We are going to be issuing POS cards with our HELOCs. Do we need to do a Reg E disclosure with the loan or will the ones with the checking account be sufficient? They are calling this a Dummy checking account, but we still have to give all disclosures don't we? Our loan dept was thinking they would have to get sig card, etc.

Cards accessing a credit product (i.e. HELOC) will be treated as a credit card and will be governed by Reg. Z.

I agree with Dan as it sounds like you are actually using the credit line.

Look to Reg. E's OSC at 205.12, — Determining applicable regulation. i. For transactions involving access devices that also function as credit cards, whether Regulation E or Regulation Z (12 CFR part 226) applies depends on the nature of the transaction. For example, if the transaction solely involves an extension of credit, and does not include a debit to a checking account (or other consumer asset account), the liability limitations and error resolution requirements of Regulation Z apply. If the transaction debits a checking account only (with no credit extended), the provisions of Regulation E apply. If the transaction debits a checking account but also draws on an overdraft line of credit attached to the account, Regulation E's liability limitations apply, in addition to §§226.13(d) and (g) of Regulation Z (which apply because of the extension of credit associated with the overdraft feature on the checking account). If a consumer's access device is also a credit card and the device is used to make unauthorized withdrawals from a checking account, but also is used to obtain unauthorized cash advances directly from a line of credit that is separate from the checking account, both Regulation E and Regulation Z apply.

So you may need to look at "Z" and see what disclosures may be needed.

Andy, if I read Reg E and Z correctly, they contradict one another in the issuance of cards. Reg E allows unsolicited cards to be sent if they are not activated. Reg Z did not allow unsolicited cards to be sent. If this reading is correct, can we send unsolicited unactivated cards to our HELOC customers? We're planning on mailing these cards this week - I would GREATLY appreciate your thoughts. Thanks!

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can we send unsolicited unactivated cards to our HELOC customers?

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I'm not Andy, but IMO under the provisions of the OSC to 226.5b(f)(3)(iv), you can. However, I would caution that you should have a very strong activation process in place.

We went through this a couple of years ago and I believe that Reg Z prohibits sending unsolicited cards (Section 226.12a); maybe we took the conservative approach but we required all account holders to respond verbally or in writing before the card would be issued. Reg Z is applicable not Reg E to the issuance of cards for HELOC accounts.

but IMO under the provisions of the OSC to 226.5b(f)(3)(iv), you can.

Thanks for that reference!

I am inclined to follow the lowest common denominator. That means if you are sending a joint access device, one subject to both Reg. E and Reg. Z, I would default to Reg. Z and NOT send unsolicited cards. While I haven't explored Dan's cite in detail, I do not feel it is explicit enough to over-ride 12(a)'s prohibition.

As always, thank you. I have thoroughly read Dan's cite and I still had doubts - I always take the most conservative approach and that would be to not send unsolicited cards. I appreciate everyone's input!!

After re-reading my cite and Andy's cite, I will have to agree you should not send unsolicited cards. My initial thought was you were not issuing an unsolicited credit card, you were only adding an access device, but 12 A indicates that adding a credit feature to a card constitutes the issuance of a credit card. Sorry for the confusion.

Are there two ways to do this? It sounds as if you can access the card directly to the line. If I am understanding our product correctly, a checking account will be opened solely for this purpose with a VISA checkcard issued that can be used. When the POS transaction hits the account it will be covered by a draw on the line. Does this still just require Reg Z and not incur Reg E disclosures?

You should probably check with your operations people to see if the checking account is held a loan or deposit. At our bank, we have a checking account to access the line of credit, but it is carried on the loan side not the deposit side. So it really isn't a (deposit) checking account. It's tied directly to the loan. The checking account number is actually the line number.

Did I see some discussion one other time regarding Checkcard and access to credit? Seems like VISA would not allow a checkcard or debit card to be used to access credit --- it would then be a credit card. Anyone?????

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If I am understanding our product correctly, a checking account will be opened solely for this purpose with a VISA checkcard issued that can be used.

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That is just an access device to the HELOC. IMO, it would not be an "asset" account (unless you allow regular deposits and withdrawals) and subject to Reg. E.