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#389654 - 07/22/05 04:56 PM Credit Cards & the minimum payment
Anonymous
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There is a nasty rumor going around that the OCC has issued guidance that effective October 2005 credit card companies MUST adjust the minimum payment calculation to fit a 10 year repayment schedule. There is another variation on this rumor that the minumum payment must be increased to 5%. Can anyone confirm or deny these rumors? If they are true, do you have a citation?

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Lending Compliance
#389655 - 07/22/05 06:31 PM Re: Credit Cards & the minimum payment
Truffle Royale Offline

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I remember reading something just this past week about raising the mimimum payment. I don't recall a regulatory reference and danged if I can find it now. I'll keep looking. Maybe someone else will have more facts.

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#389656 - 07/25/05 02:39 PM Re: Credit Cards & the minimum payment
LoisLane Offline
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The change is because of "Account Management and Loss Allowance Guidance" that was issued sometime in 2004 by the federal banking regulators. The guidance shows that minimum payments should amortize the balance due over a reasonable period of time (consistent with factors specified in the guidance).
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#389657 - 07/25/05 05:53 PM Re: Credit Cards & the minimum payment
Jason Spelliscy Offline
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#389658 - 07/25/05 10:02 PM Re: Credit Cards & the minimum payment
Anonymous
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In addition to the guidance referenced above, you may want to take a look at the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). BAPCPA is effective in October of this year and requires, in addition to other items, financial institutions to either 1) provide a toll-free number where customers may obtain the actual number of months that it will take to repay the customer's outstanding balance and include a message on their monthly statement or 2)give certain disclosures, on the statement, based on whether the minimum payment is greater or less than 4% of the balance.

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#389659 - 07/26/05 02:18 PM Re: Credit Cards & the minimum payment
Creditcopper Offline
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Quote:

The change is because of "Account Management and Loss Allowance Guidance" that was issued sometime in 2004 by the federal banking regulators. The guidance shows that minimum payments should amortize the balance due over a reasonable period of time (consistent with factors specified in the guidance).



I just re-read the guidance and there is nothing mentioned about amortizing the credit card balances over a specific time frame just that it should be "reasonable". Am I missing something about a 10 year amortization?? Any help is appreciated -
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#389660 - 07/26/05 03:35 PM Re: Credit Cards & the minimum payment
Tallie Offline
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Joined: Apr 2004
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Cowtown
There is nothing I know of a 10-year amortization. I do believe that they want banks to ensure that negative amortization does not happen, ever. And if you were to come across a situation like that, to rectify it immediately. I know that our OCC examiner did throw out the 5% min payment or at least to always include part of principal with the payment to ensure there is always a principal reduction of the balance. Hope that helps.

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#389661 - 07/28/05 04:33 PM Re: Credit Cards & the minimum payment
Anonymous
Unregistered

Quote:

There is nothing I know of a 10-year amortization. I do believe that they want banks to ensure that negative amortization does not happen, ever. And if you were to come across a situation like that, to rectify it immediately. I know that our OCC examiner did throw out the 5% min payment or at least to always include part of principal with the payment to ensure there is always a principal reduction of the balance. Hope that helps.



Last night (July 27th)I was watching the 6 pm news on one of the local news stations in Detroit. They reported that "the federal regulators" are going to begin requiring consumers to make a 4% minimum payment on their credit card accounts. They did not provide a date when that would start or why. They also did not mention any other open ended credit facilities like personal lines of credit, overdraft lines of credit or home equities.

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#389662 - 07/28/05 05:04 PM Re: Credit Cards & the minimum payment
ToTo Offline
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Joined: Apr 2004
Posts: 595
OZ
Maybe this is where the 4% comes in: I believe that part of the new bankruptcy law mandates revisions to Reg Z. One of the mandated revisions is a "minimum payment warning" on the periodic statement, which would include, among other things, the time it would take to pay off the balance at the current payment. The required warning is different depending on whether the minimum payment is "not more than 4%" or "more than 4%". It is my understanding (could be wrong) that the disclosure will be required the later of: 18 months after the legislation was enacted or 12 months after the Federal Reserve amends Reg Z to include these requirements.

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#389663 - 08/03/05 01:29 PM Re: Credit Cards & the minimum payment
Anonymous
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Does that mean no more Interest Only plans?

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#711631 - 04/04/07 09:49 PM Re: Credit Cards & the minimum payment Anonymous
Yada...Yada...Yada... Offline
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Bringing this up from the dead. We just had a discussion on Section 127 of the Consumer Credit Protection Act regarding the minimum payment warning. It does not appear REG Z has been updated to reflect this. Any other word on this out there? Do we need to do anything until Reg Z is changed?
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#714763 - 04/11/07 05:47 PM Re: Credit Cards & the minimum payment Yada...Yada...Yada...
Yada...Yada...Yada... Offline
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Bump...
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#714766 - 04/11/07 05:50 PM Re: Credit Cards & the minimum payment Yada...Yada...Yada...
swiggles Offline
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swiggles
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We haven't changed a thing with respect to our credit cards. The credit cards are ours, but we outsource the processes. Typically, our vendor would advise regarding mandatory changes of this nature. We're just sittin' tight for now.
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