Alert April 17, 2012

CFPB Proposes Rule to Narrow Scope of Regulation Z

The CFPB issued a proposed rule to limit the reach of Regulation Z’s credit card fee restrictions. This proposed rule seeks “to resolve the uncertainty caused by . . .  litigation.”  In First Premier Bank et al v. The United States Consumer Financial Protection Bureau et al, 819 F. Supp. 2d 906 (D. S.D. Sept. 23, 2011), a credit card issuer sought and obtained a preliminary injunction against the FRB, preventing it from enforcing 12 C.F.R. § 1026.52(a). First Premier alleged that the FRB exceeded its authority by expanding Regulation Z to apply to fees the consumer is required to pay prior to account opening – rather than the first year of the account as required by the Credit Card Accountability and Responsibility Disclosure Act of 2009, which amended the Truth in Lending Act. The CFPB’s proposal would limit Regulation Z’s credit card fees restrictions to only during the first year after account opening. The CFPB noted that its proposal may impose potential costs on consumers by allowing creditors to collect fees that may be disallowed absent the proposal. The period for public comment ends on June 11, 2012. Click here for the proposed rule and click here for the order.