The Catholic University of America

Summary of Federal Laws

Compliance Partners

Executive Assistant for VP of Finance

Director of Alumni Relations

Director of Financial Aid

VP of Finance and Treasurer

Financial Aid Programs

Truth in Lending Act (Regulation Z)

15 U.S.C. § 1601 et seq.; 12 C.F.R. § 226.1 et seq.; 12 CFR § 1026.46 Special Disclosure Requirements for Private Education Loans

Requires disclosures for loans and credit plans, but exempts Perkins Loans and Federal Family Education Loans. Loans made, insured or guaranteed pursuant to programs authorized by Title IV are exempt. See 12 C.F.R. § 226.3(f).

In terms of loans made to employees, the university would only meet the definition of creditor under the law if the school is:

A person (A) who regularly extends consumer credit 3 that is subject to a finance charge or is payable by written agreement in more than four installments (not including a downpayment), and (B) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract.

Note that the footnote 3 states as follows:

3 A person regularly extends consumer credit only if it extended credit (other than credit subject to the requirements of § 226.32) more than 25 times (or more than five times for transactions secured by a dwelling) in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of § 226.32 or one or more such credit extensions through a mortgage broker.

There is thus a threshold question of whether or not the volume of loans to employees is such that it meets the more than 25 times in the prior calendar year limit. In addition, to come under the terms of the act, the following four conditions need to be met:

1) In general, this regulation applies to each individual or business that offers or extends credit when four conditions are met: (i) the credit is offered or extended to consumers; (ii) the offering or extension of credit is done regularly; 1 (iii) the credit is subject to a finance charge or is payable by a written agreement in more than 4 installments; and (iv) the credit is primarily for personal, family, or household purposes. 12 CFR § 226.1 (c

If the school determines that Regulation Z applies, then the school must comply with the disclosure requirements of the law. There must be a disclosure statement given to the consumer, and the terms "annual percentage rate" and "finance charge" must be more conspicuously displayed than other terms. 12 CFR § 226.18 lists the specific disclosures that must be made. This includes the creditor's identity, the amount financed, an itemization of the amount financed, the finance charge, the annual percentage rate, the variable rate, if any, the payment schedule, the total of payments, as well as other information, including any late payment requirements.

Final Rule, Regulation Z as amended by the Higher Education Opportunity Act, 74 Fed. Reg. 41193 (August 14, 2009)

These final rules are effective Sept. 14, 2009 but compliance is optional until Feb. 14, 2010.

Following enactment of HEOA, private education loans are covered by a number of TILA requirements. Title IV loans are exempt. A *private education loan* as defined by the regulations does not include an extension of credit made by the school if the term is 90 days or less (emergency loans) or if an interest rate will not be applied to the credit balance and the term of the extension is one year or less. However, if your school makes short term loans, note that they are subject to the extension of credit subject to the requirements of Section 12 CFR 226.17 and 12 CFR 226.18. These are the general disclosure requirements and 226.18 lists the content of disclosures. See Subpart F of the regs, Special Rules for Private Education Loans. Also see Subpart C-Closed End Credit. If a student or applicant obtains a private loan (even if the loan is not from the school) the school will have to complete the financial aid section of the student's self certification that the creditor must obtain before completing the loan.

Final Rule, 75 Fed. Reg. 7657, Truth in Lending, Unfair or Deceptive Acts or Practices; (Feb. 22, 2010)

Effective Feb. 22, 2010, The Board amends Regulation Z, which implements provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009. The final rule covers a number of issues related to credit cards. Alumni Associations will have to make disclosures as noted below. The final rule clarified that a *college student credit card* includes a college affinity card, and that, in addition, a card may fall within the scope of the definition regardless of the fact that it is not intentionally targeted at or marketed to college students. As the Board discussed in the October 2009 Regulation Z Proposal, the definition is intended to be broad and would apply to students of any age attending an institution of higher education and applies to all students, including those enrolled in graduate programs or joint degree programs, i.e. there is not an age limitation for certain purposes under the rule. An agreement may qualify as a college credit card agreement even if marketing of cards under the agreement is targeted at alumni, faculty, staff, and other non-student consumers, as long as cards may also be issued to students in connection with the agreement.

Consistent with the statute, Sec. 226.57(b) requires an institution of higher education to publicly disclose any credit card marketing contract or other agreement made with a card issuer or creditor. The Board also proposed comment 57(b)-1 to specify that an institution of higher education may fulfill its duty to publicly disclose any contract or other agreement made with a card issuer or creditor for the purposes of marketing a credit card by posting such contract or agreement on its Web site. Comment 57(b)-1 also provided that the institution of higher education may alternatively make such contract or agreement available upon request, provided the procedures for requesting the documents are
reasonable and free of cost to the requestor, and the contract or agreement is provided within a reasonable time frame. See the NACUBO summary of the rules that deal with marketing to students.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009

Amends the Truth in Lending Act to require institutions of higher education to publicly disclose any contract or other agreement made with a card issuer or creditor for purposes of marketing a credit card, prohibits card issuers or creditors from offering certain inducements to college students to apply for credit cards, and includes a statement of the sense of the Congress regarding college and university policies relating to credit cards. See Section 304. Signed by the President on May 22, 2009 and effective nine months later, so Feb. 22, 2010. See White House Press Release for summary of the law.

 

See the Fair Credit Reporting Act for related topics.

Resources

Truth in Lending Act summary on FDIC web page

College Credit Card Agreements: Annual Report to Congress by the Consumer Financial Protection Bureau, October 2012. 

Credit Card Act

(see Section 303 for college students)

**Database of College Credit Card Agreements (CFPB)

 

updated 4/30/13 to add TILA summary

updated 4-24-14 to update link to closed end credit and add a link to 12 CFR 1026.46