Q: Under 32 CFR 232.4(d), is it permissible to consider benefits provided by credit card rewards programs in determining whether the amount of a fee is (a) less than or equal to an average amount of a fee for a substantially similar product or service for purposes of comparison under the safe harbor and (b) reasonable overall?
A: Generally, yes. Section 232.4(d)(1) provides that for a credit card account under an open-end (not home-secured) consumer credit plan, a bona fide fee, other than a periodic rate, is not a charge required to be included in the MAPR, provided it is a bona fide fee and reasonable for that type of fee. Under § 232.4(d)(3)(i), whether a fee is reasonable is determined by comparison to fees typically imposed by other creditors for the same or a substantially similar product or service. Under § 232.4(d)(3)(iii), whether a fee is reasonable depends on other factors relating to the credit card account. Section 232.4(d)(3)(iv) further clarifies that whether a participation fee is reasonable may be determined in reference to whether a credit card offers additional services or other benefits. Moreover, the supplementary information to the July 2015 Final Rule explains that ‘‘the ‘reasonable’ condition for a bona fide fee is intended to be applied flexibly so that, in general, creditors may continue to offer a wide range of credit card products that carry reasonable costs expressly tied to specific products or services and which vary depending upon the covered borrower’s own choices regarding the use of the card.’’
Under the Department’s flexibly applied conditional exclusion, creditors may use any reasonable approach in identifying whether a fee is substantially similar for purposes of comparison and reasonable overall. Thus, the Department’s policy, in this regard, permits a creditor to consider whether the benefits provided by a rewards program in determining whether a fee is reasonable overall. Moreover, creditors may consider rewards program benefits in determining whether the amount of a fee is less than or equal to an average amount of a fee for a substantially similar product or service for purposes of the safe harbor in § 232.4(d)(3)(ii).