Credit cards for business purposes: When Reg Z actually does apply

Last week, the Compliance Team hosted our Regulatory Compliance School. Congrats to all the new NCCOs! If you, too, want to become an NCCO, you can join us in Minneapolis for the summer session of Regulatory Compliance School.

One of the key principles we teach at Compliance School is that most of the consumer regulations (TISA, Reg E, Reg X, Reg Z, etc.) do not apply to business-purpose accounts. These rules generally leave it up to the credit union to determine when an account is opened for a business purpose. If a credit union determines the account is for business purposes, then it does not have to provide disclosures, such as account opening disclosures, periodic statements or change in terms notices. Like many of our Compliance School attendees also learned, the CFPB loves its exceptions and enjoys hiding them in the commentary. So, today’s blog focuses on the exception to this rule for credit card accounts.

Section 1026.3(a) of Regulation Z provides the general rule: credit extended to a person for business purposes and credit extended to an entity are exempt from the regulation. The commentary to this provision explains that, for credit card accounts, there are two rules that apply even if the credit extended is generally considered exempt from the regulation: section 1026.12(a) on issuing credit cards and section 1026.12(b) on liability for unauthorized use.


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