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September 30, 2009

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Rob Rutkowski

Thanks for getting your arms around this so quickly! We mentioned you quite a bit on CIiCU this month and the great work you're doing here. I am relieved to hear that the minimum payment warning language will only apply to credit card accounts. Moving the July date to February is unfortunate though.

Anthony Demangone

Here's another comment from another great CU attorney, Brian Witt.

We have to be real careful on advising CU clients at this point on this rule clarification and I think your caveat of “proposed” is critical.

The FRB’s proposed clarification of the “consequences” of failing to adopt procedures to mail statements 21 days prior to the payment due date will NOT ensure mailing statements 21 days in advance of the due date rather it tends to invite creditors to ignore the 21 day delivery rule and not adopt procedures to provide for the 21 statement delivery.

The FRB’s clarification will permit creditors to simply modify their operational practices to provide that - no payments made after a payment due date but received within the 21 day period after statement mailing will be treated late for any purpose. However, payments received after the due date and after the 21 day period of when the statement was mailed can be treated as late for any purpose. Based upon the FRB’s example, if the borrower pays on the 22nd day after the statement is provided, even if statements are not mailed 21 days prior to the payment due date, the payment can be treated as late for any purpose. The prohibition simply does not apply. This clarification will only require a programming change and is far easier to implement than the 21 day mailing rule.

While this may appear to be the relief the credit union industry sought, further FRB clarification would be necessary to make it real.

Notwithstanding the FRB’s clarification, the FRB neglects to point out the additional consequences of failing to provide statements 21 days in advance under Reg Z 226.5(b)(2)(ii): Reg Z civil liability for compliance violations will now be: $500 minimum and $5000 maximum under Sec. 107 of the CARD Act.

Kim DeDapper

Holy brain drain, Batman! Thank you SO much for the portion-controlled version, Anthony. I dub thee Compliance KING!

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