Consumers will be pleased to discover a little known regulation enacted for their protection. This regulation, known as Regulation Z or the Truth in Lending Law, regulates certain credit card practices and helps consumers to know the cost of credit and achieve a fair and timely solution to credit card billing disputes. Each of the questions below is designed to help you understand how Regulation Z works.

Regulation Z applies to:

  • Credit offered or extended to a consumer;
  • Credit used primarily for personal, family or household purposes;
  • Credit subject to a finance charge or made payable by a written agreement in more than four installments;
  • The advertising of such credit transactions, i.e. credit card applications sent by mail or offered by telephone.

If the offer is for a credit card, then Regulation Z may apply even if there is no finance charge or the credit is not payable by a written agreement in more than four installments.

When Does the Creditor Have to Post My Payment?

The simple answer is as soon as the creditor receives it! How many times have you argued with a creditor over the posting of a payment that you sent on time? If that creditor acted properly, under Regulation Z, any payment you sent must be credited to your account as of the day the creditor actually received the payment, and NOT when the creditor gets around to posting it. If there is a delay in posting the payment, you cannot be charged additional fees. The only exception is when the delay in crediting the payment does not cause you to pay a finance charge.

Suppose, on your monthly statement, the creditor listed certain requirements for you to follow when making a payment, but accepts a payment that does not conform to those requirements? In that case, the creditor still has to credit your payments within five days of receipt, even though you did not follow instructions. For example, assume a creditor has informed the debtor that the payment must be sent along with the account number or payment stub, and the debtor sends a payment but fails to include either the account number or stub. If the creditor accepts the payment anyway, the payment must be credited within five business days of receipt, even though the debtor has failed to follow instructions.

If you always wait until the last minute to send your payments and do not send it so it conforms to your creditors’ requirements, your payment might be recorded after the due date and result in a late charge even though it arrived on time.

How Will I Know What the Terms of the Credit Are and if the Amount the Creditor Charges Me Is Correct?

Under Regulation Z, consumers must be told important information about how much the credit will cost them and the terms. When you are given an application or offer to open a credit or charge card account, the card issuer must disclose certain information before you agree to accept the credit offer, including:

  • Annual percentage rate (how much the credit will cost you, expressed as a yearly rate) and the Periodic Rate (how the creditor will determine the finance charge for each billing period).
  • Annual fees the consumer must pay for issuance of the card or for the availability of credit (usually $25-$50 for regular cards and $75 or more for a “gold” or “platinum” card).
  • User fees (or transaction fees) the consumer must pay for charging more than the established credit limit, making late payments, using a card to receive a cash advance or set fees a consumer may have to make each month just for having the card.
  • Grace period. Whether a grace period is provided, allowing the consumer to avoid paying a finance charge by paying the full amount due each month before the due date. If no grace period is provided, consumers must be told up-front.

Knowing this information before deciding whether to accept an offer of credit will help you compare credit offers to decide which offer best suits your needs. Likewise, creditors have many requirements under Regulation Z for closed-end credit, such as a loan. Before the credit is granted, the creditor must inform the consumer of important terms, some of which include:

  • Total finance charge - how much the credit will cost you during the time you are using the credit.
  • Amount financed - a total amount of credit that is being provided to you, including the loan amount, other sums that the creditor has agreed to finance (minus finance charges that the consumer has prepaid).
  • Annual percentage rate - how much the credit will cost you, expressed as a yearly rate.
  • Variable rate - information about the terms of the variation, including how much the rate can go up and under what circumstances.
  • Schedule for repayment and total number of payments - amount and timing of payments.
  • Fees for late payments - how much the creditor will charge the consumer if payments are made late.
  • Provision demanding full payment - the circumstances under which the consumer could be required to pay the amount owed in full.