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Truth in Lending: 6.8.4.4.2 Certain changes in APRs
A change-in-terms notice is required forty-five days in advance of any increase in the annual percentage rate.1772
Truth in Lending: 6.8.4.5.1 Changes to terms not included in the account-opening table
Creditors do not need to give advance notice of any change in a charge or fee, or even the addition of a new charge, if the change is not considered “significant.”1783 Significant changes are listed at § 6.8.4.4.1, supra.
Truth in Lending: 6.8.4.5.2 Changes agreed to by the consumer
The creditor can mail or deliver a notice as late as the effective date of a change, if the consumer had agreed to the particular change.1786 This exception only applies when a consumer substitutes collateral or when the creditor can advance additional credit only if a change relatively unique to that consumer is made, such as the consumer’s providing additional security or paying an increased minimum payment amount.1787
Truth in Lending: 6.8.4.6.1 Changes disclosed in the account-opening agreement
No notice of a change in terms is required if the specific change is set forth initially in the account-opening agreement, such as a rate increase pursuant to a variable-rate plan, provided that the required disclosures are given.1790 A general contract reservation in the account-opening disclosures that the creditor may change the terms is not such an explanation.1791 But if the plan is a variable rate plan in which changes are tied to an index and disclosed in the initial statement, advanc
Truth in Lending: 6.8.4.6.3 Expiration of a promotional rate
An increase in an APR or in certain fees does not require a change-in-terms notice when the increase is due to the expiration of a promotional rate or fee.1808 The promotional time period and the “post-promotional” rate or fee must have been properly disclosed.1809 The increased APR or fee must not exceed the disclosed “post-promotional” rate or fee.1810 This exception parallels the promotional rate and fee exception established by the Credit
Truth in Lending: 6.8.4.6.4 Operation of a variable rate
For credit cards and other types of open-end (not home-secured) credit, an increase in an APR does not require a change-in-terms notice when the increase is due to a variable APR.1821 The increase must result from the operation of an index that is not under the control of the creditor and is available to the general public.1822
Truth in Lending: 6.8.4.6.5 Completion or failure to comply with a workout or temporary hardship arrangement
An increase in an APR or fee does not require a change-in-terms notice when the increase is due to the completion of or failure to comply with a workout or temporary hardship arrangement.1828 However, the increased APR or must not exceed the APR or fee that applied before commencement of the arrangement.1829 The creditor must have provided the consumer with a clear and conspicuous written disclosure of the terms of the arrangement, including disclosure of APR increases that would be triggere
Truth in Lending: 6.8.4.6.6 Skip features; reduction of finance charges
The creditor is not required to provide a change-in-terms notice when it initially allows customers to skip or reduce payments, or temporarily reduces finances charges other than the interest rate.1834 Some creditors extend this privilege during the holiday shopping period.
Truth in Lending: 6.8.4.6.7 Change-in-terms for convenience checks and supplemental credit features
If a change is applicable only to convenience checks, i.e., checks that access a credit card account, the issuer is not required to provide a change-in-terms notice if issuer makes the proper convenience check disclosures on or with the check.1845
Truth in Lending: 6.8.4.6.8 Other types of changes that do not require a notice
A change-in-terms notice is not required for certain other changes as well:
Truth in Lending: 6.8.4.7.1 General contents
The change-in-terms notice must contain the following information:
Truth in Lending: 6.8.4.7.2 Summary of changes
The critical disclosure in a change-in-terms notice is the summary of changes. It is this disclosure that must be disclosed in a tabular format.1865
The format and content of the disclosure is the same as the disclosures required for the account-opening table.1866 However, a tabular format is not required for:1867
Truth in Lending: 6.8.4.7.4 Statement of reasons for rate increase
If the change in terms is a rate increase for a credit card account under an open-end (not home-secured) consumer credit plan,1879 the issuer must disclose no more than four of the principal reasons for the increase.1880 These reasons must be listed in order of importance.1881 There is no minimum number of reasons that must be disclosed,1882 although presumably at least one reason must be give
Truth in Lending: 6.8.4.8 Substantive Limitations on Changes in Terms
The ability of creditors to make changes in the terms of an open-end credit contract is mostly derived from state laws that have extremely permissive provisions allowing such changes.1890 TILA itself is not a source of authority for the ability of creditors to make changes in terms.1891 A discussion of when unilateral changes in terms are permitted, and their abuses, is found in another treatise in this series.1892
Truth in Lending: 6.8.4.9 Delivery of Notice
If the creditor cannot prove that it actually sent the change-in-terms notice to the consumer, the notice may be ineffective under the contract to change the terms.1906 Unfortunately, the creditor is only required to establish that it sent the notice, and need not prove that the consumer actually received the notice.1907 However, simply showing that a creditor’s normal business practice is to send a notice may not be sufficient; the creditor should also show that the particular notice at iss
Truth in Lending: 6.8.5.1 General Requirements
TILA, as amended by the Credit CARD Act of 2009, requires creditors to provide forty-five days’ notice before increasing the APR for a credit card account.1909 This provision applies regardless of whether the increase is permitted under the terms of the contract.
Truth in Lending: 6.8.5.2 Timing of the Notice
The creditor is required to give the notice of penalty rate imposition at least forty-five days prior to the effective date of the increase.1920 However, the notice must be given after the occurrence of the event that triggered the penalty rate, i.e., the default, delinquency, or other violation of the account agreement.1921 Thus, creditors are not permitted to send general, boilerplate notices to all consumers reminding them of the conditions that may give rise to a penalty rate.
Truth in Lending: 6.8.5.3 Format of the Notice
In general, the penalty rate notice must be clear and conspicuous.1923 If the penalty rate notice is included on or with a periodic statement, creditors are required to use a table format similar to the credit card application/solicitation table and account-opening table.1924 This table must be on the front of any page of the periodic statement.1925
Truth in Lending: 6.8.5.4.1 General
The notice of penalty rate imposition must include the following disclosures:1929
Truth in Lending: 6.8.5.4.2 Penalty rates applied to an outstanding balance where no minimum payment made within sixty days
For credit cards under an open-end (not home-secured) consumer credit plan, a penalty rate cannot be applied to an outstanding or “protected”1931 balance unless the consumer fails to make the minimum payment within sixty days.1932 In such cases, the issuer must disclose the right to reinstatement for six months of on-time payments,1933 i.e., that the increased rate will cease to apply to transactions that occurred prior to or within fourteen
Truth in Lending: 6.8.5.5 Penalty Rate Notices for Over-the-Limit Transactions
If a creditor imposes a penalty rate because the consumer exceeded the credit limit on an account, the creditor need not provide a notice if the creditor had earlier provided a notice of the reduction in the credit limit.1935 This notice must have been provided at least forty-five days in advance of imposing the penalty rate and must include the following disclosures:1936
Truth in Lending: 6.8.6.1.1 General
For credit cards, card issuers must provide cardholders with written notice of the renewal before the scheduled renewal date of the credit or charge card account in two circumstances:1941