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Regulation Z & Credit Cards

by Genevieve Adams

Overview

Regulation Z is a federal regulation that was put in place to enforce the requirements of the Truth in Lending Act. Most of the regulation covers the disclosures that are required to be given during certain credit transactions between application and the closing process. One of the credit products covered by this legislation is the credit card. Regulation Z puts in place requirements for initial disclosures, periodic statements, notifications of changes in terms and mitigating unauthorized use of credit cards.
Issuance of Credit Cards

Section 226.12 of Regulation Z states that new credit cards may not be issued to a person or business other than in response to an oral or written request for the credit card. In basic terms, this means that banks and credit card companies are prohibited by law from giving credit cards to people who have not asked for them. This is in place for the protection of the consumer because opening a new credit card affect credit bureau reports and scores. If you receive a credit card in the mail that you did not request or apply for, inform the institution that sent it to you. Let it know that you have received a card you did not authorize, and request that the company contact the credit bureaus to set the record straight.

Initial Disclosures

If you apply for a credit card---or receive a solicitation or pre-approval in the mail---Regulation Z requires that you be given certain disclosures about the terms of the credit card. The most important information is usually contained in a table that will show you the annual percentage rates that will be charged for purchases, cash advances and balance transfers. Additionally, the credit card company must disclose fees that associated with the account, including annual fees and fees charged for balance transfers or the use of courtesy credit card checks. When considering a new credit card, review these terms carefully to ensure that the card is right for you.
Periodic Statements

A credit card company must send out a periodic statement for every billing cycle if your credit card has a balance of more than $1 or if it charged you fees or interest during that cycle. Section 226.7 of Regulation Z indicates that these statements must include certain information that will help you understand the state of your account. Each statement will show you the balance on your account at the beginning of the billing cycle, each individual transaction that occurred on your card, payments that you made, the balance used to compute your interest, the amount of interest charged and the annual percentage rate that was used to determine your finance charges. This information may be used to keep track of the transactions you make on your card and how much they are truly costing you.
Change in Terms

If the credit card company decides to change the terms of your account and that change would have a negative effect on you and your credit card, they are required to notify you at least 15 days in advance of the change taking effect under Regulation Z. These changes are usually disclosed in somewhat fine print, but they are very important to the way you use your account because it usually increases the amount you are paying for the card. One of the most common changes is a significant increase in the interest rate or fees on your credit card. You have the right to refuse these changes before they take effect. If you receive a notice of changes you are not willing to accept, you may contact your company to refuse the change. They will close your credit card and you will be allowed to pay off the remainder of the balance under the old interest rate and terms of the account.
Unauthorized Use

Regulation Z also limits your personal liability in the case that your card is used without your knowledge or permission. If you find a charge on your credit card that you did not make yourself, immediately contact your bank or credit card company and inform them of the charge. You may notify the company either verbally or in writing, and they must conduct an investigation. If they find that the charge is indeed unauthorized, the regulation limits your liability to no more than $50. However, many credit card companies have a "zero liability policy," which means that you have no liability for unauthorized transactions.