(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 1026.9(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 due to
delinquency. If an issuer increases a rate applicable to a consumer’s
account pursuant to section 1026.55(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 1026.55(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.
(3) Effective April 1, 2022, in the case where the rate applicable
immediately prior to the increase was a variable rate with a formula
based on a LIBOR index, the card issuer reduces the annual percentage
rate to a rate determined by a replacement formula that is derived
from a replacement index value on October 18, 2021, plus replacement
margin that is equal to the LIBOR index value on October 18, 2021,
plus the margin used to calculate the rate immediately prior to the
increase (previous formula). A card issuer must satisfy the conditions
set forth in section 1026.55(b)(7)(ii) for selecting a replacement
index. If the replacement index is not published on October 18, 2021,
the card issuer generally must use the values of the indices on the
next calendar day for which both the LIBOR index and the replacement
index are published as the index values to use to determine the replacement
formula. The one exception is that if the replacement index is the
Board-selected benchmark replacement for consumer loans to replace
the 1-month, 3-month, 6-month, or 12-month U.S. Dollar LIBOR index,
the card issuer must use the index value on June 30, 2023, for the
LIBOR index and, for the Board-selected benchmark replacement for
consumer loans, must use the index value on the first date that index
is published, as the index values to use to determine the replacement
formula.
(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 1026.9 and 1026.55 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 1026.55(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.
(3) Transition
from LIBOR. The requirements of this section do not apply to
increases in an annual percentage rate that occur as a result of the
transition from the use of a LIBOR index as the index in setting a
variable rate to the use of a replacement index in setting a variable
rate if the change from the use of the LIBOR index to a replacement
index occurs in accordance with section 1026.55(b)(7)(i) or (ii).
