Q: Under 32 CFR 232.4(b), are creditors permitted to waive fees or periodic charges at the end of a billing cycle or earlier for open-end credit, in order to prevent a borrower from being assessed a military annual percentage rate (MAPR) in excess of 36 percent during that billing cycle?
A. Yes. Section 232.4(b) requires that a creditor may not impose an MAPR greater than 36 percent in connection with an extension of consumer credit that is closed-end credit or in any billing cycle for open- end credit. In an open-end credit account, a covered borrower’s use of a line of credit might, under certain circumstances, give rise to the imposition of a combination of fees and/ or periodic charges that would cause the MAPR to exceed the limit in § 232.4(b). A creditor can comply with § 232.4(b) by designing a combination of periodic rates and fees that cannot possibly result in an MAPR greater than 36 percent. Nevertheless, nothing in 32 CFR part 232 prohibits a creditor from complying by waiving fees or finance charges, either in whole or in part, in order to reduce the MAPR to 36 percent or below in a given billing cycle. Thus, a creditor could alternatively comply by not imposing charges in excess of 36 percent MAPR that would otherwise be permitted under the credit agreement.