We are looking at offering an open end consumer line of credit which could be tied to a DDA account and cover overdrafts. In doing this, if a debit card is used which in turn creates an overdrawn DDA account and a draw on the line is made to cover the overdraft, does that make the debit card a credit card as defined under Reg Z?
The term credit card is defined as follows, “(15)(i) Credit card means any card, plate, or other single credit device that may be used from time to time to obtain credit.
(ii) Credit card account under an open-end (not home-secured) consumer credit plan means any open-end credit account that is accessed by a credit card, except:
(A) A home-equity plan subject to the requirements of § 1026.40 that is accessed by a credit card; or
(B) An overdraft line of credit that is accessed by a debit card or an account number.
(iii) Charge card means a credit card on an account for which no periodic rate is used to compute a finance charge.”
Your plan qualifies as a “credit card,” but not as a “credit card account under an open-end (not home-secured) consumer credit plan.” The requirements vary for the two terms.