Terminating or freezing open-end credit

Do you have 99 problems and an open-end credit account is one of them? We have previously blogged about limitation of services, but what happens when you want to terminate or freeze open-end credit accounts? The first thing you should do is check the account agreement to see if the member has violated any terms of the agreement. Second, you should check to see whether Regulation Z prohibits freezing or terminating an account prior to maturity.

Regulation Z, section 1026.11(b), discusses account termination for open-end credit.  This section focuses on termination due to inactivity. Specifically, section 1026.11(b)(1) prohibits a creditor from terminating an account prior to its maturity when the reason for the termination is solely because the consumer has not incurred a finance charge. However, section 1026.11(b)(2) provides an exception to this rule. Section 1026.11(b)(2) permits a credit to terminate an account if the account has been inactive for three months or more. Under section 1026.11(b)(2), an account is considered inactive if:

1.       No credit has been extended to the consumer, such as;

 

continue reading »