From: Kari Osier, Compliance Specialist
Section 1026.9(c)(2)(i)(A) of Regulation Z requires forty-five (45) days’ advance prior notice for any “significant changes in account terms”. What is a “significant change in account terms”? A significant change would be a change to any term that was required to be disclosed in the account-opening table or directly underneath it, including the following:
• Any annual percentage rates;
• Fees for the issuance or availability of credit;
• Fixed finance charges or a minimum interest charge exceeding $1;
• Grace period;
• Balance computation method;
• Cash advance fee, balance transfer fee, or transaction charges;
• Late payment fee, over-the-limit fee, or returned-payment fee;
• Information regarding periodic rates required to be disclosed under Regulation Z Section 1026.6(b)(4);
• Increase in the minimum payment; and
• Acquisition of a security interest.
The change-in-terms notice must be in writing and contain a summary of the change that will be imposed; a statement that changes are being made; for non-credit card accounts, a statement that the member has the right to opt out of the change; the date the change becomes effective; if applicable, a statement that the member may find additional information about the change in the notice; and, for APR increases: the balances to which the new rate will apply; if a penalty rate applies at the time, a statement that the new rate will not apply until the penalty rate no longer applies; and for credit card accounts, a statement of reasons for the rate increase.
Advance notice is not required for a change that is not significant, and the credit union may send a notice of the change before the member agrees to it as long as it is obvious and the member would notice the disclosure. If a credit union decides to give written disclosures, it can choose to mail a complete new set of the account-opening disclosures if the change is highlighted, or if the disclosure statement is accompanied by a letter or some other insert drawing attention to the term being changed. It does not need to use the summary table or formatting required for significant changes.