We have a customer who placed their credit card purchase on a deferred interest promotional plan on the card in which interest is not charged, but accrues during the promo period and will be assessed if the promo plan balance is not paid off by the plan's expiration date.

The original purchase amount in the promo plan was $2249.21. The customer also had a continuous balance in the revolving portion of her account. The promotional plan was for 24 months and set to expire on 11/29/17. We applied her payments as required by Reg. Z, i.e., applying the minimum due for the promotional plan first and the remainder of the payment to the revolving balance which was being charged interest.

She filed a Claims & Defenses dispute (under Reg. Z 1026.12 in March 2019) and it was determined to be valid. At that point in time, the balance remaining in the promotional plan was $1685.21, because $564.00 of her payments had been applied to the promo plan balance. The dispute was found in her favor, but we only credited $1685.21 since that is what was still owed on the plan. The total balance on her account including the revolving balance at the time of her dispute was $3000.

My feeling is that we should not have limited the credit to what was remaining on the plan. Instead, we should have gone back through and calculated what the promo plan balance would have been if all of the payments had been credited to the revolving balance, based on the Commentary quoted below. If we had done that, she would have not have paid anything on the promo plan balance and the entire $2249.21 would still be owed on the promo plan.

The Commentary to Reg Z Section 1026.53(a) states: “Claims or defenses under § 1026.12(c) and billing error disputes under § 1026.13. When a consumer has asserted a claim or defense against the card issuer pursuant to § 1026.12(c) or alleged a billing error under § 1026.13, the card issuer must apply the consumer's payment in a manner that avoids or minimizes any reduction in the amount subject to that claim, defense, or dispute” and the Commentary to Reg Z Section 1026.12(c) states: “Method of calculating the amount of credit outstanding…When a consumer has asserted a claim or defense against a creditor pursuant to § 1026.12(c), the creditor must apply any payment or other credit in a manner that avoids or minimizes any reduction in the amount subject to that claim or defense. Accordingly, to determine the amount of credit outstanding for purposes of this section, payments and other credits must be applied first to amounts other than the disputed transaction.”

There is no distinction made in the Reg. regarding whether the disputed purchase was in a promotional plan or not. When the customer first disputed her $2249.21 purchase in March 2019, the total balance on her account at that time was over $3000. Therefore, since we treated this as a valid claims and defenses dispute, I feel we should have credited the entire $2249.21 instead of the $1685.21 balance remaining on her promo plan.

Is my thought process correct? OR since the disputed purchase was in a separate promo plan, were we only obligated to credit the amount still owed in the promo plan when she made the dispute?