[kmeade]

My bank is contemplating adding VISA card access to our consumer revolving lines of credit (RVC) mainly HELOC accounts. What are the pros and cons of adding VISA cards to RVC accounts?

[scottpcarr]

When I was previously researching this topic at another FI, I came across this item posted by Dan Persfull via BankersOnline. As in most cases, I had to trust what Dan shared but I also needed to verify his statements.I actually agree with this statements and will note that the greatest concern is that these cards will be covered under Regulation Z (12 C.F.R. Part 1026.12 – https://gov.ecfr.io/cgi-bin/text-idx?ID=cd0137fdd5ada388202c90b131fcb117&mc=true&node=se12.9.1026_112&rgn=div8).

Question:
Please provide some of the pros and cons — particular as related to fraud risk — of providing access to Home Equity Lines of Credit (HELOCs) via debit card.
Answer:

Pros:
* Convenient for the account holder.
* Less costly to bank than supplying paper checks.

Cons:
* The debit card will be a credit card and the account will be regulated by Reg. Z
* You lose the right to set off
* Visa/MC rules may not allow you to use their brand name

[kmeade]

Thank you Scott, this helps!

[jholzknecht]

Scott’s list of cons includes “The debit card will be a credit card and the account will be regulated by Regulation Z.” This is a big deal, very big deal. Listed below are the sections of Regulation Z that come into play for credit card accounts. The requirements are manageable, but they are a big load.

You don’t want to take on this burden for a handful of accounts. You need to spread this overhead over a good volume of accounts.

• Subpart B—Open-End Credit
• 1026.5—General disclosure requirements.*
• 1026.6—Account-opening disclosures.*
• 1026.7—Periodic statement.*
• 1026.8—Identifying transactions on periodic statements.*
• 1026.9—Subsequent disclosure requirements.
• 1026.10—Payments.*
• 1026.11—Treatment of credit balances; account termination.
• 1026.12—Special credit card provisions.*
• 1026.13—Billing error resolution.*
• 1026.14—Determination of annual percentage rate.
• 1026.15—Right of rescission.
• 1026.16—Advertising.

• Subpart G—Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students
• 1026.51—Ability to Repay
• 1026.52—Limitations on Fees.*
• 1026.53—Allocation of payments.
• 1026.54—Limitations on the imposition of finance charges.
• 1026.55—Limitations on increasing annual percentage rates, fees, and charges.*
• 1026.56—Requirements for over-the-limit transactions.
• 1026.57—Reporting and marketing rules for college student open-end credit.*
• 1026.58—Internet posting of credit card agreements.
• 1026.59—Reevaluation of rate increases.
• 1026.60—Credit and charge card applications and solicitations.*

[kmeade]

I completely agree, this was my thought from the beginning, but I was asked to get views from others outside the bank. Thank you both, this helps a lot.

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