9(d) Finance Charge Imposed at Time of Transaction

1. Disclosure prior to imposition. A person imposing a finance charge at the time of honoring a consumer's credit card must disclose the amount of the charge, or an explanation of how the charge will be determined, prior to its imposition. This must be disclosed before the consumer becomes obligated for property or services that may be paid for by use of a credit card. For example, disclosure must be given before the consumer has dinner at a restaurant, stays overnight at a hotel, or makes a deposit guaranteeing the purchase of property or services.

9(e)  Disclosures Upon Renewal of Credit or Charge Card

1. Coverage. This paragraph applies to credit and charge card accounts of the type subject to 226.5a. (See §226.5a(a)(3) and the accompanying commentary for discussion of the types of accounts subject to §226.5a.) The disclosure requirements are triggered when a card issuer imposes any annual or other periodic fee on such an account, whether or not the card issuer originally was required to provide the application and solicitation disclosures described in §226.5a.

2. Form. The disclosures under this paragraph must be clear and conspicuous, but need not appear in a tabular format or in a prominent location. The disclosures need not be in a form the cardholder can retain.

3. Terms at renewal. Renewal notices must reflect the terms actually in effect at the time of renewal. For example, a card issuer that offers a preferential annual percentage rate to employees during their employment must send a renewal notice to employees disclosing the lower rate actually charged to employees (although the card issuer also may show the rate charged to the general public).

4. Variable rate. If the card issuer cannot determine the rate that will be in effect if the cardholder chooses to renew a variable-rate account, the card issuer may disclose the rate in effect at the time of mailing or delivery of the renewal notice. Alternatively, the card issuer may use the rate as of a specified date (and then update the rate from time to time, for example, each calendar month) or use an estimated rate under §226.5(c).

5. Renewals more frequent than annual. If a renewal fee is billed more often than annually, the renewal notice should be provided each time the fee is billed. In this instance, the fee need not be disclosed as an annualized amount. Alternatively, the card issuer may provide the notice no less than once every twelve months if the notice explains the amount and frequency of the fee that will be billed during the time period covered by the disclosure, and also discloses the fee as an annualized amount. The notice under this alternative also must state the consequences of a cardholder's decision to terminate the account after the renewal notice period has expired. For example, if a $2 fee is billed monthly but the notice is given annually, the notice must inform the cardholder that the monthly charge is $2, the annualized fee is $24, and $2 will be billed to the account each month for the coming year unless the cardholder notifies the card issuer. If the cardholder is obligated to pay an amount equal to the remaining unpaid monthly charges if the cardholder terminates the account during the coming year but after the first month, the notice must disclose that fact.

6. Terminating credit availability. Card issuers have some flexibility in determining the procedures for how and when an account may be terminated. However, the card issuer must clearly disclose the time by which the cardholder must act to terminate the account to avoid paying a renewal fee. State and other applicable law govern whether the card issuer may impose requirements such as specifying that the cardholder's response be in writing or that the outstanding balance be repaid in full upon termination.

7. Timing of termination by cardholder. When a card issuer provides notice under §226.9(e)(1), a cardholder must be given at least 30 days or one billing cycle, whichever is less, from the date the notice is mailed or delivered to make a decision whether to terminate an account. When notice is given under §226.9(e)(2), a cardholder has 30 days from mailing or delivery to decide to terminate an account.

8. Timing of notices. A renewal notice is deemed to be provided when mailed or delivered. Similarly, notice of termination is deemed to be given when mailed or delivered.

9. Prompt reversal of renewal fee upon termination. In a situation where a cardholder has provided timely notice of termination and a renewal fee has been billed to a cardholder's account, the card issuer must reverse or otherwise withdraw the fee promptly. Once a cardholder has terminated an account, no additional action by the cardholder may be required.

9(e)(3)  Notification on Periodic Statements

1. Combined disclosures. If a single disclosure is used to comply with both §§226.9(e) and 226.7, the periodic statement must comply with the rules in §§226.5a and 226.7. For example, the words grace period must be used and the name of the balance calculation method must be identified (if listed in §226.5a(g)) to comply with the requirements of §226.5a, even though the use of those terms would not otherwise be required for periodic statements under §226.7. A card issuer may include some of the renewal disclosures on a periodic statement and others on a separate document so long as there is some reference indicating that they relate to one another. All renewal disclosures must be provided to a cardholder at the same time.

2. Preprinted notices on periodic statements. A card issuer may preprint the required information on its periodic statements. A card issuer that does so, however, using the advance notice option under §226.9(e)(1), must make clear on the periodic statement when the preprinted renewal disclosures are applicable. For example, the card issuer could include a special notice (not preprinted) at the appropriate time that the renewal fee will be billed in the following billing cycle, or could show the renewal date as a regular (preprinted) entry on all periodic statements.

9(f)  Change in Credit Card Account Insurance Provider

1. Coverage. This paragraph applies to credit card accounts of the type subject to §226.5a if credit insurance (typically life, disability, and unemployment insurance) is offered on the outstanding balance of such an account. (Credit card accounts subject to §226.9(f) are the same as those subject to §226.9(e); see comment 9(e)–1.) Charge card accounts are not covered by this paragraph. In addition, the disclosure requirements of this paragraph apply only where the card issuer initiates the change in insurance providers. For example, if the card issuer's current insurance provider is merged into or acquired by another company, these disclosures would not be required. Disclosures also need not be given in cases where card issuers pay for credit insurance themselves and do not separately charge the cardholder.

2. No increase in rate or decrease in coverage. The requirement to provide the disclosure arises when the card issuer changes the provider of insurance, even if there will be no increase in the premium rate charged the consumer and no decrease in coverage under the insurance policy.

3. Form of notice. If a substantial decrease in coverage will result from the change in providers, the card issuer either must explain the decrease or refer to an accompanying copy of the policy or group certificate for details of the new terms of coverage. (See the commentary to appendix G–13.)

4. Discontinuation of insurance. In addition to stating that the cardholder may cancel the insurance, the card issuer may explain the effect the cancellation would have on the consumer's credit card plan.

5. Mailing by third party. Although the card issuer is responsible for the disclosures, the insurance provider or another third party may furnish the disclosures on the card issuer's behalf.

9(f)(3)  Substantial Decrease in Coverage

1. Determination. Whether a substantial decrease in coverage will result from the change in providers is determined by the two-part test in §226.9(f)(3): First, whether the decrease is in a significant term of coverage; and second, whether the decrease might reasonably be expected to affect a cardholder's decision to continue the insurance. If both conditions are met, the decrease must be disclosed in the notice.

References

Statute: Section 127(a)(7).

Other sections: Sections 226.4 through 226.7 and appendix G.

Previous regulation: Section 226.7 (d) through (f) and (j) and Interpretation §§226.705 and 226.708.

1981 changes: Section 226.9(a) implements the statutory change that the long-form statement of billing rights be provided only once a year. The provision now permits two rather than one means of providing the long-form statement to consumers. The verbatim text of the annual statement is no longer required; creditors may use any version “substantially similar” to the one in appendix G. If the creditor elects to use the alternative summary statement, the new regulation no longer requires that the long-form statement be sent upon receiving a billing error notice and at the consumer's request. The rules in §226.708 on switching the type of billing rights statement used have been modified.

Under §226.9(b) disclosure requirements have been streamlined when supplemental credit devices or new credit features are added to an existing open-end plan.

Section 226.9(c) substantially changes the change-in-terms rules. Change-in-terms disclosures must now be made 15 days before the effective date of the change, rather than 15 days before the billing cycle in which the change will take effect. The kinds of changes that will trigger disclosures have been reduced: change-in-terms notices are no longer required for the types of changes described in §226.9(c)(2). But the provision reverses Interpretation §226.705, which indicated that certain changes in the balance computation method did not require disclosure because they could result in lowered finance charges; now, any change in the balance computation method requires disclosure.

When a finance charge is imposed at the time of a transaction, §226.9(d) only requires disclosure of the finance charge at point of sale; the amount financed and annual percentage rate figured in accordance with the closed-end credit provisions need no longer be disclosed. Furthermore, the finance charge disclosure now may be made orally by the person honoring the card.

The following is the revision to this section of the Official Staff Interpretations, effective 7/1/2010:

Section 226.9—Subsequent Disclosure Requirements

9(a) Furnishing statement of billing rights .

9(a)(1) Annual statement .

1. General . The creditor may provide the annual billing rights statement:

i. By sending it in one billing period per year to each consumer that gets a periodic statement for that period; or

ii. By sending a copy to all of its accountholders sometime during the calendar year but not necessarily all in one billing period (for example, sending the annual notice in connection with renewal cards or when imposing annual membership fees).

2. Substantially similar . See the commentary to Model Forms G–3 and G–3(A) in Appendix G to part 226.

9(a)(2) Alternative summary statement .

1. Changing from long-form to short form statement and vice versa . If the creditor has been sending the long-form annual statement, and subsequently decides to use the alternative summary statement, the first summary statement must be sent no later than 12 months after the last long-form statement was sent. Conversely, if the creditor wants to switch to the long-form, the first long-form statement must be sent no later than 12 months after the last summary statement.

2. Substantially similar . See the commentary to Model Forms G–4 and G–4(A) in Appendix G to part 226.

9(b) Disclosures for supplemental credit access devices and additional features .

1. Credit access device—examples. Credit access device includes, for example, a blank check, payee-designated check, blank draft or order, or authorization form for issuance of a check; it does not include a check issued payable to a consumer representing loan proceeds or the disbursement of a cash advance.

2. Credit account feature—examples . A new credit account feature would include, for example:

i. The addition of overdraft checking to an existing account (although the regular checks that could trigger the overdraft feature are not themselves “devices”).

ii. The option to use an existing credit card to secure cash advances, when previously the card could only be used for purchases.

Paragraph 9(b)(2) .

1. Different finance charge terms . Except as provided in §226.9(b)(3) for checks that access a credit card account, if the finance charge terms are different from those previously disclosed, the creditor may satisfy the requirement to give the finance charge terms either by giving a complete set of new account-opening disclosures reflecting the terms of the added device or feature or by giving only the finance charge disclosures for the added device or feature.

9(b)(3) Checks that access a credit card account .

9(b)(3)(i) Disclosures .

1. Front of the page containing the checks . The following would comply with the requirement that the tabular disclosures provided pursuant to §226.9(b)(3) appear on the front of the page containing the checks:

i. Providing the tabular disclosure on the front of the first page on which checks appear, for an offer where checks are provided on multiple pages;

ii. Providing the tabular disclosure on the front of a mini-book or accordion booklet containing the checks; or

iii. Providing the tabular disclosure on the front of the solicitation letter, when the checks are printed on the front of the same page as the solicitation letter even if the checks can be separated by the consumer from the solicitation letter using perforations.

Paragraph 9(b)(3)(i)(D) .

1. Grace period . Creditors may use the following language to describe a grace period on check transactions: “Your due date is [at least]__days after the close of each billing cycle. We will not charge you interest on check transactions if you pay your entire balance by the due date each month.” Creditors may use the following language to describe that no grace period on check transactions is offered, as applicable: “We will begin charging interest on these checks on the transaction date.”

9(c) Change in terms .

9(c)(1) Rules affecting home-equity plans .

1. Changes initially disclosed . No notice of a change in terms need be given if the specific change is set forth initially, such as: rate increases under a properly disclosed variable-rate plan, a rate increase that occurs when an employee has been under a preferential rate agreement and terminates employment, or an increase that occurs when the consumer has been under an agreement to maintain a certain balance in a savings account in order to keep a particular rate and the account balance falls below the specified minimum. The rules in §226.5b(f) relating to home-equity plans limit the ability of a creditor to change the terms of such plans.

2. State law issues . Examples of issues not addressed by §226.9(c) because they are controlled by state or other applicable law include:

i. The types of changes a creditor may make. (But see §226.5b(f))

ii. How changed terms affect existing balances, such as when a periodic rate is changed and the consumer does not pay off the entire existing balance before the new rate takes effect.

3. Change in billing cycle . Whenever the creditor changes the consumer's billing cycle, it must give a change-in-terms notice if the change either affects any of the terms required to be disclosed under §226.6(a) or increases the minimum payment, unless an exception under §226.9(c)(1)(ii) applies; for example, the creditor must give advance notice if the creditor initially disclosed a 25-day grace period on purchases and the consumer will have fewer days during the billing cycle change.

9(c)(1)(i) Written notice required .

1. Affected consumers . Change-in-terms notices need only go to those consumers who may be affected by the change. For example, a change in the periodic rate for check overdraft credit need not be disclosed to consumers who do not have that feature on their accounts.

2. Timing—effective date of change . The rule that the notice of the change in terms be provided at least 15 days before the change takes effect permits mid-cycle changes when there is clearly no retroactive effect, such as the imposition of a transaction fee. Any change in the balance computation method, in contrast, would need to be disclosed at least 15 days prior to the billing cycle in which the change is to be implemented.

3. Timing—advance notice not required . Advance notice of 15 days is not necessary—that is, a notice of change in terms is required, but it may be mailed or delivered as late as the effective date of the change—in two circumstances:

i. If there is an increased periodic rate or any other finance charge attributable to the consumer's delinquency or default.

ii. If the consumer agrees to the particular change. This provision is intended for use in the unusual instance when a consumer substitutes collateral or when the creditor can advance additional credit only if a change relatively unique to that consumer is made, such as the consumer's providing additional security or paying an increased minimum payment amount. Therefore, the following are not “agreements” between the consumer and the creditor for purposes of §226.9(c)(1)(i): The consumer's general acceptance of the creditor's contract reservation of the right to change terms; the consumer's use of the account (which might imply acceptance of its terms under state law); and the consumer's acceptance of a unilateral term change that is not particular to that consumer, but rather is of general applicability to consumers with that type of account.

4. Form of change-in-terms notice . A complete new set of the initial disclosures containing the changed term complies with §226.9(c)(1)(i) if the change is highlighted in some way on the disclosure statement, or if the disclosure statement is accompanied by a letter or some other insert that indicates or draws attention to the term change.

5. Security interest change—form of notice . A copy of the security agreement that describes the collateral securing the consumer's account may be used as the notice, when the term change is the addition of a security interest or the addition or substitution of collateral.

6. Changes to home-equity plans entered into on or after November 7, 1989 . Section 226.9(c)(1) applies when, by written agreement under §226.5b(f)(3)(iii), a creditor changes the terms of a home-equity plan—entered into on or after November 7, 1989—at or before its scheduled expiration, for example, by renewing a plan on terms different from those of the original plan. In disclosing the change:

i. If the index is changed, the maximum annual percentage rate is increased (to the limited extent permitted by §226.30), or a variable-rate feature is added to a fixed-rate plan, the creditor must include the disclosures required by §226.5b(d)(12)(x) and (d)(12)(xi), unless these disclosures are unchanged from those given earlier.

ii. If the minimum payment requirement is changed, the creditor must include the disclosures required by §226.5b(d)(5)(iii) (and, in variable-rate plans, the disclosures required by §226.5b(d)(12)(x) and (d)(12)(xi)) unless the disclosures given earlier contained representative examples covering the new minimum payment requirement. (See the commentary to §226.5b(d)(5)(iii), (d)(12)(x) and (d)(12)(xi) for a discussion of representative examples.)

iii. When the terms are changed pursuant to a written agreement as described in §226.5b(f)(3)(iii), the advance-notice requirement does not apply.

9(c)(1)(ii) Notice not required .

1. Changes not requiring notice . The following are examples of changes that do not require a change-in-terms notice:

i. A change in the consumer's credit limit.

ii. A change in the name of the credit card or credit card plan.

iii. The substitution of one insurer for another.

iv. A termination or suspension of credit privileges. (But see §226.5b(f).)

v. Changes arising merely by operation of law; for example, if the creditor's security interest in a consumer's car automatically extends to the proceeds when the consumer sells the car.

2. Skip features . If a credit program allows consumers to skip or reduce one or more payments during the year, or involves temporary reductions in finance charges, no notice of the change in terms is required either prior to the reduction or upon resumption of the higher rates or payments if these features are explained on the initial disclosure statement (including an explanation of the terms upon resumption). For example, a merchant may allow consumers to skip the December payment to encourage holiday shopping, or a teachers' credit union may not require payments during summer vacation. Otherwise, the creditor must give notice prior to resuming the original schedule or rate, even though no notice is required prior to the reduction. The change-in-terms notice may be combined with the notice offering the reduction. For example, the periodic statement reflecting the reduction or skip feature may also be used to notify the consumer of the resumption of the original schedule or rate, either by stating explicitly when the higher payment or charges resume, or by indicating the duration of the skip option. Language such as “You may skip your October payment,” or “We will waive your finance charges for January,” may serve as the change-in-terms notice.

9(c)(1)(iii) Notice to restrict credit .

1. Written request for reinstatement . If a creditor requires the request for reinstatement of credit privileges to be in writing, the notice under §226.9(c)(1)(iii) must state that fact.

2. Notice not required . A creditor need not provide a notice under this paragraph if, pursuant to the commentary to §226.5b(f)(2), a creditor freezes a line or reduces a credit line rather than terminating a plan and accelerating the balance.

9(c)(2) Rules affecting open-end (not home-secured) plans .

1. Changes initially disclosed . Except as provided in §226.9(g)(1), no notice of a change in terms need be given if the specific change is set forth initially, such as a rate increases under a properly disclosed variable-rate plan. In contrast, notice must be given if the contract allows the creditor to increase the rate at its discretion.

2. State law issues . Some issues are not addressed by §226.9(c)(2) because they are controlled by state or other applicable law, such as 12 CFR 227.24. These issues include:

i. The types of changes a creditor may make.

ii. How changed terms affect existing balances, such as when a periodic rate is changed and the consumer does not pay off the entire existing balance before the new rate takes effect.

3. Change in billing cycle . Whenever the creditor changes the consumer's billing cycle, it must give a change-in-terms notice if the change either affects any of the terms described in §226.9(c)(2)(i), unless an exception under §226.9(c)(2)(ii) or (c)(2)(iv) applies; for example, the creditor must give advance notice if the creditor initially disclosed a 28-day grace period on purchases and the consumer will have fewer days during the billing cycle change.

9(c)(2)(i) Changes where written advance notice is required .

1. Affected consumers . Change-in-terms notices need only go to those consumers who may be affected by the change. For example, a change in the periodic rate for check overdraft credit need not be disclosed to consumers who do not have that feature on their accounts. If a single credit account involves multiple consumers that may be affected by the change, the creditor should refer to §226.5(d) to determine the number of notices that must be given.

2. Timing—effective date of change . The rule that the notice of the change in terms be provided at least 45 days before the change takes effect permits mid-cycle changes when there is clearly no retroactive effect, such as the imposition of a transaction fee. Any change in the balance computation method, in contrast, would need to be disclosed at least 45 days prior to the billing cycle in which the change is to be implemented.

3. Timing—advance notice not required . Advance notice of 45 days is not necessary—that is, a notice of change in terms is required, but it may be mailed or delivered as late as the effective date of the change if the consumer agrees to the particular change. This provision is intended for use in the unusual instance when a consumer substitutes collateral or when the creditor can advance additional credit only if a change relatively unique to that consumer is made, such as the consumer's providing additional security or paying an increased minimum payment amount. Therefore, the following are not “agreements” between the consumer and the creditor for purposes of §226.9(c)(2)(i): The consumer's general acceptance of the creditor's contract reservation of the right to change terms; the consumer's use of the account (which might imply acceptance of its terms under state law); and the consumer's acceptance of a unilateral term change that is not particular to that consumer, but rather is of general applicability to consumers with that type of account.

4. Form of change-in-terms notice . Except if §226.9(c)(2)(iii) applies, a complete new set of the initial disclosures containing the changed term complies with §226.9(c)(2)(i) if the change is highlighted on the disclosure statement, or if the disclosure statement is accompanied by a letter or some other insert that indicates or draws attention to the term being changed.

5. Security interest change—form of notice . A copy of the security agreement that describes the collateral securing the consumer's account may be used as the notice, when the term change is the addition of a security interest or the addition or substitution of collateral.

6. Examples . See comment 9(g)–1 for examples of how an issuer that is subject to 12 CFR 227.24 or similar law may comply with the timing requirements for notices required by §226.9(c)(2)(i).

9(c)(2)(ii) Charges not covered by §226.6(b)(1) and (b)(2) .

1. Applicability . Generally, if a creditor increases any component of a charge, or introduces a new charge, that is imposed as part of the plan under §226.6(b)(3) but is not required to be disclosed as part of the account-opening summary table under §226.6(b)(1) and (b)(2), the creditor may either, at its option provide at least 45 days' written advance notice before the change becomes effective to comply with the requirements of §226.9(c)(2)(i), or provide notice orally or in writing, or electronically if the consumer requests the service electronically, of the amount of the charge to an affected consumer before the consumer agrees to or becomes obligated to pay the charge, at a time and in a manner that a consumer would be likely to notice the disclosure. (See the commentary under §226.5(a)(1)(iii) regarding disclosure of such changes in electronic form.) For example, a fee for expedited delivery of a credit card is a charge imposed as part of the plan under §226.6(b)(3) but is not required to be disclosed in the account-opening summary table under §226.6(b)(1) and (b)(2). If a creditor changes the amount of that expedited delivery fee, the creditor may provide written advance notice of the change to affected consumers at least 45 days before the change becomes effective. Alternatively, the creditor may provide oral or written notice, or electronic notice if the consumer requests the service electronically, of the amount of the charge to an affected consumer before the consumer agrees to or becomes obligated to pay the charge, at a time and in a manner that the consumer would be likely to notice the disclosure. (See comment 5(b)(1)(ii)–1 for examples of disclosures given at a time and in a manner that the consumer would be likely to notice them.)

9(c)(2)(iii) Disclosure requirements .

9(c)(2)(iii)(A) Changes to terms described in account-opening table .

1. Changing margin for calculating a variable rate . If a creditor is changing a margin used to calculate a variable rate, the creditor must disclose the amount of the new rate (as calculated using the new margin) in the table described in §226.9(c)(2)(iii), and include a reminder that the rate is a variable rate. For example, if a creditor is changing the margin for a variable rate that uses the prime rate as an index, the creditor must disclose in the table the new rate (as calculated using the new margin) and indicate that the rate varies with the market based on the prime rate.

2. Changing index for calculating a variable rate . If a creditor is changing the index used to calculate a variable rate, the creditor must disclose the amount of the new rate (as calculated using the new index) and indicate that the rate varies and the how the rate is determined, as explained in §226.6(b)(2)(i)(A). For example, if a creditor is changing from using a prime rate to using the LIBOR in calculating a variable rate, the creditor would disclose in the table the new rate (using the new index) and indicate that the rate varies with the market based on the LIBOR.

3. Changing from a variable rate to a non-variable rate. If a creditor is changing from a variable rate to a non-variable rate, the creditor must disclose the amount of the new rate (that is, the non-variable rate) in the table.

4. Changing from a non-variable rate to a variable rate. If a creditor is changing from a non-variable rate to a variable rate, the creditor must disclose the amount of the new rate (the variable rate using the index and margin), and indicate that the rate varies with the market based on the index used, such as the prime rate or the LIBOR.

5. Changes in the penalty rate, the triggers for the penalty rate, or how long the penalty rate applies. If a creditor is changing the amount of the penalty rate, the creditor must also redisclose the triggers for the penalty rate and the information about how long the penalty rate applies even if those terms are not changing. Likewise, if a creditor is changing the triggers for the penalty rate, the creditor must redisclose the amount of the penalty rate and information about how long the penalty rate applies. If a creditor is changing how long the penalty rate applies, the creditor must redisclose the amount of the penalty rate and the triggers for the penalty rate, even if they are not changing.

6. Changes in fees. If a creditor is changing part of how a fee that is disclosed in a tabular format under §226.6(b)(1) and (b)(2) is determined, the creditor must redisclose all relevant information related to that fee regardless of whether this other information is changing. For example, if a creditor currently charges a cash advance fee of “Either $5 or 3% of the transaction amount, whichever is greater. (Max: $100),” and the creditor is only changing the minimum dollar amount from $5 to $10, the issuer must redisclose the other information related to how the fee is determined. For example, the creditor in this example would disclose the following: “Either $10 or 3% of the transaction amount, whichever is greater. (Max: $100).”

7. Combining a notice described in §226.9(c)(2)(iii) with a notice described in §226.9(g)(3). If a creditor is required to provide a notice described in §226.9(c)(2)(iii) and a notice described in §226.9(g)(3) to a consumer, the creditor may combine the two notices. This would occur if penalty pricing has been triggered, and other terms are changing on the consumer's account at the same time.

8. Content. Sample G–20 contains an example of how to comply with the requirements in §226.9(c)(2)(iii) when the following terms are being changed: (i) a variable rate is being changed to a non-variable rate; and (ii) the late payment fee is being increased in accordance with a formula that depends on the outstanding balance on the account. The sample explains when the new rate will apply to new transactions and to which balances the current rate will continue to apply.

9. Clear and conspicuous standard. See comment 5(a)(1)–1 for the clear and conspicuous standard applicable to disclosures required under §226.9(c)(2)(iii)(A)(1).

10. Terminology. See §226.5(a)(2) for terminology requirements applicable to disclosures required under §226.9(c)(2)(iii)(A)(1).

9(c)(2)(iv) Notice not required.

1. Changes not requiring notice. The following are examples of changes that do not require a change-in-terms notice:

i. A change in the consumer's credit limit except as otherwise required by §226.9(c)(2)(v).

ii. A change in the name of the credit card or credit card plan.

iii. The substitution of one insurer for another.

iv. A termination or suspension of credit privileges.

v. Changes arising merely by operation of law; for example, if the creditor's security interest in a consumer's car automatically extends to the proceeds when the consumer sells the car.

2. Skip features. If a credit program allows consumers to skip or reduce one or more payments during the year, or involves temporary reductions in finance charges, no notice of the change in terms is required either prior to the reduction or upon resumption of the higher rates or payments if these features are explained on the account-opening disclosure statement (including an explanation of the terms upon resumption). For example, a merchant may allow consumers to skip the December payment to encourage holiday shopping, or a teacher's credit union may not require payments during summer vacation. Otherwise, the creditor must give notice prior to resuming the original schedule or rate, even though no notice is required prior to the reduction. The change-in-terms notice may be combined with the notice offering the reduction. For example, the periodic statement reflecting the reduction or skip feature may also be used to notify the consumer of the resumption of the original schedule or rate, either by stating explicitly when the higher payment or charges resume or by indicating the duration of the skip option. Language such as “You may skip your October payment,” or “We will waive your interest charges for January” may serve as the change-in-terms notice.

3. Changing from a variable rate to a non-variable rate. If a creditor is changing a rate applicable to a consumer's account from a variable rate to a non-variable rate, the creditor must provide a notice as otherwise required under §226.9(c) even if the variable rate at the time of the change is higher than the non-variable rate. (See comment 9(c)(2)(iii)(A)–3.)

4. Changing from a non-variable rate to a variable rate. If a creditor is changing a rate applicable to a consumer's account from a non-variable rate to a variable rate, the creditor must provide a notice as otherwise required under §226.9(c) even if the non-variable rate is higher than the variable rate at the time of the change. (See comment 9(c)(2)(iii)(A)–4.)

9(d) Finance charge imposed at time of transaction.

1. Disclosure prior to imposition. A person imposing a finance charge at the time of honoring a consumer's credit card must disclose the amount of the charge, or an explanation of how the charge will be determined, prior to its imposition. This must be disclosed before the consumer becomes obligated for property or services that may be paid for by use of a credit card. For example, disclosure must be given before the consumer has dinner at a restaurant, stays overnight at a hotel, or makes a deposit guaranteeing the purchase of property or services.

9(e) Disclosures upon renewal of credit or charge card.

1. Coverage. This paragraph applies to credit and charge card accounts of the type subject to §226.5a. (See §226.5a(a)(5) and the accompanying commentary for discussion of the types of accounts subject to §226.5a.) The disclosure requirements are triggered when a card issuer imposes any annual or other periodic fee on such an account, whether or not the card issuer originally was required to provide the application and solicitation disclosures described in §226.5a.

2. Form. The disclosures under this paragraph must be clear and conspicuous, but need not appear in a tabular format or in a prominent location. The disclosures need not be in a form the cardholder can retain.

3. Terms at renewal. Renewal notices must reflect the terms actually in effect at the time of renewal. For example, a card issuer that offers a preferential annual percentage rate to employees during their employment must send a renewal notice to employees disclosing the lower rate actually charged to employees (although the card issuer also may show the rate charged to the general public).

4. Variable rate. If the card issuer cannot determine the rate that will be in effect if the cardholder chooses to renew a variable-rate account, the card issuer may disclose the rate in effect at the time of mailing or delivery of the renewal notice. Alternatively, the card issuer may use the rate as of a specified date within the last 30 days before the disclosure is provided.

5. Renewals more frequent than annual. If a renewal fee is billed more often than annually, the renewal notice should be provided each time the fee is billed. In this instance, the fee need not be disclosed as an annualized amount. Alternatively, the card issuer may provide the notice no less than once every 12 months if the notice explains the amount and frequency of the fee that will be billed during the time period covered by the disclosure, and also discloses the fee as an annualized amount. The notice under this alternative also must state the consequences of a cardholder's decision to terminate the account after the renewal-notice period has expired. For example, if a $2 fee is billed monthly but the notice is given annually, the notice must inform the cardholder that the monthly charge is $2, the annualized fee is $24, and $2 will be billed to the account each month for the coming year unless the cardholder notifies the card issuer. If the cardholder is obligated to pay an amount equal to the remaining unpaid monthly charges if the cardholder terminates the account during the coming year but after the first month, the notice must disclose the fact.

6. Terminating credit availability. Card issuers have some flexibility in determining the procedures for how and when an account may be terminated. However, the card issuer must clearly disclose the time by which the cardholder must act to terminate the account to avoid paying a renewal fee. State and other applicable law govern whether the card issuer may impose requirements such as specifying that the cardholder's response be in writing or that the outstanding balance be repaid in full upon termination.

7. Timing of termination by cardholder. When a card issuer provides notice under §226.9(e)(1), a cardholder must be given at least 30 days or one billing cycle, whichever is less, from the date the notice is mailed or delivered to make a decision whether to terminate an account. When notice is given under §226.9(e)(2), a cardholder has 30 days from mailing or delivery to decide to terminate an account.

8. Timing of notices. A renewal notice is deemed to be provided when mailed or delivered. Similarly, notice of termination is deemed to be given when mailed or delivered.

9. Prompt reversal of renewal fee upon termination. In a situation where a cardholder has provided timely notice of termination and a renewal fee has been billed to a cardholder's account, the card issuer must reverse or otherwise withdraw the fee promptly. Once a cardholder has terminated an account, no additional action by the cardholder may be required.

9(e)(3) Notification on periodic statements.

1. Combined disclosures. If a single disclosure is used to comply with both §§226.9(e) and 226.7, the periodic statement must comply with the rules in §§226.5a and 226.7. For example, a description substantially similar to the heading describing the grace period required by §226.5a(b)(5) must be used and the name of the balance-calculation method must be identified (if listed in §226.5a(g)) to comply with the requirements of §226.5a. A card issuer may include some of the renewal disclosures on a periodic statement and others on a separate document so long as there is some reference indicating that the disclosures relate to one another. An example of a sufficient reference for creditors using the delayed notice method is: “Your annual fee of [$ amount] is billed on this statement. Please see [other side/inserts] for important information about the terms that apply to the renewal of your account and how to close your account to avoid paying the annual fee.” All renewal disclosures must be provided to a cardholder at the same time.

2. Preprinted notices on periodic statements. A card issuer may preprint the required information on its periodic statements. A card issuer that does so, however, using the advance-notice option under §226.9(e)(1), must make clear on the periodic statement when the preprinted renewal disclosures are applicable. For example, the card issuer could include a special notice (not preprinted) at the appropriate time that the renewal fee will be billed in the following billing cycle, or could show the renewal date as a regular (preprinted) entry on all periodic statements.

9(f) Change in credit card account insurance provider.

1. Coverage. This paragraph applies to credit card accounts of the type subject to §226.5a if credit insurance (typically life, disability, and unemployment insurance) is offered on the outstanding balance of such an account. (Credit card accounts subject to §226.9(f) are the same as those subject to §226.9(e); see comment 9(e)–1.) Charge card accounts are not covered by this paragraph. In addition, the disclosure requirements of this paragraph apply only where the card issuer initiates the change in insurance provider. For example, if the card issuer's current insurance provider is merged into or acquired by another company, these disclosures would not be required. Disclosures also need not be given in cases where card issuers pay for credit insurance themselves and do not separately charge the cardholder.

2. No increase in rate or decrease in coverage. The requirement to provide the disclosure arises when the card issuer changes the provider of insurance, even if there will be no increase in the premium rate charged to the consumer and no decrease in coverage under the insurance policy.

3. Form of notice. If a substantial decrease in coverage will result from the change in provider, the card issuer either must explain the decrease or refer to an accompanying copy of the policy or group certificate for details of the new terms of coverage. (See the commentary to Appendix G–13 to part 226.)

4. Discontinuation of insurance. In addition to stating that the cardholder may cancel the insurance, the card issuer may explain the effect the cancellation would have on the consumer's credit card plan.

5. Mailing by third party. Although the card issuer is responsible for the disclosures, the insurance provider or another third party may furnish the disclosures on the card issuer's behalf.

9(f)(3) Substantial decrease in coverage.

1. Determination. Whether a substantial decrease in coverage will result from the change in provider is determined by the two-part test in §226.9(f)(3): First, whether the decrease is in a significant term of coverage; and second, whether the decrease might reasonably be expected to affect a cardholder's decision to continue the insurance. If both conditions are met, the decrease must be disclosed in the notice.

9(g) Increase in rates due to delinquency or default or as a penalty.

1. Affected consumers. If a single credit account involves multiple consumers that may be affected by the change, the creditor should refer to Sec. 226.5(d) to determine the number of notices that must be given.

2. Combining a notice described in Sec. 226.9(g)(1) with a notice described in Sec. 226.9(c)(2)(i). If a creditor is required to provide notices pursuant to both Sec. 226.9(c)(2)(i) and (g)(1) to a consumer, the creditor may combine the two notices. This would occur when penalty pricing has been triggered, and other terms are changing on the consumer's account at the same time.

3. Clear and conspicuous standard. See comment 5(a)(1)-1 for the clear and conspicuous standard applicable to disclosures required under Sec. 226.9(g).

9(g)(4) Exceptions.

9(g)(4)(i) Workout or temporary hardship arrangements. See comment 9(c)(2)(v)-6.

9(g)(4)(ii) Decrease in credit limit.

1. The following illustrates the requirements of Sec. 226.9(g)(4)(ii). Assume that a creditor decreased the credit limit applicable to a consumer's account and sent a notice pursuant to Sec. 226.9(g)(4)(ii) on January 1, stating among other things that the penalty rate would apply if the consumer's balance exceeded the new credit limit as of February 16. If the consumer's balance exceeded the credit limit on February 16, the creditor could impose the penalty rate on that date. However, a creditor could not apply the penalty rate if the consumer's balance did not exceed the new credit limit on February 16, even if the consumer's balance had exceeded the new credit limit on several dates between January 1 and February 15. If the consumer's balance did not exceed the new credit limit on February 16 but the consumer conducted a transaction on February 17 that caused the balance to exceed the new credit limit, the general rule in Sec. 226.9(g)(1)(ii) would apply and the creditor would be required to give an additional 45 days' notice prior to imposition of the penalty rate (but under these circumstances the consumer would have no ability to cure the over- the-limit balance in order to avoid penalty pricing).

9(h) Consumer rejection of significant change in terms or increase in annual percentage rate.

9(h)(1) Right to reject.

1. Reasonable requirements for submission of rejections. A creditor may establish reasonable requirements for the submission of rejections of a significant change in terms or other increase in an annual percentage rate for a credit card account. For example:

i. It would be reasonable for a creditor to require that rejections be made by the primary account holder and that the consumer identify the account number.

ii. It would be reasonable for a creditor to require that rejections be made only using the toll-free telephone number disclosed pursuant to Sec. 226.9(c) or (g). It would also be reasonable for a creditor to designate additional channels for the submission of rejections (such as an address for rejections submitted by mail) so long as the creditor does not require that rejections be submitted through such additional channels.

iii. It would be reasonable for a creditor to require that rejections be received before the effective date disclosed pursuant to Sec. 226.9(c) or (g) and to treat the account as not subject to Sec. 226.9(h) if a rejection is received on or after that date. It would not, however, be reasonable to require that rejections be submitted earlier than the day before the effective date. If a creditor is unable to process all rejections received before the effective date, the creditor may delay implementation of the change in terms or rate increase until all rejections have been processed. In the alternative, the creditor could implement the change or increase on the effective date and then, on any account for which a timely rejection was received, reverse the change or increase and remove or credit any interest charges or fees imposed as a result of the change or increase. For example, if the effective date for a rate increase is June 15 and the creditor cannot process all rejections received by telephone on June 14 until June 16, the creditor may delay imposition of the rate increase until June 17. Alternatively, the creditor could impose the increased rate on all affected accounts on June 15 and then, once all rejections have been processed, return any account for which a timely rejection was received to the prior rate and ensure that the account is not assessed any additional interest as a result of the increased rate or that the account is credited for such interest.

2. Use of account following provision of notice. A consumer does not waive or forfeit the right to reject a significant change in terms or a rate increase by using the account for transactions prior to the effective date of the change or increase. Similarly, a consumer does not revoke a rejection by using the account for transactions after the rejection is received. If, however, the account is used for a transaction more than 14 days after provision of the Sec. 226.9(c) or (g) notice, Sec. 226.9(h)(3)(ii) permits the creditor to apply the changed term or increased rate to that transaction even if the consumer rejects the change or increase before the effective date. See example in comment 9(h)(3)(ii)-3.i.

9(h)(2)(i) Prohibition on applying changed term or increased rate.

similar programs. Section 226.9(h)(2)(i) provides that, when a creditor is notified of a rejection of a significant change to an account term or other increase in an annual percentage rate as provided in Sec. 226.9(h)(1), the creditor must not apply the change or increase to the account. However, Sec. 226.9(h)(2)(i) does not prohibit a creditor from applying the terms of a pre- existing promotional rate or deferred interest or similar program. The following examples illustrate the application of Sec. 226.9(h)(2)(i) in these circumstances:

i. Promotional rates. Assume that a credit card account is opened on January 1 of year one and that, on December 31 of year one, the creditor notifies the consumer of the following promotional rate offer: A non-variable annual percentage rate of 5% will apply to purchases for nine months (from January 1 through September 30 of year two) and, beginning on October 1, the rate for purchases will increase to a non-variable rate of 15%. The required minimum periodic payment due on July 5 is not received by the creditor until July 15. On July 15, the account has a purchase balance of $1,000 at the 5% rate. On that same date, the creditor provides a notice pursuant to Sec. 226.9(g) informing the consumer that, consistent with the terms of the cardholder agreement, the rate on the $1,000 balance and for new purchases will increase to a 30% penalty rate on August 29. The notice further states that the consumer may reject the increase by calling a specified toll-free telephone number before August 29 but that, if the consumer does so, credit availability for the account will be terminated. On July 31, the consumer calls the toll-free telephone number and rejects the increase. Section 226.9(h)(2)(i) prohibits the creditor from increasing the rate applicable to the $1,000 balance at this time. However, consistent with the terms of the promotional rate offer, Sec. 226.9(h)(2)(i) does not prohibit the creditor from beginning to accrue interest on any remaining portion of the $1,000 balance at 15% on October 1. Furthermore, pursuant to Sec. 226.9(c)(2)(v)(B), the creditor is not required to provide advance notice of this increase.

ii. Deferred interest and similar programs. Assume that a credit card account is opened on January 1 of year one and that, on December 31 of year one, the creditor notifies the consumer of the following promotional program: Interest on purchases made during the months of January through June of year two will accrue at a non- variable annual percentage rate of 15% but the consumer will not be obligated to pay that accrued interest if all required minimum periodic payments are received by the creditor on or before the payment due date and all purchases made during the six-month period are paid in full by December 31 of year two. On January 15 of year two, the consumer uses the account for a $1,000 purchase. The payment due on September 1 of year two is not received by the creditor until September 15. On that same date, the creditor provides a notice pursuant to Sec. 226.9(g) informing the consumer that on October 30, consistent with the terms of the promotional program, interest accrued on the $1,000 purchase at 15% since January 15 will be added to the outstanding balance account. The notice also states that the consumer may reject the addition of accrued interest to the outstanding balance by calling a specified toll-free telephone number before October 30 but that, if the consumer does so, credit availability for the account will be terminated. On October 1, the consumer calls the toll-free telephone number and exercises the right to reject. Section 226.9(h)(2)(i) prohibits the creditor from adding the accrued interest to the outstanding balance at this time. However, on January 1 of year three, Sec. 226.9(h)(2)(i) does not prohibit the creditor from, consistent with the terms of the promotional program, adding interest accrued on the $1,000 purchase at 15% since January 15 of year two to the outstanding balance if the $1,000 purchase is not paid in full by December 31 of year two. Furthermore, pursuant to Sec. 226.9(c)(2)(v)(B), the creditor is not required to provide advance notice of this increase.

9(h)(2)(ii) Prohibition on penalties.

1. Solely as a result of rejection. A creditor is prohibited from imposing a fee or charge or treating an account as in default solely as a result of the consumer's rejection of a significant change in terms or a rate increase. For example, a creditor is prohibited from imposing a monthly maintenance fee that would be charged only if the consumer rejected the change or increase. A creditor is not, however, prohibited from continuing to charge a fee that was charged before the rejection. For example, a creditor that charged a periodic fee or a fee for late payment before a change or increase was rejected is not prohibited from charging those fees after rejection of the change or increase.

2. Termination of credit availability. Section 226.9(h)(2)(ii) does not prohibit a creditor from terminating or suspending credit availability if the consumer rejects a significant change in terms or a rate increase. If, however, the creditor elects not to terminate or suspend credit availability for consumers who reject a change or increase, Sec. 226.9(h)(3)(ii) permits the creditor to apply the changed term or increased rate to transactions that occur more than 14 days after provision of the Sec. 226.9(c) or (g) notice. See example in comment 9(h)(3)(ii)-3.ii.

9(h)(2)(iii) Repayment of outstanding balance.

1. No less beneficial to the consumer. A creditor may provide a method of repaying the balance subject to Sec. 226.9(h)(2)(iii) that is different from the methods listed in Sec. 226.9(h)(2)(iii) so long as the method used is no less beneficial to the consumer than one of the listed methods. A method is no less beneficial to the consumer if the method results in a required minimum periodic payment that is equal to or less than a minimum payment calculated using the method for the account prior to the date on which the creditor received the rejection. Similarly, a method is no less beneficial to the consumer if the method amortizes the balance in five years or longer or if the method results in a required minimum periodic payment that is equal to or less than a minimum payment calculated consistent with Sec. 226.9(h)(2)(iii)(C). For example:

i. If at account opening the cardholder agreement stated that the required minimum periodic payment would be either the total of fees and interest charges plus 1% of the total amount owed or $20 (whichever is greater), the creditor may require the consumer to make a minimum payment of $20 even if doing so would pay off the balance in less than five years or constitute more than 2% of the balance plus fees and interest charges.

ii. A creditor could increase the percentage of the balance included in the required minimum periodic payment from 2% to 5% so long as doing so would not result in amortization of the balance in less than five years.

iii. A creditor could require the consumer to make a required minimum periodic payment that amortizes the balance in four years so long as doing so would not more than double the percentage of the balance included in the minimum payment prior to the date on which the creditor was notified of the rejection.

9(h)(2)(iii)(B) Five-year amortization period.

1. Amortization period starting from date on which creditor was notified of rejection. Section 226.9(h)(2)(iii)(B) provides for an amortization period for the balance subject to Sec. 226.9(h)(2)(iii) of no less than five years, beginning no earlier than the date on which the creditor was notified of the rejection. A creditor is not required to recalculate the required minimum periodic payment for the balance if, during the amortization period, the balance is reduced as a result of payments by the consumer in excess of that minimum payment.

2. Amortization when applicable rate is variable. If the annual percentage rate that applies to the balance subject to Sec. 226.9(h)(2)(iii) varies with an index, the creditor may adjust the interest charges included in the required minimum periodic payment for that balance accordingly in order to ensure that the balance is amortized in five years. For example, assume that a variable rate that is currently 15% applies to a balance subject to Sec. 226.9(h)(2)(iii) and that, in order to amortize that balance in five years, the required minimum periodic payment must include a specific amount of principal plus all accrued interest charges. If the 15% variable rate increases due to an increase in the index, the creditor may increase the required minimum periodic payment to include the additional interest charges.

9(h)(2)(iii)(C) Doubling repayment rate.

1. Example. Assume that the method used by a creditor to calculate the required minimum periodic payment for a credit card account requires the consumer to pay either the total of fees and accrued interest charges plus 2% of the total amount owed or $50, whichever is greater. Assume also that, on the date on which the creditor is notified of the rejection, the account has a balance subject to Sec. 226.9(h)(2)(iii) of $2,000. Following rejection, Sec. 226.9(h)(2)(iii)(C) permits the creditor to require the consumer to pay fees and interest plus 4% of the $2,000 balance or $50, whichever is greater.

9(h)(3) Exceptions.

apply. As a general matter, Sec. 226.9(h) applies when Sec. 226.9(c)(2)(iv) or (g)(3) require disclosure of the consumer's right to reject a significant change to an account term or other increase in an annual percentage rate. Accordingly, in addition to the circumstances listed in Sec. 226.9(h)(3), Sec. 226.9(h) does not apply to home equity plans subject to the requirements of Sec. 226.5b that are accessible by a credit or charge card because Sec. 226.9(c)(2) and 226.9(g) do not apply to such plans. Similarly, Sec. 226.9(h) does not apply when the required minimum periodic payment is increased because Sec. 226.9(c)(2)(iv) does not require disclosure of the right to reject in those circumstances.

9(h)(3)(i) Delinquencies of more than 60 days.

1. Examples. Section 226.9(h)(3)(i) provides that Sec. 226.9(h) does not apply when the creditor has not received the consumer's required minimum periodic payment within 60 days after the due date for that payment. The following examples illustrate the application of this exception:

i. Account becomes more than 60 days delinquent before notice provided. Assume that a credit card account is opened on January 1 of year one and that the payment due date for the account is the fifteenth day of the month. On June 20 of year two, the account has a purchase balance of $5,000 at a non-variable annual percentage rate of 17% and the creditor has not received the required minimum periodic payments due on April 15, May 15, and June 15. On June 20, the creditor provides a notice pursuant to Sec. 226.9(g) informing the consumer that, consistent with the terms of the cardholder agreement, the rate for the $5,000 balance and for new purchases will increase to a non-variable penalty rate of 28% on August 4. Because the creditor has not received the April 15 minimum payment within 60 days after the due date, the exception in Sec. 226.9(h)(3)(i) applies and the consumer may not reject the rate increase. Even if the consumer closes or cancels the account before August 4, the creditor may apply the increased rate to the $5,000 balance.

ii. Account becomes more than 60 days delinquent after rejection. Assume that a credit card account is opened on January 1 of year one and that the payment due date for the account is the fifteenth day of the month. On April 20 of year two, the account has a purchase balance of $2,000 at a non-variable annual percentage rate of 15% and the creditor has not received the required minimum periodic payment due on April 15. On April 20, the creditor provides a notice pursuant to Sec. 226.9(g) informing the consumer that, consistent with the terms of the cardholder agreement, the rate for the $2,000 balance and for new purchases will increase to a non- variable penalty rate of 28% on June 4. The notice further states that the consumer may reject the increase by calling a specified toll-free telephone number before June 4 but that, if the consumer does so, credit availability for the account will be terminated. On May 5, the consumer calls the toll-free telephone number and rejects the increase. On June 4, Sec. 226.9(h) prohibits the creditor from applying the 28% rate to the $2,000 balance. If, however, the creditor does not receive the minimum payments due on April 15 and May 15 by June 15, Sec. 226.9(h)(3)(i) permits the creditor to increase the rate that applies to the $2,000 balance. The creditor must comply with the notice requirements of Sec. 226.9(g), but the consumer may not reject the increase. Similarly, the restrictions in Sec. 226.9(h)(2)(ii) and (iii) no longer apply to the $2,000 balance.

9(h)(3)(ii) Transactions that occur more than 14 days after provision of notice.

1. Application of Sec. 226.9(h)(3)(ii). Section 226.9(h)(3)(ii) permits a creditor to apply a changed term or increased rate to transactions that occur more than 14 days after provision of the notice required by Sec. 226.9(c) or (g). Section 226.9(h)(3)(ii) does not, however, permit a creditor to reach back to days before the effective date of the change in terms or rate increase when calculating interest charges. See examples in comment 9(h)(3)(ii)-3. Furthermore, because the exception in Sec. 226.9(h)(3)(ii) is limited to changed terms and increased rates that can be applied to transactions, it does not permit a creditor to apply a changed term to the entire account simply because the account was used for a transaction more than 14 days after provision of a Sec. 226.9(c) or (g) notice. For example, if a consumer rejects an increase in a periodic fee or late payment fee, the creditor is prohibited from applying the increased fee to the account even if the account is used for a transaction more than 14 days after provision of the Sec. 226.9(c) notice. In contrast, Sec. 226.9(h)(3)(ii) does permit a creditor to apply an increased rate or a transaction fee to a transaction that occurred more than 14 days after provision of the Sec. 226.9(c) or (g) notice so long as that increased rate or transaction fee is not applied to other transactions. See examples in comment 9(h)(3)(ii)-3.

2. More than 14 days after provision of notice. Whether a transaction occurred prior to provision of a notice or within 14 days after provision of a notice is generally determined by the date of the transaction. However, if a transaction that occurred within 14 days after provision of the notice is not charged to the account prior to the effective date of the change or increase, the creditor may treat the transaction as occurring more than 14 days after provision of the notice for purposes of Sec. 226.9(h)(3)(ii). See example in comment 9(h)(3)(ii)-3.iv. In addition, when a merchant places a ``hold'' on the available credit on an account for an estimated transaction amount because the actual transaction amount will not be known until a later date, the date of the transaction for purposes of Sec. 226.9(h)(3)(ii) is the date on which the actual transaction amount is charged to the account. See example in comment 9(h)(3)(ii)-3.iii.

3. Examples. The following examples illustrate the application of Sec. 226.9(h)(3)(ii):

i. Use of account after notice provided. Assume that a credit card account is opened on January 1 of year one. On March 14 of year two, the account has a purchase balance of $2,000 at a non-variable annual percentage rate of 15%. On March 15, the creditor provides a notice pursuant to Sec. 226.9(c) informing the consumer that the rate for the $2,000 balance and for new purchases will increase to a non-variable rate of 18% on April 30. The notice further states that the consumer may reject the increase by calling a specified toll- free telephone number before April 30 but that, if the consumer does so, credit availability for the account will be terminated. The fourteenth day after provision of the notice is March 29 and, on that date, the consumer makes a $200 purchase. On March 30, the consumer makes a $500 purchase. On April 1, the consumer calls the toll-free telephone number and rejects the increase. On April 5, a $150 automated recurring charge is honored by the creditor. On April 30, Sec. 226.9(h)(3)(ii) permits the creditor to begin accruing interest at 18% on the $500 purchase made on March 30 and the $150 transaction made on April 5. The creditor may not, however, apply the 18% rate to the $2,200 purchase balance as of March 29 because that balance reflects transactions that occurred prior to or within 14 days of the provision of the Sec. 226.9(c) notice. Similarly, the restrictions in Sec. 226.9(h)(2)(ii) and (iii) apply to the $2,200 purchase balance as of March 29 but not the $500 purchase made on March 30 and the $150 charge made on April 5.

ii. Credit availability not terminated after rejection. Same facts as paragraph i. above except that the Sec. 226.9(c) notice does not state that the creditor will terminate credit availability if the consumer rejects the increase, which the consumer does on April 1. On April 30, Sec. 226.9(h)(3)(ii) permits the creditor to begin accruing interest at 18% on the $500 purchase made on March 30 and the $150 transaction made on April 5. The creditor may not, however, apply the 18% rate to the $2,200 purchase balance as of March 29 because that balance reflects transactions that occurred prior to or within 14 days of the provision of the Sec. 226.9(c) notice. Similarly, the restrictions in Sec. 226.9(h)(2)(ii) and (iii) apply to the $2,200 purchase balance as of March 29 but not the $500 purchase made on March 30 and the $150 charge made on April 5.

iii. Hold on available credit. Assume that a credit card account is opened on January 1 of year one. On September 14 of year two, the account has a purchase balance of $1,000 at a non-variable annual percentage rate of 17%. On September 15, the creditor provides a notice pursuant to Sec. 226.9(c) informing the consumer that the rate for the $1,000 balance and for new purchases will increase to a non-variable rate of 20% on October 30. The notice further states that the consumer may reject the increase by calling a specified toll-free telephone number before October 30 but that, if the consumer does so, credit availability for the account will be terminated. The fourteenth day after provision of the notice is September 29. On that date, the consumer uses the credit card to check into a hotel and the hotel obtains authorization for a $750 hold on the account to ensure there is adequate available credit to cover the anticipated cost of the stay. On October 1, the consumer calls the toll-free telephone number and rejects the increase. When the consumer checks out of the hotel on October 2, the actual cost of the stay is $850 because of additional incidental costs. On October 2, the $850 transaction is charged to the account by the hotel and honored by the creditor. For purposes of Sec. 226.9(h)(3)(ii), the transaction occurred on October 2.

iv. Transaction charged to account after effective date. Same facts as paragraph iii. above except that the $850 transaction is not charged to the account by the hotel until November 1. For purposes of Sec. 226.9(h)(3)(ii), the creditor may treat the transaction as occurring more than 14 days after provision of the Sec. 226.9(c) notice (i.e., after September 29).

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