Have you had a member call your credit union and ask if they can change their payment due date on their loan or credit card? If so, this blog is for you. We are going to go over the regulatory requirements for changing a member’s payment due date for both open-end and closed-end credit.
Open-end Credit (non-home secured)
For a credit card account under an open-end credit plan (not home secured), section 1026.7(b)(11) provides that a card issuer must provide on each periodic statement:
“(A) The due date for a payment. The due date disclosed pursuant to this paragraph shall be the same day of the month for each billing cycle.” (Emphasis added).
Comment 7 in the commentary to this section provides additional information stating:
“A creditor may adjust a consumer’s due date from time to time provided that the new due date will be the same numerical date each month on an ongoing basis. For example, a creditor may choose to honor a consumer’s request to change from a due date that is the 20th of each month to the 5th of each month, or may choose to change a consumer’s due date from time to time for operational reasons. See comment 2(a)(4)–3 for guidance on transitional billing cycles.” (Emphasis added).
Furthermore, comment 2(a)(4)-3 in the commentary discusses billing cycles stating:
“Although cycles must be equal, there is a permissible variance to account for weekends, holidays, and differences in the number of days in months. If the actual date of each statement does not vary by more than four days from a fixed “day” (for example, the third Thursday of each month) or “date” (for example, the 15th of each month) that the creditor regularly uses, the intervals between statements are considered equal. The requirement that cycles be equal applies even if the creditor applies a daily periodic rate to determine the finance charge. The requirement that intervals be equal does not apply to the first billing cycle on an open-end account (i.e., the time period between account opening and the generation of the first periodic statement) or to a transitional billing cycle that can occur if the creditor occasionally changes its billing cycles so as to establish a new statement day or date. (See comments 9(c)(1)–3 and 9(c)(2)–3.)” (Emphasis added).
Comment 9(c)(2)-3 discusses the changes in billing cycle for open-end (not home-secured) plans stating:
“Whenever the creditor changes the consumer’s billing cycle, it must give a change-in-terms notice if the change affects any of the terms described in § 1026.9(c)(2)(i), unless an exception under § 1026.9(c)(2)(v) applies; for example, the creditor must give advance notice if the creditor initially disclosed a 28-day grace period on purchases and the consumer will have fewer days during the billing cycle change. See also § 1026.7(b)(11)(i)(A) regarding the general requirement that the payment due date for a credit card account under an open-end (not home-secured) consumer credit plan must be the same day each month.” (Emphasis added).
Based on this information, a credit union may change a member’s payment due date as long as a change-in-terms notice described in 1026.9(c)(2)(i) is provided to the member.
Open-end Credit (home-equity plan)
For open-end credit (home-equity plan), section 1026.40(f)(3)(v) discusses the limitations on home equity plans stating that a credit union may not change any term of the contract with the exception of “insignificant change to terms.” Comment 2 in the commentary of this section provides examples of insignificant changes stating:
“Creditors may make minor changes to features such as the billing cycle date, the payment due date (as long as the consumer does not have a diminished grace period if one is provided), and the day of the month on which index values are measured to determine changes to the rate for variable-rate plans. A creditor also may change its rounding practice in accordance with the tolerance rules set forth in § 1026.14 (for example, stating an exact APR of 14.3333 percent as 14.3 percent, even if it had previously been stated as 14.33 percent). A creditor may change the balance computation method it uses only if the change produces an insignificant difference in the finance charge paid by the consumer. For example, a creditor may switch from using the average daily balance method (including new transactions) to the daily balance method (including new transactions).” (Emphasis added).
Under the above, a credit union may make a minor change to the payment due date of a home-equity line of credit as long as the loan does not have a diminished grace period.
Closed-end Credit (mortgage or not home-secured)
For closed-end credit, a change to the due date would likely be considered a modification of the loan contract and a credit union may need to review the contract to determine if it outlines these types of changes. Furthermore, since modifications are governed by state law a credit union may want to consult with local counsel to ensure there aren’t any state law requirements as well as ensuring that the terms are clearly disclosed to the member before proceeding.
In the end, there are no prohibitions against changing a member’s payment due date as long as the contract or regulations are followed.