Compliance Blog

Written by Steve Van Beek

The CFPB's republished Regulation Z became effective December 30, 2011.  Regulation Z is still Regulation Z but credit unions should be using the new section numbers for their citations and conduct their research under the CFPB's Regulation Z.  

The CFPB's Regulation Z is located in 12 CFR 1026.  

Credit Card Applications & Solicitations; Home Equity Lines of Credit (HELOCs)

There are a couple of tweaks to the CFPB's Reg Z.  Sections 226.5a (dealing with credit card applications and solicitations) and Sections 226.5b (dealing with home equity lines of credit) have been renumbered.  Section 226.5a is now Section 1026.60.  Section 226.5b is now Section 1026.40.  Here is from the CFPB's interim rule:

"Most significantly, the Board's §§ 226.5a and 226.5b have been renumbered as §§ 1026.60 and 1026.40, respectively. These two sections, as numbered in the Board's existing Regulation Z, do not meet the current requirements for section numbering for publication in the Code of Federal Regulations. See 1 CFR 21.11(g). Because existing § 226.5a relates to credit card disclosures, the Bureau is codifying it as § 1026.60 so that it will appear in subpart G, Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students. Because existing § 226.5b relates to home-equity plans, the Bureau is codifying it as § 1026.40 so that it will appear in subpart E, Special Rules for Certain Home Mortgage Transactions. All existing cross-references to these two sections are changed accordingly throughout the Bureau's new Regulation Z."

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Private Education Loans

The CFPB also clarified Section 1026.46(b)(5) which addresses the coverage of Reg Z's private education loans.  The CFPB's clarification adds an "or" to clarify that open-end private education loans are not covered by Subpart F of Regulation Z (Sections 1026.46-48).  

We've heard from some credit unions in the past on the confusion in the exceptions because of way the regulation was worded.  The preamble to the previous rule was clear but the regulatory section was confusing.  Here is the CFPB's explanation for the clarification:

"The Board's existing § 226.46(b)(5)(iii) provides that the term “private education loan” does not include “open-end credit any loan that is secured by real property or a dwelling.” As adopted by the Board, this provision inadvertently omitted the word “or” between “open-end credit” and “any loan that is secured by real property or a dwelling.” Thus, as written, the provision is unclear but could be interpreted to exclude from “private education loan” only open-end credit that is secured by real property or a dwelling, whereas it was intended to exclude all open-end credit, regardless of whether secured, and all loans that are secured by real property or a dwelling, whether open- or closed-end. In the SUPPLEMENTARY INFORMATION to the final rule that adopted § 226.46(b)(5)(iii), the Board stated that the term “private education loan” was being adopted substantially as proposed and noted that under the proposal “[a] private education loan excluded any credit otherwise made under an open-end credit plan. It also excluded any closed-end loan secured by real property or a dwelling.” 74 FR 41194, 41203 (Aug. 14, 2009). To correct this error, the Bureau's § 1026.46(b)(5)(iii) inserts the word “or” in the appropriate place."

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The CFPB's Regulations, including Regulation Z, are listed under Title X of the Code of Federal Regulations.