This article was originally published 17 July, 2009
On July 15, 2009, the Board of Governors of the Federal Reserve System (Board) released implementing regulations for two key provisions of the Credit CARD Act of 2009, Pub. L. 111-24, 123 Stat. 1734 (2009). Those two provisions, which become effective on August 20, 2009, require creditors to deliver periodic statements at least 21 days prior to a due date (21-Day Rule) and require creditors to provide notice of changes relating to credit card accounts at least 45 days in advance of the effective date (45-Day Rule). The release is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090715a.htm.
The Board's regulations to implement the 45-Day Rule contain a number of onerous provisions that will be of significant concern to issuers. The regulations implement a new federal opt-out right, that applies even to penalty rates disclosed to the cardholder in advance and included in the cardholder agreement. The issuer is required to accept opt-outs through a toll-free telephone number. Further, when an issuer provides notices of a penalty rate increase, it must wait until the trigger for the penalty has occurred. This means that issuers raising a rate because of a 60-day delinquency will need to wait until the account is 60 days delinquent, and then provide 45 days advance notice of the new rate. And, in order to avoid triggering a change-in-terms disclosure, the rules require written disclosure of the length of promotional and deferred interest plans, and the numerical APRs that will apply thereafter, prior to the start of such plans.
Because of the short time period between the enactment of the Credit CARD Act and the August 20, 2009 effective date, the Board released these regulations as an Interim Final Rule, and the regulations will become effective on August 20. However, there is also a 60-day comment period after publication in the Federal Register, and the Board may modify the regulations based on any comments received.
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