Truth in Lending, 67458-67509 [2010-26515]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Proposed Rules]
[Pages 67458-67509]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-26515]



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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. 75 , No. 211 / Tuesday, November 2, 2010 / 
Proposed Rules

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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1393]
RIN No. 7100-AD55


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: On February 22, 2010 and June 29, 2010, the Board published in 
the Federal Register final rules amending Regulation Z's provisions 
that apply to open-end (not home-secured) credit plans, in each case in 
order to implement provisions of the Credit Card Accountability 
Responsibility and Disclosure Act of 2009. The Board believes that 
clarification is needed regarding compliance with certain aspects of 
the final rules. Accordingly, to facilitate compliance, the Board 
proposes to amend specific portions of the regulations and official 
staff commentary.

DATES: Comments must be received on or before January 3, 2011.

ADDRESSES: You may submit comments, identified by Docket No. R-1393 and 
RIN No. 7100-AD55, 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 and RIN 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: Stephen Shin, Attorney, or Amy 
Henderson or Benjamin K. Olson, Counsels, 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

The Credit Card Act

    The Credit Card Accountability Responsibility and Disclosure Act of 
2009 (Credit Card Act) was signed into law on May 22, 2009. Public Law 
111-24, 123 Stat. 1734 (2009). The Credit Card Act primarily amended 
the Truth in Lending Act (TILA) and established a number of new 
substantive and disclosure requirements to establish fair and 
transparent practices pertaining to open-end consumer credit plans.
    The requirements of the Credit Card Act that pertain to credit 
cards or other open-end credit for which the Board has rulemaking 
authority became 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) became effective on August 
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)) became 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) 
became effective on August 22, 2010 (15 months after enactment).

Implementation of Credit Card Act

    The Board issued rules to implement the provisions of the Credit 
Card Act in stages, consistent with the statutory timeline established 
by Congress. On July 22, 2009, the Board published an interim final 
rule to implement the provisions of the Credit Card Act that became 
effective on August 20, 2009. See 74 FR 36077. On January 12, 2010, the 
Board issued a final rule adopting in final form the requirements of 
the July 2009 interim final rule and implementing the provisions of the 
Credit Card Act that became effective on February 22, 2010. See 75 FR 
7658 (February 2010 Final Rule). On June 15, 2010, the Board issued a 
final rule implementing the provisions of the Credit Card Act that 
became effective on August 22, 2010. See 75 FR 37526 (June 2010 Final 
Rule).
    Since publication of the February 2010 and June 2010 Final Rules, 
the Board has become aware that clarification is needed to resolve 
confusion regarding how institutions will comply with particular 
aspects of those rules. Accordingly, in order to provide guidance and 
facilitate compliance with the final rules, the Board proposes to amend 
portions of the regulations and the accompanying staff commentary. 
These proposed amendments are discussed in detail in Section III of 
this supplementary information.
    Although comment is requested on the proposed amendments, the Board 
emphasizes that the purpose of this rulemaking is to clarify and 
facilitate compliance with the consumer protections contained in the 
February 2010 and June 2010 Final Rules, not to reconsider the need 
for--or the extent of--the protections implemented in those rules. 
Thus, commenters are encouraged to limit their submissions accordingly.

II. Statutory Authority

    In the supplementary information for the February 2010 and June 
2010 Final Rules, the Board set forth the sources of its statutory 
authority under the Truth in Lending Act and the Credit Card Act. See 
75 FR 7662 and 75 FR 37528. For purposes of these proposed rules, the 
Board continues to rely on this legal authority.

III. Section-by-Section Analysis

Section 226.2 Definitions and Rules of Construction

2(a) Definitions

2(a)(15) Credit Card

2(a)(15)(ii) Credit Card Account Under an Open-End (Not Home-Secured)

Consumer Credit Plan
    In the February 2010 Final Rule, the Board retained the pre-
existing definition of ``credit card'' as any card, plate, or other 
single credit device that may be used from time to time to obtain 
credit. See Sec.  226.2(a)(15)(i). However, the Board also defined a 
new, somewhat narrower term in order to implement the

[[Page 67459]]

provisions of the Credit Card Act that apply to ``credit card 
account[s] under an open end consumer credit plan.'' Specifically, in a 
new Sec.  226.2(a)(15)(ii), the Board defined the term ``credit card 
account under an open-end (not home-secured) consumer credit plan'' as 
meaning any open-end credit account accessed by a credit card except a 
home-equity plan subject to the requirements of Sec.  226.5b accessed 
by a credit card or an overdraft line of credit accessed by a debit 
card.
    The Board declined requests from industry commenters to exempt all 
lines of credit accessed solely by an account number from the 
definition in Sec.  226.2(a)(15)(ii), noting Congress' apparent intent 
to apply the Credit Card Act broadly to products that meet the 
definition of ``credit card.'' See 75 FR 7664-7665. However, the Board 
understands that this determination has caused uncertainty about 
whether all credit products accessed by an account number are subject 
to TILA's credit card provisions.
    In particular, some institutions offer general purpose open-end 
lines of credit that are linked to a checking or other asset account 
with the same institution. The consumer can use the line's account 
number to request an extension of credit, which is then deposited into 
the asset account. The Board understands that there has been some 
confusion as to whether, in these circumstances, the account number is 
a ``credit card'' for purposes of Sec.  226.2(a)(15)(i) and therefore a 
``credit card account under an open-end (not home-secured) consumer 
credit plan'' for purposes of Sec.  226.2(a)(15)(ii). Because most if 
not all credit accounts can be accessed in some fashion by an account 
number, the Board does not believe that Congress generally intended to 
treat account numbers as credit cards for purposes of TILA. However, 
the Board is concerned that, when an account number can be used to 
access an open-end line of credit to purchase goods or services, it 
would be inconsistent with the purposes of the Credit Card Act to 
exempt the line of credit from the protections provided for credit card 
accounts. For example, creditors may offer open-end credit accounts 
designed for online purchases that function like a traditional credit 
card account but can only be accessed using an account number. In these 
circumstances, the Board believes that TILA's credit card protections 
should apply.
    Accordingly, the Board proposes to clarify the application of Sec.  
226.2(a)(15)(i) and (a)(15)(ii) to account numbers by amending comment 
2(a)(15)-2, which provides illustrative examples of credit devices that 
are and are not credit cards. Specifically, the Board would add an 
additional example clarifying that an account number that accesses a 
credit account is not credit card, unless the account number can access 
an open-end line of credit to purchase goods or services. The comment 
would further clarify that, if, for example, a creditor provides a 
consumer with an open-end line of credit that can be accessed by an 
account number in order to transfer funds into another account (such as 
an asset account), the account number is not a credit card for purposes 
of Sec.  226.2(a)(15)(i). However, if the account number can also 
access the line of credit in order to purchase goods or services (such 
as an account number that can be used to purchase goods or services on 
the Internet), the account number is a credit card for purposes of 
Sec.  226.2(a)(15)(i). Furthermore, if the line of credit can also be 
accessed by a card (such as a debit card or prepaid card), then that 
card is a credit card for purposes of Sec.  226.2(a)(15)(i).
    In addition, the Board proposes to adopt a new comment 2(a)(15)-4, 
which would clarify the test used for determining whether an account is 
a credit card account under an open-end (not home-secured) consumer 
credit plan for purposes of Sec.  226.2(a)(15)(ii). The Board would 
also amend the exception in Sec.  226.2(a)(15)(ii)(B) to clarify that--
like an overdraft line of credit accessed by a debit card--an overdraft 
line of credit accessed by an account number (such as when a debit card 
number or checking account number is used to make an online purchase 
that overdraws the asset account) is excluded from the definition of 
``credit card account under an open-end (not home-secured) consumer 
credit plan.'' Finally, for clarity and consistency, the Board would 
make non-substantive revisions to the exception for home-equity plans 
in Sec.  226.2(a)(15)(ii)(A).

2(a)(15)(iii) Charge Card

    The Board understands that there has been some confusion as to 
whether a charge card is a ``credit card account under an open-end (not 
home-secured) consumer credit plan,'' as defined in Sec.  
226.2(a)(15)(ii). Section 226.2(a)(15)(iii) defines a ``charge card'' 
as a credit card on an account for which no periodic rate is used to 
compute a finance charge. The Board has historically applied the same 
requirements to credit and charge cards, unless otherwise stated. See 
Sec.  226.2(a)(15); comment 2(a)(15)-3. Therefore, as discussed in the 
February 2010 Final Rule, the Board adopted a similar approach when 
implementing the provisions of the Credit Card Act. See 75 FR 7672-
7673. Nevertheless, for clarity and consistency, the Board proposes to 
amend comment 2(a)(15)-3 to state that references to a credit card 
account under an open-end (not home-secured) consumer credit plan in 
Subpart B (Open-End Credit) and Subpart G (Special Rules Applicable to 
Credit Card Accounts and Open-End Credit Offered to Students) include 
charge cards unless otherwise stated.
    The Board would also update the list of provisions in comment 
2(a)(15)-3 that distinguish charge cards from credit cards. In 
addition, the Board would remove the statement in the comment that, 
when the term ``credit card'' is used in the listed provisions, it 
refers to credit cards other than charge cards. While generally 
accurate, this statement may be overbroad in certain circumstances. For 
example, the exemption in Sec.  226.7(b)(12)(v)(A) and the safe harbor 
in Sec.  226.52(b)(1)(ii)(C) are limited to charge card accounts that 
require payment of outstanding balances in full at the end of each 
billing cycle. Accordingly, the applicability of a particular provision 
should be determined based on a review of that provision and the 
relevant staff commentary.

Section 226.5 General Disclosure Requirements

5(b) Time of Disclosures

5(b)(2) Periodic Statements

    Prior to the Credit Card Act, TILA Section 163 generally required 
creditors to send periodic statements for open-end consumer credit 
plans at least 14 days before the expiration of any period within which 
any credit extended may be repaid without incurring a finance charge 
(i.e., a ``grace period''). See 15 U.S.C. 1666b (2008). The Board's 
Regulation Z, however, extended this 14-day requirement to apply even 
if no grace period was provided. Specifically, prior to the 2009 
amendments implementing the Credit Card Act, Sec.  226.5(b)(2)(ii) 
required that creditors mail or deliver periodic statements at least 14 
days before the date by which payment was due for purposes of avoiding 
not only finance charges as a result of the loss of a grace period but 
also any other charges (such as late payment fees). See also former 
comment 5(b)(2)(ii)-1 (2008). Thus, before the Credit Card Act, 
creditors were generally required to provide consumers with at least 14 
days to make payments for all open-end consumer credit accounts.

[[Page 67460]]

    Effective August 20, 2009, the Credit Card Act amended TILA Section 
163 to generally prohibit a creditor from treating a payment as late or 
imposing additional finance charges with respect to open-end consumer 
credit plans unless the creditor mailed or delivered the periodic 
statement at least 21 days before the payment due date and the 
expiration of any grace period. See Credit Card Act Sec.  106(b)(1). 
The Board's July 2009 interim final rule made corresponding amendments 
to Sec.  226.5(b)(2)(ii) and the accompanying official staff 
commentary. See 74 FR 36077 (July 22, 2009). Because amended TILA 163 
required that periodic statements be mailed at least 21 days before the 
payment due date for all open-end consumer credit accounts even if no 
grace period was provided, the amendments to Sec.  226.5(b)(2)(ii) 
removed the pre-existing 14-day requirement as unnecessary.
    However, in November 2009, the Credit CARD Technical Corrections 
Act of 2009 (Technical Corrections Act) further amended TILA Section 
163. Public Law 111-93, 123 Stat. 2998 (Nov. 6, 2009). The Technical 
Corrections Act narrowed the requirement that statements be mailed or 
delivered at least 21 days before the payment due date to apply only to 
credit card accounts, rather than to all open-end consumer credit 
plans. However, open-end consumer credit plans that provide a grace 
period remain subject to the 21-day requirement in Section 163(b). In 
its February 2010 Final Rule, the Board narrowed the application of 
Sec.  226.5(b)(2)(ii) for consistency with the Technical Corrections 
Act. However, in doing so, the Board inadvertently failed to reinsert 
the 14-day requirement for open-end consumer credit plans without a 
grace period.
    The Board believes that it would be inconsistent with the purposes 
of the Credit Card Act for consumers to receive less time to make 
payments after its implementation than they did beforehand. 
Accordingly, pursuant to its authority under Section 105(a) of TILA and 
Section 2 of the Credit Card Act, the Board proposes to amend Sec.  
226.5(b)(2)(ii) to reinsert the 14-day requirement for open-end 
consumer credit plans that are not subject to the Credit Card Act's 21-
day requirements. Specifically, the Board would revise Sec.  
226.5(b)(2)(ii) to require that, when an open-end account is not 
accessed by a credit card and does not provide a grace period, 
creditors must adopt reasonable procedures designed to ensure that 
periodic statements are mailed or delivered at least 14 days prior to 
the date on which the required minimum periodic payment must be made to 
avoid being treated as late. In addition, creditors would be required 
to adopt reasonable procedures designed to ensure that required minimum 
periodic payments received within 14 days after mailing or delivery of 
the periodic statement are not treated as late for any purpose. The 
Board would also revise the commentary to Sec.  226.5(b)(2)(ii) for 
consistency with these proposed revisions.
    Finally, the proposed rule would delete comment 5(b)(2)(iii)-1, 
which implemented the pre-Credit Card Act version of TILA Section 163 
and was inadvertently retained in the February 2010 Final Rule.

Section 226.5a Credit and Charge Card Applications and Solicitations

5a(b) Required Disclosures

5a(b)(1) Annual Percentage Rate

Limitations on Rate Decreases
    Section 226.5a(b)(1) requires that the tabular disclosure provided 
with credit and charge card applications and solicitations state each 
periodic rate that may be used to compute the finance charge on an 
outstanding balance for purchases, a cash advance, or a balance 
transfer, expressed as an annual percentage rate. Section 
226.5a(b)(1)(i) clarifies this disclosure requirement when a rate is a 
variable rate. In part, Sec.  226.5a(b)(1)(i) provides that a card 
issuer may not disclose any applicable limitations on rate increases or 
decreases in the table.
    Section 226.55 sets forth limitations on rate increases applicable 
to credit card accounts under an open-end (not home-secured) consumer 
credit plan. Section 226.55(b)(2) provides that a card issuer may 
increase an annual percentage rate when (1) the rate varies according 
to an index that is not under the card issuer's control and is 
available to the general public, and (2) the rate increase is due to an 
increase in that index. In the February 2010 Final Rule, the Board 
adopted comment 55(b)(2)-2 that clarified that a card issuer exercises 
control over the operation of an index if the variable rate based on 
that index is subject to a fixed minimum rate or similar requirement 
that does not permit the variable rate to decrease consistent with 
reductions in the index.
    The Board is proposing to amend Sec.  226.5a(b)(1)(i) for 
conformity with comment 55(b)(2)-2. The Board is aware that, as a 
practical matter, Sec.  226.55(b)(2) and comment 55(b)(2)-2 preclude 
card issuers from imposing a variable rate that is subject to a fixed 
minimum rate. Accordingly, the Board is proposing to delete as 
unnecessary language in Sec.  226.5a(b)(1)(i) providing that a card 
issuer may not disclose any applicable limitations on rate decreases in 
the table. The Board notes that Sec.  226.6(b)(2)(i)(A) contains 
analogous language regarding limitations on rate decreases. However, 
Sec.  226.55(b)(2) applies only to credit card accounts under an open-
end (not home-secured) consumer credit plan while Sec.  226.6(b) 
applies to all open-end (not home-secured) credit. Therefore, the Board 
is not proposing to delete the reference to limitations on rate 
decreases from Sec.  226.6(b)(2)(i)(A). But see the discussion in the 
supplementary information to Sec.  226.9(c)(2)(v)(C) regarding the 
notice requirements that apply to an open-end (not home-secured) plan 
with a variable rate that is subject to a fixed minimum rate.
Loss of Employee Preferential Rates
    If a rate may increase as a penalty for one or more events 
specified in the account agreement, Sec.  226.5a(b)(1)(iv) requires 
that the card issuer disclose the increased rate that may apply, a 
brief description of the event or events that may result in the 
increased rate, and a brief description of how long the increased rate 
will remain in effect. This disclosure generally must appear in the 
Sec.  226.5a table; however, Sec.  226.5a(b)(1)(iv)(B) provides that, 
for introductory rates as defined in Sec.  226.16(g)(2)(ii), the card 
issuer must briefly disclose directly beneath the table the 
circumstances, if any, under which the introductory rate may be 
revoked, and the type of rate that will apply after the introductory 
rate is revoked. The Board adopted this format requirement for the 
disclosure regarding loss of an introductory rate in part due to 
concerns that including this information in the tabular disclosure 
could lead to ``information overload.'' See 74 FR 5244, 5286.
    The Board is aware that some issuers may offer preferential or 
reduced rates at account opening that are not ``introductory rates'' as 
defined in Sec.  226.16(g)(2)(ii). For example, an issuer may offer a 
preferential rate to its employees. Eligibility for the preferential or 
reduced rate is conditioned upon the consumer's continued employment 
with the issuer. Accordingly, if the consumer's employment is 
terminated, the contract provides that the rate will increase from the 
reduced preferential rate to a higher rate, such as the standard rate 
on the account.\1\
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    \1\ The Board notes that 45 days' advance notice is required 
pursuant to Sec.  226.9(g) prior to imposition of the higher rate. 
See 74 FR 5346. In addition, the limitations set forth in Sec.  
226.55 apply.

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    The Board is proposing a new Sec.  226.5a(b)(1)(iv)(C), which would 
require that disclosures regarding the loss of an employee preferential 
rate be placed directly below the tabular disclosure. New Sec.  
226.5a(b)(1)(iv)(C) would generally mirror Sec.  226.5a(b)(1)(iv)(B) 
and would provide that if a card issuer discloses in the table a 
preferential annual percentage rate for which only employees of the 
creditor or employees of a third party are eligible, the card issuer 
must briefly disclose directly beneath the table the circumstances 
under which such preferential rate may be revoked, and the rate that 
will apply after such preferential rate is revoked. The Board believes 
that this placement requirement is appropriate in order to prevent 
``information overload'' and to focus consumers' attention on the 
disclosures that they find the most important.
    The Board is proposing a new comment 5a(b)(1)-5.iv to provide 
guidance regarding the disclosure below the table of the circumstances 
under which an employee preferential rate may be revoked. Comment 
5a(b)(1)-5.iv would generally mirror relevant portions of the guidance 
set forth in comment 5a(b)(1)-5.iii regarding the revocation of 
introductory rates. In addition, proposed comment 5a(b)(1)-5.iv would 
clarify that the description of the circumstances in which an employee 
preferential rate could be revoked should be brief. For example, if an 
issuer may increase an employee preferential rate based upon 
termination of the employee's employment relationship with the issuer 
or a third party, the comment would clarify that an issuer may describe 
this circumstance as ``if your employment with [issuer or third party] 
ends.''
    Proposed Sec.  226.5a(b)(1)(iv)(C) would apply only to loss of 
employee preferential rates. The Board solicits comment on whether 
there are other types of preferential or reduced rates that are not 
introductory rates as defined in Sec.  226.16(g)(2)(ii) but for which 
similar treatment under Sec.  226.5a would be appropriate.
    For the reasons discussed above, the Board also is proposing a new 
Sec.  226.6(b)(2)(i)(D)(3) that would mirror proposed Sec.  
226.5a(b)(1)(iv)(C) and would require that brief disclosures regarding 
the loss of an employee preferential rate be placed directly below the 
tabular disclosure provided at account opening. The Board is also 
proposing conforming amendments to the formatting requirements set 
forth in Sec. Sec.  226.5a(a)(2)(iii) and 226.6(b)(1)(ii).
Disclosure of How Long a Penalty Rate Will Remain in Effect
    If a rate may increase as a penalty for one or more events 
specified in the account agreement, Sec.  226.5a(b)(1)(iv) requires 
that the card issuer disclose the increased rate that may apply, a 
brief description of the event or events that may result in the 
increased rate, and a brief description of how long the increased rate 
will remain in effect. The Board understands that, in light of several 
provisions of the Credit Card Act, there may be confusion regarding how 
issuers must disclose the period for which the penalty rate will remain 
in effect. The Board understands that historically some issuers' card 
agreements provided that penalty rates, once triggered, could remain in 
effect indefinitely. However, the enactment of the Credit Card Act 
established certain circumstances in which a card issuer must reduce 
the rate even after penalty pricing has been triggered. In particular, 
Sec.  226.55(b)(4) requires a card issuer to reduce a rate that was 
raised based upon a delinquency of more than 60 days, if the consumer 
makes the first six required minimum payments on time following the 
effective date of the rate increase. In addition, Sec.  226.59 requires 
a card issuer to periodically review accounts on which a rate increase 
has been imposed and, where appropriate based on the review, reduce the 
rate applicable to the account.
    As a consequence of Sec.  226.55(b)(4) and 226.59, the Board 
understands that it may be unclear how issuers should disclose the 
duration for which a penalty rate will be in effect, for example if the 
contract provides that the penalty rate may remain in effect 
indefinitely, except to the extent otherwise required by Sec. Sec.  
226.55(b)(4) and 226.59. Accordingly, the Board is proposing to amend 
comment 5a(b)(1)-5.i to clarify that a card issuer may not disclose in 
the table any limitations imposed by Sec. Sec.  226.55(b)(4) and 226.59 
on the duration of increased rates. Proposed comment 5a(b)(1)-5.i would 
set forth two examples. First, the proposed comment states that if a 
card issuer reserves the right to apply the increased rate to any 
balances indefinitely, to the extent permitted by Sec. Sec.  
226.55(b)(4) and 226.59, the issuer should disclose that the penalty 
rate may apply indefinitely. The second example would provide that if 
the issuer generally provides that the increased rate will apply until 
the consumer makes twelve timely consecutive required minimum periodic 
payments, except to the extent that Sec. Sec.  226.54(b)(4) and 226.59 
apply, the issuer should disclose that the penalty rate will apply 
until the consumer makes twelve consecutive timely minimum payments.
    The Board believes more complex disclosures explaining the 
applicability of the rules in Sec. Sec.  226.55(b)(4) and 226.59 would 
be confusing to consumers, and would be of limited assistance in 
shopping for credit, given that those provisions apply to all issuers. 
In addition, consumers to whose accounts the cure right under Sec.  
226.55(b)(4) applies will be notified of that right when they receive a 
notice under Sec.  226.9(c)(2) or 226.9(g) disclosing the associated 
rate increase.
Other Proposed Amendments to Sec.  226.5a(b)(1)
    The Board is proposing an amendment to comment 5a(b)(1)-5.ii to 
correct a technical error. As discussed above, pursuant to Sec.  
226.5a(b)(1)(iv)(B), information regarding the revocation of an 
introductory rate is required to be disclosed directly beneath the 
table. Comment 5a(b)(1)-5.ii, which discusses the disclosures regarding 
the revocation of an introductory rate, contains an erroneous reference 
to a disclosure in, rather than beneath, the table. Accordingly, the 
Board is proposing a technical amendment to comment 5a(b)(1)-5.ii for 
conformity with the placement requirements in Sec.  
226.5a(b)(1)(iv)(B).

5a(b)(2) Fees for Issuance or Availability

    Comment 5a(b)(2)-4 states that, if fees required to be disclosed 
are waived or reduced for a limited time, the introductory fees or the 
fact of fee waivers may be disclosed in the table in addition to the 
required fees if the card issuer also discloses how long the reduced 
fees or waivers will remain in effect. For the reasons discussed below, 
the Board would revise this comment to clarify that the card issuer 
must comply with the disclosure requirements in Sec. Sec.  
226.9(c)(2)(v)(B) and 226.55(b)(1).

5a(b)(5) Grace Period

    Section 226.5a(b)(5) requires that the tabular disclosure provided 
with credit and charge card applications and solicitations state the 
date by which or the period within which any credit extended for 
purchases may be repaid without incurring a finance charge due to a 
periodic interest rate and any conditions on the availability of the 
grace period. If no grace period is provided, that fact must be 
disclosed.
    Comment 5a(b)(5)-1 states that an issuer that offers a grace period 
on all purchases and conditions the grace

[[Page 67462]]

period on the consumer paying his or her outstanding balance in full by 
the due date each billing cycle, or on the consumer paying the 
outstanding balance in full by the due date in the previous and/or the 
current billing cycle(s) will be deemed to meet the requirements in 
Sec.  226.5a(b)(5) by providing the following disclosure, as 
applicable: ``Your due date is [at least] ------ days after the close 
of each billing cycle. We will not charge you any interest on purchases 
if you pay your entire balance by the due date each month.'' This model 
language was developed through extensive consumer testing.
    In the February 2010 Final Rule, the Board adopted comment 
5a(b)(5)-4, which clarifies that Sec.  226.5a(b)(5) does not require a 
card issuer to disclose the limitations on the imposition of finance 
charges in Sec.  226.54. Implementing the Credit Card Act, Sec.  226.54 
provides that, when a consumer pays some but not all of the balance 
subject to a grace period prior to the expiration of the grace period, 
the card issuer is prohibited from imposing finance charges on the 
portion of the balance paid. In adopting comment 5a(b)(5)-4, the Board 
was concerned that the inclusion of language attempting to describe the 
limitations set forth in Sec.  226.54 could reduce the effectiveness of 
the grace period disclosure. The Board also stated its belief that a 
disclosure of the limitations set forth in Sec.  226.54 is not 
necessary insofar as the model language set forth in comment 5a(b)(5)-1 
accurately states that a consumer generally will not be charged any 
interest on purchases if the entire balance is paid by the due date 
each month. Thus, although Sec.  226.54 limits the imposition of 
finance charges if the consumer pays less than the entire balance shown 
on the periodic statement, the model language achieves its intended 
purpose of explaining succinctly how a consumer can avoid all interest 
charges on purchases.
    Many issuers offer a grace period on all purchases under which no 
interest will be charged on purchases shown on a periodic statement if 
a consumer pays his or her outstanding balance shown on the periodic 
statement in full by the due date in the previous and/or the current 
billing cycle(s). Many of these issuers are using the model language 
set forth in comment 5a(b)(5)-1, or substantially similar language, to 
describe the grace period and the conditions on its availability. 
Nonetheless, other issuers have chosen not to use the model language 
set forth in comment 5a(b)(5)-1, even though the issuers would be 
permitted to do so. Some of the issuers that have chosen not to use the 
model language are disclosing the grace period in more technical 
detail, including a discussion of the limitations on imposition of 
finance charges under Sec.  226.54, and the impact of payment 
allocation on whether interest will be charged on purchases due to the 
loss of a grace period. Other issuers are including detailed language 
to explain the conditions on the grace period, such as an explanation 
that the consumer will not be charged any interest on new purchases, or 
any portion of a new purchase, paid by the due date on the consumer's 
current billing statement if the consumer paid his or her entire 
balance on the previous billing statement in full by the due date on 
that statement.
    As discussed above, the Board believes the inclusion of language 
attempting to describe the limitations set forth in Sec.  226.54 or the 
impact of payment allocation on whether interest will be charged on 
purchases due to the loss of a grace period could reduce the 
effectiveness of the grace period disclosure. Thus, the Board proposes 
to revise comment 5a(b)(5)-1 to clarify that issuers must not disclose 
in the table required by Sec.  226.5a the limitations on the imposition 
of finance charges as a result of a loss of a grace period in Sec.  
226.54, or the impact of payment allocation on whether interest is 
charged on purchases as a result of a loss of a grace period. However, 
issuers would not be prohibited from disclosing this information 
outside the table. Comment 5a(b)(5)-4, which states that card issuers 
are not required to disclose the limitations set forth in Sec.  226.54, 
would be deleted.
    In addition, the Board proposes to revise comment 5a(b)(5)-1 to 
clarify that, for purposes of the tabular disclosures required by Sec.  
226.5a, certain issuers must use the disclosure language set forth in 
proposed comment 5a(b)(5)-1. Specifically, proposed comment 5a(b)(5)-1 
notes that some issuers may offer a grace period on all purchases under 
which interest will not be charged on purchases if the consumer pays 
the outstanding balance shown on a periodic statement in full by the 
due date shown on that statement for one or more billing cycles. The 
proposed comment clarifies that in these circumstances, Sec.  
226.5a(b)(5) requires that the issuer disclose the grace period and the 
conditions for its applicability using the following language, or 
substantially similar language, as applicable: ``Your due date is [at 
least] ---- days after the close of each billing cycle. We will not 
charge you any interest on purchases if you pay your entire balance by 
the due date each month.'' As discussed above, this disclosure language 
was developed through extensive consumer testing, and the Board 
believes this disclosure language achieves its intended purpose of 
explaining succinctly how a consumer can avoid all interest charges on 
purchases.
    The Board recognizes that some issuers may structure their grace 
periods differently than as described above, and the disclosure 
language described above may not be accurate for those issuers. 
Proposed comment 5a(b)(5)-1 notes that some issuers may offer a grace 
period on all purchases under which interest may be charged on 
purchases even if the consumer pays the outstanding balance shown on a 
periodic statement in full by the due date shown on that statement each 
billing cycle. For example, an issuer may charge interest on purchases 
if the consumer uses the account for a cash advance, regardless of 
whether the outstanding balance shown on the periodic statement is paid 
in full by the due date shown on that statement. In these 
circumstances, Sec.  226.5a(b)(5) requires the issuer to amend the 
above disclosure language to describe accurately the conditions on the 
applicability of the grace period. Nonetheless, under the proposal, 
these issuers in disclosing the grace period and the conditions on its 
availability in the Sec.  226.5a table still may not disclose the 
limitations on the imposition of finance charges as a result of a loss 
of a grace period in Sec.  226.54, or the impact of payment allocation 
on whether interest is charged on purchases as a result of a loss of a 
grace period.

5a(b)(6) Balance Computation Method

    Section 226.5a(b)(6) requires that a card issuer disclose on or 
with a credit card application or solicitation information about the 
method it uses to determine the balance for purchases on which the 
finance charge is computed. Comment 5a(b)(6)-1 provides guidance on how 
to comply with this requirement to disclose balance computation 
information for purchase balances. This comment also contains a cross-
reference to the commentary to Sec.  226.5a(g) for guidance on 
particular balance computation methods. There currently is no 
commentary to Sec.  226.5a(g), so this cross-reference would be deleted 
as obsolete.

[[Page 67463]]

Section 226.6--Account-Opening Disclosures

6(b) Rules Affecting Open-End (Not Home-Secured) Plans

6(b)(2) Required Disclosures for Account-Opening Table for Open-End 
(Not Home-Secured) Plans

6(b)(2)(i) Annual Percentage Rate
    The Board proposes to replace the reference to ``card issuer'' in 
Sec.  226.6(b)(2)(i)(B) with ``creditor'' in order to correct a 
typographical error and to provide clarity and consistency with the 
scope of Sec.  226.6(b).
    In addition, for the reasons discussed in the supplementary 
information to Sec.  226.5a(b)(1), the Board is proposing a new Sec.  
226.6(b)(2)(i)(D)(3) that would require that certain information 
regarding revocation of an employee preferential rate be disclosed 
directly beneath the account-opening table.

6(b)(2)(v) Grace Period

    Section 226.6(b)(2)(v) requires that the account-opening summary 
table state the date by which or the period within which any credit may 
be repaid without incurring a finance charge due to a periodic interest 
rate and any conditions on the availability of the grace period. If no 
grace period is provided, that fact must be disclosed.
    Many creditors offer a grace period on purchases, but do not offer 
a grace period on cash advances and balance transfers. Samples G-17(B) 
and G-17(C) provide guidance on complying with Sec.  226.6(b)(2)(v) 
when a creditor offer a grace period on purchases but no grace period 
on balance transfers and cash advances. See comment 6(b)(2)(v)-3. 
Specifically, Samples G-17(B) and G-17(C) contain the following model 
language to meet the requirements in Sec.  226.6(b)(2)(v): ``Your due 
date is [at least] -- days after the close of each billing cycle. We 
will not charge you any interest on purchases if you pay your entire 
balance by the due date each month. We will begin charging interest on 
cash advances and balance transfers on the transaction date.'' This 
model language was developed through extensive consumer testing.
    Comment 6(b)(2)(v)-1 provides model language for creditors to use 
when they provide a grace period on all types of transactions for the 
account. Specifically, this comment states that an issuer that offers a 
grace period on all types of transactions for the account and 
conditions the grace period on the consumer paying his or her 
outstanding balance in full by the due date each billing cycle, or on 
the consumer paying the outstanding balance in full by the due date in 
the previous and/or the current billing cycle(s) will be deemed to meet 
the requirements in Sec.  226.6(b)(2)(v) by providing the following 
disclosure, as applicable: ``Your due date is [at least] -- days after 
the close of each billing cycle. We will not charge you any interest on 
your account if you pay your entire balance by the due date each 
month.''
    In addition, for the reasons discussed in the section-by-section 
analysis to Sec.  226.5a(b)(5), in the February 2010 Final Rule, the 
Board adopted comment 6(b)(2)(v)-4, which clarifies that Sec.  
226.6(b)(2)(v) does not require a card issuer to disclose the 
limitations on the imposition of finance charges in Sec.  226.54. 
Implementing the Credit Card Act, Sec.  226.54 provides that, when a 
consumer pays some but not all of the balance subject to a grace period 
prior to the expiration of the grace period, the card issuer is 
prohibited from imposing finance charges on the portion of the balance 
paid. In adopting comment 6(b)(2)-4, the Board was concerned that the 
inclusion of language attempting to describe the limitations set forth 
in Sec.  226.54 could reduce the effectiveness of the grace period 
disclosure.
    As discussed above, many creditors offer a grace period on 
purchases, but do not offer a grace period on cash advances and balance 
transfers. Many of these creditors are using the model language set 
forth in Samples G-17(B) and G-17(C), or substantially similar 
language, to meet the requirements in Sec.  226.6(b)(2)(v). 
Nonetheless, other creditors have chosen not to use this model 
language, even though the creditors would be permitted to do so. Some 
of the creditors that have chosen not to use the model language are 
disclosing the grace period for purchases in more technical detail, 
including a discussion of the limitations on imposition of finance 
charges under Sec.  226.54, and the impact of payment allocation on 
whether interest will be charged on purchases due to the loss of a 
grace period. Other creditors are including detailed language to 
explain the conditions on the grace period for purchases, such as an 
explanation that the consumer will not be charged any interest on new 
purchases, or any portion of a new purchase, paid by the due date on 
the consumer's current billing statement if the consumer paid his or 
her entire balance on the previous billing statement in full by the due 
date on that statement.
    Consistent with proposed changes to comment 5a(b)(5)-1 and for the 
reasons discussed in the section-by-section analysis to Sec.  
226.5a(b)(5), the Board proposes to revise comment 6(b)(2)(v)-1 to 
clarify that creditors must not disclose in the table required by Sec.  
226.6(b) the limitations on the imposition of finance charges as a 
result of a loss of a grace period in Sec.  226.54, or the impact of 
payment allocation on whether interest is charged on transactions as a 
result of a loss of a grace period. The Board believes the inclusion of 
language attempting to describe the limitations set forth in Sec.  
226.54 and the impact of payment allocation on whether interest will be 
charged on transactions due to the loss of a grace period could reduce 
the effectiveness of the grace period disclosure required by Sec.  
226.6(b)(2)(v). Comment 6(b)(2)(v)-4, which states that card issuers 
are not required to disclose the limitations set forth in Sec.  226.54, 
would be deleted.
    In addition, consistent with proposed changes to comment 5a(b)(5)-1 
and for the reasons discussed in the section-by-section analysis to 
Sec.  226.5a(b)(5), the Board proposes to revise comment 6(b)(2)(v)-3 
to clarify that Sec.  226.6(b)(2)(v) requires certain creditors that 
provide a grace period on purchases but not on cash advances and 
balance transfers to use the disclosure language this is currently set 
forth in Samples G-17(B) and G-17(C). Specifically, proposed comment 
6(b)(2)(v)-3 notes that some creditors do not offer a grace period on 
cash advances and balance transfers, but offers a grace period for all 
purchases under which interest will not be charged on purchases if the 
consumer pays the outstanding balance shown on a periodic statement in 
full by the due date shown on that statement for one or more billing 
cycles. Proposed comment 6(b)(2)(v)-3 clarifies that in these 
circumstances, Sec.  226.6(b)(2)(v) requires that the creditor disclose 
the grace period for purchases and the conditions for its 
applicability, and the lack of a grace period for cash advances and 
balance transfers using the following language, or substantially 
similar language, as applicable: ``Your due date is [at least] -- days 
after the close of each billing cycle. We will not charge you any 
interest on purchases if you pay your entire balance by the due date 
each month. We will begin charging interest on cash advances and 
balance transfers on the transaction date.'' This disclosure language, 
which also is set forth in the ``Paying Interest'' row in Samples G-
17(B) and G-17(C), was developed through extensive consumer testing. 
The Board believes this disclosure language achieves its intended 
purpose of explaining succinctly how a consumer can avoid all interest 
charges on purchases, while

[[Page 67464]]

explaining that no grace period is offered for cash advances and 
balance transfers.
    The Board recognizes that some creditors may offer a grace period 
on purchases but structure their grace periods differently than as 
described above, and the disclosure language described above may not be 
accurate for those creditors. Proposed comment 6(b)(2)(v)-3 notes that 
some creditors may offer a grace period on all purchases under which 
interest may be charged on purchases even if the consumer pays the 
outstanding balance shown on a periodic statement in full by the due 
date shown on that statement each billing cycle. For example, a 
creditor may charge interest on purchases if the consumer uses the 
account for a cash advance, regardless of whether the outstanding 
balance shown on the periodic statement is paid in full by the due date 
shown on that statement. Proposed comment 6(b)(2)(v)-3 clarifies that 
in these circumstances, Sec.  226.6(a)(2)(v) requires the creditor to 
amend the above disclosure language to accurately describe the 
conditions on the applicability of the grace period. Nonetheless, under 
the proposal, these creditors in disclosing the grace period and the 
conditions on its availability still may not disclose the limitations 
on the imposition of finance charges as a result of a loss of a grace 
period in 226.54, or the impact of payment allocation on whether 
interest is charged on purchases as a result of a loss of a grace 
period.
    Similarly, some creditors may not offer a grace period on cash 
advances and balance transfers, and will begin charging interest on 
these transactions from a date other than the transaction date, such as 
the posting date. Proposed comment 6(b)(2)(v)-3 clarifies that in these 
circumstances, Sec.  226.6(a)(2)(v) requires the creditor to amend the 
above disclosure language to be accurate.
    Consistent with the proposed changes to comment 6(b)(2)(v)-3, the 
Board also proposes changes to comment 6(b)(2)(v)-1 which discusses 
circumstances where a creditor offers a grace period on all types of 
transactions on the account, including purchases, cash advances, and 
balances transfers. Specifically, proposed comment 6(b)(2)(v)-1 notes 
that some creditors may offer a grace period on all types of 
transactions under which interest will not be charged on transactions 
if the consumer pays the outstanding balance shown on a periodic 
statement in full by the due date shown on that statement for one or 
more billing cycles. In these circumstances, Sec.  226.6(b)(2)(v) 
requires that the creditor disclose the grace period and the conditions 
for its applicability using the following language, or substantially 
similar language, as applicable: ``Your due date is [at least] ---- 
days after the close of each billing cycle. We will not charge you any 
interest on your account if you pay your entire balance by the due date 
each month.'' Proposed comment 6(b)(2)(v)-1 also notes that other 
creditors may offer a grace period on all types of transactions under 
which interest may be charged on transactions even if the consumer pays 
the outstanding balance shown on a periodic statement in full by the 
due date shown on that statement each billing cycle. This proposed 
comment clarifies that in these circumstances, Sec.  226.6(b)(2)(v) 
requires the creditor to amend the above disclosure language to 
describe accurately the conditions on the applicability of the grace 
period.

6(b)(2)(vi) Balance Computation Method

    Section 226.6(b)(2)(vi) requires that a creditor disclose 
information about balance computation methods as part of the account-
opening disclosures. Specifically, Sec.  226.6(b)(2)(vi) provides that 
a creditor must disclose the name of the balance computation method 
listed in Sec.  226.5a(g) that is used to determine the balance on 
which the finance charge is computed for each feature, or an 
explanation of the method used if it is not listed, along with a 
statement that an explanation of the method(s) required by Sec.  
226.6(b)(4)(i)(D) is provided with the account-opening disclosures. The 
information required by Sec.  226.6(b)(2)(vi) must appear directly 
beneath the account-opening summary table. See Sec.  226.6(b)(2)(ii).
    The names of the balance computation methods listed in Sec.  
226.5a(g) describe balance computation methods for purchases (e.g., 
``average daily balance (including new purchases)'' and ``average daily 
balance (excluding new purchases)''). Nonetheless, unlike Sec.  
226.5a(b)(6), creditors are required in Sec.  226.6(b)(2)(vi) to 
disclose the balance computation method used for each feature on the 
account. Samples G-17(B) and G-17(C) provide guidance on how to 
disclose the balance computation method where the same method is used 
for all features on the account. See comment 6(b)(2)(vi)-1. Samples G-
17(B) and G-17(C) disclose, as an example, the ``average daily balance 
(including new purchases)'' as the method that is being used to 
calculate the balance for all features on the account. Thus, for 
simplicity, where the balance for each feature is computed using the 
same balance computation method, a creditor may use the name of the 
appropriate balance computation method listed in Sec.  226.5a(g) (e.g., 
``average daily balance (including new purchases)'') to satisfy the 
requirement to disclose the name of the method for all features on the 
account, even though the name only refers to purchases.
    Questions have been asked, however, regarding whether a creditor 
may revise the names of the balance computation methods listed in Sec.  
226.5a(g) to be more accurate by referring more broadly to all new 
transactions (rather than referring only to ``new purchases'') when the 
same method is used to calculate the balances for all features on the 
account. For example, creditors have asked whether they can revise the 
name listed in Sec.  226.5a(g)(i) to disclose it as ``average daily 
balance (including new transactions)'' when this method is used to 
calculate the balances for all features of the account. Also, creditors 
have asked whether they may revise the names listed in Sec.  226.5a(g) 
to be applicable to features other than purchases. Creditors in some 
cases may disclose the balance computation methods separately for each 
feature, such as when a different balance computation method applies to 
purchases than to cash advances.
    To address these compliance issues and to provide additional 
flexibility to creditors, the Board proposes to revise comment 
6(b)(2)(vi)-1 to provide that in cases where the balance for each 
feature is computed using the same balance computation method, a single 
identification of the name of the balance computation method is 
sufficient. In that case, the proposed comment makes explicitly clear 
that a creditor may use an appropriate name listed in Sec.  226.5a(g) 
(e.g., ``average daily balance (including new purchases)'') to satisfy 
the requirement to disclose the name of the method for all features on 
the account, even though the name only refers to purchases. For 
example, if a creditor uses the average daily balance method including 
new transactions as the balance computation method for all features, a 
creditor may use the name ``average daily balance (including new 
purchases)'' listed in Sec.  226.5a(g)(i) to satisfy the requirement to 
disclose the name of the balance computation method for all features. 
As an alternative, the proposed comment provides that a creditor may 
revise the balance computation names listed in Sec.  226.5a(g) to refer 
more broadly to all new credit transactions, such as using the language 
``new transactions'' or ``current transactions'' (e.g., ``average daily 
balance (including new transactions)''), rather than simply

[[Page 67465]]

referring to new purchases when the same method is used to calculate 
the balances for all features of the account.
    In addition, the Board proposes to add comment 6(b)(2)(vi)-2 to 
address situations where a creditor is disclosing the name of the 
balance computation methods separately for each feature. In that case, 
in using the names listed in Sec.  226.5a(g) to satisfy the 
requirements of Sec.  226.6(b)(2)(vi) for features other than 
purchases, a creditor must revise the names listed in Sec.  226.5a(g) 
to refer to the other features. For example, when disclosing the name 
of the balance computation method applicable to cash advances, a 
creditor must revise the name listed in Sec.  226.5a(g)(i) to disclose 
it as ``average daily balance (including new cash advances)'' when the 
balance for cash advances is figured by adding the outstanding balance 
(including new cash advances and deducting payments and credits) for 
each day in the billing cycle, and then dividing by the number of days 
in the billing cycle. Similarly, a creditor must revise the name listed 
in Sec.  226.5a(g)(ii) to disclose it as ``average daily balance 
(excluding new cash advances)'' when the balance for cash advances is 
figured by adding the outstanding balance (excluding new cash advances 
and deducting payments and credits) for each day in the billing cycle, 
and then dividing by the number of days in the billing cycle.

Section 226.7 Periodic Statement

7(b) Rules Affecting Open-End (Not Home-Secured) Plans

7(b)(5) Balance on Which Finance Charge Computed

    Section 226.7(b)(5) provides that a creditor must disclose on the 
periodic statement the amount of the balance to which a periodic rate 
was applied and an explanation of how that balance was determined, 
using the term Balance Subject to Interest Rate. As an alternative to 
providing an explanation of how the balance was determined, a creditor 
that uses a balance computation method identified in Sec.  226.5a(g) 
may, at the creditor's option, identify the name of the balance 
computation method and provide a toll-free telephone number where 
consumers may obtain from the creditor more information about the 
balance computation method and how resulting interest charges were 
determined. If the method used is not identified in Sec.  226.5a(g), 
the creditor shall provide a brief explanation of the method used.
    Comment 7(b)(5)-7 provides guidance on the use of one balance 
computation method explanation or name when multiple balances are 
disclosed. Specifically, comment 7(b)(5)-7 notes that sometimes the 
creditor will disclose more than one balance to which a periodic rate 
was applied, even though each balance was computed using the same 
balance computation method. For example, if a plan involves purchases 
and cash advances that are subject to different rates, more than one 
balance must be disclosed, even though the same computation method is 
used for determining the balance for each feature. In these cases, one 
explanation or a single identification of the name of the balance 
computation method is sufficient. In addition, sometimes the creditor 
separately discloses the portions of the balance that are subject to 
different rates because different portions of the balance fall within 
two or more balance ranges, even when a combined balance disclosure 
would be permitted under comment 7(b)(5)-1. In these cases, one 
explanation or a single identification of the name of the balance 
computation method is also sufficient (assuming, of course, that all 
portions of the balance were computed using the same method).
    The comment does not specify, however, whether in this case a 
creditor may use the balance computation method names listed in Sec.  
226.5a(g) (e.g., ``average daily balance (including new purchases)'') 
as the single identification of the name of the balance computation 
method used for all features, even though the name only refers to 
purchases. In addition, as discussed in the section-by-section analysis 
to Sec.  226.6(b)(2)(vi), questions have been asked as to whether a 
creditor may revise the names of the balance computation methods listed 
in Sec.  226.5a(g) to refer more broadly to all new transactions 
(rather than referring only to ``new purchases'') when the same method 
is used to calculate the balances for all features on the account. For 
example, creditors have asked whether they may revise the name listed 
in Sec.  226.5a(g)(i) to disclose it as ``average daily balance 
(including new transactions)'' when this method is used to calculate 
the balances for all features of the account. Also, creditors have 
asked whether they may revise the names listed in Sec.  226.5a(g) to be 
applicable to features other than purchases. Creditors in some cases 
may disclose the balance computation methods separately for each 
feature, such as when a different balance computation method applies to 
purchases than for cash advances.
    To address these compliance issues and to provide additional 
flexibility to creditors, consistent with proposed guidance in comment 
6(b)(2)(vi), the Board proposes to revise comment 7(b)(5)-7 to provide 
that in cases where each balance was computed using the same balance 
computation method, a creditor may use an appropriate name listed in 
Sec.  226.5a(g) (e.g., ``average daily balance (including new 
purchases)'') as the single identification of the name of the balance 
computation method applicable to all features, even though the name 
only refers to purchases. For example, if a creditor uses the average 
daily balance method including new transactions as the balance 
computation method for all features, a creditor may use the name 
``average daily balance (including new purchases)'' listed in Sec.  
226.5a(g)(i) to satisfy the requirement to disclose the name of the 
balance computation method for all features. As an alternative, the 
proposed comment provides that a creditor may revise the balance 
computation names listed in Sec.  226.5a(g) to refer more broadly to 
all new credit transactions, such as using the language ``new 
transactions'' or ``current transactions'' (e.g., ``average daily 
balance (including new transactions)''), rather than simply referring 
to new purchases when the same method is used to calculate the balances 
for all features of the account.
    Also consistent with proposed comment 6(b)(2)(vi)-2, the Board 
proposes to add a new comment 7(b)(5)-8 to address situations where a 
creditor is disclosing the name of the balance computation methods 
separately for each feature. Proposed comment 7(b)(5)-8 provides that 
in those cases, where a creditor is using the names listed in Sec.  
226.5a(g) to satisfy the requirements of Sec.  226.7(b)(5) for features 
other than purchases, a creditor must revise the names listed in Sec.  
226.5a(g) to refer to the other features. For example, when disclosing 
the name of the balance computation method applicable to cash advances, 
a creditor must revise the name listed in Sec.  226.5a(g)(i) to 
disclose it as ``average daily balance (including new cash advances)'' 
when the balance for cash advances is figured by adding the outstanding 
balance (including new cash advances and deducting payments and 
credits) for each day in the billing cycle, and then dividing by the 
number of days in the billing cycle. Similarly, a creditor must revise 
the name listed in Sec.  226.5a(g)(ii) to disclose it as ``average 
daily balance (excluding new cash advances)'' when the balance for cash 
advances is figured by adding the outstanding balance (excluding new 
cash advances and deducting payments and credits) for each day in the 
billing cycle, and then dividing by the number of days in the billing 
cycle.

[[Page 67466]]

7(b)(6) Charges Imposed

    Section 226.7(b)(6) generally requires the disclosure of the 
amounts of any charges imposed on a plan, which consists of finance 
charges attributable to periodic interest rates (disclosed as Interest 
Charged), and charges imposed as part of a plan other than charges 
attributable to periodic interest rates (disclosed as Fees). In 
addition, calendar year to date totals for both interest and fees must 
be disclosed. Comment 7(b)(6)-3 provides guidance for disclosing 
calendar-year-to-date totals for fees. In order to avoid inconsistency, 
the Board proposes to amend comment 7(b)(6)-3 to clarify that this 
guidance applies to fees as well as interest charged.

7(b)(12) Repayment Disclosures

    Section 226.7(b)(12) requires that for a credit card account under 
an open-end (not home-secured) consumer credit plan, card issuers 
generally must disclose the following repayment disclosures on each 
periodic statement: (1) A ``warning'' statement indicating that making 
only the minimum payment will increase the interest the consumer pays 
and the time it takes to repay the consumer's balance; (2) the length 
of time it would take to repay the outstanding balance if the consumer 
pays only the required minimum monthly payments and no further advances 
are made; (3) the total cost to the consumer of paying the balance in 
full if the consumer pays only the required minimum monthly payment and 
no further advances are made; (4) the monthly payment amount that would 
be required for the consumer to pay off the outstanding balance in 36 
months, if not further advances are made; (5) the total cost to the 
consumer of paying the balance in full if the consumer pays the balance 
over 36 months; (6) the total savings of paying the balance in 36 
months (rather than making only minimum payments); and (7) a toll-free 
telephone number at which the consumer may receive information about 
accessing consumer credit counseling. See Sec.  226.7(b)(12)(i).
    To simplify the disclosures, Sec.  226.7(b)(12)(i) and (ii) provide 
that card issuers must round the following disclosures to the nearest 
whole dollar when disclosing them on the periodic statement: (1) The 
minimum payment total cost estimate, (2) the estimated monthly payment 
for repayment in 36 months, (3) the total cost estimate for repayment 
in 36 months, and (4) the savings estimate for repayment in 36 months. 
See Sec.  226.7(b)(12)(i)(C), (b)(12)(i)(F)(1)(i), 
(b)(12)(i)(F)(1)(iii), (b)(12)(i)(F)(1)(iv) and (b)(12)(ii)(C). Some 
card issuers have requested, however, that they be permitted to provide 
these disclosures on the periodic statement rounded to the nearest cent 
to be more accurate and to avoid potential consumer confusion that 
rounding to the dollar might cause in certain circumstances. For 
example, assume that a consumer's balance is $3,000 and the APR on the 
account is 14.4%. The estimated monthly payment to repay the balance in 
36 months would be $103.12 (rounded to the nearest cent). A card issuer 
would be required to disclose on the periodic statement the estimated 
monthly payment for repayment in 36 months as $103, and the total cost 
estimate for repayment in 36 months as $3,712. (The total cost estimate 
for repayment in 36 months is calculated by multiplying $103.12 times 
36,