OCC Advisory on Credit Card Practice - AL-2004-10

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The OCC (Office of the Comptroller of the Currency) is a regulatory agency that supervises and regulates national banks and federal savings associations in the United States. In 2004, the OCC issued an advisory (AL-2004-10) on credit card practices, specifically addressing the risks associated with certain practices that may be unfair or deceptive.

The advisory covers practices related to finance and credit management that may be unfair or deceptive, and that can expose a bank to compliance and reputation risks. These practices may include, but are not limited to, the following:

• Interest rate increases: The OCC advisory warns banks against raising interest rates on existing credit card balances without sufficient notice or a valid reason.
• Late payment fees: Banks are cautioned against imposing excessive late payment fees or charging fees for payments received on the due date.
• Over-limit fees: The advisory suggests that banks should consider limiting over-limit fees or eliminating them altogether.
• Minimum payment warning: The OCC recommends that banks provide a warning to consumers about the long-term costs of making only minimum payments on their credit card balances.
• Payment allocation: Banks are advised to allocate payments in a way that minimizes interest charges for consumers.

The advisory also covers marketing and account management practices that may be unfair or deceptive and expose a bank to compliance and reputation risks. These practices may include, but are not limited to, the following:

• Teaser rates: Banks are cautioned against using teaser rates that may mislead consumers about the long-term cost of credit.
• Balance transfer fees: The OCC recommends that banks disclose balance transfer fees upfront and consider capping these fees.
• Payment due dates: Banks are advised to set payment due dates that do not unfairly penalize consumers, such as by setting the due date on a weekend or holiday.
• Opt-out rights: Banks are encouraged to provide consumers with clear and simple opt-out rights for marketing solicitations.

In summary, the OCC advisory on credit card practices (AL-2004-10) covers finance and credit management practices as well as marketing and account management practices that may be unfair or deceptive and expose a bank to compliance and reputation risks. The advisory provides guidance on how banks can avoid these risks by implementing fair and transparent practices.