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Federal Register / Vol. 86, No. 227 / Tuesday, November 30, 2021 / Rules and Regulations requirement of additional credit information for any advances on the account except as permitted from time to time with respect to open-end accounts pursuant to 1026.2a20.
ii. Subsequent changes generally.
Subsequent changes to an open-end account or the threshold amount may result in the account no longer qualifying for the exemption in 1026.3b. In these circumstances, the creditor must begin to comply with all of the applicable requirements of this part within a reasonable period of time after the account ceases to be exempt.
Once an account ceases to be exempt, the requirements of this part apply to any balances on the account. The creditor, however, is not required to comply with the requirements of this part with respect to the period of time during which the account was exempt.
For example, if an open-end credit account ceases to be exempt, the creditor must within a reasonable period of time provide the disclosures required by 1026.6 reflecting the current terms of the account and begin to provide periodic statements consistent with 1026.7. However, the creditor is not required to disclose fees or charges imposed while the account was exempt. Furthermore, if the creditor provided disclosures consistent with the requirements of this part while the account was exempt, it is not required to provide disclosures required by 1026.6 reflecting the current terms of the account. See also comment 3b6.
iii. Subsequent changes when exemption is based on initial extension of credit. If a creditor makes an initial extension of credit that exceeds the threshold amount in effect at that time, the open-end account remains exempt under 1026.3b regardless of a subsequent increase in the threshold amount, including an increase pursuant to 1026.3b1ii as a result of an increase in the CPIW. Furthermore, in these circumstances, the account remains exempt even if there are no further extensions of credit, subsequent extensions of credit do not exceed the threshold amount, the account balance is subsequently reduced below the threshold amount such as through repayment of the extension, or the credit limit for the account is subsequently reduced below the threshold amount. However, if the initial extension of credit on an account does not exceed the threshold amount in effect at the time of the extension, the account is not exempt under 1026.3b even if a subsequent extension exceeds the threshold amount or if the account balance later exceeds the threshold
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amount for example, due to the subsequent accrual of interest.
iv. Subsequent changes when exemption is based on firm commitment.
A. General. If a creditor makes a firm written commitment at account opening to extend a total amount of credit that exceeds the threshold amount in effect at that time, the open-end account remains exempt under 1026.3b regardless of a subsequent increase in the threshold amount pursuant to 1026.3b1ii as a result of an increase in the CPIW. However, see comment 3b8 with respect to the increase in the threshold amount from $25,000 to $50,000. If an open-end account is exempt under 1026.3b based on a firm commitment to extend credit, the account remains exempt even if the amount of credit actually extended does not exceed the threshold amount. In contrast, if the firm commitment does not exceed the threshold amount at account opening, the account is not exempt under 1026.3b even if the account balance later exceeds the threshold amount. In addition, if a creditor reduces a firm commitment, the account ceases to be exempt unless the reduced firm commitment exceeds the threshold amount in effect at the time of the reduction. For example:
1. Assume that, at account opening in year one, the threshold amount in effect is $50,000 and the account is exempt under 1026.3b based on the creditors firm commitment to extend $55,000 in credit. If during year one the creditor reduces its firm commitment to $53,000, the account remains exempt under 1026.3b. However, if during year one the creditor reduces its firm commitment to $40,000, the account is no longer exempt under 1026.3b.
2. Assume that, at account opening in year one, the threshold amount in effect is $50,000 and the account is exempt under 1026.3b based on the creditors firm commitment to extend $55,000 in credit. If the threshold amount is $56,000 on January 1 of year six as a result of increases in the CPIW, the account remains exempt. However, if the creditor reduces its firm commitment to $54,000 on July 1 of year six, the account ceases to be exempt under 1026.3b.
B. Initial extension of credit. If an open-end account qualifies for a 1026.3b exemption at account opening based on a firm commitment, that account may also subsequently qualify for a 1026.3b exemption based on an initial extension of credit.
However, that initial extension must be a single advance in excess of the
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threshold amount in effect at the time the extension is made. In addition, the account must continue to qualify for an exemption based on the firm commitment until the initial extension of credit is made. For example:
1. Assume that, at account opening in year one, the threshold amount in effect is $50,000 and the account is exempt under 1026.3b based on the creditors firm commitment to extend $55,000 in credit. The account is not used for an extension of credit during year one. On January 1 of year two, the threshold amount is increased to $51,000 pursuant to 1026.3b1ii as a result of an increase in the CPIW. On July 1 of year two, the consumer uses the account for an initial extension of $52,000. As a result of this extension of credit, the account remains exempt under 1026.3b even if, after July 1 of year two, the creditor reduces the firm commitment to $51,000 or less.
2. Same facts as in paragraph 4.iv.B.1
of this section except that the consumer uses the account for an initial extension of $30,000 on July 1 of year two and for an extension of $22,000 on July 15 of year two. In these circumstances, the account is not exempt under 1026.3b based on the $30,000 initial extension of credit because that extension did not exceed the applicable threshold amount $51,000, although the account remains exempt based on the firm commitment to extend $55,000 in credit.
3. Same facts as in paragraph 4.iv.B.1
of this section except that, on April 1 of year two, the creditor reduces the firm commitment to $50,000, which is below the $51,000 threshold then in effect.
Because the account ceases to qualify for a 1026.3b exemption on April 1
of year two, the account does not qualify for a 1026.3b exemption based on a $52,000 initial extension of credit on July 1 of year two.
5. Closed-end credit. i. Qualifying for exemption. A closed-end loan is exempt under 1026.3b unless the extension of credit is secured by real property, or by personal property used or expected to be used as the consumers principal dwelling; or is a private education loan as defined in 1026.46b5, if either of the following conditions is met:
A. The creditor makes an extension of credit at consummation that exceeds the threshold amount in effect at the time of consummation. In these circumstances, the loan remains exempt under 1026.3b even if the amount owed is subsequently reduced below the threshold amount such as through repayment of the loan.
B. The creditor makes a commitment at consummation to extend a total amount of credit in excess of the
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