**X-post from Fair Lending - this is probably a better home for it**

We have risk based pricing on our credit cards. When a customer requests an increase to their line of credit, we basically treat it as a new application - run credit, calculate DTI, etc. Then we slot them into our risk based pricing matrix. In some cases, that means a higher rate - which we present as an option: "We can increase your limit from $10,000 to $15,000, but if we do so we'll also have to increase your rate by 2%. Do you still want to move forward or keep things as they are?"

This doesn't seem to be addressed specifically in Reg Z, but a strict reading seems to put us in a gray area. Is our practice kosher, or are we running into requirements like re-evaluating credit every 6 months and all that stuff?

Bueller...?

Nobody? Has this not come up? Dumb question? The first rule of gray areas is you do not talk about gray areas?

When a customer requests an increase to their line of credit......

They have applied for credit. I guess I just could not figure out where your confusion was stemming from? What specifically (citation) are your concerns?

That is how we treat them. If they ask for an increase, we will run a new application, pull credit, etc. If they want the higher limit they have to take the rate that they qualify for at the time of the requested increase. Haven't had any issues with regulators.

CULady - just out of curiosity, if their rate jumps, do you give them the option to say "No Thanks" and stick with their prior limit and rate?

Our confusion stems from 12 CFR 1026.59.

I'd think a customer's request to increase their limit reasonably prompts a review of their credit, and that if we have risk based pricing it's reasonable to slot them in where they fit; that might mean an interest rate increase. This also doesn't seem to conflict with the intent of the reg, especially if we give them an option to withdraw their request....

Compliance (and our compliance resource) has shot this down with 1026.59, however. I'm confused because I'm not convinced that they're right in their contention that: If a member requests a credit limit increase, we are not permitted to increase their rate as well upon review of the credit report without then engaging in bi-annual credit reviews on that account. I don't really think the scenario fits the reg, but I also can't find where it explicitly says that it DOESN'T.

1026.59—Reevaluation of rate increases.

(a) General rule.(1) Evaluation of increased rate. If a card issuer increases an annual percentage rate that applies to a credit card account under an open-end (not home-secured) consumer credit plan,

The card issuer (you) is not increasing the rate. You are evaluating a specific consumer request for additional credit. You make the offer and the consumer can accept or they can stick with their current account - correct. You aren't using this opportunity to also reassess the rate that they currently have on the current plan - correct. They can take the offer or stay where they are. If that is correct, 1026.59 will not apply.

MScarn6942 - Yes. They would make the request, we would respond with our offer and they would either accept or withdraw. We would never make a change without the member agreeing to the change.

Agree with Randy. They are asking for credit. You can offer them the terms and they can take it or leave it. You are not randomly changing their rate.

Thank you! Distinguishing between who is initiating the rate increase is helpful, and where I was getting hung up.

So, you've got a $5k balance on a $5k line at the low rate of 12.9%. You want to increase that line to $10k. Upon reviewing your credit, we say sure, we can do that, but your score has dropped and we'd need to increase the rate on this account to 15.9% to accommodate your request. You have the option to withdraw. If you accept, however, the rate on your line will be increased to 15.9% and your credit limit will be increased to $10k. Everybody leaves happy, and we don't have to circle back in 6 months and re-evaluate.

Opening this issue again (sorry). What about section 1026.55 where the lender cannot raise the credit card APR for one year after account opening unless it falls under a 1026.55(b) exception? For accounts opened for one year or less, the balance has to be protected under 1026.55(c) until it is paid. So I would say to sleipnir that as long as the customer requests the LOC increase after a year that the card has been opened they can increase the rate - unless their system can handle the two rates - ours cannot.

Trying to reopen the issue again - Seems to me like the rule should only apply to the card issuer unilaterally choosing to increase the APR, not when a borrower requests an increase to their limit. I also don't see this scenario as an exception to the rule. Any help would be greatly appreciated.