Reg Z: Credit Card Alert!

Regulation Z clearly provides that a fee imposed on a credit card customer for exceeding the credit limit on the account is not a finance charge. Thus, credit card issuers have been imposing these fees without including them in the finance charge. A federal court disagrees with Reg Z in this regard. In fact, the court held that the Truth in Lending Act so clearly includes such fees that the FRB's decision to exempt them from the finance charge is outside the scope of their authority. According to the court, all card issuers should be including the fee for exceeding the credit limit in the finance charge.

This decision is generating consternation throughout the industry. Stay tuned. Meanwhile, it is prudent to include over-the-limit fees in the finance charge. The alternative is to waive the fees or not accept a charge that exceeds the limit.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 5, 5/02