# FDIC Law, Regulations, Related Acts

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## 6500 - Consumer Financial Protection Bureau

**
Appendix M1 to Part 1026—Repayment Disclosures
**

(a) *Definitions.* (1) "Promotional terms" means
terms of a cardholder's account that will expire in a fixed period of
time, as set forth by the card issuer.

(2) "Deferred interest or similar plan" means a plan where a consumer will not be obligated to pay interest that accrues on balances or transactions if those balances or transactions are paid in full prior to the expiration of a specified period of time.

(b) *Calculating minimum payment repayment estimates.* (1)
*Minimum payment formulas.* When calculating the minimum
payment repayment estimate, card issuers must use the minimum payment
formula(s) that apply to a cardholder's account. If more than one
minimum payment formula applies to an account, the issuer must apply
each minimum payment formula to the portion of the balance to which the
formula applies. In this case, the issuer must disclose the longest
repayment period calculated. For example, assume that an issuer uses
one minimum payment formula to calculate the minimum payment amount for
a general revolving feature, and another minimum payment formula to
calculate the minimum payment amount for special purchases, such as a
"club plan purchase." Also, assume that based on a consumer's
balances in these features and the annual percentage rates that apply
to such features, the repayment period calculated pursuant to this
Appendix for the general revolving feature is 5 years, while the
repayment period calculated for the special purchase feature is 3
years. This issuer must disclose 5 years as the repayment period for
the entire balance to the consumer. If any promotional terms related to
payments apply to a cardholder's account, such as a deferred billing
plan where minimum payments are not required for 12 months, card
issuers may assume no promotional terms apply to the account. For
example, assume that a promotional minimum payment of $10 applies to
an
account for six months, and then after the promotional period
expires, the minimum payment is calculated as 2 percent of the
outstanding balance on the account or $20 whichever is greater. An
issuer may assume during the promotional period that the $10
promotional minimum payment does not apply, and instead calculate the
minimum payment disclosures based on the minimum payment formula of 2
percent of the outstanding balance or $20, whichever is greater.
Alternatively, during the promotional period, an issuer in calculating
the minimum payment repayment estimate may apply the promotional
minimum payment until it expires and then apply the minimum payment
formula that applies after the promotional minimum payment expires. In
the above example, an issuer could calculate the minimum payment
repayment estimate during the promotional period by applying the $10
promotional minimum payment for the first six months and then applying
the 2 percent or $20 (whichever is greater) minimum payment formula
after the promotional minimum payment expires. In calculating the
minimum payment repayment estimate during a promotional period, an
issuer may not assume that the promotional minimum payment will apply
until the outstanding balance is paid off by making only minimum
payments (assuming the repayment estimate is longer than the
promotional period). In the above example, the issuer may not calculate
the minimum payment repayment estimate during the promotional period by
assuming that the $10 promotional minimum payment will apply beyond the
six months until the outstanding balance is repaid.

(2) *Annual percentage rate.* When calculating the
minimum payment repayment estimate, a card issuer must use the annual
percentage rates that apply to a cardholder's account, based on the
portion of the balance to which the rate applies. If any promotional
terms related to annual percentage rates apply to a cardholder's
account, other than deferred interest or similar plans, a card issuer
in calculating the minimum payment repayment estimate during the
promotional period must apply the promotional annual percentage rate(s)
until it expires and then must apply the rate that applies after the
promotional rate(s) expires. If the rate that applies after the
promotional rate(s) expires is a variable rate, a card issuer must
calculate that rate based on the applicable index or formula. This
variable rate is accurate if it was in effect within the last 30 days
before the minimum payment repayment estimate is provided. For deferred
interest plans or similar plans, if minimum payments under the deferred
interest or similar plan will repay the balances or transactions in
full prior to the expiration of the specified period of time, a card
issuer must assume that the consumer will not be obligated to pay the
accrued interest. This means, in calculating the minimum payment
repayment estimate, the card issuer must apply a zero percent annual
percentage rate to the balance subject to the deferred interest or
similar plan. If, however, minimum payments under the deferred interest
plan or similar plan may not repay the balances or transactions in full
prior to the expiration of the specified period of time, a card issuer
must assume that a consumer will not repay the balances or transactions
in full prior to the expiration of the specified period of time and
thus the consumer will be obligated to pay the accrued interest. This
means, in calculating the minimum payment repayment estimate, the card
issuer must apply the annual percentage rate at which interest is
accruing to the balance subject to the deferred interest or similar
plan.

(3) *Beginning balance.* When calculating the minimum
payment repayment estimate, a card issuer must use as the beginning
balance the outstanding balance on a consumer's account as of the
closing date of the last billing cycle. When calculating the minimum
payment repayment estimate, a card issuer may round the beginning
balance as described above to the nearest whole dollar.

(4) *Assumptions. *When calculating the minimum payment
repayment estimate, a card issuer for each of the terms below, may
either make the following assumption about that term, or use the
account term that applies to a consumer's account.

(i) Only minimum monthly payments are made each month. In addition, minimum monthly payments are made each month--for example, a debt cancellation or suspension agreement, or skip payment feature does not apply to the account.

(ii) No additional extensions of credit are obtained, such as new purchases, transactions, fees, charges or other activity. No refunds or rebates are given.

(iii) The annual percentage rate or rates that apply to a cardholder's account will not change, through either the operation of a variable rate or the change to a rate, except as provided in paragraph (b)(2) of this Appendix. For example, if a penalty annual percentage rate currently applies to a consumer's account, a card issuer may assume that the penalty annual percentage rate will apply to the consumer's account indefinitely, even if the consumer may potentially return to a non-penalty annual percentage rate in the future under the account agreement.

(iv) There is no grace period.

(v) The final payment pays the account in full ( i.e., there is no residual finance charge after the final month in a series of payments).

(vi) The average daily balance method is used to calculate the balance.

(vii) All months are the same length and leap year is ignored. A monthly or daily periodic rate may be assumed. If a daily periodic rate is assumed, the issuer may either assume (1) a year is 365 days long, and all months are 30.41667 days long, or (2) a year is 360 days long, and all months are 30 days long.

(viii) Payments are credited either on the last day of the month or the last day of the billing cycle.

(ix) Payments are allocated to lower annual percentage rate balances before higher annual percentage rate balances.

(x) The account is not past due and the account balance does not exceed the credit limit.

(xi) When calculating the minimum payment repayment estimate, the assumed payments, current balance and interest charges for each month may be rounded to the nearest cent, as shown in Appendix M2 to this part.

(5) *Tolerance. *A minimum payment repayment estimate
shall be considered accurate if it is not more than 2 months above or
below the minimum payment repayment estimate determined in accordance
with the guidance in this Appendix (prior to rounding described in
§ 1026.7(b)(12)(i)(B) and without use of the assumptions listed in
paragraph (b)(4) of this Appendix to the extent a card issuer chooses
instead to use the account terms that apply to a consumer's account).
For example, assume the minimum payment repayment estimate calculated
using the guidance in this Appendix is 28 months (2 years, 4 months),
and the minimum payment repayment estimate calculated by the issuer is
30 months (2 years, 6 months). The minimum payment repayment estimate
should be disclosed as 2 years, due to the rounding rule set forth in
§ 1026.7(b)(12)(i)(B). Nonetheless, based on the 30-month estimate,
the issuer disclosed 3 years, based on that rounding rule. The issuer
would be in compliance with this guidance by disclosing 3 years,
instead of 2 years, because the issuer's estimate is within the 2
months' tolerance, prior to rounding. In addition, even if an issuer's
estimate is more than 2 months above or below the minimum payment
repayment estimate calculated using the guidance in this Appendix, so
long as the issuer discloses the correct number of years to the
consumer based on the rounding rule set forth in
§ 1026.7(b)(12)(i)(B), the issuer would be in compliance with this
guidance. For example, assume the minimum payment repayment estimate
calculated using the guidance in this Appendix is 32 months (2 years, 8
months), and the minimum payment repayment estimate calculated by the
issuer is 38 months (3 years, 2 months). Under the rounding rule set
forth in § 1026.7(b)(12)(i)(B), both of these estimates would be
rounded and disclosed to the consumer as 3 years. Thus, if the issuer
disclosed 3 years to the consumer, the issuer would be in compliance
with this guidance even though the minimum payment repayment estimate
calculated by the issuer is outside the 2 months' tolerance amount.

(c) *Calculating the minimum payment total cost estimate.
*When calculating the minimum payment total cost estimate, a card
issuer must total the dollar amount of the interest and principal that
the consumer would pay if he or she made minimum payments for the
length of time calculated as the minimum payment repayment estimate
under paragraph (b) of this Appendix. The minimum payment total cost
estimate is deemed to be accurate if it is based on a minimum payment
repayment estimate that is within the tolerance guidance set forth in
paragraph (b)(5) of this Appendix. For example, assume the minimum
payment repayment estimate calculated using the guidance in this
Appendix is 28 months (2 years, 4 months), and the minimum payment
repayment estimate calculated by the issuer is 30 months (2 years, 6
months). The minimum payment total cost estimate will be deemed
accurate even if it is based on the 30 month estimate for length of
repayment, because the issuer's minimum payment repayment estimate is
within the 2 months' tolerance, prior to rounding. In addition, assume
the minimum payment repayment estimate calculated under this Appendix
is 32 months (2 years, 8 months), and the minimum payment repayment
estimate calculated by the issuer is 38 months (3 years, 2 months).
Under the rounding rule
set forth in
§ 1026.7(b)(12)(i)(B), both of these estimates would be rounded and
disclosed to the consumer as 3 years. If the issuer based the minimum
payment total cost estimate on 38 months (or any other minimum payment
repayment estimate that would be rounded to 3 years), the minimum
payment total cost estimate would be deemed to be accurate.

(d) *Calculating the estimated monthly payment for repayment
in 36 months.* (1) *In general.* When calculating the
estimated monthly payment for repayment in 36 months, a card issuer
must calculate the estimated monthly payment amount that would be
required to pay off the outstanding balance shown on the statement
within 36 months, assuming the consumer paid the same amount each month
for 36 months.

(2) *Weighted annual percentage rate. *In calculating
the estimated monthly payment for repayment in 36 months, an issuer may
use a weighted annual percentage rate that is based on the annual
percentage rates that apply to a cardholder's account and the portion
of the balance to which the rate applies, as shown in Appendix M2 to
this part. If a card issuer uses a weighted annual percentage rate and
any promotional terms related to annual percentage rates apply to a
cardholder's account, other than deferred interest plans or similar
plans, in calculating the weighted annual percentage rate, the issuer
must calculate a weighted average of the promotional rate and the rate
that will apply after the promotional rate expires based on the
percentage of 36 months each rate will apply, as shown in Appendix M2
to this part. For deferred interest plans or similar plans, if minimum
payments under the deferred interest or similar plan will repay the
balances or transactions in full prior to the expiration of the
specified period of time, if a card issuer uses a weighted annual
percentage rate, the card issuer must assume that the consumer will not
be obligated to pay the accrued interest. This means, in calculating
the weighted annual percentage rate, the card issuer must apply a zero
percent annual percentage rate to the balance subject to the deferred
interest or similar plan. If, however, minimum payments under the
deferred interest plan or similar plan may not repay the balances or
transactions in full prior to the expiration of the specified period of
time, a card issuer in calculating the weighted annual percentage rate
must assume that a consumer will not repay the balances or transactions
in full prior to the expiration of the specified period of time and
thus the consumer will be obligated to pay the accrued interest. This
means, in calculating the weighted annual percentage rate, the card
issuer must apply the annual percentage rate at which interest is
accruing to the balance subject to the deferred interest or similar
plan. A card issuer may use a method of calculating the estimated
monthly payment for repayment in 36 months other than a weighted annual
percentage rate, so long as the calculation results in the same payment
amount each month and so long as the total of the payments would pay
off the outstanding balance shown on the periodic statement within 36
months.

(3) *Assumptions. *In calculating the estimated monthly
payment for repayment in 36 months, a card issuer must use the same
terms described in paragraph (b) of this Appendix, as appropriate.

(4) *Tolerance. *An estimated monthly payment for
repayment in 36 months shall be considered accurate if it is not more
than 10 percent above or below the estimated monthly payment for
repayment in 36 months determined in accordance with the guidance in
this Appendix (after rounding described in
§ 1026.7(b)(12)(i)(F)(*1*)(*i*)).

(e) *Calculating the total cost estimate for repayment in 36
months. *When calculating the total cost estimate for repayment in
36 months, a card issuer must total the dollar amount of the interest
and principal that the consumer would pay if he or she made the
estimated monthly payment calculated under paragraph (d) of this
appendix each month for 36 months. The total cost estimate for
repayment in 36 months shall be considered accurate if it is based on
the estimated monthly payment for repayment in 36 months that is
calculated in accordance with paragraph (d) of this appendix.

(f) *Calculating the savings estimate for repayment in 36
months. *When calculating the savings estimate for repayment in 36
months, if a card issuer chooses under § 1026.7(b)(12)(i) to round
the disclosures to the nearest whole dollar when disclosing them on the
periodic statement, the card issuer must calculate the savings estimate
for repayment in 36 months by subtracting the total cost estimate for
repayment in 36 months calculated under paragraph (e) of this appendix
(rounded to the nearest whole dollar) from the minimum payment total
cost estimate calculated under paragraph (c) of this appendix (rounded
to the nearest whole dollar). If a card issuer chooses under
§ 1026.7(b)(12)(i), however, to round the disclosures to the nearest
cent when disclosing them on the periodic
statement, the card issuer must calculate the savings estimate
for repayment in 36 months by subtracting the total cost estimate for
repayment in 36 months calculated under paragraph (e) of this appendix
(rounded to the nearest cent) from the minimum payment total cost
estimate calculated under paragraph (c) of this appendix (rounded to
the nearest cent). The savings estimate for repayment in 36 months
shall be considered accurate if it is based on the total cost estimate
for repayment in 36 months that is calculated in accordance with
paragraph (e) of this appendix and the minimum payment total cost
estimate calculated under paragraph (c) of this appendix.

*[Codified to 12 C.F.R. Part 1026, Appendix
M1]
*