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Compliance Where does line fall on APR increase ban
WASHINGTON (8/25/10)--Change is in the air for many credit unions that offer credit cards, and one credit union has asked the Credit Union National Association if the rules imposed by the now effective Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) would prevent them from switching all credit cards to variable-rate plans. According to CUNA’s August Compliance Challenge, the CARD Act’s prohibition on increases to the annual percentage rates (APR) and fees during the first year after an account is opened applies to accounts opened on or after Feb. 22, 2010. Generally, Reg. Z permits the APR and fees to be increased at any time after a credit card account is opened only if certain exceptions apply. For example, an increase in the APR upon the expiration of an introductory or promotional period is permitted, provided certain disclosures are given to the member before the start of the introductory or promotional period. Furthermore, an increase in the APR or fee due to completion of a workout arrangement or the failure of the member to complete a workout arrangement is permitted, provided certain disclosures are given to the member prior to commencement of the workout arrangement. Additionally, an increase in the APR on a credit card account is also permitted where the account opening or card agreement provides for changes in the rate according to the operation of an index that is not under the control of the creditor and is available to the general public. Finally, an increase in the APR and fees is permitted if the creditor provides a 45-day notice of change in terms. However, unlike the prior exceptions, this last exception does not permit a card issuer to increase an APR or any fee during the first year after the account is opened. For the full Compliance Challenge, use the resource link.


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