Truth in Lending, 36077-36102 [E9-17195]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 74, Number 139 (Wednesday, July 22, 2009)]
[Rules and Regulations]
[Pages 36077-36102]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17195]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 74, No. 139 / Wednesday, July 22, 2009 / 
Rules and Regulations

[[Page 36077]]



FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1364]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim final rule; request for public comment.

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SUMMARY: The Board is amending Regulation Z, which implements the Truth 
in Lending Act, and the staff commentary to the regulation in order to 
implement provisions of the Credit Card Accountability Responsibility 
and Disclosure Act of 2009 that are effective on August 20, 2009. These 
amendments are being issued in the form of an interim final rule and 
primarily pertain to advance notices of rate increases and changes in 
terms and the time consumers are given to make their payments.

DATES: This interim final rule is effective August 20, 2009. Comments 
must be received on or before September 21, 2009.

ADDRESSES: You may submit comments, identified by Docket No. R-1364, 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.
     Facsimile: (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 form 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 Benjamin K. Olson, Senior 
Attorneys, 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 and Implementation of the Credit Card Act

January 2009 Regulation Z and FTC Act Rules

    On December 18, 2008, the Board adopted two final rules pertaining 
to open-end (not home-secured) credit. These rules were published in 
the Federal Register on January 29, 2009. The first rule makes 
comprehensive changes to Regulation Z's provisions applicable to open-
end (not home-secured) credit, including amendments that affect all of 
the five major types of required disclosures: Applications and 
solicitations, account-opening disclosures, periodic statements, 
notices of changes in terms, and advertisements. See 74 FR 5244 
(January 2009 Regulation Z Rule). The second is a joint rule published 
with the Office of Thrift Supervision (OTS) and the National Credit 
Union Administration (NCUA) under the Federal Trade Commission Act (FTC 
Act) to protect consumers from unfair acts or practices with respect to 
consumer credit card accounts. See 74 FR 5498 (January 2009 FTC Act 
Rule). The effective date for both rules is July 1, 2010.
    On May 5, 2009, the Board published proposed clarifications and 
technical amendments to the January 2009 Regulation Z Rule in the 
Federal Register. See 74 FR 20784. The Board, the OTS, and the NCUA 
(collectively, the Agencies) concurrently published proposed 
clarifications and technical amendments to the January 2009 FTC Act 
Rule. See 74 FR 20804. In both cases, as stated in the Federal 
Register, these proposals were intended to clarify and facilitate 
compliance with the consumer protections contained in the January 2009 
final rules and not to reconsider the need for--or the extent of--those 
protections. The comment period on both of these proposed sets of 
amendments ended on June 4, 2009. Where relevant, the Board has 
considered the comments submitted in preparing this interim final rule. 
The Board is still considering other comments received in response to 
the proposed amendments and intends to finalize those amendments, with 
revisions as appropriate, in connection with its next final rulemaking 
regarding credit cards. The fact that certain proposed amendments are 
not addressed in this Federal Register notice does not mean that they 
have been withdrawn. Rather, such amendments are still under 
consideration by the Board.

The Credit Card Act

    On May 22, 2009, the Credit Card Accountability Responsibility and 
Disclosure Act of 2009 (Credit Card Act) was signed into law. Public 
Law 111-24, 123 Stat. 1734 (2009). The Credit Card Act primarily amends 
the Truth in Lending Act (TILA) and establishes a number of new 
substantive and disclosure requirements to establish fair and 
transparent practices pertaining to open-end consumer credit plans. 
Several of the provisions of the Credit Card Act are similar to 
provisions in the Board's January 2009 Regulation Z and FTC Act Rules, 
while other portions of the Credit Card Act address practices or 
mandate disclosures that were not addressed in the Board's rules.
    The requirements of the Credit Card Act that pertain to credit 
cards or other open-end credit for which the Board has rulemaking 
authority become effective in three stages. First, provisions generally 
requiring that consumers receive 45 days' advance notice of interest 
rate increases and significant changes in terms (new TILA Section 
127(i)) and provisions regarding the amount of time that consumers have 
to make payments (revised TILA Section 163) will become effective on 
August

[[Page 36078]]

20, 2009 (90 days after enactment of the Credit Card Act). A majority 
of the requirements under the Credit Card Act for which the Board has 
rulemaking authority, including, among other things, provisions 
regarding interest rate increases (revised TILA Section 171), over-the-
limit transactions (new TILA Section 127(k)), and student cards (new 
TILA Sections 127(c)(8), 127(p), and 140(f)) become effective on 
February 22, 2010 (9 months after enactment).
    Finally, two provisions of the Credit Card Act addressing the 
reasonableness and proportionality of penalty fees and charges (new 
TILA Section 149) and re-evaluation by creditors of rate increases (new 
TILA Section 148) are effective on August 22, 2010 (15 months after 
enactment). For these provisions that become effective on August 22, 
2010, the statute requires the Board to issue final rules not later 
than February 22, 2010 (9 months after enactment). However, the Board 
notes that, while new TILA Section 148 is not effective until August 
22, 2010, it applies to rate increases that have occurred since January 
1, 2009. Specifically, new TILA Section 148 requires that, if a 
creditor has increased a rate on a credit card account since January 1, 
2009 based on the credit risk of the consumer, market conditions, or 
other factors, the creditor must review the account at least once every 
six months and consider changes in such factors in subsequently 
determining whether to reduce that rate.\1\
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    \1\ The Credit Card Act also requires the Board to conduct 
several studies and to make several reports to Congress, and sets 
forth differing time periods in which these studies and reports must 
be completed.
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Implementation Plan

    The Board intends to implement the provisions of the Credit Card 
Act in stages, consistent with the statutory timeline established by 
Congress. Accordingly, this interim final rule implements those 
provisions of the statute that are effective August 20, 2009, primarily 
addressing change-in-terms notice requirements and the amount of time 
that consumers have to make their payments. As discussed in more detail 
in II. Statutory Authority, the Board is issuing these rules in interim 
final form based on its determination that, given the short 
implementation period established by the Credit Card Act and the fact 
that similar rules were already the subject of notice-and-comment 
rulemaking, it would be impracticable and unnecessary to issue a 
proposal for public comment followed by a final rule. The Board intends 
to consider comments on this interim final rule in connection with its 
next rulemaking required by the Credit Card Act.
    The Board intends to separately consider the remaining issues under 
the Credit Card Act and to finalize implementing regulations, in 
accordance with the timeline established by Congress, upon notice and 
after giving the public an opportunity to comment.
    To the extent appropriate, the Board intends to use its January 
2009 rules and the underlying rationale as the basis for its 
rulemakings under the Credit Card Act. The Board also intends to retain 
those portions of its January 2009 Regulation Z Rule that are 
unaffected by the Credit Card Act. The Board is not withdrawing any 
provisions of the January 2009 Regulation Z Rule or its January 2009 
FTC Act Rule at this time. The Board anticipates that in connection 
with finalizing rules for those provisions of the Credit Card Act that 
are effective February 22, 2010, it will amend or withdraw those 
portions of the January 2009 rules that are inconsistent with the 
requirements of the Credit Card Act. In particular, the Board 
anticipates that all of the requirements in its January 2009 FTC Act 
Rule will be withdrawn from Regulation AA and moved into Regulation Z, 
consistent with Congress's approach of amending the Truth in Lending 
Act.\2\ Finally, except as otherwise noted, the Board intends to 
consider comments received on the proposed clarifications and technical 
amendments that were published on May 5, 2009 and to incorporate final 
clarifications and amendments, to the extent appropriate, when it 
promulgates final rules in the second stage of its rulemaking.
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    \2\ See also OTS Memorandum for Chief Executive Officers: Credit 
CARD Act: Interest Rate Increases and Rules on Unfair Practices 
(issued July 13, 2009) (available at https://files.ots.treas.gov/25312.pdf); NCUA Press Release: Working with Other Regulators on 
Credit CARD Act and UDAP Rule (issued July 1, 2009) (available at 
https://www.ncua.gov/news/press_releases/2009/MR09-0701.htm).
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II. Statutory Authority

General Rulemaking Authority

    Section 2 of the Credit Card Act states that the Board ``may issue 
such rules and publish such model forms as it considers necessary to 
carry out this Act and the amendments made by this Act.'' This interim 
final rule implements Sec. Sec.  101(a) and 106(b) of the Credit Card 
Act, which amend TILA. TILA mandates that the Board prescribe 
regulations to carry out its purposes and specifically authorizes the 
Board, among other things, to 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 TILA, or prevent 
circumvention or evasion of TILA. See 15 U.S.C. 1604(a).

Authority To Issue Interim Final Rules Without Notice and Comment

    The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA) 
generally requires public notice before promulgation of regulations. 
See 5 U.S.C. 553(b). Unless notice or hearing is required by statute, 
however, the APA provides an exception ``when the agency for good cause 
finds (and incorporates the finding and a brief statement of reasons 
therefor in the rules issued) that notice and public procedure thereon 
are impracticable, unnecessary, or contrary to the public interest.'' 5 
U.S.C. 553(b)(B). For the reasons discussed below, the Board finds 
that, with respect to this rulemaking, there is good cause to conclude 
that providing notice and an opportunity to comment is impracticable 
and unnecessary.
    As an initial matter, neither the Credit Card Act nor TILA requires 
the Board to provide notice or a hearing with respect to this 
rulemaking. See Credit Card Act Sec.  2; 15 U.S.C. 1604(a). TILA 
Section 105(c) does require notice and an opportunity for public 
comment with respect to the adoption of model disclosure forms and 
clauses but the Board is not adopting model disclosure forms or clauses 
in this interim final rule. 15 U.S.C. 1604(c). Moreover, even if the 
Board were adopting such forms or clauses, TILA Section 105(c) only 
requires notice and an opportunity to comment ``in accordance with [5 
U.S.C. 553].'' Thus, the adoption of model disclosure forms and clauses 
is subject to the good cause exception in Sec.  553(b)(B).
    Furthermore, for purposes of implementing Sec. Sec.  101(a) and 
106(b) of the Credit Card Act, providing notice and an opportunity to 
comment within the timeframe mandated by Congress would be 
impracticable. Although most provisions of the Credit Card Act are 
effective 9 months after enactment, Sec. Sec.  101(a) and 106(b) are 
effective in 90 days (i.e., on August 20, 2009). This period does not 
provide sufficient time for the Board to:
     Prepare proposed regulations and publish them in the 
Federal Register;

[[Page 36079]]

     Provide a reasonable period for interested parties to 
review the proposal and prepare comments;
     Analyze the comments submitted; and
     Prepare the final regulations and publish them in the 
Federal Register.
    Even if the Board were able to technically comply with Sec.  553's 
notice-and-comment process within the allotted time, such a process 
would not comply with the purpose of the APA because interested parties 
would not have sufficient time to prepare well-researched comments and 
the Board would not have time to conduct a meaningful review and 
analysis of those comments. Furthermore, because the Board's 
regulations will provide creditors with guidance on how to comply with 
Sec. Sec.  101(a) and 106(b) of the Credit Card Act, a notice-and-
comment process would leave little or no time between the issuance of 
final regulations and the statutory effective date for creditors to 
adjust their procedures in order to comply. In contrast, the adoption 
of an interim final rule enables the Board to provide this guidance 
further in advance of the effective date, which provides creditors with 
more time to comply with the statutory provisions. As discussed in I. 
Background and Implementation of the Credit Card Act, interested 
parties will still have an opportunity to submit comments following 
issuance of the interim final rule, which the Board will consider when 
promulgating a non-interim final rule as part of a subsequent 
rulemaking implementing other provisions of the Credit Card Act.
    Finally, notice and an opportunity to comment is unnecessary with 
respect to the implementation of Sec. Sec.  101(a) and 106(b) of the 
Credit Card Act because these provisions are similar in most respects 
to rules recently adopted by the Board and other Agencies after notice 
and public comment. For example, as discussed in detail in III. 
Section-by-Section Analysis, Sec.  101(a) of the Credit Card Act 
generally requires creditors to provide 45 days' advance notice of an 
increase in an annual percentage rate or other significant change in 
the terms of the cardholder agreement, a requirement that largely 
mirrors provisions in the January 2009 Regulation Z Rule recently 
adopted by the Board. See 12 CFR 226.9(c)(2) and (g),\3\ 74 FR 5244, 
5413-5415. Similarly, Sec.  106(b) of the Credit Card Act requires 
creditors to mail or deliver periodic statements 21 days before payment 
is due, which is similar to a provision recently adopted by the Board 
and the other Agencies in the January 2009 FTC Act Rule. See 12 CFR 
227.22, 74 FR 5498, 5560.\4\ Prior to adopting these rules, the Board 
and the other Agencies received and considered more than 60,000 
comments. Although the statutory provisions are not identical to the 
regulations in all respects, interested parties have already had an 
opportunity to comment on the core issues.\5\ To the extent that the 
Board's interim final rule fails to anticipate new, material issues, 
interested parties will have the opportunity to raise those issues in 
their comments so that the Board can consider them in a subsequent 
rulemaking under the Credit Card Act.
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    \3\ For convenience, this supplementary information refers to 
provisions in the January 2009 Regulation Z and FTC Act Rules by 
citing to the Code of Federal Regulations as well as the Federal 
Register. The Board notes that because these provisions are not yet 
effective, they have not been incorporated into the existing Code of 
Federal Regulations.
    \4\ Although the Board, OTS, and NCUA adopted substantively 
identical rules under the FTC Act, each agency placed its rules in 
its respective part of title 12 of the Code of Federal Regulations. 
Specifically, the Board placed its rules in part 227, the OTS in 
part 535, and the NCUA in part 706. For simplicity, this 
supplementary information cites to the Board's rules and official 
staff commentary.
    \5\ The Board recognizes that there are two significant 
differences between the January 2009 rules and this interim final 
rule. First, the interim final rule permits a consumer to reject a 
rate increase or other significant change to the account terms in 
accordance with new TILA Section 127(i). Second, the mailing or 
delivery requirement for periodic statements in the interim final 
rule applies to all open-end consumer credit plans, while the 
analogous provision in the January 2009 FTC Act Rule applies only to 
credit card accounts.
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Authority To Issue an Interim Final Rule With an Effective Date of 
August 20, 2009

    Because Sec. Sec.  101(a) and 106(b) of the Credit Card Act are 
effective on August 20, 2009,\6\ the Board's interim final rule 
implementing those provisions is also effective on that date. The APA 
generally requires that rules be published not less than 30 days before 
their effective date. See 5 U.S.C. 553(d). As with the notice 
requirement, however, the APA provides an exception when ``otherwise 
provided by the agency for good cause found and published with the 
rule.'' Id. Sec.  553(d)(3). Notwithstanding the time saved by issuing 
an interim final rule without advance notice and the similarity of the 
new statutory provisions to regulations previously issued by the Board, 
60 days may not be sufficient time for the Board to review the 
legislation carefully, revise its regulations for consistency with the 
Credit Card Act, and ensure that the revised regulations are published 
in the Federal Register 30 days before the August 20, 2009 effective 
date.\7\ Accordingly, the Board finds that good cause exists to publish 
the interim final rule less than 30 days before the effective date.
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    \6\ See Credit Card Act Sec.  3.
    \7\ The date on which the Board's notice is published in the 
Federal Register depends on a number of variables that are outside 
the Board's control, including the number and size of other notices 
submitted to the Federal Register prior to the Board's notice.
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    Similarly, although 12 U.S.C. 4802(b)(1) generally requires that 
new regulations and amendments to existing regulations take effect on 
the first day of the calendar quarter which begins on or after the date 
on which the regulations are published in final form (in this case, 
October 1, 2009), the Board has determined that--for the reasons 
discussed above--there is good cause for making the interim final rule 
effective on August 20. See 12 U.S.C. 4802(b)(1)(A) (providing an 
exception to the general requirement when ``the agency determines, for 
good cause published with the regulation, that the regulations should 
become effective before such time''). Although the Credit Card Act does 
not expressly require the Board to issue regulations implementing 
Sec. Sec.  101(a) and 106(b) before October 1, Congress clearly 
intended creditors to be in compliance with those provisions on August 
20. Accordingly, the Board believes that providing creditors with 
guidance regarding compliance with Sec. Sec.  101(a) and 106(b) before 
October 1 is consistent with 12 U.S.C. 4802(b)(1)(C), which provides an 
exception to the general requirement when ``the regulation is required 
to take effect on a date other than the date determined under [12 
U.S.C. 4802(b)(1)] pursuant to any other Act of Congress.''
    Finally, TILA Section 105(d) provides that any regulation of the 
Board (or any amendment or interpretation thereof) requiring any 
disclosure which differs from the disclosures previously required by 
Chapters 1, 4, or 5 of TILA (or by any regulation of the Board 
promulgated thereunder) shall have an effective date no earlier than 
``that October 1 which follows by at least six months the date of 
promulgation.'' However, even assuming that TILA Section 105(d) applies 
to the interim final rule, the Board believes that the specific 
provisions governing the effective dates for Sec. Sec.  101(a) and 
106(b) of the Credit Card Act override the general provision in TILA 
Section 105(d).

[[Page 36080]]

III. Section-by-Section Analysis

Section 226.5 General Disclosure Requirements

5(b) Time of Disclosures
    As amended by the Credit Card Act, TILA Section 163 generally 
prohibits a creditor from treating a payment as late or imposing 
additional finance charges unless the creditor mailed or delivered the 
periodic statement at least 21 days before the payment due date and the 
expiration of any period within which any credit extended may be repaid 
without incurring a finance charge (i.e., a ``grace period''). See 
Credit Card Act Sec.  106(b). Unlike most of the Credit Card Act's 
provisions, the amendments to TILA Section 163 apply to all open-end 
consumer credit plans rather than just credit card accounts.\8\ As 
discussed below, the Board has implemented amended TILA Section 163 by 
revising Sec.  226.5(b)(2)(ii) and the accompanying official staff 
commentary.\9\
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    \8\ Specifically, while most provisions in the Credit Card Act 
apply to ``credit card account[s] under an open end consumer credit 
plan'' (e.g., Sec.  101(a)), amended TILA Section 163--like current 
TILA Section 163--applies to ``open end consumer credit plan[s].''
    \9\ The January 2009 Regulation Z Rule revised aspects of Sec.  
226.5(b)(2)(ii). However, because those revisions are not effective 
until July 1, 2010, this interim final rule amends the version of 
Sec.  226.5(b)(2)(ii) that is currently in effect. Accordingly, when 
this supplementary information refers to ``current'' or ``existing'' 
paragraphs of Sec. Sec.  226.5 or 226.9, it refers to the version 
that is currently in effect, not the version adopted in the Board's 
January 2009 Regulation Z Rule, which is effective July 1, 2010.
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    Currently, TILA Section 163 requires creditors to send periodic 
statements at least 14 days before the expiration of the grace period 
(if any), unless prevented from doing so by an act of God, war, natural 
disaster, strike, or other excusable or justifiable cause (as 
determined under regulations of the Board). 15 U.S.C. 1666b. The 
current version of Regulation Z, however, applies the 14-day 
requirement even when the consumer does not receive a grace period. 
Specifically, current Sec.  226.5(b)(2)(ii) requires that creditors 
mail or deliver periodic statements 14 days before the date by which 
payment is due for purposes of avoiding not only finance charges as a 
result of the loss of a grace period but also any charges other than 
finance charges (such as late fees). See also comment 5(b)(2)(ii)-1.
    In the January 2009 FTC Act Rule, the Board and the other Agencies 
prohibited institutions from treating payments on consumer credit card 
accounts as late for any purpose unless the institution provided a 
reasonable amount of time for consumers to make payment. See 12 CFR 
227.22(a), 74 FR 5560; see also 74 FR 5508-5512. This rule included a 
safe harbor for institutions that adopt reasonable procedures designed 
to ensure that periodic statements specifying the payment due date are 
mailed or delivered to consumers at least 21 days before the payment 
due date. See 12 CFR 227.22(b)(2), 74 FR 5560. The 21-day safe harbor 
was intended to allow seven days for the periodic statement to reach 
the consumer by mail, seven days for the consumer to review their 
statement and make payment, and seven days for that payment to reach 
the institution by mail. However, to avoid any potential conflict with 
the 14-day requirement in TILA Section 163(a), the rule expressly 
stated that it would not apply to any grace period provided by an 
institution. See 12 CFR 227.22(c), 74 FR 5560.
5(b)(2) Periodic Statements
5(b)(2)(ii) Mailing or Delivery
    The Credit Card Act's amendments to TILA Section 163 codify aspects 
of current Sec.  226.5(b)(2)(ii) as well as the provision in the 
January 2009 FTC Act Rule regarding the mailing or delivery of periodic 
statements. Specifically, like current Sec.  226.5(b)(2)(ii), amended 
TILA Section 163 applies the mailing or delivery requirement to both 
the expiration of the grace period and the payment due date. In 
addition, similar to the January 2009 FTC Act Rule, amended TILA 
Section 163 adopts 21 days as the appropriate time period between the 
date on which the statement is mailed or delivered to the consumer and 
the date on which the consumer's payment must be received by the 
creditor to avoid adverse consequences.
    Rather than establishing an absolute requirement that periodic 
statements be mailed 21 days in advance of the payment due date, 
amended TILA Section 163(a) codifies the same standard adopted by the 
Board and the other Agencies in the January 2009 FTC Act Rule, which 
requires creditors to adopt ``reasonable procedures designed to 
ensure'' that statements are mailed or delivered at least 21 days 
before the payment due date. Notably, however, the 21-day requirement 
for grace periods in amended TILA Section 163(b) does not include 
similar language regarding ``reasonable procedures.'' Because the 
payment due date generally coincides with the expiration of the grace 
period, the Board believes that it will facilitate compliance to apply 
a single standard to both circumstances. The ``reasonable procedures'' 
standard recognizes that, for issuers mailing hundreds of thousands of 
periodic statements each month, it would be difficult if not impossible 
to know whether a specific statement is mailed or delivered on a 
specific date. Furthermore, applying different standards could 
encourage creditors to establish a payment due date that is different 
from the date on which the grace period expires, which could lead to 
consumer confusion. Accordingly, the Board is amending Sec.  
226.5(b)(2)(ii) to require that creditors adopt reasonable procedures 
designed to ensure that periodic statements are mailed or delivered at 
least 21 days before the payment due date and the expiration of the 
grace period. In doing so, the Board relies on its authority under TILA 
Section 105(a) to make adjustments that are necessary or proper to 
effectuate the purposes of TILA and to facilitate compliance therewith. 
See 15 U.S.C. 1604(a).
    For clarity, the Board also amends Sec.  226.5(b)(2)(ii) to define 
``grace period'' as ``a period within which any credit extended may be 
repaid without incurring a finance charge due to a periodic interest 
rate.'' This definition is consistent with the definition of grace 
period adopted by the Board in its January 2009 Regulation Z Rule. See 
Sec. Sec.  226.5a(b)(5), 226.6(b)(2)(v), 74 FR 5404, 5407; see also 74 
FR 5291-5294, 5310.
    Finally, amended TILA Section 163 deletes current Section 163(b), 
which states that the 14-day mailing requirement does not apply ``in 
any case where a creditor has been prevented, delayed, or hindered in 
making timely mailing or delivery of [the] periodic statement within 
the time period specified * * * because of an act of God, war, natural 
disaster, strike, or other excusable or justifiable cause, as 
determined under regulations of the Board.'' 15 U.S.C. 1666b(b). The 
Board believes that the Credit Card Act's removal of this language is 
consistent with the adoption of a ``reasonable procedures'' standard 
insofar as a creditor's procedures for responding to any of the 
situations listed in current TILA Section 163(b) will now be evaluated 
for reasonableness in addressing those situations. Accordingly, the 
Board has removed the language implementing current TILA Section 163(b) 
from footnote 10 to Sec.  226.5(b)(2)(ii).\10\
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    \10\ Both current and amended TILA Section 163 require that the 
periodic statement include the date on which the grace period will 
expire and the amount on which the finance charge will be based if 
the consumer does not pay the balance in full prior to expiration of 
the grace period. The Board notes that current Sec.  226.7(e) and 
(j) require disclosure of this information. In addition, the 21-day 
mailing requirement in amended TILA Section 163(a) is tied to the 
provision of a periodic statement that includes ``the information 
required by section 127(b).'' Although Sec. Sec.  201 and 202 of the 
Credit Card Act amend TILA Section 127(b), those provisions are not 
effective until February 22, 2010. Accordingly, until such time as 
the amendments to TILA Section 127(b) are effective, the Board 
interprets amended TILA Section 163(a) to refer to the current 
version of TILA Section 127(b).

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[[Page 36081]]

    The Board is adopting a new comment 5(b)(2)(ii)-1, which clarifies 
that, under the ``reasonable procedures'' standard, a creditor is not 
required to determine the specific date on which periodic statements 
are mailed or delivered to each individual consumer. Instead, a 
creditor complies with Sec.  226.5(b)(2)(ii) if it has adopted 
reasonable procedures designed to ensure that periodic statements are 
mailed or delivered to consumers no later than a certain number of days 
after the closing date of the billing cycle and adds that number of 
days to the 21-day period required by Sec.  226.5(b)(2)(ii) when 
determining the payment due date and the date on which any grace period 
expires. For example, if a creditor has adopted reasonable procedures 
designed to ensure that periodic statements are mailed or delivered to 
consumers no later than three days after the closing date of the 
billing cycle, the payment due date and the date on which any grace 
period expires must be no less than 24 days after the closing date of 
the billing cycle. The Board and the other Agencies adopted a similar 
comment in the January 2009 FTC Act Rule. See 12 CFR 227.22 comment 
22(b)-1, 74 FR 5511, 5561.
    The Board is deleting current comment 5(b)(2)(ii)-1 because it 
refers to the 14-day rule for grace periods and is therefore no longer 
consistent with Sec.  226.5(b)(2)(ii). To the extent that current 
comment 5(b)(2)(ii)-1 clarifies that Sec.  226.5(b)(2)(ii) applies in 
circumstances where the consumer is not eligible or ceases to be 
eligible for a grace period, it is no longer necessary because that 
requirement is reflected in amended Sec.  226.5(b)(2)(ii) and elsewhere 
in the amended commentary.
    The Board is also adopting a new comment 5(b)(2)(ii)-2, which 
clarifies that treating a payment as late for any purpose includes 
increasing the annual percentage rate as a penalty, reporting the 
consumer as delinquent to a credit reporting agency, or assessing a 
late fee or any other fee based on the consumer's failure to make a 
payment within a specified amount of time or by a specified date. 
However, because amended TILA Section 163 (like current TILA Section 
163) does not require creditors to provide a grace period, the comment 
also clarifies that, when an account is not eligible or ceases to be 
eligible for a grace period, imposing a finance charge due to a 
periodic interest rate does not constitute treating a payment as late 
for purposes of Sec.  226.5(b)(2)(ii).\11\ The Board and the other 
Agencies adopted a similar comment in the January 2009 FTC Act Rule. 
See 12 CFR 227.22 comment 22(a)-1, 74 FR 5510, 5561.
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    \11\ The Board notes, however, that Sec.  102(a) of the Credit 
Card Act creates a new TILA Section 127(j), which addresses the 
ability of creditors to charge interest from the date of the 
transaction in certain circumstances. However, unlike the amendments 
to Section 163, this provision is effective 9 months after enactment 
and will be implemented by the Board in a separate rulemaking. See 
Credit Card Act Sec.  3.
---------------------------------------------------------------------------

    The Board is deleting current comment 5(b)(2)(ii)-2, which 
clarifies that the emergency circumstances exception in footnote 10 
does not extend to the failure to provide a periodic statement because 
of computer malfunction. As discussed above, footnote 10 is based on 
current TILA Section 163(b), which has been repealed.
    The Board is adopting a new comment 5(b)(2)(ii)-3, which clarifies 
that, for purposes of Sec.  226.5(b)(2)(ii), ``payment due date'' 
generally means the date by which the creditor requires the consumer to 
make the required minimum periodic payment in order to avoid that 
payment being treated as late for any purpose. However, the comment 
also addresses the meaning of payment due date in two circumstances 
where a late payment or other fee may not be assessed until a date that 
is later than the date on which payment is due.
    First, the comment notes that some creditors provide an additional 
period of time after the contractual due date during which a late 
payment fee will not be assessed. This period--which is sometimes 
referred to as a ``courtesy period''-- may be set forth in the account 
agreement (as with some home equity plans subject to the requirements 
of Sec.  226.5b) or may be provided as an informal policy or practice 
(as with some credit card accounts). Regardless of whether the courtesy 
period is mandated by state law, new comment 5(b)(2)(ii)-3 clarifies 
that, for purposes of Sec.  226.5(b)(2)(ii), the payment due date is 
the due date according to the legal obligation between the parties, not 
the end of the additional ``courtesy'' period.
    Second, the comment notes that some state or other laws require 
that a certain number of days must elapse following a due date before a 
late payment or other fee may be imposed. As with courtesy periods, the 
comment clarifies that in these circumstances the payment due date for 
purposes of Sec.  226.5(b)(2)(ii) is the due date according to the 
legal obligation between the parties, not the date before which state 
law prohibits imposition of a late payment or other fee.
    The Board is adopting comment 5(b)(2)(ii)-4, which clarifies the 
definition of ``grace period'' in Sec.  226.5(b)(2)(ii). Specifically, 
this comment clarifies that a deferred interest or similar promotional 
program under which the consumer is not obligated to pay interest that 
accrues on a balance if that balance is paid in full prior to the 
expiration of a specified period of time is not a grace period for 
purposes of Sec.  226.5(b)(2)(ii). This comment also clarifies that a 
courtesy period is not a grace period for purposes of Sec.  
226.5(b)(2)(ii).
    Current comment 5(b)(2)(ii)-3 provides that, when a consumer asks 
to pick up his or her periodic statements, the creditor may permit--but 
not require--the consumer to do so, provided that statements are made 
available 14 days before expiration of the grace period. For 
organizational purposes, the Board has redesignated this comment as 
comment 5(b)(2)(ii)-4. In addition, the Board has revised the comment 
for clarity and for consistency with the new 21-day requirement.
    Finally, current comment 5(b)(2)(ii)-4 contains a cross-reference 
to comment 7-3.iv., which provides examples of grace periods in the 
context of a deferred interest transaction. For organizational 
purposes, the Board has redesignated this comment as comment 
5(b)(2)(ii)-6. In addition, the Board has made a technical amendment to 
this comment without intended substantive change and revised comment 7-
3.iv. for consistency with the new 21-day requirement.\12\
---------------------------------------------------------------------------

    \12\ In the January 2009 FTC Act Rule, the Board and the other 
Agencies adopted comment 22(b)-3, which clarified that an 
institution that only provided periodic statements electronically 
and only accepted payments electronically could comply with the 
general requirement in 12 CFR 227.22(a) to provide a reasonable 
amount of time to make payment without providing periodic statements 
21 days before the payment due date. See 74 FR 5561. Under amended 
TILA Section 163, however, the 21-day requirement applies regardless 
of how periodic statements are provided and payments are made.
---------------------------------------------------------------------------

Implementation

    As discussed in I. Background and Implementation of the Credit Card 
Act, the effective date for revised TILA Section 163 (as amended by the 
Credit Card Act) is August 20, 2009. In order to comply with revised 
Sec.  226.5(b)(2)(ii) (which implements revised TILA Section 163), 
creditors must have in

[[Page 36082]]

place on August 20 reasonable procedures designed to ensure that 
periodic statements are mailed or delivered at least 21 days before the 
payment due date and the date on which any grace period expires. That 
is, the relevant date for purposes of determining when a creditor must 
comply with revised Sec.  226.5(b)(2)(ii) is the date on which the 
periodic statement is mailed or delivered, not the due date or grace 
period expiration date reflected on the statement. Thus, if a periodic 
statement is mailed or delivered on August 20, the creditor must have 
reasonable procedures designed to ensure that the payment due date and 
the grace period expiration date are not earlier than September 10. 
However, if a periodic statement is mailed or delivered on August 19, 
this new requirement does not apply to that statement.
    The Board believes that this is the appropriate reading of the 90-
day implementation period in the Credit Card Act. Although the Credit 
Card Act could be construed to require creditors to have reasonable 
procedures designed to ensure that periodic statements are mailed or 
delivered at least 21 days before any payment due date or grace period 
expiration date that falls on or after August 20, this reading would 
create uncertainty regarding compliance with the amendments to TILA 
Section 163 by requiring creditors to mail or deliver periodic 
statements in accordance with revised TILA Section 163 and Sec.  
226.5(b)(2)(ii) prior to the effective date for those provisions. 
Accordingly, for clarity and consistency, the Board believes the better 
reading of the Credit Card Act is that creditors must begin to comply 
with amended TILA Section 163 (as implemented in amended Sec.  
226.5(b)(2)(ii)) with respect to periodic statements mailed or 
delivered on or after August 20, 2009.
    Revised Sec.  226.5(b)(2)(ii) applies to credit card accounts as 
well as all other open-end consumer credit plans. The Board understands 
that, with respect to open-end consumer credit plans other than credit 
cards, it may be difficult for some creditors to update their systems 
to produce periodic statements by August 20, 2009 that disclose payment 
due dates and grace period expiration dates (if applicable) that are 
consistent with the 21-day requirement in revised Sec.  
226.5(b)(2)(ii). As a result, it is possible that, for a short period 
of time after August 20, some periodic statements for open-end consumer 
credit plans other than credit cards may disclose payment due dates and 
grace period expiration dates (if applicable) that are technically 
inconsistent with the interim final rule. In these circumstances, the 
creditor may remedy this technical issue by prominently disclosing 
elsewhere on or with the periodic statement that the consumer's payment 
will not be treated as late for any purpose if received within 21 days 
after the statement was mailed or delivered. Under no circumstances 
does revised Sec.  226.5(b)(2)(ii) permit a creditor to treat a payment 
as late for any purpose if that payment is received within 21 days 
after mailing or delivery of the periodic statement.

Section 226.7 Periodic Statement

    As discussed above, the Board has revised comment 7-3.iv. for 
consistency with the amendments to Sec.  226.5(b)(2)(ii), which require 
that periodic statements be mailed or delivered 21 days before the 
payment due date and the expiration of any grace period. The revisions 
to this comment in the January 2009 Regulation Z Rule and the revisions 
proposed in May 2009 will be addressed in a subsequent rulemaking. See 
74 FR 5320, 5476; 74 FR 20786, 20798

Section 226.9 Subsequent Disclosure Requirements

    The Board is adopting revisions to Sec.  226.9(c) and is adopting 
new Sec.  226.9(g) and (h) to implement new TILA Section 127(i), 
enacted as part of the Credit Card Act. New TILA Section 127(i) 
generally requires that creditors provide consumers with 45 days' 
advance notice of rate increases and other significant changes to the 
terms of their credit card account agreements. Credit Card Act Sec.  
101(a)(1). Section 127(i) also requires change-in-terms notices to 
contain a disclosure of a consumer's right to cancel the account, 
pursuant to the Board's rules, prior to the effective date of the rate 
increase or change. Section 127(i) is effective on August 20, 2009, 90 
days after enactment of the Credit Card Act. As discussed below, the 
amendments to Sec.  226.9(c) and (g) adopted in this interim final rule 
in large part parallel the requirements adopted in the Board's January 
2009 Regulation Z Rule, with changes to conform to new TILA Section 
127(i).
    However, consistent with the staged approach to implementations 
outlined above in I. Background and Implementation of the Credit Card 
Act, several requirements that were included in Sec.  226.9(c) and (g) 
of the Board's January 2009 Regulation Z Rule are not included in this 
interim final rule. Compliance with these requirements is not mandated 
by the Credit Card Act, and therefore this interim final rule does not 
require compliance with these requirements on August 20, 2009. For 
example, this interim final rule does not require that advance notices 
of changes in terms or the imposition of penalty rates pursuant to 
Sec.  226.9(c) and (g) comply with certain tabular formatting 
requirements contained in the January 2009 Regulation Z Rule. However, 
the Board is not withdrawing these or any other requirements of the 
January 2009 Regulation Z Rule at this time. The implementation of, and 
any changes to, the January 2009 Regulation Z Rule and January 2009 FTC 
Act Rule necessary to conform with the Credit Card Act will be 
addressed in connection with the next stage of the Board's implementing 
regulations.
    Accordingly, because the January 2009 Regulation Z Rule is not 
effective until July 1, 2010, the Board has based the amendments to 
Sec.  226.9(c) in this interim final rule on the text of existing Sec.  
226.9(c) rather than on the version of Sec.  226.9(c) included in the 
January 2009 Regulation Z Rule. Similarly, new Sec.  226.9(g) is based 
on the January 2009 Regulation Z Rule but does not implement all of the 
formatting and content requirements included in the January 2009 
rulemaking.
    In addition, the Board is not including model forms or model 
clauses for advance notices of rate increases or changes in terms in 
this interim final rule, for several reasons. First, the formatting and 
content requirements of the January 2009 Regulation Z Rule are not yet 
effective, and therefore any model clause or form included with this 
interim final rule would be subject to further revision for conformity 
with that rule. Second, as discussed below, the Credit Card Act also 
imposes additional content requirements for change-in-terms notices, 
several of which are not effective until February 22, 2010. The Board 
intends to finalize new model forms in the next stage of its rulemaking 
under the Credit Card Act that comply with all of these new 
requirements simultaneously.

226.9(c) Change in Terms

Credit Card Act \13\
---------------------------------------------------------------------------

    \13\ For convenience, this section summarizes all of the 
provisions of the Credit Card Act related to advance notices of 
changes in terms and rate increases. Consistent with the approach it 
took in the January 2009 Regulation Z Rule, the Board is 
implementing the advance notice requirements applicable to 
contingent rate increases set forth in the cardholder agreement in a 
separate section (Sec.  226.9(g)) from those advance notice 
requirements applicable to changes in the cardholder agreement 
(Sec.  226.9(c)). The distinction between these types of changes is 
that Sec.  226.9(g) addresses changes in a rate being applied to a 
consumer's account consistent with the existing terms of the 
cardholder agreement, while Sec.  226.9(c) addresses changes in the 
underlying terms of the agreement.
---------------------------------------------------------------------------

    New TILA Section 127(i)(1) generally requires creditors to provide 
consumers

[[Page 36083]]

with a written notice of an annual percentage rate increase at least 45 
days prior to the effective date of the increase, for credit card 
accounts under an open-end consumer credit plan. Credit Card Act Sec.  
101(a)(1). The statute establishes several exceptions to this general 
requirement. Credit Card Act Sec.  101(a)(1) and (b)(2). The first 
exception applies when the change is an increase in an annual 
percentage rate upon expiration of a specified period of time, provided 
that prior to commencement of that period, the creditor clearly and 
conspicuously disclosed to the consumer the length of the period and 
the rate that would apply after expiration of the period. The second 
exception applies to increases in variable annual percentage rates that 
change according to operation of a publicly available index that is not 
under the control of the creditor. Finally, a third exception applies 
to rate increases due to the completion of, or failure of a consumer to 
comply with, the terms of a workout or temporary hardship arrangement, 
provided that prior to the commencement of such arrangement the 
creditor clearly and conspicuously disclosed to the consumer the terms 
of the arrangement, including any increases due to completion or 
failure.
    In addition to the rules in new TILA Section 127(i)(1) regarding 
rate increases, new TILA Section 127(i)(2) establishes an additional 
45-day advance notice requirement for significant changes, as 
determined by rule of the Board, in the terms (including an increase in 
any fee or finance charge) of the cardholder agreement between the 
creditor and the consumer. Credit Card Act Sec.  101(a)(1).
    New TILA Section 127(i)(3) also establishes an additional content 
requirement for notices of interest rate increases or significant 
changes in terms provided pursuant to new TILA Section 127(i). Such 
notices are required to contain a brief statement of the consumer's 
right to cancel the account, pursuant to rules established by the 
Board, before the effective date of the rate increase or other change 
disclosed in the notice. In addition, new TILA Section 127(i)(4) states 
that closure or cancellation of an account pursuant to the consumer's 
right to cancel does not constitute a default under the existing 
cardholder agreement, and does not trigger an obligation to immediately 
repay the obligation in full or through a method less beneficial than 
those listed in revised TILA Section 171(c)(2). (The disclosure 
associated with the right to cancel is discussed in the section-by-
section analysis to Sec.  226.9(c) and (g), while the substantive rules 
regarding this new right are discussed in the section-by-section 
analysis to Sec.  226.9(h).)
    The Board notes that there are additional provisions of the Credit 
Card Act that may impact the content of change-in-terms notices, and 
the types of changes that are permitted pursuant to a change-in-terms 
notice, that are not effective until February 22, 2010. For example, 
revised TILA Section 171(a) generally prohibits, subject to several 
exceptions, increases in annual percentage rates and other finance 
charges applicable to outstanding balances. In addition, revised TILA 
Section 171(b) and new TILA Section 148(b) will require, for certain 
types of rate increases, that the advance notice state the reason for a 
rate increase. Finally, for penalty rate increases applied to 
outstanding balances when the consumer fails to make a minimum payment 
within 60 days after the due date, as permitted by revised TILA Section 
171(b)(4), a creditor will be required to terminate the penalty rate 
increase if the consumer makes the subsequent six minimum payments on 
time. Consistent with the Board's approach to implementing the changes 
contained in the Credit Card Act discussed in I. Background and 
Implementation of the Credit Card Act, these changes will be addressed 
in the next stage of the Board's rulemaking.

Scope of 45-Day Advance Notice Rules

    The Board is using its authority under TILA Section 105(a) and 
Sec.  2 of the Credit Card Act to interpret the term ``credit card 
account under an open-end consumer credit plan,'' as that term is used 
in new TILA Section 127(i), not to include accounts that are home-
equity lines of credit (HELOCs) subject to Sec.  226.5b, even if those 
accounts may be accessed by a credit card device. Thus, the provisions 
in new TILA Section 127(i) would not apply to HELOC accounts. This is 
consistent with the Board's historical treatment of HELOC accounts 
accessible by a credit card under TILA; for example, the credit and 
charge card application and solicitation disclosure requirements under 
Sec.  226.5a expressly do not apply to home-equity plans accessible by 
a credit card that are subject to Sec.  226.5b. The Board is currently 
engaged in reviewing the rules applicable to HELOCs as part of its 
staged review of all of Regulation Z and will consider any appropriate 
revisions to the change-in-terms requirements for HELOCs in connection 
with that review.

January 2009 Regulation Z Rule

    The Board's interim final rule to implement the advance notice 
requirements of new TILA Section 127(i) draws upon information 
considered by the Board in adopting its January 2009 Regulation Z Rule. 
Section 226.9(c) of the Board's January 2009 Regulation Z Rule, similar 
to new TILA Section 127(i), requires 45 days' advance written notice of 
changes in key account terms. The terms for which 45 days' advance 
written notice of changes is required under the January 2009 Regulation 
Z Rule are the same terms that the Board required to be disclosed in 
the new account-opening table required for open-end (not home-secured) 
credit pursuant to Sec.  226.6(b)(1) and (b)(2) of the January 2009 
Regulation Z Rule. The terms for which advance notice of changes is 
required under the January 2009 Regulation Z Rule are those that the 
Board determined, in part based on its consumer testing, to be of the 
greatest importance to consumers, including annual percentage rates and 
other key charges, such as transaction fees and penalty fees.
    As discussed in the supplementary information to Sec.  226.9(g) in 
the January 2009 Regulation Z Rule, the Board also adopted a new Sec.  
226.9(g) to require 45 days' advance notice of increases in the rates 
applicable to a consumer's delinquency or default, or as a penalty for 
one or more events specified in the account agreement, such as making a 
late payment or obtaining an extension of credit that exceeds the 
credit limit. New Sec.  226.9(g) of the January 2009 Regulation Z Rule 
was intended to complement Sec.  226.9(c) by requiring advance notice 
of rate increases that, while not technically changes in the terms of 
the consumer's account agreement, may still come as a costly surprise 
to the consumer.

9(c)(1) Rules Affecting Home-Equity Plans and Open-End Plans That Are 
Not Credit Card Accounts

    The interim final rule preserves, in Sec.  226.9(c)(1) and 
associated staff commentary, the existing change-in-terms notice 
requirements for home-equity plans and other open-end plans that are 
not credit card accounts. These rules are substantively identical to 
the current rules under Sec.  226.9(c), except for several technical 
and renumbering changes.
    The Board notes that open-end (not home-secured) lines of credit 
that are not credit card accounts will be subject

[[Page 36084]]

to the revised change-in-terms notice requirements contained in the 
January 2009 Regulation Z Rule when that rule becomes effective. In 
particular, changes made in January 2009 to Sec.  226.9(c) and (g) have 
not been withdrawn. However, the January 2009 Regulation Z Rule is not 
yet effective, and unsecured lines of credit that are not credit card 
accounts are not subject to the advance notice requirements in the 
Credit Card Act. Therefore the existing rules have been preserved for 
such lines of credit for the period between the effective date of this 
interim final rule and the date the January 2009 Regulation Z Rule 
becomes effective. Thus, creditors offering open-end (not home-secured) 
lines of credit that are not credit card accounts may continue to 
comply with the existing change-in-terms notice requirements, which 
have been adopted in this interim final rule as renumbered Sec.  
226.9(c)(1).
    The Board notes that it also is currently reviewing those portions 
of Regulation Z that pertain to home-equity lines of credit, and the 
applicable notice requirements for such products may be amended in the 
course of that rulemaking.

9(c)(2) Rules Affecting Open-End (Not Home-Secured) Plans

9(c)(2)(i) Changes Where Written Advance Notice Is Required
    Section Sec.  226.9(c)(2) sets forth the change-in-terms notice 
requirements for credit card accounts that are not home-secured. 
Paragraph (c)(2)(i) sets forth the general rule for when change-in-
terms notices must be provided, and states that a creditor must provide 
a written notice of a significant change to an account term as 
described in paragraph (c)(2)(ii) or an increase in the required 
minimum periodic payment, in each case at least 45 days' prior to the 
effective date of the change, unless an exception in paragraph 
(c)(2)(v) applies. Consistent with current Sec.  226.9(c), however, the 
45-day advance notice requirement does not apply if the consumer has 
agreed to the particular change; in that case, the notice need only be 
given before the effective date of the change.
9(c)(2)(ii) Significant Changes in Account Terms
    Paragraph (c)(2)(ii) identifies significant changes in account 
terms for which 45 days' advance notice is required. This paragraph 
implements both new TILA Sections 127(i)(1) and (i)(2). Consistent with 
new TILA Section 127(i)(1), Sec.  226.9(c)(2)(ii)(A) defines changes in 
annual percentage rates as significant changes. Furthermore, Sec.  
226.9(c)(2)(ii)(A) is broad and includes the rates applicable to 
purchases, cash advances, and balance transfers, as well as any 
discounted initial rate, premium initial rate, or penalty rate that may 
apply to the account. Accordingly, Sec.  226.9(c)(2)(ii)(A) is intended 
to cover changes in contract terms that result in increases in all 
types of annual percentage rates; notices of increases in applicable 
annual percentage rates due to the application of existing provisions 
in the cardholder agreement are covered by Sec.  226.9(g), which is 
discussed elsewhere in this section-by-section analysis.
    Paragraphs (c)(2)(ii)(B) through (c)(2)(ii)(L) set forth the 
remaining terms for which a change requires 45 days' advance notice, 
pursuant to the Board's authority under new TILA Section 127(i)(2) to 
determine by rule what constitutes a ``significant change'' in terms. 
The list in paragraphs (c)(2)(ii)(B) through (c)(2)(ii)(L) mirrors the 
list of terms required to be disclosed in the account-opening table 
required pursuant to Sec.  226.6(b)(1) and (b)(2) of the January 2009 
Regulation Z Rule. This list comprises those terms that, based on the 
Board's consumer testing, are those that are the most important to 
consumers. This list includes the types of fees that a consumer should 
be aware of prior to use of the account, such as key penalty fees, 
transaction fees, and fees imposed for the issuance or availability of 
an open-end credit plan, and of which the Board believes a consumer 
would most benefit from receiving 45 days' advance notice of a change. 
This list also includes additional terms, such as the grace period 
applicable to the account and the balance computation method, that are 
not fees but that can have a significant impact on the cost of credit 
to a consumer.
    The Board notes that a broader interpretation of what constitutes a 
significant change in terms could result in anomalous results that 
would not necessarily benefit consumers. There are some fees, such as 
fees for expedited delivery of a replacement card, that it may not be 
useful to disclose long in advance of when they become relevant to the 
consumer. For such fees, the Board believes that a more flexible 
approach, consistent with that adopted in the January 2009 Regulation Z 
Rule is appropriate. Thus, if a consumer calls to request an expedited 
replacement card, the consumer could be informed of the amount of the 
fee in the telephone call in which the consumer requests the card. 
Otherwise, the consumer would have to wait 45 days from receipt of a 
change-in-terms notice to be able to order an expedited replacement 
card, which would likely negate the benefit to the consumer of 
receiving the expedited delivery service.
9(c)(2)(iii) Changes Not Covered by Sec.  226.9(c)(2)(i)
    Accordingly, the Board is adopting Sec.  226.9(c)(2)(iii) to 
clarify how issuers generally must disclose changes in terms that are 
not subject to the disclosure requirements in Sec.  226.9(c)(2)(i), 
i.e., that are not significant changes as described in Sec.  
226.9(c)(2)(ii) or an increase in the required minimum payment. New 
Sec.  226.9(c)(2)(iii) generally mirrors the substance of Sec.  
226.9(c)(2)(ii) of the January 2009 Regulation Z Rule, and provides 
that creditors may disclose changes in those terms either by giving 45 
days' advance written notice, or by providing notice of the amount of 
the charge before the consumer agrees to or becomes obligated to pay 
the charge, at a time and in a manner that the consumer would be likely 
to notice the disclosure of the charge.
9(c)(2)(iv) Disclosure Requirements--Changes to Terms Described in 
Paragraph (c)(2)(i)
    New Sec.  226.9(c)(2)(iv) sets forth the disclosure requirements 
for change-in-terms notices required to be given pursuant to Sec.  
226.9(c)(2)(i). Paragraphs (c)(2)(iv)(A)-(c)(2)(iv)(C) require the 
notice to provide a description of the changes, state that changes are 
being made to the account, and state the date the changes will become 
effective. Except when the change is an increase in the required 
minimum payment, paragraph (c)(2)(iv)(D) generally requires the notice 
to inform the consumer of his or her right to reject a change in terms 
disclosed pursuant to Sec.  226.9(c)(2) prior to the effective date of 
the change unless the consumer fails to make a required minimum 
periodic payment within 60 days after the due date for that payment. 
The notice also is required to disclose instructions for rejecting the 
change or changes, and a toll-free telephone number that the consumer 
may use to notify the creditor of the rejection. If applicable, issuers 
also are required to disclose that if the consumer rejects the change 
or changes, the consumer's ability to use the account for further 
advances will be terminated or suspended.
    The Board is not requiring that consumers receive a notice of their 
right to reject the impending changes to the account when they are 
notified, pursuant to Sec.  226.9(c)(2)(i), of an increase in the 
required minimum

[[Page 36085]]

payment. The right to reject minimum payment increases appears to be 
inconsistent with the intent of other portions of the Credit Card Act. 
In the Credit Card Act, Congress amended TILA Section 127(b)(11) to 
require enhanced disclosures regarding the impact of making only 
minimum payments, specifically to warn consumers that making only 
minimum payments can increase the amount of interest they pay and the 
time it takes to repay balances. Permitting a consumer to reject an 
increase in the minimum payment could potentially subject that consumer 
to increased interest charges and a longer amortization period, if the 
consumer continues to make only the minimum payment.
    As discussed elsewhere in the section-by-section analysis to Sec.  
226.9(c), the Board notes that the January 2009 Regulation Z Rule 
imposes additional formatting and content requirements on change-in-
terms notices. While those requirements are not included in this 
interim final rule, the Board will address them in a later stage of 
rulemaking required by the Credit Card Act, and intends to amend those 
requirements prior to their effective date to the extent necessary to 
conform with the requirements of the Credit Card Act.
9(c)(2)(v) Notice Not Required
    The Board is adopting Sec.  226.9(c)(2)(v) to set forth the 
exceptions to the general change-in-terms notice requirements for 
credit card accounts that are not home-secured. Paragraph (c)(2)(v)(A) 
retains several exceptions that are in current Sec.  226.9(c), 
including charges for documentary evide