Credit Card Applications, Solicitations, and the Delivery of Required Disclosures
Section 1026.60 requires a credit union to provide disclosures required under the same section with a solicitation or an application to open a credit or charge a credit account. A solicitation under section 1026.60 “means an offer by the card issuer to open a credit or charge card account that does not require the consumer to complete an application.” An example of a solicitation for purposes of this section is a “firm offer of credit” for a credit or charge card as defined under the Fair Credit Reporting Act. Comment 60(a)(1)-1 of Section 1026.60 maintains
[a] card issuer may contact a consumer who has not been preapproved for a card account about opening an account (whether by direct mail, telephone, or other means) and invite the consumer to complete an application. Such a contact does not meet the definition of solicitation, nor is it covered by this section, unless the contact itself includes an application form in a direct mailing, electronic communication or “take-one”; an oral application in a telephone contact initiated by the card issuer; or an application in an in-person contact initiated by the card issuer.
In other words, section 1026.60 and its obligations do not apply if an application is not taken. If a credit union initiates contact and an application is taken by the consumer or a solicitation by a credit union also contains an application, then section 1026.60 and its obligations apply.
The question of how disclosures are made is generally determined by how the credit union makes the solicitation and how the member receives the application. For example, section 1026.60(f) requires a credit union to disclose the required information either through the mail or in person when the application and solicitation is made in-person. Section 1026.60(f) maintains a credit union “complies with the requirements of… [section 1026.60(f)]…if the [credit union] provides disclosures in accordance with paragraph (c)(1) [Direct mail and electronic applications and solicitations] or (e)(1) [Telephone applications and solicitations] of this section.” One thing to keep in mind though is whether an in-person application following contact by the credit union is considered a “consumer-initiated request.” This is important because credit unions are not required to provide disclosures if the member requests an application. But if the credit union’s initial contact falls under the definition of a solicitation, then disclosures are required.
Comment 60(a)(5)-1 provides some insight into what is considered a consumer-initiated request versus credit union-initiated applications or solicitations.
Applications provided to a consumer upon request are not covered by § 1026.60, even if the request is made in response to the card issuer's invitation to apply for a card account. To illustrate, if a card issuer invites consumers to call a toll-free number or to return a response card to obtain an application, the application sent in response to the consumer's request need not contain the disclosures required under § 1026.60. Similarly, if the card issuer invites consumers to call and make an oral application on the telephone, § 1026.60 does not apply to the application made by the consumer. If, however, the card issuer calls a consumer or initiates a telephone discussion with a consumer about opening a card account and contemporaneously takes an oral application, such applications are subject to § 1026.60, specifically § 1026.60(d). Likewise, if the card issuer initiates an in-person discussion with a consumer about opening a card account and contemporaneously takes an application, such applications are subject to § 1026.60, specifically § 1026.60(f).
When the application and solicitation is made over the phone, the credit union is required to give oral disclosures under section 1026.60(d)(1). However, a credit union may provide disclosures through alternative means. Section 1026.60(d)(2) provides a credit union does not need to give oral disclosures if the credit union satisfies section 1026.60(d)(2)(i) and section 1026.60(d)(2)(ii) in which the credit union “discloses in writing within 30 days after the consumer requests the card.”
Now, if a solicitation or application is provided to the public such as published in a magazine under section 1026.60(e), then a credit union is required to follow specific requirements for general publications. The requirements change based on whether there is a disclosure of information found in section 1026.60(b). A credit union may include in the publication applicable information, the date the information as printed, and another statement that the consumer should contact the credit union to see whether there is any change in the stated information. If there is no section 1026.60(b) information included in the publication, then a credit union will state the costs associated with the credit card and an invite by the credit union for the member to request information about the costs. The regulations found under section 1026.60(e) refer to applications and solicitations made to the public. These are referred to as “take-one” applications. Comment 60(e)-1 provides that these take-one applications and the applicability of section 1026.60(e) will apply to those solicitation and applications that are “found at counters in banks and retail establishments, as well as applications contained in catalogs, magazines and other generally available publications.” These types of solicitations and applications are offered to the general public.
A credit union that provides direct mail and electronic applications and solicitations are required to generally follow section 1026.60(c). Section 1026.60(c)(1) requires a credit union to disclose section 1026.60(b) information with the application or solicitation that is mailed to the member or provided to the member in electronic form. The caveat to this section is its intersection with the requirements under section 1026.60(e) and what is required when a credit union provides a take-one. What happens if a credit union is mailing a publicly available publication? What section controls the disclosures? Comment 60(c)-1 offers insight into how to treat directly mailed solicitation and applications.
Applications or solicitations contained in generally available publications mailed to consumers (such as subscription magazines) are subject to the requirements applicable to take-ones in § 1026.60(e), rather than the direct mail requirements of § 1026.60(c). However, if a primary purpose of a card issuer's mailing is to offer credit or charge card accounts - for example, where a card issuer “prescreens” a list of potential cardholders using credit criteria, and then mails to the targeted group its catalog containing an application or a solicitation for a card account - the direct mail rules apply. In addition, a card issuer may use a single application form as a take-one (in racks in public locations, for example) and for direct mailings, if the card issuer complies with the requirements of § 1026.60(c) even when the form is used as a take-one - that is, by presenting the required § 1026.60 disclosures in a tabular format.
The credit union may want to review section 1026.60(c)-(f) to see how a credit union is required to provide the obligated disclosures under 1026.60.
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