Compliance Blog

Section 303, which applies only to credit card accounts, adds subsection (p) to Section 127 of the Truth in Lending Act:

"(p) PARENTAL APPROVAL REQUIRED TO INCREASE CREDIT LINES FOR ACCOUNTS FOR WHICH PARENT IS JOINTLY LIABLE. - No increase may be made in the amount of credit authorized to be extended under a credit card account for which a parent, legal guardian, or spouse of the consumer, or any other individual has assumed joint liability for debts incurred by the consumer in connection with the account before the consumer attains the age of 21, unless that parent, guardian, or spouse approves in writing, and assumes joint liability for, such increase."

Don't let the subheading to subsection (p) confuse you - it applies broader than "parental approval."  Thus, if a 19 year-old would like an increase in their credit limit - the credit union would need to have written approval of the increase from whichever individual (parent, guardian, or spouse) will be joint on the increased amount.

This section becomes effective February 22, 2010.  Will this apply to existing credit cards held by persons under 21?  It is very possible.  There does not appear to be a "grand-fathering clause" or other language to limit this section to only new cards issued after February 22, 2010.  Additionally, the section requires whoever provides the written approval to "assume joint liability" for the increased amount.  If a person under 21, has an individual credit card account they may just be prevented from obtaining a credit limit increase until they turn 21.  Obviously, the Federal Reserve will amend Regulation Z to clarify and provide guidance on complying with subsection (p) of Section 127 of TILA.  

Did you catch the confusion in the subsection itself?  No increase in a credit limit for a credit card "for which a parent, legal guardian, or spouse of the consumer, or any other individual has assumed joint liability."  However, later in the same sentence, the section only allows the "parent, guardian, or spouse" to approve the increase in writing.  What about the "or any other individual?"  Hopefully, the Federal Reserve will clarify this situation.