FDIC Issues Financial Institution Letter on Immediate Applicability of Credit Card Act

By W. Bernard Mason

On August 6, 2009 the Federal Deposit Insurance Corporation issued Financial Institution Letter (FIL) 44-2009 advising its supervised institutions of certain aspects of The Credit Card Accountability Responsibility and Disclosure Act of 2009 that take effect on August 20, 2009. It advises institutions to take appropriate steps to ensure compliance with these new requirements.

The FIL advises that, with regard to all open-end consumer credit accounts, including credit cards and home equity lines of credit accessed by a credit card, creditors must mail or deliver periodic statements at least 21 days before the payment is due. Applicable to credit card accounts, creditors must give 45-days’ notice of increases in the Annual Percentage Rate (APR) or other significant changes in terms, including a notice of the right to cancel the account. Both of these provisions become effective on August 20, 2009.

Further, all increases in the APR of a credit card account after January 1, 2009 must be reviewed beginning in August 2010 for a possible reduction in the APR based upon the same factors used to justify the increase. This mandatory “look-back” review will occur at least once every six months and will require creditors to use “reasonable methodology” in making assessments regarding possible rate decreases.

The Federal Reserve Board is required to issue final rules within nine months after enactment of the new law to implement these provisions. The FDIC is advising its supervised institutions to demonstrate regular meaningful progress in preparing for full compliance with these new restrictions and requirements, including adoption of reasonable methodologies for determining rate changes as well as adequate procedures to review accounts.

The Federal Reserve’s interim final rule, adopted on July 15, 2009 and applicable to all insured institutions, is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090715a1.pdf - PDF