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REG Z Change for Late Charge Assessment (Credit Card Act)

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  • #2359
    LGOFORTH
    Participant

    In March, the Federal Reserve Board issued technical corrections to Regulation Z for the Credit Card Act of 2009 concerning the number of days between the billing date and due date of open-end consumer credit plans. This change is effective October 1, 2011.

    If a bank does not charge a late charge for cash reserve accounts, are we still required to allow a minimum of 14 days between the billing date and the due date of a payment plus any additional time for rendering and mailing? 😀

    #2884
    JGo9
    Participant

    Here is what I’ve found Reg Z 226.5(b)(2)(ii) to read starting 10-1-2011.

    Effective 10/1/2011, with compliance optional prior to that date, paragraph 226.5(b)(2)(ii) above is revised to read as follows:

    (ii) Timing requirements.

    (A) Credit card accounts under an open-end (not home-secured) consumer credit plan. For credit card accounts under an open-end (not home- secured) consumer credit plan, a card issuer must adopt reasonable procedures designed to ensure that:

    (1) Periodic statements are mailed or delivered at least 21 days prior to the payment due date disclosed on the statement pursuant to § 226.7(b)(11)(i)(A); and

    (2) The card issuer does not treat as late for any purpose a required minimum periodic payment received by the card issuer within 21 days after mailing or delivery of the periodic statement disclosing the due date for that payment.

    (B) Open-end consumer credit plans. For accounts under an open-end consumer credit plan, a creditor must adopt reasonable procedures designed to ensure that:

    (1) If a grace period applies to the account:

    (i) Periodic statements are mailed or delivered at least 21 days prior to the date on which the grace period expires; and

    (ii) The creditor does not 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 by the creditor within 21 days after mailing or delivery of the periodic statement.

    (2) Regardless of whether a grace period applies to the account:

    (i) Periodic statements are mailed or delivered at least 14 days prior to the date on which the required minimum periodic payment must be received in order to avoid being treated as late for any purpose; and

    (ii) The creditor does not treat as late for any purpose a required minimum periodic payment received by the creditor within 14 days after mailing or delivery of the periodic statement.

    (3) For purposes of paragraph (b)(2)(ii)(B) of this section, “grace period” means a period within which any credit extended may be repaid without incurring a finance charge due to a periodic interest rate.10

    The entire purpose of the earlier delivery is due to helping the customer avoid fees. If there are no fees that can be incurred due to the timing of the payment from your customers, then I don’t think the 14 day requirement would apply to you as it was intended. However, the section above does mentioned “Reguardless of whether a grace period applies to the account” and I think this might include you to have to abide by the 14 day requirement.

    I don’t think that the spirit of the law would require you to comply with the 14 day requirement, but I can’t find that smoking good that gives you an out of not having to comply.

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