(1) Temporary
rate, fee, or charge exception. A card issuer may increase an
annual percentage rate or a fee or charge required to be disclosed
under section 1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) upon the
expiration of a specified period of six months or longer, provided
that:
(i) Prior to the commencement of that
period, the card issuer disclosed in writing to the consumer, in a
clear and conspicuous manner, the length of the period and the annual
percentage rate, fee, or charge that would apply after expiration
of the period; and
(ii) Upon expiration of the specified period:
(A) The card issuer
must not apply an annual percentage rate, fee, or charge to transactions
that occurred prior to the period that exceeds the annual percentage
rate, fee, or charge that applied to those transactions prior to the
period;
(B) If the disclosures
required by paragraph (b)(1)(i) of this section are provided pursuant
to section 1026.9(c), the card issuer must not apply an annual percentage
rate, fee, or charge to transactions that occurred within 14 days
after provision of the notice that exceeds the annual percentage rate,
fee, or charge that applied to that category of transactions prior
to provision of the notice; and
(C) The card issuer must not apply an annual
percentage rate, fee, or charge to transactions that occurred during
the period that exceeds the increased annual percentage rate, fee,
or charge disclosed pursuant to paragraph (b)(1)(i) of this section.
(2) Variable rate exception. A card
issuer may increase an annual percentage rate when:
(i) The
annual percentage rate varies according to an index that is not under
the card issuer’s control and is available to the general public;
and
(ii) The increase
in the annual percentage rate is due to an increase in the index.
(3) Advance notice exception. A card issuer
may increase an annual percentage rate or a fee or charge required
to be disclosed under section 1026.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii)
after complying with the applicable notice requirements in section
1026.9(b), (c), or (g), provided that:
(i) If a card issuer
discloses an increased annual percentage rate, fee, or charge pursuant
to section 1026.9(b), the card issuer must not apply that rate, fee,
or charge to transactions that occurred prior to provision of the
notice;
(ii) If
a card issuer discloses an increased annual percentage rate, fee,
or charge pursuant to section 1026.9(c) or (g), the card issuer must
not apply that rate, fee, or charge to transactions that occurred
prior to or within 14 days after provision of the notice; and
(iii) This exception does
not permit a card issuer to increase an annual percentage rate or
a fee or charge required to be disclosed under section 1026.6(b)(2)(ii),
(iii), or (xii) during the first year after the account is opened,
while the account is closed, or while the card issuer does not permit
the consumer to use the account for new transactions. For purposes
of this paragraph, an account is considered open no earlier than the
date on which the account may first be used by the consumer to engage
in transactions.
(4) Delinquency
exception. A card issuer may increase an annual percentage rate
or a fee or charge required to be disclosed under section 1026.6(b)(2)(ii),
(b)(2)(iii), or (b)(2)(xii) due to the card issuer not receiving the
consumer’s required minimum periodic payment within 60 days after
the due date for that payment, provided that:
(i) The
card issuer must disclose in a clear and conspicuous manner in the
notice of the increase pursuant to section 1026.9(c) or (g):
(A) A statement
of the reason for the increase; and
(B) That the increased annual percentage rate,
fee, or charge will cease to apply if the card issuer receives six
consecutive required minimum periodic payments on or before the payment
due date beginning with the first payment due following the effective
date of the increase; and
(ii) If the card issuer receives six
consecutive required minimum periodic payments on or before the payment
due date beginning with the first payment due following the effective
date of the increase, the card issuer must reduce any annual percentage
rate, fee, or charge increased pursuant to this exception to the annual
percentage rate, fee, or charge that applied prior to the increase
with respect to transactions that occurred prior to or within 14 days
after provision of the section 1026.9(c) or (g) notice.
(5) Workout and temporary hardship arrangement exception. A card issuer may increase an annual percentage rate or a fee or
charge required to be disclosed under section 1026.6(b)(2)(ii), (b)(2)(iii),
or (b)(2)(xii) due to the consumer’s completion of a workout or temporary
hardship arrangement or the consumer’s failure to comply with the
terms of such an arrangement, provided that:
(i) Prior to commencement
of the arrangement (except as provided in section 1026.9(c)(2)(v)(D)),
the card issuer has provided the consumer with a clear and conspicuous
written disclosure of the terms of the arrangement (including any
increases due to the completion or failure of the arrangement); and
(ii) Upon the completion
or failure of the arrangement, the card issuer must not apply to any
transactions that occurred prior to commencement of the arrangement
an annual percentage rate, fee, or charge that exceeds the annual
percentage rate, fee, or charge that applied to those transactions
prior to commencement of the arrangement.
(6) Servicemembers Civil Relief Act exception. If an annual percentage
rate or a fee or charge required to be disclosed under section 1026.6(b)(2)(ii),
(iii), or (xii) has been decreased pursuant to 50 U.S.C. app. 527
or a similar Federal or state statute or regulation, a card issuer
may increase that annual percentage rate, fee, or charge once 50 U.S.C.
app. 527 or the similar statute or regulation no longer applies, provided
that the card issuer must not apply to any transactions that occurred
prior to the decrease an annual percentage rate, fee, or charge that
exceeds the annual percentage rate, fee, or charge that applied to
those transactions prior to the decrease.
(7) Index replacement
and margin change exception. A card issuer may increase an annual
percentage rate when:
(i) The card issuer changes the index
and margin used to determine the annual percentage rate if the original
index becomes unavailable, as long as historical fluctuations in the
original and replacement indices were substantially similar, and as
long as the replacement index and replacement margin will produce
a rate substantially similar to the rate that was in effect at the
time the original index became unavailable. If the replacement index
is newly established and therefore does not have any rate history,
it may be used if it and the replacement margin will produce a rate
substantially similar to the rate in effect when the original index
became unavailable; or
(ii) If a variable rate on the plan is calculated using a LIBOR index,
the card issuer changes the LIBOR index and the margin for calculating
the variable rate on or after April 1, 2022, to a replacement index
and a replacement margin, as long as historical fluctuations in the
LIBOR index and replacement index were substantially similar, and
as long as the replacement index value in effect on October 18, 2021,
and replacement margin will produce an annual percentage rate substantially
similar to the rate calculated using the LIBOR index value in effect
on October 18, 2021, and the margin that applied to the variable rate
immediately prior to the replacement of the LIBOR index used under
the plan. If the replacement index is newly established and therefore
does not have any rate history, it may be used if the replacement
index value in effect on October 18, 2021, and the replacement margin
will produce an annual percentage rate substantially similar to the
rate calculated using the LIBOR index value in effect on October 18,
2021, and the margin that applied to the variable rate immediately
prior to the replacement of the LIBOR index used under the plan. If
the replacement index is not published on October 18, 2021, the card
issuer generally must use the next calendar day for which both the
LIBOR index and the replacement index are published as the date for
selecting indices values in determining whether the annual percentage
rate based on the replacement index is substantially similar to the
rate based on the LIBOR index. 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, in determining whether the annual percentage rate
based on the replacement index is substantially similar to the rate
based on the LIBOR index.
(1) Definition
of protected balance. For purposes of this paragraph, “protected
balance” means the amount owed for a category of transactions to which
an increased annual percentage rate or an increased fee or charge
required to be disclosed under section 1026.6(b)(2)(ii), (b)(2)(iii),
or (b)(2)(xii) cannot be applied after the annual percentage rate,
fee, or charge for that category of transactions has been increased
pursuant to paragraph (b)(3) of this section.
(2) Repayment
of protected balance. The card issuer must not require repayment
of the protected balance using a method that is less beneficial to
the consumer than one of the following methods:
(i) The
method of repayment for the account before the effective date of the
increase;
(ii) An
amortization period of not less than five years, beginning no earlier
than the effective date of the increase; or
(iii) A required minimum periodic payment
that includes a percentage of the balance that is equal to no more
than twice the percentage required before the effective date of the
increase.
