Interpretation of provision in Truth in Lending Regulation Z on annual credit card membership fees
Text was produced by OCR from a scan and may contain errors; check the PDF before quoting.
Page 1
The Board of. Governors of, the Fedarnl Reserve System today fesued | a \ Trach in Lending interpretation relating to annual
membership foes chor ged by some credit card isguera.
The Board aid ‘tuch fees are not “part of the "finance
charge” bince they are. | Imposed asa qualification of F member abip
rEa TH, hee
and for the tnauance of a yeveddt, card vather than as an incident
00 or as a | condition of any poet tte ‘extension of nredit.
oe:
a aM eopy of the “Ancer pretation to Regulation zie attached,
tea fea be | wa Oe,
Page 2
ISIlilll llK r/.^ TITLE 12—BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM S U B C H A P T E R A — B O A R D OF GOVERNORS OP THE FEDERAL RESERVE S V S p M ( (Reg. 2) PART 226--TRUTH IN LENDING '-,7fioS Chargaa for Membership In Open End Credit Plan | 226.407 Chorees for membership in open end credit plan (a) A credit card Issuer charges tho cardholder an annual fee for membership In the credit plan and f c r iaauance of a credit card for ufttn in conjunction with the plan. The payment of the foe isi required as n condition of roetabership in the plan, whether or not the cardholder U « S « B his cord for the purpose of obtaining credit. The question arises whether t h a w f««s are finance charges under § 226.4(a) of Regulation Z. (b) Since such fees are imposed as a qualification of membership In the plan and for the influence of a credit card, and not a$ incident to or as a condition of any specific extension of credit, they do not fall within the definition of a "finance charge" under § 226.4(a) of Regulation Z. (Interprets and applies 15 U.S.C, 1605) By order of the Board of Governors, August 12, 1971, (signed) Kenneth A, Kenyon Kenneth A. Kenyon Deputy Secretary (SEAL)