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Truth in Lending: 6.3.3.5 Other Terms
Issuers must use terminology that is consistent.286 Terminology need not be identical, as long as it is close enough in meaning to enable the customer to relate the required disclosures.287 Thus, except for the required terms, a creditor has some flexibility in the descriptive or identifying terms used to make disclosures, but must be consistent in use of such terms.
Truth in Lending: 6.2.4.4.2 Exception for incidental overdrafts
A prepaid card is not considered to be a hybrid prepaid-credit card merely because it allows certain “incidental” overdrafts, if it meets the following conditions:
Truth in Lending: 6.2.4.5.1 Credit cards for open-end plans
The general TILA definition of creditor requires that the person “regularly” extend credit that is either subject to a finance charge or payable by written agreement in more than four installments.165 For open-end plans involving a credit card, however, the Act and Regulation Z provide that any “card issuer” is a creditor.166 There is no requirement that the credit be subject to a finance charge or payable by written agreement in more than four installments.
Truth in Lending: 6.2.4.5.2 Card accounts without a finance charge or installment payments
The Act and Regulation Z provide that any card issuer is a creditor if it extends credit that is not subject to a finance charge and not payable by written agreement in more than four installments.169 For example, some travel and entertainment plans do not impose a finance charge on an outstanding balance and do not provide for installment payments.
Truth in Lending: 6.2.4.5.3 Any card issuer extending closed-end credit
Any “card issuer” that extends closed-end credit that is subject to a finance charge or is payable by written agreement in more than four installments is subject to the applicable open-end disclosures of Subpart B and the Fair Credit Billing Act, as well as the closed-end provisions of Subpart C.173 Since the definition of “card issuer” is a person who issues a credit card,174 this definition presupposes the existence of a credit card.
Truth in Lending: 6.2.4.5.5 Visa and MasterCard not creditors
The well-known credit card brands of Visa and MasterCard are not creditors for purposes of TILA.190 Visa and MasterCard are actually joint associations composed of members that are either: (1) card issuers; or (2) financial institutions that acquire transactions from merchants who accept these cards.191 Visa and MasterCard operate systems for the clearing and settlement of credit card transactions.192 They also do not grant credit, although t
Truth in Lending: 6.2.4.5.6 Person who honors a card
A person who honors a credit card and offers a discount that is a finance charge is a creditor.196 Regulation Z limits the obligations of these creditors to the requirements of the provisions relating to discounts,197 disclosing a finance charge imposed at the time of the transaction, and crediting returns and refunds.198
Truth in Lending: 6.2.4.6 Purchasers of Defaulted Credit Card Debt
Delinquent credit card debt is sometimes sold to debt buyers, often for pennies on the dollar.199 One tactic used by some debt buyers is to offer “debt transfer” credit cards, in which debt buyer provides the cardholder a new credit card. The old, stale debt is then charged to the new credit card, arguably reviving it.
Truth in Lending: 6.2.4.7 Cardholder
A cardholder is statutorily defined as “any person to whom a credit card is issued.”209 Under this definition, a cardholder need not be a consumer or even a natural person. However, Regulation Z limits “cardholders” to “natural persons” 210 except with respect to the rules on unauthorized use and unsolicited issuance of credit cards,211 which apply to organizations and businesses. 212
Truth in Lending: 6.3.1 Introduction
In general, all open-ended credit disclosures must be made “clearly and conspicuously,” in writing, and in a form that the consumer may keep.”227 Many of the open-end disclosures, including credit card application and solicitation disclosures, account-opening disclosures, and change-in-terms notice, must be made in a special tabular format.228
Truth in Lending: 6.3.4.1 Written Versus Oral Disclosures
The vast majority of disclosures required by Subpart B must be made in writing.288 However, there are several significant exceptions to this rule.
A creditor may make oral disclosures when making a solicitation or taking an application for open-end credit by telephone.289 Oral disclosure is also permitted when a merchant or creditor imposes a surcharge as a condition to the use of a credit card.290
Truth in Lending: 6.3.4.2 In Form That a Consumer May Keep
With a few exceptions, open-end disclosures must be in a form that the consumer can keep.298 Whether the consumer was given disclosures in a form the consumer could keep prior to consummation has been a contentious issue in closed-ended transactions, especially in the automobile finance context.299
The exceptions to the requirement that the disclosures be in a form the consumer may keep are:300
Truth in Lending: 6.3.4.3 Who Must Receive Disclosures
Disclosures must be given to the consumer who is obligated in the transaction.308 If the account is a joint one, disclosures may be made to either account holder.309 However, disclosures must be made to a consumer who has primary liability, and is not simply a surety, guarantor, or authorized user.310 If the account is a home-secured line of credit that is rescindable,311 separate account-open
Truth in Lending: 6.3.4.4 Integrated Document
Account-opening disclosures and periodic statements must be on an “integrated” document. The document may include multiple pages, and disclosures may be made on the front and reverse unless otherwise indicated,313 so long as it is clear that the pages constitute one document.314 The integrated document must be provided all at once to the consumer; the creditor cannot provide separate pages at different times.315
Truth in Lending: 6.3.5.1 Introduction
Creditors have been aggressively seeking consumer’s consent to make these disclosures electronically, in order to reduce costs for postage and printing. Creditors have promoted electronic disclosures as a “green” environmental choice. Yet there are many advantages to physical paper disclosures, especially for low-income consumers, the elderly, and those on the other side of the “Digital Divide.”321
Truth in Lending: 6.3.5.2 The E-Sign Act
The Electronic Signatures in Global and National Commerce Act327 establishes the enforceability of electronic contracts, disclosures, other records, and signatures, as a matter of federal law. E-Sign provides that documents or signatures cannot be denied legal effect, validity, or enforceability solely because they are in electronic form.
Truth in Lending: 6.3.5.3 Assessing Compliance with the Electronic Disclosure Rules
If an open-end creditor makes critically important disclosures electronically, practitioners should investigate the following issues:
Truth in Lending: 6.3.6 Model Forms and Clauses
Several model forms have been published in conjunction with the disclosure rules.351 As with other model forms, proper use of the model forms will generally place a creditor in compliance with TILA.352 However, a creditor is not required to use an exact mirror of the model form and may use a disclosure that is “substantially similar.”353 Conversely, a failure to provide disclosures sufficiently similar to the model forms could constitute a TI
Truth in Lending: 6.4.1 Overview
TILA and Regulation Z contain provisions regulating the advertisement of open-end credit, including credit card applications.355 Regulation Z defines an “advertisement” to mean a commercial message in any medium that promotes, directly or indirectly, a credit transaction.356 The official interpretations contain a number of examples of what constitutes an advertisement and what is excluded.357
Truth in Lending: 6.4.2 “Triggered” Advertising Disclosures
Certain disclosure requirements are triggered if the advertisement expressly or impliedly mentions any specific terms of a credit plan, even if they are not required disclosures (such as seller’s points, or the minimum periodic payment),370 or mentions terms required to be disclosed in the account-opening disclosures under Regulation Z § 1026.6, such as finance charge, periodic rate, annual percentage rate, or security interest.371 These triggers include both affirmative or negative referenc
Truth in Lending: 6.4.3 Special Disclosures Required for Credit Sales Advertising
In some cases, retail sellers will use open-end credit plans to finance the purchase of “big ticket” goods or services, such as electronics or furniture. These sellers and their affiliated creditors will offer open-end credit plans to avoid making closed-end disclosures, which contain more information about the price of credit.374
Truth in Lending: 6.4.4 Disclosure of Credit Card Agreements on the Internet
The Credit CARD Act requires all credit card issuers to post their credit card agreements on the internet and submit them to the CFPB.379 The CFPB in turn must maintain a publicly available internet site with a central repository of all issuers’ card agreements.380 The CFPB has set up this repository, or database, located at https://www.consumerfinance.gov/credit-cards/agreements.
Truth in Lending: 6.4.5.1 Introduction
TILA requires specific introductory rate disclosures when such rates are included in promotional materials accompanying credit card applications and solicitations.386 Regulation Z extends these introductory rate disclosures to all advertisements that offer an introductory rate, not just those accompanying applications and solicitations.387 While this rule applies to all advertisements in any form, many of the specific formatting requirements discussed below only apply to written or electroni