Definition
Regulation Z is an amendment to the Federal Truth in Lending Act which requires standardized disclosures about terms and costs of credit.
Analysis
Regulation Z does more than just beef up disclosure requirements for revolving credit accounts. It also is intended to increase competition between credit card issuers.
According to Federal Reserve Board Chairman Ben Bernanke, the purpose of Regulation Z is to “make sure that consumers get key information about credit card terms in a clear and conspicuous format and at a time when it would be most useful to them.” Additionally, Bernanke commented that “greater clarity in credit disclosures allows consumers to make more-informed credit decisions and enhances competition among credit card issuers.”
Some of the key focuses of Regulation Z relate to the cost of credit. Disclosures must clearly explain what interest rates and fees are, as well as to explain the conditions in which adjustments to those terms could be made.
Regulation Z is expected to be finalized in 2008.
