On January 31, 2013, the Consumer Financial Protection Bureau (“CFPB”) published a notice in the Federal Register seeking information regarding the impact of financial products marketed to students enrolled in institutions of higher education (the “Notice”). Although the Credit Card Accountability, Responsibility and Disclosure Act of 2009 includes requirements that financial companies publicly disclose credit card agreements with colleges, universities and alumni associations, less is known about other financial products marketed to students, including debit cards to access student loan funds and bank accounts. At this time, we can only speculate about the outcome of the CFPB’s inquiry, but it is possible that it may lead to requirements, similar to those relating to credit cards, that financial companies publicly disclose these types of agreements with institutions of higher education.
Category Archives: Credit CARD Act
Federal Court Enjoins Regulation Z Amendment
Posted in Credit CARD Act; Truth in Lending ActA federal judge in Sioux Falls, South Dakota, has issued a preliminary injunction to postpone and enjoin the effective date of a recent amendment to Federal Reserve Board Regulation Z.
The case was brought by credit card issuer First Premier Bank and its subsidiary Premier Bankcard, LLC (collectively First Premier) against the Bureau of Consumer Financial Protection (which now has enforcement authority over plaintiffs for violations of Regulation Z) and Treasury Secretary Timothy Geithner. First Premier alleged that the Federal Reserve Board exceeded its rulemaking authority under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the Credit CARD Act) in promulgating a final rule amending part of Regulation Z (12 C.F.R. § 226.52) on March 18, 2011.
Federal Reserve Board Reports to Congress on College Credit Card Agreements
Posted in Credit CARD ActYesterday, the Federal Reserve Board issued its second report to Congress concerning agreements between credit card issuers and institutions of higher education or certain affiliated organizations (e.g., alumni associations or foundations) that provide for credit card issuance to college students.
Under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Credit CARD Act), credit card issuers must submit to the Board each year a copy of any college credit card agreement between the issuer and an institution of higher education or affiliated organization that was in effect during the preceding calendar year, as well as data on the number of credit card accounts opened pursuant to that agreement that were open at year-end, the amount of payments made to the institution or affiliated organization during the year, and the number of new college credit card accounts that were opened during the year. The Credit CARD Act requires the Board to report to Congress each year on the data it has collected from the card issuers. The new report is for the year ended December 31, 2010.
In addition to the report, the Board published copies of each college credit card agreement it received for the reporting period ended December 31, 2010.
Old Reg Z Does Not Require Notice of Changes Contemplated in Cardholder Agreement
Posted in Class Actions; Credit CARD Act; Truth in Lending ActYesterday the United States Supreme Court unanimously ruled that the pre-2009 version of Reg Z did not require a new notice to be given when a creditor raises the interest rate on a credit card account in response to a cardholder default. Although the case was decided under now repealed law, it is important for a couple of reasons. First, it resolves a split in the circuits about how to interpret certain Federal Reserve Board (“Board”) regulations called Reg Z which were promulgated to implement the Truth in Lending Act. Second it gives additional guidance on how the courts should defer to a federal agency’s interpretation of its own ambiguous regulation.
Ninth Circuit Creates Split About the Meaning of the Word “Sue” as Used in the CROA
Posted in Credit CARD ActThe Credit Repair Organizations Act (CROA), found at 15 U.S.C. § 1679, was enacted to ensure consumers of services of credit repair organizations are provided with the information necessary to make informed decisions regarding the purchase of such services; and to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. Section 1679c of the
CROA requires that credit repair organizations make certain written disclosures to consumers including that consumers have “a right to sue a credit repair organization that violates” the CROA. The CROA also contains a provision that voids any waiver by consumers of rights provided in the CROA. In a recent decision, Greenwood, et al. v. CompuCredit Corp., —F.3d—, 2010 WL 3222415 (9th Cir. Aug. 17, 2010)(Thomas, J.), the Ninth Circuit disagreed with decisions from other circuits about whether arbitration agreements between credit repair organizations and consumers are enforceable when a consumer sues for violations of the CROA. Specifically, there is now a dispute among the circuits about what the word “sue” means as used in the CROA. Does the word “sue” as used in Section 1679c create a right for consumers to sue in court; or does the word “sue” encompass dispute resolution through arbitration?
Fed Restricts Fees and Expiry Dates for Stored Value Cards and Gift Certificates
Posted in Credit CARD Act; Electronic Funds Transfer ActToday, the Federal Reserve Board issued a final rule restricting certain fees and expiration dates applicable to gift certificates, store gift cards and other prepaid or stored value cards. The rule only applies to certificates and cards sold to consumers. Certain loyalty, award and promotional gift cards are exempt from the new restrictions.
- Limits on Fees: In general, the rule prohibits dormancy, inactivity or service fees unless three conditions are satisfied: (i) there must have been no activity under the certificate or card within the one-year period before imposition of the fee; (ii) only one such fee may be imposed in any calendar month; and (iii) the seller or issuer must clearly and conspicuously disclose such fees on the certificate or card itself, and must provide those disclosures to the purchaser prior to purchase. The rule also prohibits fees for replacing an expired certificate or card if the underlying funds have not expired.
- Limits on Expiration: The rule distinguishes between the expiration date of the certificate or card, on the one hand, and the expiration date of the underlying funds. The expiration date of any funds underlying the certificate or card must be at least five years after the issuance of a gift card or the last addition of funds to a stored value card. The Fed now requires issuers of gift certificates and cards to establish policies and procedures intended to provide consumers with a reasonable opportunity to purchase a card or certificate which expires, if at all, at least five years from purchase.
- Disclosures Required: The rule mandates clear and conspicuous disclosures on the certificate or card itself of (i) any expiration date of funds underlying a certificate or card, (ii) the difference between the expiration date for the underlying funds and the card or certificate itself, and (iii) any issuance or cash-out fees imposed on the certificate or card.
The new rule becomes effective August 22, 2010. It implements certain portions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 and amends the Federal Reserve Board’s existing Regulation E.
Barney Frank: The Credit CARD Act Is Working
Posted in Credit CARD ActToday — the first day that many of the key provisions of the Credit CARD Act go into effect — Representative Barney Frank, chair of the Financial Services Committee, issued a press release in which he claims the Act is working and credit card holders are reaping the benefits. In support of the claim, Rep. Frank links to a PDF of a couple of letters from credit card companies. Representative Frank’s press release is reproduced below:
Washington, DC – Today, Financial Services Committee Chairman Barney Frank (D-MA) released the following statement on the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, and commented on the following letters that credit card companies have been sending to their customers as a result of the new law’s implementation.
“These letters indicate that Americans are now seeing the benefits of the CARD Act. It was unfortunately the case that some banks tried to game the system after we passed the bill into law, but their actions provide further evidence of our need for a Consumer Financial Protection Agency. While the House did pass a bill to speed up the implementation date of the CARD Act, there was an inevitable delay in the legislative process and Republican objections in the Senate blocked the bill. Had the CFPA been in existence we could have moved right away to block the banks’ egregious actions.”
In May, President Obama signed into law the Credit CARD Act, historic legislation that will protect consumers from deceptive credit card practices and equip them with the information and rights they need to responsibly manage their credit. Today, most of the key reforms are set to go in to effect, including prohibition of arbitrary interest rate increases and interest charges on debt paid on time (double-cycle billing ban).
For more information, click here.
Federal Reserve Issues Credit Card Act Regulations
Posted in Credit CARD ActThe Federal Reserve Board issued final rules yesterday amending Regulation Z and implementing certain provisions of the Credit Card Accountability and Disclosure Act of 2009. Most of the rules are effective February 22, 2010. A couple are already in place. The final rules are more than 1500 pages long counting the commentary, but are summarized in the Fed’s press release. Click here to see the release. These are the 15 high points:
Debt Settlement Firm Offers “Rate Jacking” Story Contest
Posted in Credit CARD ActCalling the current political climate “pro-consumer” is perhaps stating the obvious. But when does capitalizing on the resulting rhetoric and negative sentiment go too far? How about a “Contest For Consumers Who Were Rate Jacked in 2009,” with the grand prize of free debt settlement services?
Debt settlement company Consumer Recovery Network, a self-proclaimed “ethical, consumer-friendly debt settlement firm,” has initiated a contest for “consumers who were rate jacked by their credit card companies in 2009,” inviting them to share their “rate jacking stories with it for the opportunity to win free debt settlement services from the company.” The contest is supposedly ”a way to celebrate” the provisions of the Credit Card Accountability Responsibility and Disclosure Act that become effective on February 22, 2010.
Read more about the contest here in the company’s press release on the topic.
Class Action Suit Filed Against Citibank Over Increased Annual Percentage Rates
Posted in Credit CARD ActOn Tuesday, a putative class of plaintiffs filed a Complaint in the federal district court of Rhode Island against Citibank, alleging that Citibank is illegally raising annual percentage rates (“APRs”) before the effective date of the Credit Card Account and Responsibility and Disclosure Act of 2009 (“Credit CARD Act”).
Proposed Accelerated Credit CARD Act Reforms Headed To Senate
Posted in Credit CARD ActThe House of Representative has approved legislation that will move up the effective date of many reforms under the Credit Card Accountability, Responsibility, and Disclosure ACT (“Credit CARD Act”) that were scheduled for implementation in February and August next year. In August of this year, the Credit CARD Act began requiring credit card providers to send statements at least 21 days in advance of the payment due date, provide heightened notice of increases in interest rates or other changes in significant terms, and inform their customers of the right to cancel a credit card before rate hikes or other significant changes go into effect.
Congresswoman Markey Introduces Credit Card Rate Freeze Act To The House
Posted in Credit CARD ActToday, Representative Betsy Markey of Colorado introduced the House companion bill to the bill introduced by Sen. Chris Dodd to the Senate on Monday.
Senator Chris Dodd Introduces New Bill To Immediately Freeze Credit Card Interest Rates
Posted in Credit CARD ActSenate Banking Committee Chairman Chris Dodd introduced a bill today that seeks to freeze interest rates on existing credit card balances. The Credit Card Accountability, Responsibility, and Disclosure Act (the “Credit CARD Act”), passed by Congress in May, currently allows interest rate increases on existing balances under limited circumstances. The new bill, if passed by Congress, would force credit card companies to freeze rates on existing balances until the remaining provision of the Credit CARD Act go into effect in February 2010.
Dodd’s new bill comes just days before the House of Representatives is expected to vote on accelerating to December 1, 2009 the new rules under the Credit CARD Act.