The rules made significant changes to how credit unions and other financial institutions were required to support
open-end credit.
In April 2005 the Bankruptcy Act was enacted, which contains several amendments to TILA, including provisions requiring new disclosures for
open-end credit accounts.
However, by establishing an
open-end credit account with a limit of at least $500, the consumer would save the additional $159 annually in premiums (assuming no transaction costs to opening the account), would only need to exercise the credit option in the event of a loss, and could extend the repayment over three years or more.
When subaccounts continue to meet the revolving and replenishing criteria for
open-end credit, the credit union can check the member's credit rating when first establishing the account and again when they raise the credit limit.
In a typical
open-end credit sale, the contractor completes a credit slip and credit charge application with the consumer when making the sale.
The general
open-end credit disclosures must be provided before the first transaction, which typically occurs at closing.
While lawmakers and aides didn't intend to include the provision on
open-end credit in the legislation, it may not be simple to remove, said NAFCU Director of Legislative Affairs Brad Thaler.
The league also encouraged credit unions to write to the Federal Reserve about the difficulty of complying with the notification rules on
open-end credit accounts by the Aug.
The regulation carefully defines
open-end credit as "consumer credit extended under a plan in which (i) the creditor reasonably contemplates repeated transactions; (ii) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) the amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that the outstanding balance is repaid" (Regulation Z 226.
Y, lawyer who represents an unnamed federal credit union that doesn't impose late fees on a member's
open-end credit account until five days after the payment is due.
b) Prohibited acts or practices for dwelling-secured loans;
open-end credit.
