There’s nothing more frustrating than believing, nay, knowing that you are an exempt from a requirement only to find out after reading the commentary that the regulation actually denotes the opposite. The feeling could be compared to that of walking up the stairs, expecting one more stair at the top, when suddenly, your foot falls through the empty space, making your stomach drop. Many financial institutions know the feeling too well. Noncompliance, even ignorant noncompliance, has its consequences: lawsuits, restitutions, rough examinations—all huge regulatory stomachaches.
Before your foot plummets through oxygen molecules yet again, we wish to make you aware of another regulation the commentary of which provides key information if you want to avoid the lawsuits some institutions are experiencing. These institutions are being sued for neglecting to provide for each individual cardholder “access to his or her specific credit card agreement under §1026.58(e).”
This references one of the CFPB’s many, many changes to TILA (Regulation Z), specifically 12 CRF 1026.58(d) and (e). Subsection (d) involves submitting agreements to the Bureau and posting a generic credit card agreement on the website. There are several pages dedicated to the exemptions for Subsection (d), including one based on the de minimis exception (which is, of course, referring to any institution that maintains less than 10,000 cards). It would then seem to follow that the institution would be exempt from the disclosure requirement outlined in Subsection (e) too, but this is not the case. Here it is in context in the regulation itself:
“(e) Agreements for all open accounts. (1) Availability of individual cardholder’s agreement. With respect to any open credit card account, a card issuer must either:
(i) Post and maintain the cardholder’s agreement on its Web site; or
(ii) Promptly provide a copy of the cardholder’s agreement to the cardholder upon the cardholder’s request. If the card issuer makes an agreement available upon request, the issuer must provide the cardholder with the ability to request a copy of the agreement both by using the issuer’s Web site (such as by clicking on a clearly identified box to make the request) and by calling a readily available telephone line the number for which is displayed on the issuer’s Web site and clearly identified as to purpose. The card issuer must send to the cardholder or otherwise make available to the cardholder a copy of the cardholder’s agreement in electronic or paper form no later than 30 days after the issuer receives the cardholder’s request.
(2) Special rule for issuers without interactive Web sites. An issuer that does not maintain a Web site from which cardholders can access specific information about their individual accounts, instead of complying with §1026.58(e)(1), may make agreements available upon request by providing the cardholder with the ability to request a copy of the agreement by calling a readily available telephone line, the number for which is displayed on the issuer’s Web site and clearly identified as to purpose or included on each periodic statement sent to the cardholder and clearly identified as to purpose. The issuer must send to the cardholder or otherwise make available to the cardholder a copy of the cardholder’s agreement in electronic or paper form no later than 30 days after the issuer receives the cardholder’s request.”
Although not completely clear, the card issuer exempt in (d) is still required to provide each individual cardholder with access to his or her specific credit card agreement under §1026.58(e) by posting and maintaining the agreement on the card issuer’s website or by providing a copy of the agreement upon the cardholder’s request. This fact is illumined by the official commentary, which reads:
“58(d) Posting of Agreements Offered to the Public
- Requirement applies only to agreements submitted to the Bureau. Card issuers are only required to post and maintain on their publicly available Web site the credit card agreements that the card issuer must submit to the Bureau under §1026.58(c). If, for example, a card issuer is not required to submit any agreements to the Bureau because the card issuer qualifies for the de minimis exception under §1026.58(c)(5), the card issuer is not required to post and maintain any agreements on its Web site under §1026.58(d). Similarly, if a card issuer is not required to submit a specific agreement to the Bureau, such as an agreement that qualifies for the private label exception under §1026.58(c)(6), the card issuer is not required to post and maintain that agreement under §1026.58(d) (either on the card issuer’s publicly available Web site or on the publicly available Web sites of merchants at which private label credit cards can be used). (The card issuer in both of these cases is still required to provide each individual cardholder with access to his or her specific credit card agreement under §1026.58(e) by posting and maintaining the agreement on the card issuer’s Web site or by providing a copy of the agreement upon the cardholder’s request.)” [Emphasis added.]
So it’s true; §1026.58(e) outlines the requirements for providing individuals access to their own credit card agreement, but does not offer any exemptions. However, many small card providers are mistakenly thinking that the exemption they qualified for in part (d) also applies to part (e).
Although you may find that in 9 examinations out of 10, you won’t be cited in an examination for this, you never know when your particular examiner will penalize you for noncompliance. Or worse, you could cross paths with a credit card borrower seeking to be released from his or her debts, and this person could have a lawyer.
Take a second look at your online credit card agreements so that you aren’t caught naively assuming there is one more step in this regulatory staircase.