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Dreher Tomkies LLP
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BOARD PROPOSES TO CLARIFY REGULATION Z CARD ACT RULES

The Federal Reserve Board (Board) has issued a proposed rule amending Regulation Z to clarify portions of the Board's final rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). See Alerts dated July 16, 2009, and January 12, March 4, March 9 and June 15, 2010. The Board proposes to amend parts of Regulation Z and its official staff commentary to resolve uncertainty and facilitate compliance. The clarifications cover a wide range of topics, from definitions (Section 226.2) to reevaluation of rate increases (Section 226.59).

For example, the Board proposes to clarify how creditors should disclose limitations on rate decreases, duration of penalty rates, grace period limitations, fee waivers and balance computation method(s) in tabular application and solicitation and account-opening disclosures.

The Board also proposes to, e.g.:

  • Revise rules regarding prompt crediting of payments and fees related to the method of payment
  • Clarify multiple provisions on allocation of payments
  • Require consideration of an applicant's independent ability to pay (and not spousal or household income)
  • Provide further guidance on changes in terms, penalty fee safe harbors and restrictions on increasing APRs, fees and charges
  • Narrow information required to be included in agreements submitted to the Board and posted on the Internet

The Board invites comment on the proposal within 60 days after publication in the Federal Register.

BOARD ISSUES INTERIM FINAL RULE ON APPRAISAL INDEPENDENCE

The Board also has issued an interim final rule amending Regulation Z to implement Section 129E of the Truth in Lending Act (TILA), which was enacted as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). TILA Section 129E establishes new requirements for appraisal independence for principal dwelling-secured consumer credit transactions to ensure that (i) appraisals are based on appraisers' independent professional judgment and (ii) creditors and their agents pay customary and reasonable fees to appraisers.

Section 1472 of the Dodd-Frank Act essentially codifies and expands on the protections in the Board's 2008 Appraisal Independence Rules under the Home Ownership and Equity Protection Act. Accordingly, the Board is removing the Appraisal Independence Rules effective on April 1, 2011.

The Board seeks comment on all aspects of the interim final rule, which generally will be effective 60 days after the date of publication in the Federal Register.

BOARD ISSUES FINAL RULE IMPLEMENTING DELAYED EFFECTIVE DATE OF CERTAIN GIFT CARD REQUIREMENTS

Finally, the Board has issued a final rule amending Regulation E, which implements the Electronic Fund Transfer Act, and its official staff commentary to implement legislation modifying the effective date of some disclosure requirements in the gift card provisions of the CARD Act.

As explained in our Alert dated July 19, 2010, the legislation gives gift card producers until January 31, 2011 to comply with several disclosure provisions that originally were set to become effective on August 22, 2010. The Board issued an interim final rule implementing these changes in August and sought comment on the interim rule. See 75 Fed. Reg. 50683 (Aug. 17, 2010).

The final rule generally adopts the interim final rule as issued and also delays the effective date of certain requirements that relate to the disclosure provisions addressed by the legislation.

The final rule will be effective 30 days after publication in the Federal Register.

  • Judy Scheiderer