When retailers establish their own credit accounts they must conform with regulatory standards. Specifically the rules are defined by the Bureau of Consumer Financial Protection. The long and the short of the regulatory standard is to assure effective communications of all financing costs as well as any fees applied to customers when open ended credit accounts are offered.
Changes to Merchant Plus
We have evaluated these regulations and made the needed changes which will be available to all our clients on version 5.2. The following specific changes are incorporated in accordance with the regulatory requirements:
- A Repayment Disclosure statement can be printed which estimates the payoff and length of time it will take if only the minimum payment is made. The repayment disclosure statement is only printed for accounts with balances on some sort of payment plan.
- All details for AR Fees, like Late Charges, are separately identified in their own section of the statement if used.
- All details for Finance Charges, from the Statement process as well as Adjustments, must be reported in their own section on the statement.
- An optional Late Payment Warning Text statement can be added as required only if Late Payment or other A/R Fees are applied.
- The Minimum Payment Warning statement can be edited. It is printed above the system generated Repayment Disclosure.
- Labels concerning interest rates and charges are changed to meet specific guidelines:
- The label “+ Finance Charge” is replaced with “+ Total Interest” in the All Plan Account Summary section.
- In the Finance Charge Information of the Credit Plan summary section at the bottom of the statement:
- The “APR” column label is replaced with “Annual Percentage Rate”.
- The “Current” column label is replaced with “Interest Charged”.
- The “Calc’ed On” column label is replaced with “Balance Subject to Interest Rate”.
- A reference (transaction) number that identifies each transaction is recommended as available.
- Interest charges and fees are identified, reported in detail separately from purchases, and sub-totaled.
- Year-to-Date interest charges and fees are reported in a separate section with specific labels.
The largest change to the statement process concerns the ability to sub-total interest and fees, including reversals of interest and fees and then to report year-to-date accumulations for both. A/R adjustments, Sale Transactions and Data Mining Charges that apply to interest and/or fees are being marked as such to facilitate the additional report for these values on the consumer statement as regulated.
Regulations for all Open End Credit Plans
Specifically the rules are defined by Regulation Z , issued by the Bureau of Consumer Financial Protection to implement the Federal Truth in Lending Act, which is contained in title I of the Consumer Credit Protection Act. Subpart G of the regulation is pertinent to retailers offering open end credit plans. It would also be prudent to review the statement backer as well as any truth in lending statements or agreements being used when credit is issued. The regulations of interest include:
- Section 1026.51 contains rules on evaluation of a consumer’s ability to make the required payments under the terms of an account.
- Section 1026.52 limits the fees that a consumer can be required to pay with respect to an open-end (not home-secured) consumer credit plan during the first year after account opening.
- Section 1026.53 contains rules on allocation of payments in excess of the minimum payment.
- Section 1026.54 sets forth certain limitations on the imposition of finance charges as the result of a loss of a grace period.
- Section 1026.55 contains limitations on increases in annual percentage rates, fees, and charges for credit card accounts.
- Section 1026.56 prohibits the assessment of fees or charges for over-the-limit transactions unless the consumer affirmatively consents to the creditor’s payment of over-the-limit transactions.
