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Bank Credit Laws: Reg Z

It was bound to happen eventually.  I pay my credit cards off every month and only regularly use 1 or 2 of my four cards.  Well, four cards is now three.  One of my banks closed my credit card due to inactivity and having “no banking relationship” beyond the card.  It is far from my oldest card, but it did have a high limit.  It will undoubtedly lower my credit score.  When I got the letter in the mail, I started to think: is this even legal?  Can the bank close my card for not doing anything wrong?

The Federal banking regulation that answers those questions is Regulation Z, also called the “Truth in Lending Act.”  Reg Z defines the reasons a bank can and can’t make changes to credit accounts.  Reg Z was updated with the recent congressional credit card law changes.  It is important to know what your rights are when the big bad bank does something to your credit accounts.

So, can the bank close my account for inactivity?  For now, yes, as long as I am given 30 days notice.  With 30 days notice, they can do pretty much whatever they want.

The regulation also covers new loan accounts.  The best summary I found is at

Have any of you seen your credit lines slashed or cut off completely by the bank while you were doing everything right?  It seems counter-intuitive that using credit responsibly is now a grounds for closing accounts.  Please let us know your experiences in the comments.

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