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Truth in Lending: 7.5.3.2.3 Method of election; reasonable opportunity to opt in

A card issuer has the option of permitting the consumer to opt in either in writing, orally, and/or electronically.546 However, for whatever method the issuer permits for opting in, the issuer must permit consumers to use the same methods to revoke the opt-in.547 For example, if a card issuer permits a consumer to opt in by telephone, it must also allow the consumer to revoke that consent by telephone.548

Truth in Lending: 7.5.3.2.4 The consumer’s opt-in

The consumer may opt in to over-the-limit fee imposition at any time.553 The Credit CARD Act provides that the opt-in will be effective until the consumer revokes it;554 however, Regulation Z permits the issuer to make the opt-in ineffective at any time by ceasing to pay over-the-limit transactions for that consumer.555 The issuer may do so for any reason, such as in order to respond to changes in the consumer’s credit risk.

Truth in Lending: 7.5.3.2.5 Confirmation of opt-in

If the consumer opts in to payment of over-the-limit transactions, the issuer must provide a written confirmation.564 The issuer may send an electronic confirmation if the consumer agrees.565 The confirmation must be provided no later than the first periodic statement sent after the consumer has opted in.566

Truth in Lending: 7.5.3.2.6 Right to revoke consent

The consumer is permitted at any time to revoke their consent or opt-in to payment of over-the-limit transactions.572 The issuer must disclose this right to revoke the consent in any periodic statement that reflects the imposition of any over-the-limit fee.573 This disclosure must be in writing.574 It must also list the methods to revoke the opt-in.575

Truth in Lending: 7.5.3.3.1 Overview

In addition to requiring the consumer to consent or opt in to payment of over-the-limit transactions, the Credit CARD Act prohibits two other over-the-limit fee practices.579 Furthermore, the Credit CARD Act requires the promulgation of regulations to prevent unfair or deceptive acts or practices in connection with the manipulation of credit limits designed to increase over-the-limit fees.580 Thus, Regulation Z includes three other restrictions on over-the-limit fee practices.

Truth in Lending: 7.5.3.3.2 No more than one over-the-limit fee per billing cycle

The Credit CARD Act prohibits issuers from charging more than one over-the-limit fee during a billing cycle.582 Furthermore, the issuer may only impose the fee if the credit limit is actually exceeded during the billing cycle,583 and the consumer consented to payment of over-the-limit transactions.584 Thus, the issuer cannot impose a recurring or periodic fees for paying over-the-limit transactions, such as a monthly “over-the-limit protectio

Truth in Lending: 7.5.3.3.3 No more than three over-the-limit fees for the same transaction

After the issuer imposes an over-the-limit fee, the Credit CARD Act prohibits issuers from charging over-the-limit fees in more than two subsequent billing cycles, unless the consumer obtains an additional extension of credit or goes below the limit and subsequently exceeds it.586 This means the issuer may not charge more than three over-the-limit fees for the same over-the-limit transaction.587 This prohibition applies even though the consumer has not paid enough of the balance to reduce it

Truth in Lending: 7.5.3.3.4 Requirement to replenish the credit line

A card issuer may not impose an over-the-limit fee solely because of the issuer’s failure to promptly replenish the consumer’s available credit line after the consumer’s payment is credited to the account.594 The consumer’s payment should be credited to the account pursuant to the rules in Regulation Z’s payment crediting rules.595

Truth in Lending: 7.5.3.3.6 Interest or fees cannot trigger over-the-limit fees

A card issuer may not impose an over-the-limit fee or charge if a consumer exceeds the credit limit solely because of fees or interest.601 The fees or interest that are covered by this prohibition include any charges that are “imposed as part of the plan,” including penalty fees, fees for issuance or availability of credit, and fees for credit insurance or debt cancellation coverage.602

Truth in Lending: 7.6.2.1 General

The Credit CARD Act imposes underwriting requirements for the first time on credit card issuers. The Act imposes a general requirement, applicable to all consumers, that an issuer may not open a credit card account or increase a credit limit unless the issuer considers the ability of the consumer to make the required minimum payments.616 The card issuer’s consideration of ability-to-repay must be based on both the consumer’s income or assets, and the consumer’s current obligations.617

Truth in Lending: 7.6.2.3.2 Consideration of income from non-applicants

Previously, Regulation Z had required issuers to consider the consumer’s independent ability to repay.648 In 2013, however, Regulation Z was amended to permit a card issuer to include in its analysis any income and assets to which the consumer has a reasonable expectation of accessing.649 Alternatively, the card issuer may limit its consideration of income and assets to the consumer’s independent resources.650 Card issuers no longer

Truth in Lending: 7.6.3.1.1 General

In addition to the generally applicable requirement that issuers consider a consumer’s ability to repay,678 the Credit CARD Act imposes specific underwriting requirements for consumers under the age of twenty-one.679 The Act establishes two methods to determine a young consumer’s ability to repay, discussed in the next subsection.

Truth in Lending: 7.6.3.1.2 Two alternative methods to establish ability to repay

Issuers are permitted to use one of two alternative methods to determine the young consumer’s ability to repay. The first alternative requires the young consumer to submit financial information “indicating an independent means of repaying” the credit.685 The second alternative requires that the application must be co-signed by an individual at least twenty-one years old.686

Truth in Lending: 7.6.3.1.3 Co-signor approval for a credit line increase

If an over-twenty-one-year-old consumer is a co-signor for a credit card account for a young consumer, the issuer must obtain the co-signor’s agreement before the credit limit for that account may be increased.701 This agreement must be in writing, and the co-signor must agree to assume liability for the increase.702 While this section of the Credit CARD Act is entitled “Parental Approval Required,” the provision also applies to “any other individual who has assumed joint liability.”

Truth in Lending: 7.6.3.1.4 Written application required

In general, an issuer is permitted to issue a credit card only upon the consumer’s request, but such a request may be made either in writing or orally.708 For young consumers, the Credit CARD Act requires that a credit card be issued only in response to a written application.709 The application must show the ability to repay by either the young consumer or a co-signor over twenty-one years.710

Truth in Lending: 7.6.3.3 Disclosures of Marketing Agreements Between Card Issuers and Schools

TILA requires institutions of higher education734 to publicly disclose any agreements with a creditor or card issuer for the purposes of marketing a credit card.735 Examples include posting such agreements on the institution’s website or making the agreements available upon request, as long as the procedures for requesting the documents are reasonable and free of cost and are provided within a reasonable time frame.736 The institution must di

Truth in Lending: 7.7.1 Payment Abuses

During the decade before the Credit CARD Act, credit card issuers deliberately instituted practices that resulted in the imposition of late payment fees. Some issuers decreased the amount of time between the mailing of the billing statement and the payment due date, increasing the chance that the consumer would send in a payment that would be received past the due date.751 Others were slow to credit payments or required that payments be received early in the morning of the due date.

Truth in Lending: 7.7.2 Prompt Crediting of Consumer Payments

Open-end creditors, including credit card issuers, must promptly credit consumer payments.754 This requirement prevents the imposition of a finance charge if the creditor has received the payment in a readily identifiable form in the amount, manner, location, and time indicated by the creditor.755 Payment must be credited as of (although not necessarily on) the day of receipt unless a delay in posting does not result in a finance charge or other charge.