Imposing Late Fees on Open-End Credit Accounts After the Due Date

Dear Ms. Chadwick:

You represent a federal credit union (FCU) that does not impose late fees on a member’s open-end
credit account until five days after the payment is due. You asked if an FCU must disclose this to
its members. No, the Credit Card Accountability, Responsibility, and Disclosure (Credit CARD) Act
and recent amendments to Regulation Z do not require an FCU to disclose any period after the payment due date before which late fees are actually imposed.

The Credit CARD Act prohibits a creditor from treating a payment on an open-end credit plan as
late for any reason unless the creditor has reasonable procedures to ensure each periodic
statement is mailed or delivered to the consumer at least 21 days before the payment due date or
the date on which the grace period expires. Pub. L. 111-24, §106(b); 123 Stat. 1734 (May 22, 2009)
(commonly referred to as the “21-day rule”). The Federal Reserve Board recently issued an interim
final rule implementing the 21-day rule under the general disclosure requirements of Regulation Z
applicable to periodic statements. 74 F.R. 36077 (July 22, 2009) (to be codified at 12 C.F.R. §226.5(b)(2)(ii)). The official staff interpretations to the rule clarify that “a courtesy period following the payment due date is not a grace period for purposes of § 226.5(b)(2)(ii).” Id. at 36097 (to be codified at 12 C.F.R. Part 226, Supplement I, comment 5(b)(2)(ii)-4).

If you have any further questions, please feel free to contact Staff Attorney Tonya Green or me at
(703) 518-6540.