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Truth in Lending: 6.8.4.3.1 Format

Creditors are required to disclose a summary of the changes using a table format similar to credit card application/solicitation table and account-opening table.1754 If the change-in-terms notice is included on or with the periodic statement, the tabular summary of the change must be disclosed on the front of any page of the statement, along certain other information.1755 This notice must be substantially similar to model form G-20 in appendix G of Regulation Z.

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: 6.8.4.7.2 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: 6.8.5.4.2 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