FRB PROPOSES REVISED REG. Z COMMENTARY ON CREDIT CARDS
The Federal Reserve Board (FRB) has published proposed revisions to the official staff commentary to Regulation Z, implementing regulations to the federal Truth in Lending Act. If adopted, the proposed revisions would clarify the status of certain credit card‑related fees and would update provisions regarding the issuance of credit cards intended to supplement but not replace an existing card.
The proposal describes an expedited payment service fee as a fee that is generally charged for an electronic funds transfer or a draft on a customer’s checking account and typically paid by a customer to avoid being assessed a late payment fee. Based on these assumptions, the proposal states that the fee should be disclosed as an “other charge,” provided that the method of payment was not authorized in advance as the regular payment method for the account. Consistent with the treatment of unanticipated late fees, the proposal provides that a change‑in‑terms notice would not be required when the change involves a fee charged for expediting a customer’s payment.
The proposal also clarifies that an expedited card delivery fee, which is imposed when the customer requests delivery of the card other than by the standard mail service generally available to customers, would not need to be disclosed either as a “finance charge” or as an “other charge.”
Finally, the proposal provides guidance regarding replacement cards issued in different sizes and formats that are intended only to supplement, but not replace, a traditional credit card. Under certain prescribed circumstances, card issuers would be allowed to replace an accepted card with more than one renewal or substitute card on the same account.
The FRB invites comments on the proposed commentary, which must be received on or before January 27, 2003. The revised commentary, if adopted, would be effective on or about April 1, 2003, with mandatory compliance required by October 1, 2003.