In the same 2023 bill (House Bill 23-1229) that included Colorado’s DIDMCA opt-out**, Colorado adopted a statute excepting certain “general-purpose credit cards”, as defined, from the state’s limitations on finance charges and fees applicable to consumer transactions, effective July 1, 2024. However, ambiguities in the definition of “general-purpose credit card” have perplexed many in the industry.

On June 21, 2024, the Colorado Uniform Consumer Credit Code (UCCC) Administrator issued an Interpretive Opinion Letter (the “June 21 Opinion”) regarding the definition of “general-purpose credit card” that is helpful in some respects, but unfortunately appears inconclusive in others.

C.R.S. § 5-2-213, the general-purpose credit card carve-out provides:

C.R.S. § 5-2-213

(1) As used in this section:

(a) “General-purpose credit card” means any card, plate, or other single credit device that may be used from time to time to obtain consumer credit under an open-end credit plan offered by a supervised financial organization, as defined in section 5-1-301(45), that:

      (I) Is accepted by any merchant that participates in a widely accepted payment card network and is accepted upon presentation at multiple, unaffiliated merchants for goods or services;

      (II) Does not charge fees, including pre-account opening fees, which exceed fifteen percent of the credit line; and

      (III) Does not include an overdraft line of credit that is accessed by a debit or prepaid card or an account number.

      (b) “Open-end credit plan” means consumer credit extended by a creditor under a plan in which:

      (I) The creditor reasonably contemplates repeated transactions;

      (II) The creditor may impose a finance charge from time to time on an outstanding unpaid balance; and

      (III) The amount of credit that may be extended to the consumer during the term of the plan, up to any limit set by the creditor, is generally made available to the extent that any outstanding balance is repaid.

      (2) Limitations in state law on finance charges and fees applicable to consumer credit transactions in sections 5-2-201, 5-2-202, and 5-2-203 shall not apply to general-purpose credit cards.

      C.R.S. § 5-2-213 (1)(a)(II), as quoted above, does not provide enough information to enable an issuer to determine whether its credit cards meet this prong of the definition of a general-purpose credit card. Open questions include which fees are to be included in calculating compliance with the 15% cap, does the term “credit line” refer to credit available when the card is first issued or at a different time, and when is the 15% calculation to be made.

      In the June 21 Opinion, the UCCC Administrator first acknowledges, “An underlying purpose and policy of the UCCC is to conform the regulation of consumer credit transactions to the policies of the federal ‘Truth in Lending Act’ [TILA].” However, the June 21 Opinion indicates the Administrator will not follow provisions of TILA and Regulation Z that the Administrator deems inconsistent with the UCCC.

      The primary operative language of the June 21 Opinion advises:

      When applying the definition of general-purpose credit card in C.R.S. § 5-2-213 (2024), the Administrator’s policy will be to seek to conform to the following provisions of TILA and Regulation Z to the extent that they are consistent with C.R.S. § 5-2-213 (2024) and all other provisions of the UCCC.

      Three interpretive policy statements about C.R.S. § 5-2-213 (1)(a)(II) follow, with citations to applicable sections of TILA and Regulation Z.

      Which Fees are Included in the 15% Calculation?

      The second interpretation, “Treatment of late payment fees, over-the-limit fees, returned-payment fees, and fees the consumer is not required to pay” responds to a question received by the Administrator “asking for clarity regarding any fees that may be excluded from the 15 percent fee calculation used in C.R.S. § 5-2-213(1)(a).” In response, the June 21 Opinion first cites to Regulation Z:

      Regulation Z provides that the following fees are not subject to the fee limitation set forth in 12 C.F.R. § 1026.52(a)(1):3 “(i) Late payment fees, over-the-limit fees, and returned-payment fees; or (ii) Fees that the consumer is not required to pay with respect to the account.” 12 C.F.R. § 1026.52(a)(2)(i) and (ii).

      However, in footnote 3, the June 21 Opinion points out:

      3 Unlike Regulation Z, C.R.S. § 5-2-213(1)(a) (2024) additionally provides that pre-account opening fees are included in the UCCC fee limit calculation.

      Accordingly, it is reasonable to understand the Administrator’s enforcement position to be that late fees, over-the-limit fees, returned payment fees, and “fees the consumer is not required to pay” are not to be included in calculating the 15% cap, but pre-account opening fees must be included.

      While the interpretation does not elaborate on fees that would be ones “the consumer is not required to pay,” under TILA and Regulation Z, those fees include expedited payment fees (where permitted), fees for optional services (such as travel insurance), fees for reissuing a lost or stolen card, and fees for copies of statements.  Comment 1026.52(a)(2)-2.  Presumably that will also be the case under Colorado law, although further clarification would be helpful.

      When is the 15% Calculation to be Made, and When is the Credit Line determined?

      Unfortunately, the first interpretation, “Applicable time period for measuring fees”, does not appear to provide definitive guidance. This interpretation is offered in response to a question “asking for clarity regarding the applicable time period for measuring the fifteen percent fee, including when the account may be considered open and when the credit limit should be measured.”

      The June 21 Opinion points out:

      Unlike TILA and Regulation Z, the UCCC does not state that the fee limitation applies only in the first year during which the account is opened. When evaluation [sic] whether the UCCC fee limitation applies in subsequent years, the Administrator will view this distinction between the UCCC and the analogous federal statutes as relevant to determining the intent of the General Assembly.

      However, beyond this indication that the time period during which the 15% fee cap must be met in order for a card to qualify as a general-purpose credit card is unlikely to be limited to one year in the eyes of the Administrator, the June 21 Opinion provides no further assistance on the question of when and for how long the fee cap applies.

      A third interpretation responds to a question “asking for clarity regarding the time for calculating whether a credit issuer has exceeded the fee limitation set forth in 12 C.F.R. § 1026.52(a)(1)” (although we assume that the question is referring to the fee limitation in C.R.S. § 5-2-213(a)(II)), but rather than providing the requested information, the interpretation cites to a section of Regulation Z that explains when an excessive fee must be refunded (with interest).

      The Administrator’s guidance on which fees must be included in the 15% calculation should be welcomed by the industry. Unfortunately, further, more definitive guidance will be necessary to enable understanding of and compliance with the new general-purpose credit card carve-out.

      **Colorado’s DIDMCA opt-out is currently subject to an injunction imposed on June 18 by the Colorado federal district court. The preliminary injunction provides that Colorado is preliminarily enjoined from enforcing its interest rate and fee limits with respect to any loan made by the plaintiffs’ members, to the extent the loan is not “made in” Colorado and the applicable interest rate in Section 1831d(a) exceeds the rate that would otherwise be permitted.