if 
key terms were summarized in a standardized format, perhaps in the same 
format as TILA's direct-mail credit card application and solicitation

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disclosures. These suggestions were consistent with the views of some 
members of the Board's Consumer Advisory Council. Industry commenters 
supported the Board's plan to use focus groups or other consumer 
research tools to test the effectiveness of any proposed revisions.
    To combat ``information overload,'' many commenters asked the Board 
to emphasize only the most important information that consumers need at 
the time the disclosure is given. They asked the Board to avoid rules 
that require the repetitive delivery of complex information, not all of 
which is essential to comparison shopping, such as a lengthy 
explanation of the creditor's method of calculating balances now 
required at account opening and on periodic statements. Commenters 
suggested that the Board would most effectively promote comparison 
shopping by focusing on essential terms in a simplified way. They 
believe some information could also be provided to consumers through 
nonregulatory, educational methods. Taken together, these approaches 
could lead to simpler disclosures that consumers might be more inclined 
to read and understand.
    Content. In general, commenters provided a variety of views on how 
to simplify TILA's cost disclosures. For example, some suggested that 
creditors should disclose only interest as the ``finance charge'' and 
simply identify all other fees and charges. Others suggested all fees 
associated with an open-end plan should be disclosed as the ``finance 
charge.'' Creditors sought, above all, clear rules.
    Comments were divided on the usefulness of open-end APRs. TILA 
requires creditors to disclose an ``interest rate'' APR for shopping 
disclosures (such as in advertisements and solicitations) and at 
account opening, and an ``effective'' APR on periodic statements that 
reflects interest and fees, such as transaction charges assessed during 
the billing period. In general, consumer groups suggested that the 
Board mandate for shopping disclosures an ``average'' or ``typical'' 
effective APR based on an historical average cost to consumers with 
similar accounts. An average APR, consumer representatives stated, 
would give consumers a more accurate picture of what consumers' actual 
cost might be. Regarding the effective APR on periodic statements, 
consumer advocates stated that it is a key disclosure that is helpful, 
and can provide ``shock value'' to consumers when fees cause the APR to 
spike for the billing cycle. Commenters representing industry argued 
that an effective APR is not meaningful, confuses consumers, and is 
difficult to explain. Some commenters suggested that a disclosure on 
the periodic statement that provides context by explaining what costs 
are included in the effective APR might improve its usefulness.
    Regarding advance notice of changes to rates and fees, comments 
were sharply divided. Creditors generally believe the current notice 
requirements are adequate, although for rate (and other) changes not 
involving a consumer's default, a number of creditors supported 
increasing the advance notice requirement from 15 to 30 days. Consumers 
and consumer representatives generally believe that when terms change, 
consumers should have the right under TILA to opt out of the new terms, 
or be allowed a much longer time period to find alternative credit 
products. They suggested a two-billing cycle advance notice or as long 
as 90 days. More fundamentally, these commenters believe card issuers 
should be held to the initial terms of the credit contract, at least 
until the credit card expires.
    Where triggering events are set forth in the account agreement such 
as events that might trigger penalty pricing, creditors believe there 
is no need to provide additional notice when the event occurs; they are 
not changing a term, they stated, but merely implementing the 
agreement. Some suggest that instead of providing a notice when penalty 
pricing is triggered, penalty pricing and the triggers should be better 
emphasized in the application and account-opening disclosures. 
Consumers and consumer representatives agree that creditors' policies 
about when terms may change should be more prominently displayed, 
including in the credit card application disclosures. They further 
believe the Board should provide new substantive protections to 
consumers, such as prohibiting the practice of increasing rates merely 
because the consumer paid late on another credit account.

B. The Bankruptcy Act's Amendments to TILA and October 2005 Advance 
Notice of Proposed Rulemaking

    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 
(the ``Bankruptcy Act'') primarily amended the federal bankruptcy code, 
but also contained several provisions amending TILA. Public Law 109-8, 
119 Stat. 23. The Bankruptcy Act's TILA amendments principally deal 
with open-end credit accounts and require new disclosures on periodic 
statements, on credit card applications and solicitations, and in 
advertisements.
    In October 2005, the Board published a second ANPR to solicit 
comment on implementing the Bankruptcy Act amendments (October 2005 
ANPR). 70 FR 60235; October 17, 2005. In the October 2005 ANPR, the 
Board stated its intent to implement the Bankruptcy Act amendments as 
part of the Board's ongoing review of Regulation Z's open-end credit 
rules. The comment period for the October 2005 ANPR closed on December 
16, 2005.
    The Board received approximately 50 comment letters in response to 
the October 2005 ANPR. Forty-five letters were submitted by financial 
institutions and their trade groups. Five letters were submitted by 
consumer groups.
    Minimum payment warnings. Under the Bankruptcy Act, creditors that 
offer open-end accounts must provide standardized disclosures on each 
periodic statement about the effects of making only minimum payments, 
including an example of how long it would take to pay off a specified 
balance, along with a toll-free telephone number that consumers can use 
to obtain an estimate of how long it will take to pay off their own 
balance if only minimum payments are made. The Board must develop a 
table that creditors can use in responding to consumers requesting such 
estimates.
    Industry commenters generally favored limiting the minimum payment 
disclosure to credit card accounts (thus, excluding HELOCs and 
overdraft lines of credit) and to those consumers who regularly make 
only minimum payments. Consumer groups generally favored broadly 
applying the rule to all types of open-end credit and to all open-end 
accountholders.
    Industry commenters supported having an option to provide 
customized information (reflecting a consumer's actual account status) 
on the periodic statement or in response to a consumer's telephone 
call, but also wanted the option to use a standardized formula 
developed by the Board. Consumer group commenters asked the Board to 
require creditors to provide more customized estimates of payoff 
periods through the toll-free telephone number and to not allow 
creditors to use a standardized formula, and supported disclosure of an 
``actual'' repayment time on the periodic statement.
    Late-payment fees. Under the Bankruptcy Act, creditors offering 
open-end accounts must disclose on each periodic statement the earliest 
date on which a late payment fee may be charged, as well as the amount 
of the fee.
    Industry commenters urged the Board to base the disclosure 
requirement on

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the contractual payment due date and to disregard any ``courtesy'' 
period that creditors informally recognize following the contractual 
payment due date. Although the industry provided mixed comments on any 
format requirements, most opposed a proximity requirement for 
disclosing the amount of the fee and the date. Comments were mixed on 
adding information about penalty APRs and ``cut-off times'' to the late 
payment disclosures. While supporters (a mix of industry and consumer 
commenters) believe the additional information is useful, others were 
concerned about the complexity of such a disclosure, and opposed the 
approach for that reason. Consumer commenters suggested substantive 
protections to ensure consumers' payments are timely credited, such as 
considering the postmark date to be the date of receipt.
    Internet solicitations. The Bankruptcy Act provides that credit 
card issuers offering cards on the Internet must include the same 
tabular summary of key terms that is currently required for 
applications or solicitations sent by direct mail.
    Although the Bankruptcy Act refers only to solicitations (where no 
application is required), most commenters (both industry and consumer 
groups) agreed that Internet applications should be treated the same as 
solicitations. Many industry commenters stated that the Board's interim 
final rule on electronic disclosures, issued in 2001, would be 
appropriate to implement the Bankruptcy Act. Regarding accuracy 
standards, the majority of industry commenters addressing this issue 
indicated that issuers should be required to update Internet 
disclosures every 30 days, while consumer groups suggested that the 
disclosures should be updated in a ``timely fashion,'' with 30 days 
being too long in some instances.
    Introductory rate offers. Under the Bankruptcy Act, credit card 
issuers offering discounted introductory rates must clearly and 
conspicuously disclose in marketing materials the expiration date of 
the offer, the rate that will apply after that date, and an explanation 
of how the introductory rate may be revoked (for example, if the 
consumer makes a late payment).
    In general, industry commenters asked for flexibility in complying 
with the new requirements. Consumer groups supported stricter 
standards, such as requiring an equivalent typeface for the word 
``introductory'' in immediate proximity to the temporary rate and 
requiring the expiration date and subsequent rate to appear either 
side-by-side with, or immediately under or above, the most prominent 
statement of the temporary rate.
    Account termination. Under the Bankruptcy Act, creditors are 
prohibited from terminating an open-end account before its expiration 
date solely because the consumer has not incurred finance charges on 
the account. Creditors are permitted, however, to terminate an account 
for inactivity.
    Regarding guidance on what should be considered an ``expiration 
date,'' several industry commenters suggested using card expiration 
dates as the account expiration date. Others cautioned against using 
such an approach, because accounts do not terminate upon a card 
expiration date. Regarding what constitutes ``inactivity,'' many 
industry commenters stated no further guidance is necessary. Among 
those suggesting additional guidance, most suggested ``activity'' 
should be measured only by consumers' actions (charges and payments) as 
opposed to card issuer activity (for example, refunding fees, billing 
inactivity fees, or waiving unpaid balances).
    High loan-to-value mortgage credit. For home-secured credit that 
may exceed the dwelling's fair-market value, the Bankruptcy Act 
amendments require creditors to provide additional disclosures at the 
time of application and in advertisements (for both open-end and 
closed-end credit). The disclosures would warn consumers that interest 
on the portion of the loan that exceeds the home's fair-market value is 
not tax deductible and encourage consumers to consult a tax advisor. 
Because these amendments deal with home-secured credit, the Board is 
not proposing revisions to Regulation Z to implement these provisions 
at this time. The Board anticipates implementing these provisions in 
connection with the upcoming review of Regulation Z's rules for 
mortgage transactions. Nevertheless, the following is a summary of the 
comments received.
    In general, creditors asked for flexibility in providing the 
disclosure, either by permitting the notice to be provided to all 
mortgage applicants, or to be provided later in the approval process 
after creditors have determined the disclosure is triggered. Similarly, 
a number of industry commenters advocated limiting the advertising rule 
to creditors that specifically market high loan-to-value mortgage 
loans. Creditor commenters asked for guidance on loan-to-value 
calculations and safe harbors for how creditors determine property 
values. Consumer advocates favored triggering the disclosure when the 
possibility of negative amortization could occur.

C. Consumer Testing

    A principal goal for the Regulation Z review is to produce revised 
and improved credit card disclosures that consumers will be more likely 
to pay attention to, understand, and use in their decisions, while at 
the same time not creating undue burdens for creditors. In April 2006, 
the Board retained a research and consulting firm (Macro International) 
that specializes in designing and testing documents to conduct consumer 
testing to help the Board review Regulation Z's credit card rules. 
Specifically, the Board used consumer testing to develop proposed model 
forms for the following credit card disclosures required by Regulation 
Z:
     Summary table disclosures provided in direct-mail 
solicitations and applications;
     Disclosures provided at account opening;
     Periodic statement disclosures; and
     Subsequent disclosures, such as notices provided when key 
account terms are changed, and notices on checks provided to access 
credit card accounts.
    Working closely with the Board, Macro International conducted 
several tests. Each round of testing was conducted in a different city, 
throughout the United States. In addition, the consumer testing groups 
contained participants with a range of ethnicities, ages, educational 
levels, credit card behavior, and whether a consumer likely has a prime 
or subprime credit card.
    Exploratory focus groups. In May and June 2006, the Board worked 
with Macro International to conduct two sets of focus groups with 
credit card consumers, in part, to learn more about what information 
consumers currently use in making decisions about their credit card 
accounts. Each focus group consisted of between eight and thirteen 
people that discussed issues identified by the Board and raised by a 
moderator from Macro International. Through these focus groups, the 
Board gathered information on what credit terms consumers usually 
consider when shopping for a credit card, what information they find 
useful when they receive a new credit card in the mail, and what 
information they find useful on periodic statements.
    Cognitive interviews on existing disclosures. In August 2006, the 
Board worked with Macro International to conduct nine cognitive 
interviews with credit card customers. These cognitive interviews 
consisted of one-on-one discussions with consumers, during

[[Page 32952]]

which consumers were asked to view existing sample credit card 
disclosures. The goals of these interviews were: (1) To learn more 
about what information consumers read when they receive current credit 
card disclosures; (2) to research how easily consumers can find various 
pieces of information in these disclosures; and (3) to test consumers' 
understanding of certain credit card-related words and phrases.
    1. Initial design of disclosures for testing. In the fall of 2006, 
the Board worked with Macro International to develop sample credit card 
disclosures to be used in the later rounds of testing, taking into 
account information learned through the focus groups and the cognitive 
interviews.
    2. Additional cognitive interviews and revisions to disclosures. In 
late 2006 and early 2007, the Board worked with Macro International to 
conduct four rounds of cognitive interviews (between seven and nine 
participants per round), where consumers were asked to view new sample 
credit card disclosures developed by the Board and Macro International. 
The rounds of interviews were conducted sequentially to allow for 
revisions to the testing materials based on what was learned from the 
testing during each previous round.
    Results of testing. Several of the model forms were developed 
through the testing. A report summarizing the results of the testing is 
available on the Board's public Web site: https://
www.federalreserve.gov.
    Testing participants generally read the summary table provided in 
direct-mail credit card solicitations and applications and ignored 
information presented outside of the table. Thus, the proposal requires 
that information about events that trigger penalty rates and about 
important fees (late-payment fees, over-the-credit-limit fees, balance 
transfer fees, and cash advance fees) be placed in the table. 
Currently, this information may be placed outside the table.
    With respect to the account-opening disclosures, consumer testing 
indicates that consumers commonly do not review their account 
agreements, which are often in small print and dense prose. The 
proposal would require creditors to include a table summarizing the key 
terms applicable to the account, similar to the table required for 
credit card applications and solicitations. Setting apart the most 
important terms in this way will better ensure that consumers are 
apprised of those terms.
    With respect to periodic statement disclosures, testing 
participants found it beneficial to have the different types of 
transactions grouped together by type. Thus, the proposal requires 
creditors to group transactions together by type, such as purchases, 
cash advances, and balance transfers. In addition, many consumers more 
easily noticed the number and amount of fees when the fees were 
itemized and grouped together with interest charges. Consumers also 
noticed fees and interest charges more readily when they were located 
near the disclosure of the transactions on the account. Thus, under the 
proposal, creditors would be required to group all fees together and 
describe them in a manner consistent with consumers' general 
understanding of costs (``interest charge'' or ``fee''), without regard 
to whether the fees would be considered ``finance charges,'' ``other 
charges'' or neither under the regulation.
    With respect to change-in-terms notices, consumer testing indicates 
that much like the account-opening disclosures, consumers may not 
typically read such notices, because they are often in small print and 
dense prose. To enhance the effectiveness of change-in-terms notices, 
when a creditor is changing terms which were required to be disclosed 
in the summary table provided at account opening, the proposed rules 
would require the creditor to include a table summarizing any such 
changed terms. Creditors commonly provide notices about changes to 
terms or rates in the same envelope with periodic statements. Consumer 
testing indicates that consumers may not typically look at the notices 
if they are provided as separate inserts given with periodic 
statements. Thus, in such cases, a table summarizing the change would 
have to appear on the periodic statement directly above the transaction 
list, where consumers are more likely to notice the changes.
    Additional testing after comment period. After receiving comments 
from the public on the proposal and the revised disclosure forms, the 
Board will work with Macro International to revise the model 
disclosures. Macro International then will conduct additional rounds of 
cognitive interviews to test the revised disclosures. After the 
cognitive interviews, quantitative testing will be conducted. The goal 
of the quantitative testing is to measure consumers' comprehension and 
the usability of the newly-developed disclosures relative to existing 
disclosures and formats.

D. Other Outreach and Research

    The Board also solicited input from members of the Board's Consumer 
Advisory Council on various issues presented by the review of 
Regulation Z's open-end credit rules. During 2005 and 2006, for 
example, the Council discussed the feasibility and advisability of 
reviewing Regulation Z in stages, ways to improve the summary table 
provided on or with credit card applications and solicitations, issues 
related to TILA's substantive protections (including dispute resolution 
procedures), and issues related to the Bankruptcy Act amendments. In 
addition, the Board met or conducted conference calls with various 
industry and consumer group representatives throughout the review 
process leading to this proposal. The Board also reviewed disclosures 
currently provided by creditors, consumer complaints received by the 
federal banking agencies, and surveys on credit card usage to help 
inform the proposal.\2\
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    \2\ Surveys reviewed include: Thomas A. Durkin, Credit Cards: 
Use and Consumer Attitudes, 1970-2000, Federal Reserve Bulletin, 
(September 2000); Thomas A. Durkin, Consumers and Credit 
Disclosures: Credit Cards and Credit Insurance, Federal Reserve 
Bulletin (April 2002).
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E. Reviewing Regulation Z in Stages

    Based on the comments received and upon its own analysis, the Board 
is proceeding with a review of Regulation Z in stages. This proposal 
largely contains revisions to rules affecting open-end plans other than 
HELOCs subject to Sec.  226.5b. These open-end (not home-secured) plans 
are distinct from other TILA-covered products, and conducting a review 
in stages allows for a manageable process. Possible revisions to rules 
affecting HELOCs will be considered in the Board's review of home-
secured credit, currently underway. To minimize compliance burden for 
creditors offering HELOCs as well as other open-end credit, many of the 
open-end rules would be reorganized to delineate clearly the 
requirements for HELOCs and other forms of open-end credit. Although 
this reorganization would increase the size of the regulation and 
commentary, the Board believes a clear delineation of rules for HELOCs 
and other forms of open-end credit pending the review of HELOC rules 
provides a clear compliance benefit to creditors. Creditors that 
generate a single periodic statement for all open-end products would be 
given the option to retain the existing periodic statement disclosure 
scheme for HELOCs, or to disclose information on periodic statements 
under the revised rules for other open-end plans.

F. Implementation Period

    The Board contemplates providing creditors sufficient time to 
implement

[[Page 32953]]

any revisions that may be adopted. The Board seeks comment on an 
appropriate implementation period.

IV. The Board's Rulemaking Authority

    TILA mandates that the Board prescribe regulations to carry out the 
purposes of the act. TILA also specifically authorizes the Board, among 
other things, to do the following:
     Issue regulations that contain such classifications, 
differentiations, or other provisions, or that provide for such 
adjustments and exceptions for any class of transactions, that in the 
Board's judgment are necessary or proper to effectuate the purposes of 
TILA, facilitate compliance with the act, or prevent circumvention or 
evasion. 15 U.S.C. 1604(a).
     Exempt from all or part of TILA any class of transactions 
if the Board determines that TILA coverage does not provide a 
meaningful benefit to consumers in the form of useful information or 
protection. The Board must consider factors identified in the act and 
publish its rationale at the time it proposes an exemption for comment. 
15 U.S.C. 1604(f).
     Add or modify information required to be disclosed with 
credit and charge card applications or solicitations if the Board 
determines the action is necessary to carry out the purposes of, or 
prevent evasions of, the application and solicitation disclosure rules. 
15 U.S.C. 1637(c)(5).
     Require disclosures in advertisements of open-end plans. 
15 U.S.C. 1663.
    In the course of developing the proposal, the Board has considered 
the information collected from comment letters submitted in response to 
its ANPRs, its experience in implementing and enforcing Regulation Z, 
and the results obtained from testing various disclosure options in 
controlled consumer tests. For the reasons discussed in this notice, 
the Board believes this proposal is appropriate to effectuate the 
purposes of TILA, to prevent the circumvention or evasion of TILA, and 
to facilitate compliance with the act.
    Also as explained in this notice, the Board believes that the 
specific exemptions proposed are appropriate because the existing 
requirements do not provide a meaningful benefit to consumers in the 
form of useful information or protection. In reaching this conclusion, 
the Board considered (1) the amount of the loan and whether the 
disclosure provides a benefit to consumers who are parties to the 
transaction involving a loan of such amount; (2) the extent to which 
the requirement complicates, hinders, or makes more expensive the 
credit process; (3) the status of the borrower, including any related 
financial arrangements of the borrower, the financial sophistication of 
the borrower relative to the type of transaction, and the importance to 
the borrower of the credit, related supporting property, and coverage 
under TILA; (4) whether the loan is secured by the principal residence 
of the borrower; and (5) whether the exemption would undermine the goal 
of consumer protection. The rationales for these proposed exemptions 
are explained below.

V. Discussion of Major Proposed Revisions

    The goal of the proposed revisions is to improve the effectiveness 
of the Regulation Z disclosures that must be provided to consumers for 
open-end accounts. A summary of the key account terms must accompany 
applications and solicitations for credit card accounts. For all open-
end credit plans, creditors must disclose costs and terms at account 
opening, generally before the first transaction. Consumers must receive 
periodic statements of account activity, and creditors must provide 
notice before certain changes in the account terms may become 
effective.
    To shop for and understand the cost of credit, consumers must be 
able to identify and understand the key terms of open-end accounts. But 
the terms and conditions affecting credit card account pricing can be 
complex. The proposed revisions to Regulation Z are intended to provide 
the most essential information to consumers when the information would 
be most useful to them, with content and formats that are clear and 
conspicuous. The proposed revisions are expected to improve consumers' 
ability to make informed credit decisions and enhance competition among 
credit card issuers. Many of the changes are based on the consumer 
testing that was conducted in connection with the review of Regulation 
Z.
    In considering the proposed revisions, the Board has also sought to 
balance the potential benefits for consumers with the compliance 
burdens imposed on creditors. For example, the proposed revisions seek 
to provide greater certainty to creditors in identifying what costs 
must be disclosed for open-end plans, and when those costs must be 
disclosed. More effective disclosures may also reduce customer 
confusion and misunderstanding, which may also ease creditors' costs 
relating to consumer complaints and inquiries.

A. Credit Card Applications and Solicitations

    Under Regulation Z, credit and charge card issuers are required to 
provide information about key costs and terms with their applications 
and solicitations.\3\ This information is abbreviated, to help 
consumers focus on only the most important terms and decide whether to 
apply for the credit card account. If consumers respond to the offer 
and are issued a credit card, creditors must provide more detailed 
disclosures at account opening, before the first transaction occurs.
---------------------------------------------------------------------------

    \3\ Charge cards are a type of credit card for which full 
payment is typically expected upon receipt of the billing statement. 
To ease discussion, this notice will refer simply to ``credit 
cards.''
---------------------------------------------------------------------------

    The application and solicitation disclosures are considered among 
the most effective TILA disclosures principally because they must be 
presented in a standardized table with headings, content, and format 
substantially similar to the model forms published by the Board. In 
2001, the Board revised Regulation Z to enhance the application and 
solicitation disclosures by adding rules and guidance concerning the 
minimum type size and requiring additional fee disclosures.
    Penalty pricing. The proposal would make several revisions that 
seek to improve consumers' understanding of default or penalty pricing. 
Currently, credit card issuers must disclose inside the table the APR 
that will apply in the event of the consumer's ``default.'' Some 
creditors define a ``default'' as making one late payment or exceeding 
the credit limit once. The actions that may trigger the penalty APR are 
currently required to be disclosed outside the table.
    Consumer testing indicated that many consumers did not notice the 
information about penalty pricing when it was disclosed outside the 
table. Under the proposal, card issuers would be required to include in 
the table the specific actions that trigger penalty APRs (such as a 
late payment), the rate that will apply, the balances to which the 
penalty rate will apply, and the circumstances under which the penalty 
rate will expire or, if true, the fact that the penalty rate could 
apply indefinitely. The regulation would require card issuers to use 
the term ``penalty APR'' because the testing demonstrated that some 
consumers are confused by the term ``default rate.''
    Similarly, the proposal requires card issuers to disclose inside 
(rather than outside) the table the fees for paying late, exceeding a 
credit limit, or making a payment that is returned, along with

[[Page 32954]]

a cross-reference to the penalty rate if, for example, paying late 
could also trigger the penalty rate. Cash advance fees and balance 
transfer fees would also be disclosed inside the table. This proposed 
change is also based on consumer testing results; fees disclosed 
outside the table were often not noticed. Requiring card issuers to 
disclose returned-payment fees would be a new disclosure.
    Variable-rate information. Currently, applications and 
solicitations offering variable APRs must disclose inside the table the 
index or formula used to make adjustments and the amount of any margin 
that is added. Additional details, such as how often the rate may 
change, must be disclosed outside the table. Under the proposal, 
information about variable APRs would be reduced to a single phrase 
indicating the APR varies ``with the market,'' along with a reference 
to the type of index, such as ``Prime.'' Consumer testing indicated 
that few consumers use the variable-rate information when shopping for 
a card. Moreover, participants were distracted or confused by details 
about margin values, how often the rate may change, and where an index 
can be found.
    Payment allocation. The proposal would add a new disclosure to the 
table about the effect on credit costs of creditors' payment allocation 
methods when payments are applied entirely to transferred balances at 
low introductory APRs. If, as is common, a creditor allocates payments 
to low-rate balances first, consumers who make purchases on the account 
will not be able to take advantage of any ``grace period'' on 
purchases, without paying off the entire balance, including the low-
rate balance transfer. Consumer testing indicated that consumers are 
often confused about this aspect of balance transfer offers. The new 
disclosure would alert consumers that they will pay interest on their 
purchases until the transferred balance is paid in full.
    Web site reference. The proposal would also require card issuers to 
include a reference to the Board's Web site, where additional 
information is available about how to compare credit cards and what 
factors to consider. This responds to commenters who suggested that the 
Board consider nonregulatory approaches to provide opportunities for 
consumers to learn about credit products.
    Subprime accounts. The proposal also addresses a concern that has 
been raised about subprime credit cards, which are generally offered to 
consumers with low credit scores or credit problems. Subprime credit 
cards often have substantial fees associated with opening the account. 
Typically, fees for the issuance or availability of credit are billed 
to consumers on the first periodic statement, and can substantially 
reduce the amount of credit available to the consumer. For example, the 
initial fees on an account with a $250 credit limit may reduce the 
available credit to less than $100. Consumer complaints received by the 
federal banking agencies state that consumers were unaware when they 
applied for cards of how little credit would be available after all the 
fees were assessed at account opening.
    To address this concern, the proposal would require additional 
disclosures if the card issuer requires fees or a security deposit to 
issue the card that are 25 percent or more of the minimum credit limit 
offered for the account. In such cases, the card issuer would be 
required to include an example in the table of the amount of available 
credit the consumer would have after paying the fees or security 
deposit, assuming the consumer receives the minimum credit limit.
    Balance computation methods. TILA requires creditors to identify 
their balance computation method by name, and Regulation Z requires 
that the disclosure be inside the table. However, consumer testing 
suggests that these names, such as the ``two-cycle average daily 
balance method,'' hold little meaning for consumers, and that consumers 
do not consider such information when shopping for accounts. 
Accordingly, the proposed rule requires creditors to place the name of 
the balance computation method outside the table, so that the 
disclosure does not detract from information that is more important to 
consumers.

B. Account-Opening Disclosures

    Regulation Z requires creditors to disclose costs and terms before 
the first transaction is made on the account. The disclosures must 
specify the circumstances under which a ``finance charge'' may be 
imposed and how it will be determined. A ``finance charge'' is any 
charge that may be imposed as a condition of or an incident to the 
extension of credit, and includes, for example, interest, transaction 
charges, and minimum charges. The finance charge disclosures include a 
disclosure of each periodic rate of interest that may be applied to an 
outstanding balance (e.g., purchases, cash advances) as well as the 
corresponding annual percentage rate (APR). Creditors must also explain 
any grace period for making a payment without incurring a finance 
charge. They must also disclose the amount of any charge other than a 
finance charge that may be imposed as part of the credit plan (``other 
charges''), such as a late-payment charge. Consumers'' rights and 
responsibilities in the case of unauthorized use or billing disputes 
must also be explained. Currently, there are few format requirements 
for these account-opening disclosures, which are typically interspersed 
among other contractual terms in the creditor's account agreement.
    Account-opening summary table. Account-opening disclosures have 
often been criticized because the key terms TILA requires to be 
disclosed are often interspersed within the credit agreements, and such 
agreements are long and complex. The proposal to require creditors to 
include a table summarizing the key terms addresses that concern by 
making the information more conspicuous. Creditors may continue, 
however, to provide other account-opening disclosures, aside from the 
fees and terms specified in the table, with other terms in their 
account agreements.
    The new table provided at account opening would be substantially 
similar to the table provided with direct-mail credit card applications 
and solicitations. Consumer testing and surveys indicate that consumers 
generally are aware of the table on applications and solicitations. 
Consumer testing also indicates that consumers may not typically read 
their account agreements, which are often in small print and dense 
prose. Thus, setting apart the most important terms in a summary table 
will better ensure that consumers are aware of those terms.
    The table required at account opening would include more 
information than the table required at application. For example, it 
would include a disclosure of any fee for transactions in a foreign 
currency or that take place in a foreign country. However, to reduce 
compliance burden for creditors that provide account-opening 
disclosures at application, the proposal would allow creditors to 
provide the more specific and inclusive account-opening table at 
application in lieu of the table otherwise required at application.
    How charges are disclosed. Under the current rules, a creditor must 
disclose any ``finance charge'' or ``other charge'' in the written 
account-opening disclosures. A subsequent written notice is required if 
one of the fees disclosed at account opening increases or if certain 
fees are newly introduced during the life of the plan. The terms 
``finance charge'' and ``other charge'' are given broad and flexible 
meanings in the regulation and commentary. This ensures that TILA 
adapts to changing

[[Page 32955]]

conditions, but it also creates uncertainty. The distinctions among 
finance charges, other charges, and charges that do not fall into 
either category are not always clear. As creditors develop new kinds of 
services, some find it difficult to determine if associated charges for 
the new services meet the standard for a ``finance charge'' or ``other 
charge'' or are not covered by TILA at all. This uncertainty can pose 
legal risks for creditors that act in good faith to comply with the 
law. Examples of included or excluded charges are in the regulation and 
commentary, but these examples cannot provide definitive guidance in 
all cases. Creditors are subject to civil liability and administrative 
enforcement for underdisclosing the finance charge or otherwise making 
erroneous disclosures, so the consequences of an error can be 
significant. Furthermore, overdisclosure of rates and finance charges 
is not permitted by Regulation Z for open-end credit.
    The fee disclosure rules also have been criticized as being 
outdated. These rules require creditors to provide fee disclosures at 
account opening, which may be months, and possibly years, before a 
particular disclosure is relevant to the consumer, such as when the 
consumer calls the creditor to request a service for which a fee is 
imposed. In addition, an account-related transaction may occur by 
telephone, when a written disclosure is not feasible.
    The proposed rule is intended to respond to these criticisms while 
still giving full effect to TILA's requirement to disclose credit 
charges before they are imposed. Accordingly, under the proposal, the 
rules would be revised to (1) specify precisely the charges that 
creditors must disclose in writing at account opening (interest, 
minimum charges, transaction fees, annual fees, and penalty fees such 
as for paying late), which would be listed in the summary table, and; 
(2) permit creditors to disclose other less critical charges orally or 
in writing before the consumer agrees to or becomes obligated to pay 
the charge. Although the proposal would permit creditors to disclose 
certain costs orally for purposes of TILA, the Board anticipates that 
creditors will continue to identify fees in the account agreement for 
contract or other reasons.
    Under the proposal, some charges would be covered by TILA that the 
current regulation, as interpreted by the staff commentary, excludes 
from TILA coverage, such as fees for expedited payment and expedited 
delivery. It may not have been useful to consumers to cover such 
charges under TILA when such coverage would have meant only that the 
charges were disclosed long before they became relevant to the 
consumer. The Board believes it would be useful to consumers to cover 
such charges under TILA as part of a rule that permits their disclosure 
at a relevant time. Further, as new services (and associated charges) 
are developed, the proposal minimizes risk of civil liability 
associated with the determination as to whether a fee is a finance 
charge or an other charge, or is not covered by TILA at all.

C. Periodic Statements

    Creditors are required to provide periodic statements reflecting 
the account activity for the billing cycle (typically, about one 
month). In addition to identifying each transaction on the account, 
creditors must identify each ``finance charge'' using that term, and 
each ``other charge'' assessed against the account during the statement 
period. When a periodic interest rate is applied to an outstanding 
balance to compute the finance charge, creditors must disclose the 
periodic rate and its corresponding APR. Creditors must also disclose 
an ``effective'' or ``historical'' APR for the billing cycle, which, 
unlike the corresponding APR, includes not just interest but also 
finance charges imposed in the form of fees (such as cash advance fees 
or balance transfer fees). Periodic statements must also state the time 
period a consumer has to pay an outstanding balance to avoid additional 
finance charges (the ``grace period''), if applicable.
    Fees and interest costs. The proposal contains a number of 
revisions to the periodic statement to improve consumers' understanding 
of fees and interest costs. Currently, creditors must identify on 
periodic statements any ``finance charges'' that have been added to the 
account during the billing cycle, and creditors typically list these 
charges with other transactions, such as purchases, chronologically on 
the statement. The finance charges must be itemized by type. Thus, 
interest charges might be described as ``finance charges due to 
periodic rates.'' Charges such as late payment fees, which are not 
``finance charges,'' are typically disclosed individually and are 
interspersed among other transactions.
    Consumer testing indicated that consumers generally understand that 
``interest'' is the cost that results from applying a rate to a balance 
over time and distinguish ``interest'' from other fees, such as a cash 
advance fee or a late payment fee. Consumer testing also indicated that 
many consumers more easily determine the number and amount of fees when 
the fees are itemized and grouped together.
    Thus, under the proposal, creditors would be required to group all 
charges together and describe them in a manner consistent with 
consumers' general understanding of costs (``interest charge'' or 
``fee''), without regard to whether the charges would be considered 
``finance charges,'' ``other charges,'' or neither. Interest charges 
would be identified by type (for example, interest on purchases or 
interest on balance transfers) as would fees (for example, cash advance 
fee or late-payment fee).
    Consumer testing also indicated that many consumers more quickly 
and accurately determined the total dollar cost of credit for the 
billing cycle when a total dollar amount of fees for the cycle was 
disclosed. Thus, the proposal would require creditors to disclose the 
(1) total fees and (2) total interest imposed for the cycle. The 
proposal would also require disclosure of year-to-date totals for 
interest charges and fees. For many consumers, costs disclosed in 
dollars are more readily understood than costs disclosed as percentage 
rates. The year-to-date figures are intended to assist consumers in 
better understanding the overall cost of their credit account and would 
be an important disclosure and an effective aid in understanding 
annualized costs, especially if the Board were to eliminate the 
requirement to disclose the effective APR on periodic statements, as 
discussed below.
    The effective APR. The ``effective'' APR disclosed on periodic 
statements reflects the cost of interest and certain other finance 
charges imposed during the statement period. For example, for a cash 
advance, the effective APR reflects both interest and any flat or 
proportional fee assessed for the advance.
    For the reasons discussed below, the Board is proposing two 
alternative approaches to address the effective APR. The first approach 
would try to improve consumer understanding of this rate and reduce 
creditor uncertainty about its calculation. The second approach would 
eliminate the requirement to disclose the effective APR.
    Creditors believe the effective APR should be eliminated. They 
believe consumers do not understand the effective APR, including how it 
differs from the corresponding (interest rate) APR, why it is often 
``high,'' and which fees the effective APR reflects. Creditors say they 
find it difficult, if not impossible, to explain the effective APR to 
consumers who call them with questions or concerns. They note that

[[Page 32956]]

callers sometimes believe, erroneously, that the effective APR signals 
a prospective increase in their interest rate, and they may make 
uninformed decisions as a result. And, creditors say, even if the 
consumer does understand the effective APR, the disclosure does not 
provide any more information than a disclosure of the total dollar 
costs for the billing cycle. Moreover, creditors say the effective APR 
is arbitrary and inherently inaccurate, principally because it 
amortizes the cost for credit over only one month (billing cycle) even 
though the consumer may take several months (or longer) to repay the 
debt.
    Consumer groups acknowledge that the effective APR is not well 
understood, but argue that it nonetheless serves a useful purpose by 
showing the higher cost of some credit transactions. They contend the 
effective APR helps consumers decide each month whether to continue 
using the account, to shop for another credit product, or to use an 
alternative means of payment such as a debit card. Consumer groups also 
contend that reflecting costs, such as cash advance fees and balance 
transfer fees, in the effective APR creates a ``sticker shock'' and 
alerts consumers that the overall cost of a transaction for the cycle 
is high and exceeds the advertised corresponding APR. This shock, they 
say, may persuade some consumers not to use certain features on the 
account, such as cash advances, in the future. In their view, the 
utility of the effective APR would be maximized if it reflected all 
costs imposed during the cycle (rather than only some costs as is 
currently the case).
    As part of the consumer testing, mock periodic statements were 
developed in an attempt to improve consumers' understanding of the 
effective APR. A written explanation and varying terminology were 
tested. In most rounds participants showed little understanding of the 
effective APR, but the form was adjusted between rounds as to 
terminology and format, and in the last round a number of participants 
showed more understanding of the effective APR.
    Thus, the draft proposal includes a number of revisions to the 
presentation of the effective APR intended to help consumers understand 
the figure. In addition, the proposal seeks to improve consumer 
understanding and reduce creditor uncertainty by specifying more 
clearly which fees are to be included in the effective APR.\4\ As 
mentioned, however, the Board is also seeking comment on an alternative 
proposal to eliminate the disclosure on the basis that it may not 
provide consumers a meaningful benefit.
---------------------------------------------------------------------------

    \4\ The proposal also would reverse a staff commentary provision 
that excludes ATM fees from the finance charge and effective APR; 
and it would address for the first time foreign transaction fees, 
which it would clarify are to be included in the finance charge and 
effective APR.
---------------------------------------------------------------------------

    Transactions. Currently, there are no format requirements for 
disclosing different types of transactions, such as purchases, cash 
advances, and balance transfers on periodic statements. Often, 
transactions are presented together in chronological order. Consumer 
testing indicated that participants found it helpful to have similar 
types of transactions grouped together on the statement. Consumers also 
found it helpful, within the broad grouping of fees and transactions, 
when transactions were segregated by type (e.g., listing all purchases 
together, separate from cash advances or balance transfe