I'm going to piggy-back on this question using two resources.
Here's a Q&A from the ABA's Staff Analysis from July 2015 followed by an excerpt from the Federal Register. Based on these, it sounds like we could exclude an annual fee from the MAPR if the line of credit had a zero balance but not if the line had a balance outstanding at the time the annual fee was assessed. Furthermore, if we waited until the line had a high outstanding balance before assessing the fee, we might get a MAPR under 36% (which, I'm sure, would be a UDAAP violation). I don't see how this makes sense. Am I misunderstanding the rule?
Q: How does a bank calculate the MAPR of an open-end account if an annual or participation fee is imposed during a billing cycle, but there is no balance for that billing cycle?
A: If an MAPR cannot be calculated because there is no balance, the creditor may not impose any fee or charge during that billing period except for a participation fee or annual fee that is $100 or less. The $100 limit does not apply if the participation fee is “bona fide” as provided in §232(d).6 In other words, if it is a “bona fide” annual fee, it may be excluded from the MAPR calculation.
This is from the Federal Register:
For example, suppose a creditor offers a line of credit to a covered borrower primarily for personal, family, or household purposes (commonly referred to as a “personal line of credit”), and permits the borrower to repay on a monthly basis. Upon establishing the personal line of credit, the covered borrower borrows $500. The creditor charges a periodic rate of 0.006875 (which corresponds to an annual rate of 8.25 percent), plus a fee of $25, charged when the account is established and annually thereafter. Under these circumstances, pursuant to § 1026.14(c)(2) of Regulation Z the creditor would calculate the MAPR as follows: “dividing the total amount of the finance charge for the billing cycle”—which is $3.44 (corresponding to (0.006875) × ($500)), plus $25—“by the amount of the balance to which it is applicable”—$500—and multiplying the quotient (expressed as a percentage) by the number of billing cycles in a year”—12 (since the creditor allows the borrower to repay monthly), which is 68.26 percent. In this example, even though the periodic rate (0.006875) would comply with the interest-rate limit under § 232.4(b), the resultant MAPR would be in excess of that limit because the amount borrowed is low at the time the annual fee is imposed. If the covered borrower instead borrows a higher amount, then the creditor still could impose the $25 annual fee and comply with § 232.4(b); for example, if the amount initially borrowed is $1,400, then the resultant MAPR would be 24.73, well below the 36 percent limit.