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Consumer Banking and Payments Law: Introduction

The Consumer Financial Protection Bureau’s prepaid accounts rule amends both Regulation E on the Electronic Fund Transfer Act and Regulation Z on the Truth in Lending Act. The rule and the regulatory amendments became effective April 1, 2019.

Consumer Banking and Payments Law: 2(a)(14) Credit

1. Exclusions. The following situations are not considered credit for purposes of the regulation:

i. Layaway plans, unless the consumer is contractually obligated to continue making payments. Whether the consumer is so obligated is a matter to be determined under applicable law. The fact that the consumer is not entitled to a refund of any amounts paid towards the cash price of the merchandise does not bring layaways within the definition of credit.

Consumer Banking and Payments Law: Paragraph 2(a)(15)

1. Usable from time to time. A credit card must be usable from time to time. Since this involves the possibility of repeated use of a single device, checks and similar instruments that can be used only once to obtain a single credit extension are not credit cards.

2. Examples. i. Examples of credit cards include:

A. A card that guarantees checks or similar instruments, if the asset account is also tied to an overdraft line or if the instrument directly accesses a line of credit.

Consumer Banking and Payments Law: 2(a)(17) Creditor

1. General. The definition contains four independent tests. If any one of the tests is met, the person is a creditor for purposes of that particular test.

Paragraph 2(a)(17)(i)

1. Prerequisites. This test is composed of two requirements, both of which must be met in order for a particular credit extension to be subject to the regulation and for the credit extension to count towards satisfaction of the numerical tests mentioned in § 1026.2(a)(17)(v).

Consumer Banking and Payments Law: 2(a)(20) Open–End Credit

1. General. This definition describes the characteristics of open-end credit (for which the applicable disclosure and other rules are contained in Subpart B), as distinct from closed-end credit. Open-end credit is consumer credit that is extended under a plan and meets all 3 criteria set forth in the definition.

2. Existence of a plan.

i. The definition requires that there be a plan, which connotes a contractual arrangement between the creditor and the consumer.

Consumer Banking and Payments Law: 4(c) Charges Excluded From the Finance Charge

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Paragraph 4(c)(3)

1. Assessing interest on an overdraft balance. Except with respect to credit offered in connection with a prepaid account as defined in § 1026.61, a charge on an overdraft balance computed by applying a rate of interest to the amount of the overdraft is not a finance charge, even though the consumer agrees to the charge in the account agreement, unless the financial institution agrees in writing that it will pay such items.

Consumer Banking and Payments Law: 7(b)(13) Format Requirements

1. Combined asset account and credit account statements. Some financial institutions provide information about deposit account and open-end credit account activity on one periodic statement. For purposes of providing disclosures on the front of the first page of the periodic statement pursuant to § 1026.7(b)(13), the first page of such a combined statement shall be the page on which credit transactions first appear.

Consumer Banking and Payments Law: 8(a) Sale Credit

1. Sale credit. The term “sale credit” refers to a purchase in which the consumer uses a credit card or otherwise directly accesses an open-end line of credit (see comment 8(b)–1 if access is by means of a check) to obtain goods or services from a merchant, whether or not the merchant is the card issuer or creditor. See comment 8(a)–9 for guidance on when credit accessed by a hybrid prepaid-credit card from a covered separate credit feature is “sale credit' or “nonsale credit.” “Sale credit” includes:

Consumer Banking and Payments Law: 8(b) Nonsale Credit

1. Nonsale credit. The term “nonsale credit” refers to any form of loan credit including, for example:

i. A cash advance.

ii. An advance on a credit plan that is accessed by overdrafts on an asset account other than a prepaid account as defined in § 1026.61.

Consumer Banking and Payments Law: 10(a) General Rule

1. Crediting date. Section 1026.10(a) does not require the creditor to post the payment to the consumer's account on a particular date; the creditor is only required to credit the payment as of the date of receipt.

2. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of completing the payment reaches the creditor. For example:

i. Payment by check is received when the creditor gets it, not when the funds are collected.

Consumer Banking and Payments Law: 10(b) Specific Requirements for Payments

1. Payment by electronic fund transfer. A creditor may be prohibited from specifying payment by preauthorized electronic fund transfer. See section 913 of the Electronic Fund Transfer Act and Regulation E, 12 CFR 1005.10(e).

2. Payment methods promoted by creditor. If a creditor promotes a specific payment method, any payments made via that method (prior to any cut-off time specified by the creditor, to the extent permitted by § 1026.10(b)(2)) are generally conforming payments for purposes of § 1026.10(b). For example:

Consumer Banking and Payments Law: 1026.12(c)-1 to -5

1. Relationship to § 1026.13. The § 1026.12(c) credit card “holder in due course” provision deals with the consumer's right to assert against the card issuer a claim or defense concerning property or services purchased with a credit card, if the merchant has been unwilling to resolve the dispute. Even though certain merchandise disputes, such as non-delivery of goods, may also constitute “billing errors” under § 1026.13, that section operates independently of § 1026.12(c).

Consumer Banking and Payments Law: 12(c)(1) General Rule

1. Situations excluded and included. The consumer may assert claims or defenses only when the goods or services are “purchased with the credit card.” This would include when the goods or services are purchased by a consumer using a hybrid prepaid-credit card to access a covered separate credit feature as defined in § 1026.61. This could include mail, the Internet or telephone orders, if the purchase is charged to the credit card account. But it would exclude:

Consumer Banking and Payments Law: 52(a)(1) General rule

1. Application. The 25 percent limit in § 1026.52(a)(1) applies to fees that the card issuer charges to the account as well as to fees that the card issuer requires the consumer to pay with respect to the account through other means (such as through a payment from the consumer's asset account, including a prepaid account as defined in § 1026.61, to the card issuer or from another credit account provided by the card issuer). For example: