The CFPB has published a final rule in today’s Federal Register amending Regulation Z (Truth in Lending) to remove fees paid before a credit card account is opened from the scope of the 25% limit on total fees that may be charged during the first year after account opening. The final rule also includes corresponding amendments to the Official Reg Z Commentary.  

The Credit CARD Act of 2009 amended TILA to provide that the total fees (other than late fees, over-the-limit fees, and returned payment fees) that may be charged to a consumer’s account “in the first year during which the account is opened” may not exceed 25% of the initial credit limit.  Although the Fed’s initial Reg Z revision to implement the CARD Act provision only included fees paid after account opening in the 25% limit, the Fed subsequently adopted a further revision to Reg Z that expanded the scope of the 25% limit to reach fees paid before account opening. 

The subsequent revision was scheduled to take effect on October 1, 2011.  However, it never became effective because in September 2011, a federal district court judge in South Dakota issued a preliminary injunction.  In April 2012, the CFPB issued a proposal to revise Reg Z and the commentary to apply the 25% limit only to fees paid during the first year after account opening.  According to the CFPB, the rule finalizing the proposal “is necessary to resolve uncertainty created by the South Dakota litigation.”  The final rule is effective immediately.