Consumer Law

A Few Comments on the Fed's Interim Final Rule on Credit Cards

By Jeff Sovern

by Jeff Sovern

Or is it the Final Interim Rule?

Yesterday I linked to the Fed's new Interim Final Rule, amending Reg Z to implement provisions of the Credit CARD Act that take effect in August.  The new Rule itself takes effect August 20, which meant there was too little time to go through the normal comment process; hence the use of the word "interim," which seemingly is meant to imply that after the Fed receives comments on the Rule, it may change it.  The Rule displaces some provisions from the rules that the Fed adopted last winter, which would have taken effect next summer, though other provisions dating from last winter should still take effect next summer, unless they are superseded by amendments yet to be announced.  Easy to follow, isn't it?

Yesterday's amendments mostly deal with changes in terms notices, governed by § 226.9 of Regulation Z.  They identify which term changes require 45 days notice to cardholders: changes in the APR, annual fees, transaction charges, grace periods, balance computation methods, cash advance fees, and late payment fees, among others, all made the list.  But here's what I wonder: will consumers read the change-in-terms notices?  They have to be clear and conspicuous, under § 226.5(a)(1), but that doesn't mean they will be noticeable.  The rules that would have taken effect in July 2010 would have required information to appear in a table and the changes could have appeared either on the periodic statement or on the front page of the notice of changes or on a separate page.  Those requirements seem to be gone for now, though the Fed's statement suggests that it may resurrect them in later rulemakings. I hope they do; they are apparently the product of consumer testing to identify the circumstances under which consumers read such notices, see Macro International Inc., Design and Testing of Effective Truth in Lending Disclosures (2008), and obviously it is preferable to have changes-in-terms provisions that consumers read.  But the Fed seemingly did not want provisions that were not to take effect until next summer to take effect this August when the Credit CARD Act did not mandate such a result.  So for a while (until next summer?) credit card issuers may give notices of term changes that consumers throw away without reading 45 days in advance, instead of throwing them away later, but we would have had unread notices until next summer even if the Credit CARD Act hadn't been passed.  (How come consumer law, which more than any other subject should be comprehensible without hiring a lawyer, is always so difficult?) But here's some good news: for those of you who want an up-to-date compilation of consumer laws, it looks like we will be able to get the Interim Final Rule into the new edition of Selected Consumer Statutes, which is expected to be out in time for fall classes. 

Full post as published by CL&P Blog on July 16, 2009 (boomark / email).