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Tying Lower Credit Card Rates To The Purchase Of Additional Services
by Lucy Griffin, BOL Guru
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Question: We are in the process of a compliance exam. We advertise our credit cards on the Internet and have brochures printed that are the same as the Internet. We have disclosed on our advertising page and in our brochures that if the consumer has any of our services they could qualify for a percentage off the credit card rate. The examiners are saying we cannot include the discounts with our advertising of the credit card disclosures under Reg Z.

Let me give an example: "Our current annual percentage rate is 15.96%; however, your total relationship with the bank can qualify you for an annual percentage rate as low as 9.96% Based on the following discounts: Checking .84%   Direct Dep. .48%   Safe dep. box .24   Savings Acct. .48   Home(R/E)loan 1.08%, etc.

This is on the Internet page above the required disclosures and is the on back of an insert with the required disclosures for printed applications. Can we not disclose the discounts available if consumers have accounts with us? It is not a requirement to get a credit card to have to have our services. Anyone can apply. The examiner is quoting 226.16(b)(1) and (3) tying to 226.6 (a)

Answer: I don't see anything in Reg Z or its commentary that would prohibit your ads. The examiner may be concerned because there isn't anything that specifically says your advertising is legal -- but there doesn't have to be. As long as the terms and conditions are clear, you should be able to post those rate reductions. The only remaining question is whether you have to post the comparable APR for each rate reduction.

First published on BankersOnline.com 2/11/02
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