Clarifiying again, because I can't put a finger on it directly in the reg (and I'm being told we aren't doing anything unless the reg says we have to):

Personal open-ended lines of credit with variable rate and a floor are subject to the 45 day notice requirements even if they do not have access via card, is that correct?

No mention of access devices in this applicable section:

Effective 10/1/2011, with earlier compliance optional, paragraph (A) above is revised to read as follows:

(A) General. For plans other than home-equity plans subject to the requirements of § 226.5b, except as provided in paragraphs (c)(2)(i)(B), (c)(2)(iii) and (c)(2)(v) of this section, when a significant change in account terms as described in paragraph (c)(2)(ii) of this section is made, a creditor must provide a written notice of the change at least 45 days prior to the effective date of the change to each consumer who may be affected. The 45-day timing requirement does not apply if the consumer has agreed to a particular change as described in paragraph (c)(2)(i)(B) of this section; for such changes, notice must be given in accordance with the timing requirements of paragraph (c)(2)(i)(B) of this section. Increases in the rate applicable to a consumer’s account due to delinquency, default or as a penalty described in paragraph (g) of this section that are not due to a change in the contractual terms of the consumer’s account must be disclosed pursuant to paragraph (g) of this section instead of paragraph (c)(2) of this section.

Thanks!

Is the 45 day notice requirement the only requirement that will affect the personal open-end line of credits??? We already mail out our statements 21 days prior to pymt date. Late coming into this....from prior post I though these changes only affected credit cards...so I'm playing catch up.

Shea- there are changes to the location of certain disclosures in and below the table, changes to periodic statements (includes HELOCs) that have deferred interest, payments (conforming and non-conforming) and advertising.

I was like you and thought it affected only credit cards until I sat down and read the whole thing. Now are playing catch up too! You are NOT alone!

That's not wanted I wanted to hear Skidoo....but thank you for your help. I guess I need to get busy

I am having a real difficult time trying to figure out which rules all to what...We offer PLC and HELOC accounts but neither are accessed by a credit card. Sorry to seem dense, but is there an easy way to determine which rules apply?

IN case anyone else was thinking of a different kind of 'grace period', it helps to read the commentary.

Curiously, does anyone out there have a personal LOC that has the no-interest type grace period that isn't a credit card?

Grace periods.

i. Definition of grace period. For purposes of § 226.5(b)(2)(ii)(B), “grace period” means a period within which any credit extended may be repaid without incurring a finance charge due to a periodic interest rate. A deferred interest or similar promotional program under which the consumer is not obligated to pay interest that accrues on a balance if that balance is paid in full prior to the expiration of a specified period of time is not a grace period for purposes of § 226.5(b)(2)(ii)(B). Similarly, a period following the payment due date during which a late payment fee will not be imposed is not a grace period for purposes of § 226.5(b)(2)(ii)(B). See comments 7(b)(11)-1, 7(b)(11)-2, and 54(a)(1)-2.

ii. Applicability of § 226.5(b)(2)(ii)(B)(1). Section 226.5(b)(2)(ii)(B)(1) applies if an account is eligible for a grace period when the periodic statement is mailed or delivered. Section 226.5(b)(2)(ii)(B)(1) does not require the creditor to provide a grace period or prohibit the creditor from placing limitations and conditions on a grace period to the extent consistent with § 226.5(b)(2)(ii)(B) and § 226.54. See comment 54(a)(1)-1. Furthermore, the prohibition in § 226.5(b)(2)(ii)(B)(1)(ii) applies only during the 21-day period following mailing or delivery of the periodic statement and applies only when the creditor receives a payment within that 21-day period that satisfies the terms of the grace period.

iii. Example. Assume that the billing cycles for an account begin on the first day of the month and end on the last day of the month and that the payment due date for the account is the twenty-fifth of the month. Assume also that, under the terms of the account, the balance at the end of a billing cycle must be paid in full by the following payment due date in order for the account to remain eligible for the grace period. At the end of the April billing cycle, the balance on the account is $500. The grace period applies to the $500 balance because the balance for the March billing cycle was paid in full on April 25. Accordingly, § 226.5(b)(2)(ii)(B)(1)(i) requires the creditor to have reasonable procedures designed to ensure that the periodic statement reflecting the $500 balance is mailed or delivered on or before May 4. Furthermore, § 226.5(b)(2)(ii)(B)(1)(ii) requires the creditor to have reasonable procedures designed to ensure that the creditor does not impose finance charges as a result of the loss of the grace period if a $500 payment is received on or before May 25. However, if the creditor receives a payment of $300 on April 25, § 226.5(b)(2)(ii)(B)(1)(ii) would not prohibit the creditor from imposing finance charges as a result of the loss of the grace period (to the extent permitted by § 226.54).

In my reading of the new rule, I pulled out the following key elements that my bank who does not offer credit cards would have to comply with:

1) Verify if any open-end credit product is designed in a way that a customer could simply provide the loan account number and make a purchase. At our bank, the loan has to be connected to a checking account, so the actual loan account number cannot make purchases; therefore, it is not a credit card.

2) Verify that all open-end credit plans get their periodic statement at least 14 days in advance.

3) If we offer a discounted rate to employees on OD lines and personal lines, if the rate changes after they are no longer employed at the bank we need to give the 45 day notice of the rate change. We would also have to adjust our initial disclosures as additional information would have to appear on the first page of the note. We have no other preferential rates.

4) If we have any variable rate personal lines of credit or OD lines with a floor, we would have to give the customer a 45 day notice of the change.

Am I missing anything major here? We are your typical community bank that offers pretty standard products.

Thanks

Don't the periodic statement changes just apply to those types of open end credit(not home-secured) that is accessible by a credit card??

There are no changes that we need to make to our HELOC or other Open End Lines of Credit periodic statements, right??

This stuff is driving me nuts!!

That's the way I read it, but I'm not positive since others seem to have a different opinion.

I'm basing the 14 day requirment applying to all open-end on 226.5(b)(2)(ii)(1) which is on page 23006 of the Federal Register version. Also, there is discussion on page 22950 of the federal register in the section by section analysis that leads me to this as well.

We had switched everything to 21 days a few years back before that techincal revision came out and never changed it back.

What a mess.

I don't think you have an issue leaving it at 21. Seems many banks changed it back then and left it and will continue to leave it. You just couldn't bill sooner than 14.

notuntermywatch, I agree with you that the 14-day requirement does apply to all open-end. I apologize, I was thinking about all the new statement requirements for credit cards having to do with formatting, etc.

notundermywatch and everyone else, I thank you for your reply's. This has been very helpful.

Okay...sorry but I am still confused. If our bank doesn't offer credit card/debit card access to any of our lines of credit, do these changes apply to us?

I believe that you still would have to look into items 2 - 4 that I mentioned above (regardless of access method). See the following pages in the federal register where there is discussion regarding these items. The link to the FR is here. http://edocket.access.gpo.gov/2011/pdf/2011-8843.pdf

14 day requirement page 22950
Employee rates page 22957
Rate change for lines with a floor page 22969

I agree. That's what I'm seeing so far...maybe along with 'back-up'plans to ensure statements are mailed timely in the event of equipment failure.

Another question, do the provisions that state that an account that can be accessed by the account number to make purchases apply to HELOC's. Sooo confusing! It seems like the definition of credit card excludes HELOC's.

Look to your definition. One of the exceptions is home-secured LOC's accessed by a credit card...you need to look to 5b for your specific HELOC requiremetns.

This is my understanding as well. My question is the following: We have maybe 3-4 open-end LOC (not home secured. They are fixed rate. Statements are mailed 10 days before the due date and 21 days before the end of the grace period (meaning no late fee is charged). Unlike a credit card account we charge interest on any outstanding balance so our grace period would still allow for the charge of interest and in my opnion is not a grace period as defined in Reg Z. I origianlly thought we were okay becasue the statement goes out 21 days before the end of our grace period, since our definiation of grace period doesn't align with Reg z's I believe we need to mail statements 14 days prior to the payment due date. Can anyone else offer an opnion?

Agree. 14 days minimum regardless.

If your lines of credit that are subject to the new 45-day advance notice requirements are already at the floor rate (because your index plus adjuster is low), I would recommend you do a little analysis on what removing the floor will do to your interest income numbers. I thought removing the floor was the easy answer but upon further review it would be a big cut to our current interest income.

On another note, I sent an email to the ABA with some questions and I have been told that the 45-day notice is required whenever there is a change to the index even if the customer's rate is not changing because they are sitting at the floor. In one of the posts I read the notice was only required if the rate changed above the floor. I don't think that is the case. Based on what the ABA says, a notice is required whenever the index changes.

In plain English, what product is this section of the commentary referring to:

However, if the account number can also access the line of credit to purchase goods or services (such as an account number that can be used to purchase goods or services on the Internet), the account number is a credit card for purposes of § 226.2(a)(15)(i), regardless of whether the creditor treats such transactions as purchases, cash advances, or some other type of transaction.

Are they trying to say if you have a personal LOC that can be accessed with checks it is a credit card for these purposes? On the other hand, if you draw on a PLOC and it dumps the money into your personal checking account it is NOT a credit card- is that what they are trying to get at?

On page 22952 of the final rule, as it pertains to loans with automatic payments, footnote (3) says, "Similar to employee preferential rates, the Board notes that 45 days' advance notice is required pursuant to 226.9(g) prior to imposition of the higher rate when the consumer ceases to meet the conditions for the preferential rates." The final rule also says that it does not consider this a "penalty" like it does the employee discount so it does not appear in the table. When we give the 45-days notice then, would we use a Change in Terms Notice (rather than a Penalty Rate Notice like we do for termination of employee rates)?