What the NFL the CFPB, and Regulation Z have in common

September 9, 2014 at 8:35 am Leave a comment

Every year the NFL gives its referees “points of emphasis”-violations of the rules that they want refs to impose more strictly with the hope of making the game better. For example, this year the NFL has decided that, in a sport where oversized men with above average speed crash into each other every 45 seconds, the game would be better if no one touches the wide receiver after five yards lest teams be able to play defense and people not enjoy playing fantasy football.

Just like the NFL has its points of emphasis and tells everyone exactly what they are so does the Bureau That Never Sleeps-the CFPB. Its latest point of emphasis comes in the form of a bulletin issued last week, is promotional credit card rates that don’t accurately disclose restrictions that companies place on offers. Given that the CFPB has the power to interpret the law, penalize what it deems to be deceptive practices and issue amendments to Regulation Z its best you double-check your own promotional material.

Under Regulation Z banks and credit unions can offer promotional rates which the regulation defines as “any annual percentage rate applicable to one or more balances or transactions on an open-end plan for a specified period of time that is lower than the annual percentage rate that will be in effect at the end of that period on such balances or transactions.”

For example, an offer of 0% interest on balance transfers. What has the Bureau concerned is that some card issuers do not “adequately convey in their marketing materials that a consumer who accepts such a promotional offer will lose his grace period on new purchases if he does not pay the entire statement balance, including the total amount subject to the promotional APR, by the payment due date.”

Unlike old-fashioned regulators that would have to wait to build a consensus for a new regulation, the CFPB goes onto remind lenders that it has the power to go after deceptive practices and is not afraid to use it. As a result credit card issuers should also be aware of the possibility that, “depending on all of the facts and circumstances, they may be at risk of engaging in an abusive practice if they fail to provide adequate information alerting consumers that they will be unable to maintain a grace period on new purchases if they do not repay their entire balance, including any promotional balance and any new purchase balance, by the statement due date.”

By the way another Regulation Z issue caught my attention yesterday. A lawsuit has been filed against American Express in Federal District Court in Manhattan alleging that the bank illegally made the minimum payment of cardholders due on September 2nd,  2013, a federal holiday. The lawsuit is a putative class action graciously offering to represent all persons similarly aggrieved by AmEx throughout the nation.

A company as big as American Express is going to get sued more often than Eli Manning throws an interception, but this news still got me rereading the regulations because this is an area that isn’t ambiguous. Under 12 CFR 1026.10 if a creditor does not receive or accept payments by mail on the due date for payments, the creditor may generally not treat a payment received the next business day as late for any purpose. The “next business day” means the next day on which the creditor accepts or receives payments by mail.

However-there is always an however with Regulation Z which is why it should be blown up and rebuilt from scratch- “If a creditor accepts or receives payments made on the due date by a method other than mail, such as electronic or telephone payments, the creditor is not required to treat a payment made by that method on the next business day as timely, even if it does not accept mailed payments on the due date.”

Whenever I deal with Regulation Z I remind people that, with certain exceptions, it is nothing more or less than a disclosure requirement. Disclose your terms and conditions clearly and there is very little you can’t do; fail to explain to your members what they are in store for and you may find yourself in trouble. Make sure your marketing department doesn’t have the final say on what is said in your advertisements.

By the way am I the only Giant fan counting the days to spring training after last night’s game?


Here is a link to the CFPB bulletin if you haven’t already looked at it. http://files.consumerfinance.gov/f/201409_cfpb_bulletin_marketing-credit-card-promotional-apr-offers.pdf




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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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