Written by Michael Coleman, Regulatory Compliance Counsel
Greetings fellow compliance professionals! For those of you who do not know me, I am Mike Coleman, the newest Regulatory Compliance Counsel here at NAFCU. As this is my inaugural blog post, I promised Steve I would not “break the blog.”
If your credit union is a NAFCU member you are probably familiar with NAFCU’s Compliance Monitor, our monthly compliance newsletter. One of the features of the Compliance Monitor is the Compliance Forum, which includes questions and answers written by our Compliance Team. You may have asked yourself, “Where do they come up with these questions?” The answer is from our NAFCU members!
Answering compliance questions is one of the major member services NAFCU’s Regulatory Compliance Division provides our members. We get a lot of questions. Sometimes we see a pattern of questions on a particular topic, particularly after there has been a recent regulatory amendment. Sometimes we get a unique question that we just feel compelled to share. When this happens, we start drafting Q&As.
Here is an example of a Q&A that might be featured in the Compliance Monitor:
Question: At our credit union we understand that the Credit CARD Act, and the resulting changes to Regulation Z, prohibits increasing an APR within the first year of account opening. However, we want to increase the annual fee for a credit card account which is six months old. Is this permissible?
Answer: No. Regulation Z contains special protections for credit card accounts which stem from the requirements of the Credit CARD Act of 2009. Regulation Z contains a general prohibition for the increase of an APR or a fee required to be disclosed at account opening unless an exception applies. Section 1026.55(b)(3) of Reg Z provides an “advanced notice exception”, which allows a credit union to use the 45 day change-in-terms process to increase an APR or a fee. However, Section 1026.55(b)(3)(iii) specifically prohibits a credit union from increasing a member’s APR or certain fees required to be disclosed in the account opening table during the first year of the account:
“(iii) This exception does not permit a card issuer to increase an annual percentage rate or a fee or charge required to be disclosed under §1026.6(b)(2)(ii), (iii), or (xii) during the first year after the account is opened, while the account is closed, or while the card issuer does not permit the consumer to use the account for new transactions. For purposes of this paragraph, an account is considered open no earlier than the date on which the account may first be used by the consumer to engage in transactions.”
(Emphasis added.) 12 C.F.R. §1026.55(b)(3)(iii).
The annual fee for a credit card account is one of the fees required to be disclosed under Section 1026.6(b)(2)(ii), therefore, increasing the annual fee during the first year after the account is opened is prohibited.
This Q&A is an example of a particular question that came in and we thought it would benefit all our members to get an answer, so we drafted a Q&A for the Compliance Monitor.
Just to add my own personal disclaimer, I grew up in the DC Metro area (in Falls Church, Virginia) and as such am an avid Redskins, Capitals, and UVA fan. In addition to Steve’s usual plugs about everything Michigan, I will do my best to keep you updated on the trials and tribulations of being a sports fan in DC. Here’s hoping RG3 lives up to the hype!