Regulation Z Truth in Lending

The Board of Governors of the Federal Reserve System (FRB) has amended Regulation Z (Truth in Lending) to revise disclosure requirements for credit and charge card solicitations and applications. The amendments are intended to enhance the consumer’s ability to notice and understand cost information generally provided in the form of a table.

As a result of this amendment:

• The annual percentage rate (APR) for purchases must be in at least 18- point type and must appear under a separate heading from other APRs.
• Penalty rates must appear inside the disclosure table, while any explanatory information regarding penalties must appear outside the table.
• The APRs for cash advances and balance transfers must be disclosed in the table, while balance transfer fees may be disclosed either in or outside of the table.
• The disclosure table must be on the same page as the application or solicitation reply form or elsewhere with a reference to the location on the application or reply form.

The revised rule provides guidance on: (1) disclosures being “prominently located,” (2) the level of detail required or permitted in the table, and (3) requiring the information in the table be “readily noticeable,” in addition to being reasonably understandable. Guidance is also provided for electronic communications.

Some credit unions expressed concern regarding the increased costs related to these requirements; however, compliance is not mandatory until October 1, 2001, permitting time for institutions to use up their existing stock of disclosures.

The FRB’s amendment, with staff interpretations, is enclosed. A notice describing the FRB’s action and the comments received is available on the FRB’s web site (www.federalreserve.gov/boarddocs/press/boardacts/2000) or from their Public Affairs Department at (202) 452-3204.