Compliance Blog

Posted by Steve Van Beek

"(b) Exceptions. A card issuer may increase an annual percentage rate or a fee or charge required to be disclosed under § 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) pursuant to an exception set forth in this paragraph even if that increase would not be permitted under a different exception."  (emphasis added).  

"55(b) Exceptions. 

1. Exceptions not mutually exclusive. A card issuer may increase an annual percentage rate or a fee or charge required to be disclosed under § 226.6(b)(2)(ii), (b)(2)(iii), or (b)(2)(xii) pursuant to an exception set forth in § 226.55(b) even if that increase would not be permitted under a different exception. For example, although a card issuer cannot increase an annual percentage rate pursuant to § 226.55(b)(1) unless that rate is provided for a specified period of at least six months, the card issuer may increase an annual percentage rate during a specified period due to an increase in an index consistent with § 226.55(b)(2). Similarly, although § 226.55(b)(3) does not permit a card issuer to increase an annual percentage rate during the first year after account opening, the card issuer may increase the rate during the first year after account opening pursuant to § 226.55(b)(4) if the required minimum periodic payment is not received within 60 days after the due date."

This is an important distinction to keep in mind.  For example, the advance notice exception can not be used in the first year an account is opened.  12 C.F.R. 226.55(b)(3)(iii).  This prohibits the credit union from raising the margin on a variable-rate account within the first year the account is opened.  However, the credit union could still increase the APR on the account, according to variable rate exception in 226.55(b)(2), if the index on the account increases (assuming the index is outside of the credit union's control).