(a) General rule.
(1) Evaluation
of increased rate. If a card issuer increases an annual percentage
rate that applies to a credit card account under an open-end (not
home-secured) consumer credit plan, based on the credit risk of the
consumer, market conditions, or other factors, or increased such a
rate on or after January 1, 2009, and 45 days’ advance notice of the
rate increase is required pursuant to section 226.9(c)(2) or (g),
the card issuer must:
(i) Evaluate the factors described in
paragraph (d) of this section; and
(ii) Based on its review of such factors,
reduce the annual percentage rate applicable to the consumer’s account,
as appropriate.
(2) Rate reductions.
(i) Timing. If a card issuer is required to reduce the rate applicable to an
account pursuant to paragraph (a)(1) of this section, the card issuer
must reduce the rate not later than 45 days after completion of the
evaluation described in paragraph (a)(1).
(ii) Applicability
of rate reduction. Any reduction in an annual percentage rate
required pursuant to paragraph (a)(1) of this section shall apply
to:
(A) Any outstanding balances to which the increased rate described
in paragraph (a)(1) of this section has been applied; and
(B) New transactions that occur
after the effective date of the rate reduction that would otherwise
have been subject to the increased rate.
(b) Policies and
procedures. A card issuer must have reasonable written policies
and procedures in place to conduct the review described in paragraph
(a) of this section.
(c) Timing. A card issuer that is subject to paragraph (a) of this
section must conduct the review described in paragraph (a)(1) of this
section not less frequently than once every six months after the rate
increase.
(d) Factors.
(1) In general. Except as provided in paragraph (d)(2) of this section,
a card issuer must review either:
(i) The factors on which
the increase in an annual percentage rate was originally based; or
(ii) The factors that
the card issuer currently considers when determining the annual percentage
rates applicable to similar new credit card accounts under an open-end
(not home-secured) consumer credit plan.
(2) Rate increases imposed between January 1, 2009 and February 21, 2010. For rate increases imposed between January 1, 2009 and February
21, 2010, an issuer must consider the factors described in paragraph
(d)(1)(ii) when conducting the first two reviews required under paragraph
(a) of this section, unless the rate increase subject to paragraph
(a) of this section was based solely upon factors specific to the
consumer, such as a decline in the consumer’s credit risk, the consumer’s
delinquency or default, or a violation of the terms of the account.
(e) Rate increases
subject to section 226.55(b)(4). If an issuer increases a rate
applicable to a consumer’s account pursuant to section 226.55(b)(4)
based on the card issuer not receiving the consumer’s required minimum
periodic payment within 60 days after the due date, the issuer is
not required to perform the review described in paragraph (a) of this
section prior to the sixth payment due date after the effective date
of the increase. However, if the annual percentage rate applicable
to the consumer’s account is not reduced pursuant to section 226.55(b)(4)(ii),
the card issuer must perform the review described in paragraph (a)
of this section. The first such review must occur no later than six
months after the sixth payment due following the effective date of
the rate increase.
(f) Termination of obligation to review factors. The obligation
to review factors described in paragraph (a) and (d) of this section
ceases to apply:
(1) If the issuer reduces the annual percentage
rate applicable to a credit card account under an open-end (not home-secured)
consumer credit plan to the rate applicable immediately prior to the
increase, or, if the rate applicable immediately prior to the increase
was a variable rate, to a variable rate determined by the same formula
(index and margin) that was used to calculate the rate applicable
immediately prior to the increase; or
(2) If the issuer reduces the annual percentage
rate to a rate that is lower than the rate described in paragraph
(f)(1) of this section.
(g) Acquired accounts.
(1) General. Except as provided in paragraph (g)(2) of this section, this section
applies to credit card accounts that have been acquired by the card
issuer from another card issuer. A card issuer that complies with
this section by reviewing the factors described in paragraph (d)(1)(i)
must review the factors considered by the card issuer from which it
acquired the accounts in connection with the rate increase.
(2) Review of acquired portfolio. If, not later than six months
after the acquisition of such accounts, a card issuer reviews all
of the credit card accounts it acquires in accordance with the factors
that it currently considers in determining the rates applicable
to its similar new credit card accounts:
(i) Except as provided
in paragraph (g)(2)(iii), the card issuer is required to conduct reviews
described in paragraph (a) of this section only for rate increases
that are imposed as a result of its review under this paragraph. See
sections 226.9 and 226.55 for additional requirements regarding rate
increases on acquired accounts.
(ii) Except as provided in paragraph
(g)(2)(iii) of this section, the card issuer is not required to conduct
reviews in accordance with paragraph (a) of this section for any rate
increases made prior to the card issuer’s acquisition of such accounts.
(iii) If as a result
of the card issuer’s review, an account is subject to, or continues
to be subject to, an increased rate as a penalty, or due to the consumer’s
delinquency or default, the requirements of paragraph (a) of this
section apply.
(h) Exceptions.
(1) Servicemembers
Civil Relief Act exception. The requirements of this section
do not apply to increases in an annual percentage rate that was previously
decreased pursuant to 50 U.S.C. app. 527, provided that such a rate
increase is made in accordance with section 226.55(b)(6).
(2) Charged off accounts. The requirements of this section do not
apply to accounts that the card issuer has charged off in accordance
with loan-loss provisions.
