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?

You have posted this in multiple forums over the last several days - with no response. Posting in multiple forums really does not increase the chance of a response.

I think you have answered your own question. If the claim was deemed valid, you owe the consumer the entire amount and the transaction needs to be reversed as of the date of the transaction as if it never happened and any activity since that time re-posted.

Thank you so much for your response. I really appreciate it. I just desperately needed expert opinion and I thought maybe I had not placed it in the proper forum the first time.
I believe that under the Commentary to both 1026.12 and 1026.53, we should go back and credit the customer for the full amount of the purchase. However, our Compliance Advisor believes that because the purchase was in a promo plan (so we could see exactly what they still owed for that purchase), we only needed to refund what was still owed on the promo plan for that purchase. I asked him to discuss it with our Law Department and the response was that it didn't even matter whether it was in a promo plan or not...we didn't need to refund any more than what was still owed and that we did not need to go back and look at how the payments had been applied before the dispute.
Our attorney also said that we only needed to be concerned about payments made AFTER the dispute...that payments made before the dispute did not need to be taken into consideration. So regardless of whether there was a promo plan or not, we did not need to be concerned about any payments made before the dispute.
This is not the way I read the regulation, so I wanted to get an expert's opinion to make sure I wasn't completely off-track.
Thank you,

OK - It has been a long time since I got into this section of Regulation Z in any great detail, but my first take on this was not correct. - It appears they are - you need to review this and the rest of the commentary to 1026.12(c):

4. Method of calculating the amount of credit outstanding. The amount of the claim or defense that the cardholder may assert shall not exceed the amount of credit outstanding for the disputed transaction at the time the cardholder first notifies the card issuer or the person honoring the credit card of the existence of the claim or defense. However, 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.

Thanks so much for taking the time to review this. I greatly appreciate it. I did read the commentary as you suggested. In fact, I quoted the section you reference (1026.12(c)(4)) in my original post. I guess I'm just interpreting incorrectly.
The way I was reading it was that, according to the first sentence in that section, the cardholder is entitled to the amount of credit outstanding for the transaction when it is first disputed. So that sets the base that the cardholder is entitled to, but then it goes on to explain how you should calculate the amount of credit understanding, i.e., "However...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" and provides direction on how to determine the amount outstanding by saying that payments and credits must be applied first to amounts other than the disputed transaction.
My thinking was that clearly payments received AFTER the dispute would not be applied to the disputed purchase (based on the first sentence of this paragraph) so it must be referring to payments received BEFORE the dispute.
I sincerely want to thank you for taking a look at this for me. I can stop worrying about it now.