Background... We had a credit card conversion in January of this year. At the time of conversion they started calculating the periodic rate as the daily periodic rate even though our disclosure stated we would use the monthly periodic rate. We have sampled some customers to see when they would have been overcharged based on what we had disclosed and what they were being charged. It was found that the only months that they were being overcharged is when the billing statement was 31 days (billing statements less than 31 days were undercharged interest).

My question is... When looking at whether we need to do restitution or not, should we
1. refund customers the difference in the 31 day months or
2. can we combine the months since conversion which would mean that overall they were undercharged interest and we wouldn't have to reimburse anything.

Others will give you a more exacting answer, but IMHO, the bank should not get undue enrichment from their mistake, If the calculations are on a monthly basis then the bank is violating their contract with the customer, and could additionally be charged with UDAAP. There may be de minimus caveats in the regulation that I'm unaware of, but the charges are not what was agreed to in the contract.

It's always legal to shortchange yourself. Chalk off those months as part of the cost of conversion.

Charging more than your agreement allows is a breach of contract and possibly usury. These months are more serious problems and should be addressed via restitution. Chalk up the cost of the necessary research and refunds to a weakness in your compliance/risk management system. Full participation in a conversion (before, during, and after) is just as important as full participation in the implementation of a new regulation.

It's always cheaper to do it right the first time.