Open-End Credit

General Disclosure Requirements

All disclosures must be:

  • “Clear and conspicuous”
  • Written
  • In a form the member can keep, except for:
  • Credit and charge card applications and solicitations
  • Home-equity plan disclosures
  • The alternative summary billing-rights statement
  • Credit and charge card renewal disclosures

Unknown Information

  • All disclosures must reflect the terms of the legal obligation between the parties.
  • If any information necessary for accurate disclosure is unknown at the time the disclosures are made, the credit union must:
  • Make the required disclosure based on the best information available at the time.
  • State clearly that the disclosure is an estimate.

Multiple Applicants

  • The credit union may provide disclosures to any of the individuals who are primarily liable on the account.
  • Separate disclosures and rescission notices must be given to each member who has a right to rescind.

Specific Formats

Specific formatting rules apply to many open-end credit disclosures:

  • Credit and charge card applications and solicitations.
  • Disclosures for home-equity plans must precede other disclosures and must be contain specific elements.
  • Account-opening disclosures for non-HELOC accounts must be provided in a tabular format.
  • Disclosures provided on periodic statements must be grouped together in a specific manner.
  • Disclosures provided on periodic statements for non-HELOC accounts must follow certain formatting requirements.
  • Disclosures accompanying checks that access a credit card account must be provided in a tabular format.
  • Disclosures provided in a change-in-terms notice for non-HELOC accounts must be provided in a tabular format.
  • Disclosures provided when a rate is increased due to delinquency, default or as a penalty on non-HELOC accounts must be provided in a tabular format.

Annual Percentage Rate

For most open-end disclosures, the APR is determined by multiplying:

  • The periodic rate that can be used to compute the finance charge BY
  • The number of periods in the year.

Periodic Statements

There are various methods of determining the APR that applies to periodic statements. The credit union should refer to Section 226.14(c) of Regulation Z for guidance.

Accuracy Requirement

An APR disclosed by a credit union is considered accurate if the disclosed rate is not more than 1/8 of a percentage point above or below the actual APR.

Oral Disclosures

When orally responding to member inquiries concerning the cost of credit, the only rate that may be stated is the “Annual Percentage Rate” or “APR.”

Exceptions
  • The credit union may answer inquiries about open-end credit by stating the periodic rate, or rates, along with the annual percentage rate.
  • If the annual percentage rate cannot be determined in advance, the rate for a sample transaction must be given with other cost information for the member’s specific transaction.

Account Opening Disclosures

  • New as of July 1, 2010
  • The following rules apply to non-HELOC accounts only
  • Disclosures are required to be provided before the first transaction under the plan

Table

A tabular format with specific headings, content and formatting is required for certain disclosures.

Bolding

The following terms in the table must be bolded:

  • Annual Percentage Rates (the APR for purchases must also be in 16 pt. font)
  • The following fees:
  • Issuance or availability
  • Transaction charges
  • Cash advance
  • Late payment
  • Over-the-limit
  • Balance transfer
  • Returned payment

Do Not Bold

Do not bold the following:

  • Fixed finance charges
  • Minimum interest charges
  • Any periodic charges that are not annualized

In-Table Disclosures

Disclose the following terms and information within the table”

Annual Percentage Rates
  • Disclose each periodic rate that may be used to compute the finance charge on an outstanding balance for purchases, cash advances, or balance transfers, expressed as an annual percentage rate.
  • When more than one rate applies for a category of transactions, disclose the range of balances to which each rate is applicable.
Variable Rates
  • For variable rates, disclose the fact that the rate may vary and how the rate is determined by identifying the type of index or formula that is used in setting the rate.
  • Do not disclose the value of the index and the amount of the margin in the table.
  • Do not disclose limitations on rate increases or decreases in the table.
Introductory Rates
  • If the initial rate is an introductory rate, disclose the rate that would otherwise apply to the account.
  • You may disclose in the table the introductory rate along with the rate that would otherwise apply to the account if you also disclose the time period during which the introductory rate will remain in effect.
  • You must use the term “introductory” or “intro” in immediate proximity to the introductory rate
  • Disclosure of the introductory rate is required for credit cards.
Premium Rates
  • If the initial rate is temporary and is higher than the rate that will apply after the temporary rate expires, you must disclose the premium initial rate.
  • The premium initial rate for purchases must be in at least 16-point type.
  • You may disclose in the table the rate that will apply after the premium initial rate expires if you also disclose the time period during which the premium initial rate will remain in effect.
  • If you disclose in the table the rate that will apply after the premium initial rate for purchases expires, that rate also must be in at least 16- point type.
  • Disclosure of the rate that will apply after the premium initial rate expires is required for credit cards.
Penalty Rates

If a rate may increase as a penalty for one or more events specified in the account agreement, you must disclose:

  • The increased rate that may apply.
  • A brief description of the event or events that may result in the increased rate.
  • A brief description of how long the increased rate will remain in effect.

If more than one penalty rate may apply, you may disclose the highest rate that could apply (instead of disclosing the specific rates or the range of rates that could apply.)

Fees for Issuance or Availability
  • You must disclose any annual or other periodic fee that may be imposed for the issuance or availability of an open-end plan
  • Include any fee based on account activity or inactivity; how frequently it will be imposed; and the annualized amount of the fee.
  • For any non-periodic fees that relates to opening the plan, you must disclose that the fee is a one-time fee.
Fixed Finance Charge or Minimum Interest Charge
  • Disclose any fixed finance charge and a brief description of the charge.
  • Disclose any minimum interest charge if it exceeds $1.00, that could be imposed during a billing cycle, and a brief description of the charge.
Transaction Charges

Disclose any transaction charge imposed for purchases.

Grace Period
  • Disclose the date by which or the period within which any credit extended may be repaid without incurring a finance charge and any conditions on the availability of the grace period.
  • If no grace period is provided, you must disclose that fact.
  • If the length of the grace period varies, you may disclose the range of days, the minimum number of days, or the average number of the days in the grace period, if the disclosure is identified as a range, minimum, or average.
  • You must use the phrase “How to Avoid Paying Interest” as the heading for the row describing the grace period if the grace period applies to all features of the account.
  • Use the phrase “Paying Interest” on the heading row if a grace period is not offered on all features of the account.
Fees

Disclose the following fees:

  • Cash advance fees
  • Late payment fees
  • Over-the-limit fees
  • Balance transfer fees
  • Returned-payment fees
Required Insurance, Debt Cancellation or Debt Suspension Coverage
  • Disclose any fees for required insurance
  • Include a cross reference to any additional information provided about the insurance or coverage, as applicable.
Available Credit

This disclosure is required if you require fees for the issuance or availability of credit and/orrequire a security deposit, and the total amount of the required fees and/or security deposit that will be imposed and charged to the account when the account is opened is 15 percent or more of the minimum credit limit for the plan. When this is the case you must provide the following disclosures:

  • The available credit remaining after these fees or security deposit are debited to the account.
  • The fact that the consumer has the right to reject the plan and not be obligated to pay the fees or any other fee or charges until the consumer has used the account or made a payment on the account after receiving a periodic statement.
  • These disclosures are not required if fees or security deposits are not debited to the account.
Web site Reference

For credit card accounts, you must include a reference to the Web site established by the Federal Reserve Board and a statement that consumers may obtain on the Web site information about shopping for and using credit cards.

Directly Below the Table

Disclose the following directly below the table.

Introductory Rates

If you disclose an introductory rate, you must disclose:

  • The circumstances under which the introductory rate may be revoked.
  • The rate that will apply after the introductory rate is revoked.

Employee Preferential Rates

If you disclose a preferential annual percentage rate for employees (or others with similar affiliation) you must briefly disclose:

  • The circumstances under which such preferential rate may be revoked.
  • The rate that will apply after such preferential rate is revoked.

Balance Computation Method

Disclose the name of the balance computation method that is used to determine the balance on which the finance charge is computed for each featurealong with a statement that an explanation of the method(s) is provided with the account-opening disclosures.

Billing Error Rights Reference

Disclose astatement that information about consumers' right to dispute transactions is included in the account-opening disclosures.

Disclosures in the Body of the Account Agreement

Disclose the following in the body of the account agreement:

Charges Imposed as Part of the Plan

  • Disclose any charges imposed as part of the plan that are not already disclosed in the table.
  • Disclose the amount of the charge or an explanation of how the charge is determined.
  • For finance charges, also include:
  • A statement of when the charge begins to accrue
  • An explanation of whether or not any time period exists within which any credit that has been extended may be repaid without incurring the charge.
  • Charges imposed as part of the plan include:
  • Finance charges
  • Charges resulting from the consumer's failure to use the plan as agreed, except amounts payable for collection activity after default, attorney's fees whether or not automatically imposed, and post-judgment interest rates permitted by law.
  • Taxes imposed on the credit transaction by a state or other governmental body, such as documentary stamp taxes on cash advances.
  • Charges for which the payment, or nonpayment, affect the consumer's access to the plan, the duration of the plan, the amount of credit extended, the period for which credit is extended, or the timing or method of billing or payment.
  • Charges imposed for terminating a plan.
  • Charges for voluntary credit insurance, debt cancellation or debt suspension.

Balance Computation Method

Disclose an explanation of the method used to determine the balance to which the rate is applied. (Model language)

Variable-rate Accounts

  • Disclose the following for variable rate accounts tied to an index:
  • The fact that the annual percentage rate may increase.
  • How the rate is determined, including the margin.
  • The circumstances under which the rate may increase.
  • The frequency with which the rate may increase.
  • Any limitation on the amount the rate may change.
  • The effect(s) of an increase.
  • For variable rate accounts not tied to increases in an index or formula, disclose the following:
  • The initial rate (expressed as a periodic rate and a corresponding annual percentage rate)
  • How long the initial rate will remain in effect and the specific events that cause the initial rate to change.
  • The rate (expressed as a periodic rate and a corresponding annual percentage rate) that will apply when the initial rate is no longer in effect and any limitation on the time period the new rate will remain in effect.
  • The balances to which the new rate will apply.
  • The balances to which the current rate at the time of the change will apply.

Voluntary Credit Insurance, Debt Cancellation or Debt Suspension

Provide required disclosures for voluntary credit insurance, debt cancellation or debt suspension.

Security Interests

Disclose the fact that the creditor has or will acquire a security interest in the property purchased under the plan, or in other property identified by item or type.

Statement of Billing Rights

Disclose a statement that outlines the consumer's rights and the creditor's responsibilities for billing errors. (Model Notice)

Periodic Statements

General Rules

  • The following rules apply to non-HELOC accounts
  • You must provide a periodic statement to members with open-end credit for each billing cycle during which a finance charge is imposed, or an account has a debit or credit balance of more than $1.
  • A “billing cycle” is the interval between the days or dates of regular periodic statements.
  • These intervals must be equal, with a maximum interval of one calendar quarter.
  • Intervals are considered equal if the number of days in a cycle does not vary by more than four days from the regular day or date of the periodic statement.

Timing

Account Type / Timing / Restrictions
Credit Cards / Mailed or delivered at least 21 days prior to the payment due date disclosed on the statement /
  • Issuer must adopt “reasonable procedures” to insure prompt delivery
  • Cannot treat any payment received within 21 days after mailing or delivery of the periodic statement as late
  • Due dates must be the same numerical date every month (or the last day of the month)
  • The due date may be adjusted at the consumer’s request

Open-end plans with a grace period (including credit cards) / Mailed or delivered at least 21 days prior to the date on which a grace period expires /
  • Creditor must adopt “reasonable procedures” to insure prompt delivery
  • Cannot impose finance charges as a result of the loss of the grace period if a payment that satisfies the terms of the grace period is received within 21 days after mailing or delivery of the periodic statement.

Open-end plans without a grace period / Mailed or delivered at least 14 days prior to the due date /
  • Cannot treat any payment received within 14 days after mailing or delivery of the periodic statement as late.

Content

Previous Balance

Disclose the account balance outstanding at the beginning of the billing cycle.

Identification of Transactions

The following information must be provided for each transaction involving the sale of property or services:

  • The transaction amount
  • The transaction date
  • The merchant's name
  • The city and state or foreign country where the transaction took place. (You may omit the address or provide any suitable designation that helps the consumer to identify the transaction when the transaction took place at a location that is not fixed; took place in the consumer's home; or was a mail, Internet, or telephone order.)

The following information must be provided for each non-sale transaction:

  • A brief identification of the transaction
  • The amount of the transaction
  • One of the following dates:
  • The date of the transaction
  • The date the transaction was debited to the consumer’s account

Credits

Disclose any credit to the account during the billing cycle, including:

  • The credit amount
  • The date of crediting. (The date need not be provided if a delay in crediting does not result in any finance or other charge.)

Periodic Rates

Disclose:

  • Each periodic rate that may be used to compute the interest charge expressed as an annual percentage rate and using the term “Annual Percentage Rate.”
  • The range of balances to which the periodic rate is applicable.
  • The types of transactions to which the periodic rateis applicable.
  • The fact that the annual percentage rate may vary if the rate is variable.
  • Promotional rates (only need to be disclosed in periods in which the offered rate is actually applied.)

Balance on Which the Finance Charge is Computed